The Income Tax Appellate Tribunal (ITAT), Mumbai bench has recently ruled that the addition in respect of Bogus purchase can be made only to the extent of the lower gross profit declared by the assessee and not on the GP declared on the normal purchases.
The assessee is a firm engaged in the business of trader’s ferrous and non-ferrous metals. The Assessing Officer reopened the assessment against the assessee-Company on the ground that the assessee has taken the bogus purchase entries from the 12 parties. The Officer accordingly made the addition to the extent of 12.5% of bogus purchase i.e. in the sum of Rs.77,78,371/-. Aggrieved by the order, the assessee filed an appeal before the first appellate authority who restricted the addition to the extent of 6.5%.
Before the Tribunal, the assessee contended that the A.O. should have deputed ward inspector and forced the attendance of these parties. It was further argued that the A.O. failed to collect and bring on record the evidence from the Sales Tax Department and not provided copies of the same to the assessee.
Referring to a catena of decisions, the ITAT noted that in case of bogus purchase where sales are accepted, quantitative details of purchases, sales and stock was filed with copy of delivery challans, the addition is required to be made only to the extent of lower G.P declared by the assessee on bogus purchases as compared to G.P. on normal purchases.
While upholding the decision of the first appellate authority, the Tribunal said that “As per the G.P. statement chart placed on record we found that the GROSS PROFIT declared by the assessee in respect of alleged bogus purchases was more than the GROSS PROFIT declared in the normal purchases. Under these facts circumstances, applying the judicial pronouncement laid down by Hon’ble Jurisdictional High Court as discussed above, we do not find any merits for the addition so upheld by CIT(A).”
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