The Chennai bench of the Income Tax Appellate Tribunal (ITAT) has held that addition on account of estimated gross profit is not permissible in the absence of evidence to prove a bogus purchase.
The allegation against the assessee is that there was one-to-one nexus between the purchase and sale of goods. The complete bill-wise quantitative details of purchases from all the parties and the corresponding sales made during the year were submitted before the lower authorities.
It was further submitted that details such as purchase orders, invoices, delivery challan, material receipt stamps, confirmation, ledger accounts, bank statements etc were submitted before the lower authorities.
The assessee has produced all the documents to prove that the purchases from the above parties are genuine. It was further submitted that the Assessing Officer has not conducted any independent inquiry to verify the purchase or sale from the parties.
The AO objected that the assessee has not produced the purchasing party and invoices were submitted only on a simple basis despite the details, ITR, and balance sheet of the parties was not produced. Further, the SOP was not filed in respect of purchases made from the said third parties and the assessee had traded any items other than regular business items of these 3 parties.
It was observed that once the source of purchases is from the books of accounts and the payment has been made through a banking channel and there is a corresponding sales which match with the quantitative bill and purchases recorded in the books of account, then it cannot be said that purchases have been made outside books which could lead to any inference that all purchases have been made outside the books or are bogus.
A Coram comprising of Shri Amit Shukla, JM & Shri S Rifaur Rahman, AM observed that none of the purchases can be held to be bogus. Further held that “no addition can be made nor any addition on account of estimated gross profit because all the purchases and corresponding sales have been fully tallied and verified and no discrepancy has been found.” The appeal of the assessee got allowed and the appeal of the revenue in this regard was dismissed.
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