The Income Tax Appellate Tribunal (ITAT), Mumbai Bench directed AO to restrict additions limited to the extent of bringing the G.P. rate on disputed purchases at the same rate of other genuine purchases.
The assessee, Dilip Kumar Sumermal Kanungo filed his return of income for the assessment year 2009-10 declaring total income of Rs.4,49,838/-. Here the assessee is a reseller of ferrous and non- ferrous metals.
The AO completed the assessment determining the income at Rs.4,75,249/-. On receipt of information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained bogus purchase bills amounting to Rs.1,24,10,733 from 8 parties, the AO issued notice under section 148 for reopening the assessment.
During the course of reassessment proceedings, the AO issued notice under section 133(6) to the said parties to verify the genuineness of the purchases. However, those notices were returned un-served by the postal authorities with the remark “left”, “not traceable”, “not known” etc. Thereafter, the AO asked the assessee to produce those parties for examination.
However, the assessee failed to do so. Having examined the details filed by the assessee, the AO noted that the assessee could not file important documents such as delivery challans, transport receipts, goods-inward register maintained in the godown. Considering the above facts, the AO estimated the profit at the rate of 12.5% of the disputed purchases of Rs.1,24,10,733 and accordingly brought to tax Rs.15,51,341. The same was confirmed by the CIT(A).
The coram Vikas Awasthy and N.K.Pradhan in the light of the decision of the Bombay High Court in the case of Mohammed Haji Adam & Co & Ors held that no purchases can be rejected without disturbing the sales in case of a trader thus, additions limited to the extent of brining the GP rate on purchases at the same rate of other genuine purchases
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