Addition of estimated profit embedded in such purchases will meet the end of justice- ITAT Ahmadabad in the case of Bogus Purchase
Here is an important judgment on the case of bogus purchase by ITAT, Ahmadabad.
The case detail is as under:
Parth Developers “B” Bench, Ahmedabad*.
Date of Order: 23.6.2023
Assessment Year: 2016-17
In this case, AO made addition of Rs. 4,17,13,702/- on account of expenditure in the nature of purchases. In first appeal, CIT (A) restricted to addition to Rs. 41,71,370/- to the extent of 10% total such purchases towards profit embedded in such purchases.
Before ITAT, Assessee has submitted as under:
(1) Assessee was engaged in construction business.
(2) Material purchased was used (consumed) in construction of construction project, which is undisputed.
(3) Assessee posses purchase bills bearing the following:
* Name of supplier.
* Address of supplier.
* Date of invoice.
* Invoice number.
* Signatures of authorized person.
* VAT/Sales Tax number.
* Tax charged in invoice
* Telephone numbers.
(4) Payments made through banking channels, i.e. account payee cheques, RTGS during the year under consideration and in next year.
(5) Such payments were reflected in the bank account and statements filed before AO.
(6) Assessee discharged burden cast upon it under the law.
(7) AO failed on following counts:
* No material against the details provided by assessee.
* Not doubted the consumption of materials in construction of project, though matching of purchase and sale was not possible due to construction business.
* Not doubted the construction of flats.
* Not doubted the sale of flats.
* AO did not cross verified the details about the suppliers from VAT department .
ITAT held as under:
(1) Purchases from impugned parties and purchases are two separate aspects.
(2) Since sale of flats and construction thereof are not doubted, the consumption of materials is substantiated, as construction was not possible without consumption of materials.
(3) Therefore, purchases cannot be doubted.
(4) Therefore, addition of entire purchases cannot be made.
(5) Addition of estimated profit embedded in such purchases will meet the end of justice.
(6) 10%profit estimated by CIT(A) is reasonable, this upheld.
Law relied upon:
(1) Bholanath Poly Fab (P) Ltd. (Gujest High Court)
(2) Sanjay Oil Cake Industries ( Gujrat High Court)
(3) Simith Seth (Gujrat High Court) (12.5%).
(4) Vijay M Mistry Constriction Ltd. (Gujrat High Court)
(5) Vijay Proteins 58 Ltd. (ITAT, Ahmedabad)
(6) Gujrat Ambuja Exports Ltd. (Gujrat High Court) (5%)
The copy of the order is as under:
