ARVIND KUMAR AGRAWAL HUF, RAIPUR,RAIPUR V. INCOME TAX OFFICER-1(1), RAIPUR (ERSTWHILE ITO BHATAPARA), RAIPUR

ITA 51/RPR/2025

AI Insights

The case involves Arvind Kumar Agrawal (HUF), who appealed against the order of the ADDL/JCIT(A)-9, Mumbai, which confirmed various additions and disallowances made by the Assessing Officer related to bogus purchases and other expenses for the assessment year 2015-16. The primary contention was regarding the disallowance of 25% of purchases deemed bogus and the addition related to peak purchase/credit. The Tribunal considered the precedents and submissions, particularly noting that the sales declared by the assessee were not disputed and there was no discrepancy between the purchases and sales. The Tribunal decided to remand the matter back to the Assessing Officer for a detailed re-evaluation based on the G.P. rate of genuine purchases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 469774 (ITAT-RAIPUR)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Other Referred Cases: Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, DCIT-1(1), Raipur Vs. M/s. Jaggannath Enterprises
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYANKA PATEL
• Assessee Lawyers: R.B DOSHI
• Keywords: Opportunity of being heard; Question of law; Bogus purchase; Bogus

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायपुर मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी पाथ[ सारथी चौधरȣ, ÛयाǓयक सदèय क े सम¢ BEFORE SHRI PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER आयकर अपील सं./ITA No. 51/RPR/2025 Ǔनधा[रण वष[ /Assessment Year : 2015-16 Arvind Kumar Agrawal (HUF) Villa No.A-76, Anandam World City, GAD Colony, In front of Aishwarya Kingdom, Kachna, Saddu, Raipur (C.G.) PAN : AABHA7878R .......अपीलाथȸ / Appellant बनाम / V/s. The Income Tax Officer-1(1), Raipur (C.G.) ……Ĥ×यथȸ / Respondent Assessee by : Shri R.B Doshi, CA Revenue by : Dr. Priyanka Patel, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 11.03.2025 घोषणा कȧ तारȣख / Date of Pronouncement : 18.03.2025 2 Arvind Kumar Agrawal, HUF Vs. ITO-1(1), Raipur ITA No.51/RPR/2025 आदेश / ORDER PER PARTHA SARATHI CHAUDHURY, JM This appeal preferred by the assessee emanates from the order of the ADDL/JCIT(A)-9, Mumbai, dated 08.11.2024 for the assessment year 2015-16 as per the following grounds of appeal on record: “1. Ld. CIT(A) erred in confirming disallowance of Rs.7,19,550/- made by the A.O out of purchase account being 25% of value of purchases made from certain parties, holding that such purchases are bogus and not genuine. Ld. CIT(A) erred in confirming action of A.O of rejecting books of accounts invoking sec. 145(3). Conclusions drawn and consequent disallowance made is arbitrary, baseless, unfounded without appreciating the facts & evidences and is not justified. 2. Ld. CIT(A) erred in confirming addition of Rs.5,53,150/- out of addition of Rs.12,72,200/- made by the A.O on account of alleged investment in bogus purchases on account of peak purchase/credit. The addition made by the A.O and confirmed by the Ld. CIT(A) is arbitrary and not justified. 3. Ld. CIT(A) erred in confirming lumpsum disallowance of Rs.2,25,000/- made by A.O out of wages, loading and unloading expenses, freight expenses and truck expenses. The disallowance made by the A.O and confirmed by the Ld. CIT(A) is arbitrary, baseless and is not justified. 4. The appellant reserves the right to add, amend or alter any grounds of appeal.” 2. The brief facts in this case are that the assessee had e-filed its return of income for A.Y.2015-16 on 29.09.2015, declaring an income of Rs.7,22,500/-. Subsequently, the case of the assessee was selected for limited scrutiny through CASS. 3 Arvind Kumar Agrawal, HUF Vs. ITO-1(1), Raipur ITA No.51/RPR/2025 3. Assessment was completed by the Assessing Officer vide his order passed u/s.143(3) of the Act, dated 28.12.2017 wherein income of the assessee was determined at Rs.30,57,554/-, after making following additions/disallowances: Sr. No. Particulars Amount 1. Disallowance of 25% of the total bogus purchases of Rs.47,97,000/- i.e. Rs.11,99,250/-. As the assessee had already disclosed 10% of such bogus purchases under IDS scheme 2016, therefore, rest 15% is added to the total income of the assessee. Rs.7,19,550/- [ Rs.11,99,250/-(-) Rs.4,79,700/-] 2. Addition on account of peak purchase/credit Rs.12,72,700/- 3. Addition of lumpsum amount on various expenses Rs.1,00,000/- 4. Disallowance u/s.14A of the Act Rs.1,17,804/- 5. Addition of lumpsum amount on various expenses Rs.1,00,000/- 6. Addition of lumpsum amount on various expenses Rs.25,000/- 4. On appeal before the first appellate authority, the Ld. ADDL/JCIT(A)-9, Mumbai sustained the addition of Rs.7,19,550/- i.e. 25% of total bogus purchases. In so far the addition on account of peak purchase/credit, the Ld. ADDL/JCIT(A)-9, Mumbai confirmed the addition 4 Arvind Kumar Agrawal, HUF Vs. ITO-1(1), Raipur ITA No.51/RPR/2025 of Rs.5,53,150/- out of total addition of Rs.12,72,200/-. The Ld. ADDL/JCIT(A)-9, Mumbai had also sustained the total addition of Rs.2,25,000/- made by the Assessing Officer out of wages loading and unloading expenses, freight expenses and truck expenses. 5. The assessee being aggrieved with the order of the Ld. ADDL/JCIT(A)-9, Mumbai has carried the matter in appeal before the Tribunal. 6. The Ld. Counsel for the assessee submitted that the issue involved in the present appeal squarely covered by the judgement of the Hon’ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No.1004 of 2016, dated 11.02.2019 which had also been followed by this bench in the case of DCIT-1(1), Raipur Vs. M/s. Jaggannath Enterprises, ITA Nos. 357 & 376/RPR/2024, dated 26.09.2024. The proposition which had been laid down by the Hon’ble High Court is that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate of other genuine purchases. 7. Per contra, the Ld. Sr. DR fairly submitted that the matter may be remanded to the file of the A.O for de-novo adjudication. 5 Arvind Kumar Agrawal, HUF Vs. ITO-1(1), Raipur ITA No.51/RPR/2025 8. I have considered the submissions made by the both the parties and facts and circumstances involved in the present case. Apropos the quantification of profit which the assessee would have made by procuring the goods in question from the open/grey market is concerned, I find that the Hon’ble High Court of Bombay in the case of Pr. Commissioner of Income Tax-17 Vs. M/s. Mohhomad Haji Adam & Company, ITA No1004 of 2016, dated 11.02.2019 while upholding the order of the Tribunal, had observed, that the addition in the hands of the assessee as regards the bogus/unproved purchases was to be made to the extent of bringing the G.P rate of such purchases at the same rate of other genuine purchases. The Hon’ble High Court while concluding as hereinabove had observed as under: “8. In the present case, as noted above, the assessee was a trader of brics. The A.O found three entities who were indulging in bogus billing activities. A.O. found that the purchases made by the assessee from these entities were bogus. This being a finding of fact, we have proceeded on such basis. Despite this, the question arises whether the Revenue is correct in contending that the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied. The finding of the CIT(A) and the Tribunal would suggest that the department had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sale declared. That being the position, the Tribunal was correct in coming to the conclusion that the purchases cannot be rejected without disturbing the sales in case of a trade. The Tribunal, therefore, correctly restricted the additions limited to the extent of bringing the G.P. rate on purchases at the same rate of other genuine purchases. The decision of the Gujarat High Court in the case of N.K. Industries Ltd. (supra) cannot be applied without reference to the facts. In fact in paragraph 8 of the same Judgment the Court held and observed as under- \"So far as the question regarding addition of Rs.3,70,78,125/- as gross profit on sales of Rs.37.08 Crores made by the Assessing Officer despite the fact that the 6 Arvind Kumar Agrawal, HUF Vs. ITO-1(1), Raipur ITA No.51/RPR/2025 said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6 % gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66% Therefore, considering 5.66 % of Rs.3,70,78,125/- which comes to Rs.20,98,62 1.88 we think it fit to direct the revenue to add Rs.20,98,621.88 as gross profit and make necessary deductions accordingly. Accordingly, the said question is answered partially in favour of the assessee and partially in favour of the revenue.\" 9. In these circumstances, no question of law, therefore, arises. All Income Tax Appeals are dismissed, accordingly. No order at costs.\" It was, thus, observed by the Hon’ble High Court that the addition in respect of the purchases which were found to be bogus in the case of the assessee before them, who was a trader, was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate as that of other genuine purchases. On the basis of the aforesaid observations of the Hon’ble High Court, I am of the considered view that on the same lines the profit made by the assessee in the case before me by procuring the goods at a discounted value from the open/grey market can safely be determined by bringing the G.P rate of such bogus purchases at the same rate as that of the other genuine purchases. 9. I, thus, in terms of the aforesaid observations restore the matter to the file of the A.O, with a direction to him to restrict the addition in the hands of the assessee qua the impugned bogus/unverified purchases by bringing the GP rate of such bogus purchases at the same rate as that of the other genuine purchases. As the issue of addition on account of bogus 7 Arvind Kumar Agrawal, HUF Vs. ITO-1(1), Raipur ITA No.51/RPR/2025 purchases is remanded to the file of the Assessing Officer for de-novo adjudication, therefore, remaining all other connected grounds are also remanded to his file for de-novo adjudication. Needless to say, the Assessing Officer shall in the course of denovo proceedings shall afford a reasonable opportunity of being heard to the assessee in accordance with law with a direction to adjudicate the same within three (3) months from the date of receipt of the order. 10. As per the aforesaid terms, the grounds of appeal Nos.1 to 3 raised by the assessee stands allowed for statistical purposes. 11. In the result, appeal of the assessee is allowed for statistical purposes. Order pronounced in open court on 18th day of March, 2025. Sd/- (PARTHA SARATHI CHAUDHURY) ÛयाǓयक सदèय/JUDICIAL MEMBER रायपुर / Raipur; Ǒदनांक / Dated : 18th March, 2025. SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G.) 4. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण, “एक-सदèय” बɅच, रायपुर / DR, ITAT, “SMC” Bench, Raipur. 5. गाड[ फ़ाइल / Guard File. 8 Arvind Kumar Agrawal, HUF Vs. ITO-1(1), Raipur ITA No.51/RPR/2025 आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur "