BHAVYA PIPE INDUSTRY,GREATER NOIDA V. INCOME TAX OFFICER, WARD-5(1)(2), NOIDA, NOIDA

CO 28/DEL/2025

AI Insights

The case involves the Income Tax Officer (ITO) appealing against the order of the CIT(A) which modified the AO's initial assessment regarding bogus purchases made by Bhavya Pipe Industry. The AO had treated the entire amount of purchases from 11 suppliers as bogus and added 25% of these purchases as unexplained expenditure under section 69C of the Income Tax Act. The CIT(A) reduced this addition by applying a GP rate of 1.39% to the purchases. Both parties contested aspects of the CIT(A)'s decision, leading to this appeal. The Tribunal's decision focused on the application of the GP rate and the verification of the suppliers' existence and transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 779208 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 14-10-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2022-2023
• Appeal Filed On: 05-03-2025
• Other Referred Cases: N.K. Proteins Ltd. vs. Deputy Commissioner of Income Tax [2017] 84, 195 (SC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: VED JAIN
• Keywords: Set aside; Business income; Question of law; Unexplained expenditure; Bogus purchase; Accommodation entries; Bogus
• Section: 143(3); 133(6); 69C; 145

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’: NEW DELHI BEFORE SHRI YOGESH KUMAR U.S., JUDICIAL MEMBER AND SHRI MANISH AGARWAL, ACCOUNTANT MEMBER ITA No.5107/Del/2024 (ASSESSMENT YEAR 2022-23) Income Tax Officer, Ward-5(1)(2), Noida. Vs. Bhavya Pipe Industry Plot No. F-39, Site- C, UPSIDC, Industrial Area, Surajpur ,Gautam Buddha Nagar, Gr. Noida-201306 Uttar Pradesh. PAN-AATFB2209D (Appellant) (Respondent) C.O. No.28/Del/2025 (ASSESSMENT YEAR 2022-23) Bhavya Pipe Industry Plot No. F-39, Site- C, UPSIDC, Industrial Area, Surajpur ,Gautam Buddha Nagar, Gr. Noida-201306 Uttar Pradesh. PAN-AATFB2209D Vs. Income Tax Officer, Ward-5(1)(2), Noida. (Cross Objector) (Respondent) Assessee by Shri Ved Jain, Adv. and Ms. Uma Upadhyay, CA, Shri Aditya Garg, CA Department by Shri Ajay Kumar Arora, Sr. DR Date of Hearing 16/07/2025 Date of Pronouncement 14/10/2025 Printed from counselvise.com 2 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries O R D E R PER MANISH AGARWAL, AM: This instant appeal is filed by the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [CIT(A), in short] dated 09.09.2024 in Appeal No. NFAC/2021-22/10338562 arising out of order passed u/s 143(3) r.w.s 144B of the Income Tax Act, 1961 (hereinafter referred as ‘the Act’) dated 12.03.2024 for Assessment Year 2022-23 and the assessee has also filed the Cross Objections. 2. Brief facts of the case are that assesse is a company engaged in the business of manufacturing of PVC Pipe under the name and style of M/s Bhavya Pipe Industries and return of income in the year appeal was filed on 31.08.2022 declaring total income of Rs.12,61,340/-. The case of the assessee was selected for scrutiny for examination of the creditors and during the course of assessment proceedings, the AO issued notice u/s 136(6) to the 11 parties from whom purchases have been made and balance were outstanding at the year end. However, none of the party appeared except in case of the two parties, since, notices 136(6) could not be issued. The AO observed that out of total nine supplier, “six suppliers” never filed their ITR and two suppliers filed their last ITR in Assessment Year 2018-19. AO further observed that out of 9 suppliers to whom notices u/s 136(6) were issued and served a reference was made to the verification unit for making necessary verification of the claim of purchases. However, it was found that none of the parties was available at the given addresses. The AO further observed that except one party Manita Rani, in case of remaining suppliers, their GST No. were got cancelled by the respective authorities. Accordingly, the AO held that the total purchases of Rs.40,96,63,102/- made from these 11 parties are unverifiable and bogus purchases and addition of 25% of the total purchases from them was made u/s 69C of the Act as unexplained Printed from counselvise.com 3 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries expenditure. For this AO placed reliance on the judgment of the Hon’ble Supreme Court in the case of N.K. Proteins Ltd. vs. Deputy Commissioner of Income Tax [2017] 84, 195 (SC). 3. Against the said order, the assessee preferred an appeal before the Ld. CIT(A) who vide impugned order dated 09.09.2024 though had confirmed the action of the AO in holding the purchases made from these 11 parties as unverifiable and bogus, however as against the addition of 25% made by the AO, the Ld. CIT(A) confirmed the addition of Rs.56,94,317/- by applying GP rate of 1.39% on such bogus purchases. Besides this disallowance of Rs.3,57,062/- out of carriage inward expenses was reduced to Rs.19,852/-. 4. Aggrieved the said order, the Revenue is in appeal by taking the following grounds of appeal: “1. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and facts of the case in restricting the addition made by the AO on account of disallowance of 25% of bogus purchase 1 shown by the assessee to 1.39% of bogus purchase, without appreciating the facts that the AO during the assessment proceedings had established that purchases made by assessee from 11 entities were bogus. 2. That the Ld. Commissioner of Income Tax (Appeals) has erred in law by not following the decision of Hon'ble Apex Court in the case of N. K. Proteins Ltd Vs. Deputy Commissioner of Income Tax [2017] 84, 195(SC) ([2017]. 3. That the Ld. Commissioner of Income Tax (Appeals) has erred in law and on facts by restricting the addition made by the AO 3 on account of disallowance of 25% of carriage inward expenses to 1.39% of carriage inward expenses, without appreciating the facts mentioned by the AO in the assessment order. 4. That the order of Ld. CIT (Appeals) being erroneous in law and on facts deserves to be set aside/ cancelled and the order of the AO to be restored. 5. That the appellant craves leave to add, to alter, or amend any grounds of appeal raised above at the time of hearing.” Printed from counselvise.com 4 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries 5. The assessee has also filed the Cross Objections by taking following grounds of cross objections: “ 1. (i) On the facts and circumstances of the case, the learned CIT(A), NFAC has erred both on facts and in law in sustaining the addition of Rs.56,94,317/- by arbitrary applying the net profit rate of 1.39% on the total turnover. (ii) That, on the facts and circumstances of the case, the Ld. CIT(A) has erred in applying the net profit rate of 1.39% on the total turnover of the assessee over and above 1.39% Gross Profit Rate declared by the assessee. (iii) That the above said addition has been sustained rejecting the detailed submissions and explanations along with the evidences brought on record by the assessee in this regard 2. On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the disallowance of Rs. 19,852/- on account of carriage inward expenses incurred on above purchases. 3. Without prejudice to the above, even otherwise the learned CIT(A), NFAC has erred both on facts and in law in rejecting the contention of the assessee that both the above additions made by AO under section 69C are not legally sustainable as it is not case of purchases/expenses Incurred not recorded in the books of accounts and hence the provision of section 69C are not applicable to the facts of the case of the assesse. 4. That, on the facts and circumstances of the case, the various judgments referred and relied upon by the CIT(A) are distinguishable and not applicable to the present case as in all these judgments there were adverse material in the form of admission either by the assessee himself regarding accommodation entries/hawala business or the adverse statement of the suppliers. 5. That the respondent craves leave to add, amend or alter any of the grounds of appeal” 6. Since, the grounds of Revenue and the Cross Objections taken by the assessee are inter-connected and inter-related, therefore, both are taken for consideration. 7. Ground of appeal Nos.1 to 4 of the Revenue and the Cross Objection No.1, 3 and 4 of the assessee are with respect to the addition made on account of bogus purchases. 8. Before us, the Ld. Sr. DR submitted that the assessee has failed to prove the genuineness of the purchases made from 11 parties and their identity also remained Printed from counselvise.com 5 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries unverified. He further submits that during the course of assessment proceedings detailed enquires were made by issuing summons u/s 136 which was never replied and further the verification was made through verification unit and the observations of the verification unit are reproduced at page 10 to 12 of the assessment order wherein it was observed by the verification unit that none of the party was found available at the given address. The Ld. Sr. DR further submits that in the present case, except one party, in case of all other parties, it was found that their GST No. were cancelled either in previous years or in the year under appeal, however, assessee claimed to have made purchases from these parties during the year under appeal. The details of the parties in whose case GST registration is cancelled is tabulated in para 4.4 at page 8 & 9 of the assessment. The Ld. Sr. DR further submits that the Ld. CIT(A) has observed that the facts of the case of N.K. Proteins Ltd. (supra) are not applicable to the present case as it was non-speaking order. The Ld. CIT(A) further observed that in the case of N.K. Proteins Ltd. (supra) the Hon’ble Gujrat High Court has restricted the addition to the gross profit declared by the assessee. Accordingly, he applied the GP rate @ 1.39% as declared by the assessee. The Ld. Sr. DR submits that in the case of N.K. Proteins Ltd. (supra), the Hon’ble High Court has held that in the event of unverifiable purchase 25% of the entire purchase could be disallowed looking to the fact that by making such kind of bogus purchase assessee has been to inflate the purchases and reduce the profits, therefore, he requested for the confirmation of the order of the AO on this issue. 9. On the other hand, the Ld. AR of the assessee submits that the books of account of the assessee were not doubted and the trading results were accepted. The assessee’s books were duly audited and purchases were duly supported by respective invoices, the payments were made through banking channel and were duly reported in the GST return filed. The Ld. AR further submits that the corresponding sales Printed from counselvise.com 6 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries have been admitted. Therefore, it could not be said that the purchases made from few parties was bogus. He also filed all the relevant details to establish the purchases made as genuine which includes details of item wise purchases, ledger account of the suppliers, purchases registers, invoices and E-way bills etc. which are available in the paper book pages 347 to 1033. He further submits that assessee has filed the GST return wherein input credit of the purchases made from these parties was claimed and allowed by the respective authorities. It is thus submitted that no purchases could be held as ingenuine purchases. With respect to the cancellation of the GST registration, it is submitted by the ld. AR that the registrations were given after due verification of the business premises and once the purchase have been made prior to the cancellation of GST, it cannot be said that such purchases were not genuine. The Ld. AR further submits that the Ld. CIT(A) has failed to appreciate that assessee has discharge the burden of proving the genuineness of the purchase by filing each possible evidence and, therefore, the same deserves to be admitted as genuine purcahses. The Ld. AR also filed the detailed written submissions in this regard which is placed on record. In the last, it is requested to delete the addition so sustained by the Ld. CIT(A). 10. Heard both the parties and perused the materials available on record. In the instant case, it has been observed that AO has made detailed enquiries in respect to purchases made from 11 suppliers and it was found that they were not existing when the physical verification was made and, their GST registration were also cancelled by the GST authorities. The AO in para 4.5 of the order has sum up its conclusion, wherein the AO observed that most of the parties have not filed their Income Tax Returns, in particular six parties have never filed the ITR though they have disclosed sales of few crores to the assessee. Further the verification unit on physical Printed from counselvise.com 7 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries verification found that these parties are not existing parties and merely filing E-bills, banking receipts etc. cannot hold the transactions as genuine as where about these 11 parties could not be ascertained thus the existence of these entities was not established. It is also observed by the AO that of the 11 supplier alleged a bogus GST registration out of 10 were canceled. Here, it is relevant to state that in case of Mr. Harjinder Singh of Shiv Trading Co. purchases of Rs. 3,56,95,500/- was made, and his GST registration was cancelled suo moto on 04.11.2020. Likewise in case of Anu Jindal of Anu Steel from whom purchases of Rs.4,29,80,500/- were made, her GST registration was suo moto cancelled on 19.09.2018. In case of Hukum Chand Prop. H.C. Enterprises from whom purchase of 2,07,69,000/- was made, his GST registration was cancelled on 09.04.2020. In case of Jasvir Singh of Hare Krishna Traders from whom purchases of Rs.24,78,750/- was claimed, his GST registration was cancelled on 03.09.2021. 11. From the perusal of the date of cancellation of the GST No of few of the suppliers as stated above, it is established that during the year under appeal, i.e. in Assessment Year 2022-23 relevant to previous year 2021-22, these parties were either not having any valid GST No. or it was cancelled during the year itself thus, the purchases claimed to have been made from these parties remained doubtful and cannot be held as genuine. The Ld. CIT(A) after considering all these facts, has reached to the conclusion that the purchases made from these parties is non-genuine and bogus purchases and made additions of the GP rate declared by the assessee. The relevant observations of the Ld. CIT(A) in this regard as contained in para 6.25 to 6.42 are as under: “6.25 During the discussion on previous grounds of appeal it has proven beyond doubt that none of suppliers were found to be existing during the course of assessment proceedings hence the present ground does not hold any water. Thus the 10th ground of appeal taken by the appellant is dismissed. Printed from counselvise.com 8 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries 6.26 The 9th ground of appeal taken by the appellant is 9. Because on the facts and circumstances of the case and in law, the Ld. A.O. has erroneously and in an utterly misplaced fashion erred in estimating 25% of the purchases as bogus without examining either the books of accounts or any other material and merely on the basis of the facts of some other case. 6.27 In support of the ground the appellant has submitted. E. It is respectfully submitted that the Ld. A.O. has gravely erred in treating 25% of the total purchase as being purchases from bogus suppliers and therefore deeming the income of the Assessee-Appellant at Rs. 10,24,15,776/-, It is submitted that such finding of the Ld. A.O. deserves to be declared as incorrect and the Impugned Assessment Order be treated as erroneous and quashed for the following reasons: - 1. The Ld. A.O. has arrived at the figure of 25% based on a mere hypothesis for which no logic or reasoning has been provided. He has merely estimated 25% of the purchases to be bogus. 1. The Ld. A.O has arrived at such figure while accepting the total sales as well without rejecting the books of accounts of the Assessee 1. The reliance by the Ld. A.O. on the decision of the Hon'ble Supreme the case of N. K. Proteins Ltd. v. Deputy, Commissioner of Income-tax, [2017] 84 taxmann.com 195 (SC), is completely misplaced. The Hon'ble Supreme Court in this case had, by a non- speaking order, upheld the decision of the Hon'ble High Court of Gujarat in N.K. Industries Ltd. v. Dy. CIT [2016] 72 taxmann.com 289 (Guj.). The Hon'ble High Court of Gujarat in its judgement had rejected the view of the Hon'ble Tribunal which had added 25% of the total bogus purchases and restricted the addition to a mere 5.66% which was the gross profit of the assessee. The findings of the Hon'ble Gujarat High Court as upheld by the Hon'ble Supreme Court are as under- 2. \"8. 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 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. 20,98,621.88 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.\" 1. Assuming without admitting, even if the ratio of the Hon'ble Supreme Court in N.K. Proteins (supra) was to be applied to the present case, the addition has to be restricted to Printed from counselvise.com 9 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries only 1.29% which is the gross profit in the books of the complete Assessee-Appellant. Thus, the findings of the Ld. A.O. are completely perverse. 1. Without prejudice to what has been submitted and strictly in the altemative, it is respectfully submitted that the even if the addition were to be made on the gross profit margin of the Assessee-Appellant (as was done in the case of N.K. Proteins (supra)), the same ought to be restricted to a mere 1.29% which is the actual gross margin disclosed by the Assessee-Appellant in its books of accounts. That, the total sales and purchases made by the Assessee-Appellant along with the Gross Profit Margin and Net Profit Margin derived by the Assessee-Appellant is tabulated as under. – Total Sales/Turnover Purchases Gross Profit Margin Net Profit Margin 49,54,29,540/- 49,46,06,558 1.39 0.25 6.28 To verify the genuineness and correctness of purchases notice u/s 133(6) of the IT Act was issued on 11 suppliers. However, none of the parties filed the required details called for u/s 133(6) of the IT Act. Furthermore, in the case of Sh. Bhupinder Singh and Sh. Anuj Kumar Sharna digital footprints ie. e-mail ID was not available hence notice u/s 133(6) was not issued. 6.29 None of the 11 suppliers have filed ITR for the AY 2022-23. In respect of 9 suppliers to whom notice u/s 133(6) was issued reference for physical verification was issued to collect necessary information, but no reply has been received from them so far. 6.30 The appellant has maintained in his reply that assessing officer has committed a legal error by disallowing the purchases and questioning the books maintained and audited u/s 145 solely based on non-compliance u/s 133(6) of the Income Tax Act. The appellant has failed to prove the genuineness or creditworthiness of the parties either during the assessment proceedings or during the appellate proceedings. 6.31 In view of the above findings it is clear ear that the has indulged in purchase from the parties who had doubtful credentials. 6.32 The A.O. cannot make additions on account of purchases without carrying out independent enquiry and affording opportunity to Assessee to controvert statement made by the seller. The Hon'ble Apex Court in the case of Pr. CIT v. Shapoorji Pallonji and Co. Ltd. [2022] 141 taxmann.com 509/288 Taxman 661 held that merely on suspicion bases on information received from sales Tax authority, assessing officer could not make addition on account of bogus purchases without carrying out independent enquiry and affording opportunity to Assessee to convert statements made by seller. 6.33 In the present case the assessing officer has conducted independent enquiry by issuing notice U/s 133(6) of the Income Tax Act and in reply to the notice not even one of the parties had filed any reply. Hence the conclusion drawn by the assessing officer is correct that the appellant might have purchased goods from other parties on lower rate and Printed from counselvise.com 10 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries introduced the bills of other parties on higher side to reduce the profitability of the business. 6.34 In the given circumstances since the sale of the appellant is not doubtful and has not been questioned by the assessing officer it can be concluded that unless some purchases are made there cannot be corresponding sale. But the question arises regarding income which is embedded in such bogus purchases or alterriatively what percentage of purchases can be treated as unexplained expenditure, this involves guess work. The correct approach in such case is to estimate suppressed. profit element embedded in the amount of such bogus purchases. In the case of Deputy Commissioner of Income-tax v. Rajeev G. Kalathil [2014] 51 taxmann.com 514/[2015] 67 SOT 0052 (Mumbai) in which case the Assessing Officer disallowed the entire expenditure incurred by the assessee on purchases as it was one of the beneficiaries of bogus hawala bills, as per information available with the Assessing Officer. The CIT (Appeals) held that when sales were accepted, then corresponding purchases could not be disallowed. He held that profit element embedded in the purchases only could be added and not the entire purchase amount and upheld the addition up to 2% of the purchase amount as profit element embedded in purchases and deleted the balance addition. The ITAT, on revenue appeal, in the above case held that the assessee had been declaring gross profit between 5% to 8% and since purchases were made from grey market the corresponding profit element would be higher and estimated further 3% of the purchases amount on traded profit embedded in the purchase amount. The High Court in revenue's appeal declined to interfere in the order of the ITAT and upheld the attribution of 5% profit on such alleged bogus purchase. (Emphasis supplied). 6.35 Furthermore in the case of Belmarks Metal Works v. ITO [IT Appeal No. 5198 (Delhi) of 2018, dated 5-3-2020] where in the Tribunal upheld the addition to the extent of profit element embedded in bogus purchases and deleted the balance addition. The Tribunal held that the source of purchases made was not outside the books of account and corresponding sales were not disputed. The Assessing Officer has not rejected books of account. Therefore, there was suppression of gross profit on purchases. 6.36 In the present case the assessing officer has not given any basis for estimating the net profit at 25% of the turnover. In a manufacturing concern the gross profit is generally between 2 to 4%. In the present case the appellant has been earning gross profit of 1.39% during the A.Y. 2022-23. 6.37 Thus the best way to estimate gross profit for current year would be to take the gross profit which has been declared by the appellant himself for the year under consideration which is 1.39%. The total turnover for the current year is Rs.49,54,29.540/- and total purchases from 11 suppliers which has not been found to be correct is of Rs. 40,96,63,102/- thus applying the rate of 1.39% on bogus purchase the suppressed gross profit on unverified purchase comes to Rs.56,94,317/- Thus the addition made should come to Rs. 56,94,317/-, 6.38 The present position is strengthened by the following case laws: Printed from counselvise.com 11 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries 6.39 Where during the course of the search it was admitted by the owners, who were doing business in semi-precious stones, that turnover was bogus and was enhanced for obtaining higher bank finance, during post-search investigation no cooperation was extended, the assessee failed to reconcile the differences in the value of stock found at the time of search and the stock as per books, the finding of the AO that either fake purchase bills were introduced so as to increase stock or the sales were reduced, and on that basis books were rejected, application of higher GP rate was held justified. [refer-Clarity Gold (P.) Ltd. v. Pr. CIT [2019] 102 taxmann.com 421 (Raj.)]. 6.40 The assessee, trading in paper and paper products, found indulging in hawala business without actual transaction. The AO disallowed entire purchases of Rs. 4.17 Crores u/s. 69C. The CIT(A) applied GP rate of 3.67% on bogus purchases, whereas the Tribunal enhanced the disallowance to 12.5% of bogus purchases. It was held that no substantial question of law arose [refer-Pooja Paper Trading Co (P.) Ltd. v. ITO [2019] 104 taxmann.com 95/264 Taxman 260 (Bom.); Pr. CIT v. Synbiotics Ltd. [2019] 106 taxmann.com 316/265 Taxman 34 (Gujarat) (Mag.) (where GP rate of 25% of bogus purchases was applied)]. 6.41 In cases where on the basis of statements of alleged suppliers it was found that no supplies were made to the assessee, it was held that purchases were bogus but on the presentation of quantitative tally of the opening stock, purchases, sales and closing stock, it was further held that \"unless some purchases are made there cannot be corresponding sale\" and, therefore, application of higher net profit rate of 5%, in a manner similar to section 44AF, could be justified. [refer- Madhukant B. Gandhi v. ITO [IT Appeal No. 1950 (Mum.) of 2009, dated 23-2-2010]]. In CIT v. Premkumar B. Rathi [2015] 59 taxmann.com 203/232 Taxman 638/377 ITR 447 (Guj.), the assessee, who was dealing in edible oils, on semi-whole sale basis, failed to prove the genuineness of purchases of Rs 2 crores (approx..) made from five parties. The AO made addition of 25% of such unexplained purchases which was reduced to 10% by the Tribunal. Even though, the High Court did not approve non- speaking order passed by the Tribunal, it confirmed the Tribunal's order on net profit rate on the ground that GP rate declared that year was better than earlier years. It may be noted that in this case the AO himself did not make addition of entire bogus purchases but restricted himself to a percentage thereof. The Hon'ble Gujarat High Court followed its own decision in CIT v. Simit P. Sheth [2013] 38 taxmann.com 385/219 Taxman 85 (Mag.)/356 ITR 451, where purchases were not found to be bogus but were made from parties other than those mentioned in books of account, it was held that not entire purchase price but only profit element embedded in such purchases could be added to income of assessee. 6.42 Thus ground 9 of the appellant is rejected but his gross profit is worked out at 1.39%. The total turnover for the current year is Rs. 49,54,29,540/- and total purchases from 11 suppliers which has not been found to be correct is of Rs. 40,96,63,102/- thus applying the rate of 1.39% on bogus purchase the suppressed gross profit on unverified purchase Printed from counselvise.com 12 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries comes to Rs. 56,94,317/-. Thus the addition made should come to Rs. 56,94,317/-which should be treated as business income.” 12. After considering the entirety of the facts and in our considered opinion, the Ld. CIT(A) has reached the conclusion that purchases made from these 11 parties was not genuine purchases and under these circumstances a fair estimation is to be made, therefore, the profit rate of 1.39% on such bogus purchase as applied by ld. CIT(AP appears to be fair and reasonable and accordingly, the order of the Ld. CIT(A) on this score is hereby upheld. 13. The C.O. No.2 of the assessee is with respect to the confirmation of disallowance of Rs.19,852/- on account of carriage inward expenses. 14. Since, we have already held the purchase of bogus and upheld the action of the Ld. CIT(A) in confirming the addition by applying the G.P. rate of 1.39%, we find no infirmity in the impugned order of Ld. CIT(A) in confirming the disallowance to the extent of the carriage inward related to such purchases. Accordingly, this Cross Objections of the assessee is dismissed. 15. In the result, the appeal of the Revenue and Cross Objection of the assessee are dismissed. Order pronounced in the open Court on 14.10.2025. Sd/- Sd/- (YOGESH KUMAR U.S.) (MANISH AGARWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 14.10.2025 PK/Sr. Ps Copy forwarded to: 1. Appellant Printed from counselvise.com 13 ITA No.5107/Del/2024 C.O.28/Del/2025 ITO vs. Bhavya Pipe Industries 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI Printed from counselvise.com "