MADHAV COPPER LTD.,BHAVNAGAR V. THE INCOME TAX OFFICER, WARD-1(8), BHAVNAGAR

ITA 275/AHD/2024

AI Insights

The case involves cross appeals by the Income Tax Officer (ITO), Ward-1(8), Bhavnagar, and Madhav Copper Ltd. concerning the assessment years 2018-19, 2020-21, and 2021-22. The appeals were related to the rejection of books of account under section 145(3) of the Income Tax Act, 1961, and the application of a gross profit rate on alleged bogus purchases. The ITO had initially applied a 12.5% gross profit rate, which was contested by the assessee and partially relieved by the CIT(A), who reduced the rate to 5% and 6% for the respective years. The Tribunal's decision affirmed the CIT(A)'s findings, emphasizing that the full disallowance of purchases was not justified when corresponding sales were accepted and no discrepancies were found in the stock records or turnover.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 669134 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2020-2021
• Other Referred Cases: N K Proteins Ltd vs. ITO, Pr. CIT Vs Surya Impex, Pr. CIT Vs S. V. Jiwani, Pr. CIT Vs Rakesh Kailashchand Jain, Pr. CIT Vs Tirupati Earth Neerprima JV, Pr. CIT Vs Hiren Parekh, JMD Corporation of India Limited Vs ITO
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R. P. RASTOGI
• Assessee Lawyers: TUSHAR HEMANI; .
• Keywords: Set aside; Unexplained expenditure; Bogus purchase; Principle of natural justice; TDS; Accommodation entries; Bogus
• Section: 147; 148; 143(3)

Judgement Text

"आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण आयकर अपीलीय अिधकरण,अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ अहमदाबाद \bयायपीठ ‘B’ अहमदाबाद। अहमदाबाद। अहमदाबाद। अहमदाबाद। IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD ] ] BEFORE S/SHRI SANJAY GARG, JUDICIAL MEMBER AND MAKARAND V.MAHADEOKAR, ACCOUNTANT MEMBER ITA No.254, 255 and 256/Ahd/2024 Asstt.Year : 2018-19, 2020-21 and 2021-22 The ITO, Ward-1(8) Bhavnagar. Vs. Madhav Copper Ltd. 348, Madhav Darshan Waghawadi Road Bhavnagar Gujarat 364 001. PAN : AAICM 2859 A ITA No.274, 275 and 276/Ahd/2024 Asstt.Year : 2018-19, 2020-21 and 2021-22 Madhav Copper Ltd. 348, Madhav Darshan Waghawadi Road Bhavnagar Gujarat 364 001. PAN : AAICM 2859 A Vs. The ITO, Ward-1(8) Bhavnagar. (Applicant) (Responent) Assessee by : Shri Tushar Hemani, Sr.Adv., and Shri Parimalsinh B. Parmar, AR Revenue by : Shri R.P. Rastogi, CIT-DR, and Shri Abhijit, Sr.DR सुनवाई की तारीख/Date of Hearing : 24/06/2025 घोषणा की तारीख /Date of Pronouncement: 25/06/2025 आदेश आदेश आदेश आदेश/O R D E R PER BENCH: These cross appeals by the Assessee and the Revenue pertain to the Assessment Years 2018–19, 2020–21 and 2021– ITA No.254 to 256 and 274 to 276 /Ahd/2024 2 22 and are directed against the respective orders passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as “CIT(A)”], under section 250 of the Income Tax Act, 1961 [hereinafter referred to as “the Act”]. The impugned orders of CIT(A) stem from assessment orders framed by the Assessment Unit of the Income Tax Department [hereinafter referred to as Assessing Officer or AO]. Since common issues are involved across all the appeals, the appeals are interconnected and arise out of identical set of facts and circumstances. Therefore, all six appeals were heard together and are being disposed of by way of this consolidated order, for the sake of convenience and judicial economy. Facts in Brief 2. The assessee is a company engaged in the business of manufacturing and trading of copper products. For the relevant assessment years under consideration the assessee filed its return of income declaring profits from business. 3. In the assessment year 2018–19, the case was reopened under section 147 of the Act based on information received from the Investigation Wing of the Department, indicating that the assessee had entered into transactions with accommodation entry providers, including M/s. RCI Industries and Technologies Ltd. and others. It was further revealed during the proceedings that the assessee had made purchases from entities flagged in GST investigations as bogus suppliers. The Assessing Officer (AO) issued notice under section 148 and framed the ITA No.254 to 256 and 274 to 276 /Ahd/2024 3 reassessment under section 143(3) r.w.s. 147. On finding that the assessee had not satisfactorily discharged the onus of establishing the genuineness of purchases and the identity of the suppliers, the AO invoked the provisions of section 145(3), rejected the books of account, and applied a gross profit rate of 12.5%. In appeal, the CIT(A) upheld the rejection of books of account but found the GP rate adopted by the AO to be excessive. Considering the nature of business and submissions placed on record, the CIT(A) restricted the GP rate to 5% of the impugned purchases. The balance disallowance was deleted. 4. In assessment year 2020–21, the case was selected for complete scrutiny under CASS. The AO noted that the assessee had made purchases from parties whose details were flagged by the Insight portal and who had not filed their income tax returns or responded to verification notices. The AO treated the purchases as unverifiable, rejected the books of account under section 145(3), and estimated income by applying a GP rate of 12.5%. The assessee contested the assessment in appeal before the CIT(A), NFAC, reiterating the genuineness of purchases and the availability of supporting documentation. While concurring with the AO’s finding on unverifiability of suppliers, the CIT(A) considered a 6% profit rate to be reasonable and accordingly granted partial relief. 5. In the subsequent assessment year 2021–22, a similar pattern emerged. The AO, based on Insight data and field verification, concluded that the assessee had made purchases ITA No.254 to 256 and 274 to 276 /Ahd/2024 4 from parties whose existence or business activity could not be substantiated. The AO once again rejected the books of account under section 145(3) and applied a GP rate of 12.5%. The CIT(A), while affirming the rejection of books, accepted the assessee’s contention that the GP rate of 12.5% was on the higher side, and therefore scaled it down to 6% and deleted the balance. 6. The tabulated details of the above assessments are as follows: Particulars A.Y. 2018–19 A.Y. 2020–21 A.Y. 2021–22 Date of Filing Return 30.10.2018 30.11.2020 28.01.2022 Returned Income (Rs.) 3,13,73,510/- 6,61,29,990/- 6,57,84,520/- Date of Return processed u/s 143(1)(a) NA 18.12.2021 22.09.2022 Income Computed u/s 143(1)(a) (Rs.) NA 6,61,29,990/- 6,58,34,650/- Date of AO’s Order 23.03.2023 27.09.2022 23.12.2022 Section of AO’s Order 147 r.w.s. 144B 143(3) r.w.s. 144B 143(3) r.w.s. 144B Amount of Alleged Bogus Purchases added (Rs.) 92,95,26,352/- 49,84,90,503/- 412,48,43,029/- Gross Profit Rate Applied by AO 12.50% 12.50% 12.50% Addition Made by AO (Rs.) 11,61,90,794/- 6,23,11,313/- 51,55,18,437/- Assessed Income (as per AO’s Order) 14,75,64,304/- 12,84,41,303/- 58,13,02,955/- Date of CIT(A)’s Order 22.12.2023 18.12.2023 20.12.2023 Gross Profit Rate Applied by CIT(A) 5% 6% 6% 7. Aggrieved by the orders of CIT(A) both Revenue, as well as assessee are in appeal before us raising following grounds of appeal: In Revenue’s appeal - ITA No. 254/Ahd/2024 – A.Y. 2018-19 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in restricting the addition made by the Assessing Officer @ 12.5% on bogus purchase to 5% without taking into consideration facts of the case? ITA No.254 to 256 and 274 to 276 /Ahd/2024 5 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is, therefore, prayed that the order of Ld. CIT(A)may be set aside and that of the Assessing Officer be restored. In Revenue’s appeal - ITA No. 255/Ahd/2024 - A.Y. 2020-21 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in restricting the addition made by the Assessing Officer @ 12.5% on bogus purchase to 6% without taking into consideration facts of the case? 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is, therefore, prayed that the order of Ld. CIT(A)may be set aside and that of the Assessing Officer be restored. In Revenue’s appeal - ITA No. 256/Ahd/2024 - A.Y. 2021-22 1. Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) was justified in restricting the addition made by the Assessing Officer @ 12.5% on bogus purchase to 6% without taking into consideration facts of the case? 2. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 3. It is, therefore, prayed that the order of Ld. CIT(A)may be set aside and that of the Assessing Officer be restored. In Assessee’s appeal – ITA No. 274/Ahd/2024 – A.Y. 2018-19 1. The Ld. AO has erred in law and on facts of the case reopening the assessment u/s. 147 of the Act. Under the facts and circumstances of the case, the action of reopening is without jurisdiction and in not permissible either in law or on facts. 2. The Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in rejecting books of accounts u/s. 145(3) of the Act. 3. The Ld. CIT(A) has erred in law and on facts in partly confirming the addition of bogus purchases made by Ld. AO without providing information/ document/ material used against the appellant and opportunity of cross-examination resulting in gross violation of principles of natural justice. 4. The Ld. CIT(A) has erred in law and on facts in partly confirming the addition of bogus purchases to the extent of Rs.4,64,76,318/- [5% of Rs.92,95,26,352/-] ITA No.254 to 256 and 274 to 276 /Ahd/2024 6 5. Both the lower authorities have erred in computing the amount of alleged bogus purchases. The purchases claimed during the year under consideration from the impugned suppliers are Rs.70,66,67,613/- and not Rs.92,95,26,352/-. 6. Alternatively, and without prejudice, the estimation of profit at the rate of 5% is highly excessive and does not reflect the real income earned of the appellant. 7. Both the lower authorities have erred in not granting set off of the profit already declared in the return of income on alleged bogus purchases against the estimated profit. 8. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 9. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s. 234A/B/C/D of the Act. 10.The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s. 270A of the Act. 11. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. In Assessee’s appeal – ITA No. 275/Ahd/2024 – A.Y. 2020-21 1. The Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in making addition on estimated profit basis without rejecting books of accounts u/s. 145(3) of the Act. 2. The Ld. CIT(A) has erred in law and on facts in partly confirming the addition of bogus purchases made by Ld. AO without providing information/ document/ material used against the appellant and opportunity of cross-examination resulting in gross violation of principles of natural justice. 3. The Ld. CIT(A) has erred in law and on facts in partly confirming the addition of bogus purchases to the extent of Rs. 2,99,09,430/- [6% of Rs. 49,84,90,503/-] 4. Alternatively, and without prejudice, the estimation of profit at the rate of 6% is highly excessive and does not reflect the real income earned of the appellant. ITA No.254 to 256 and 274 to 276 /Ahd/2024 7 5. Both the lower authorities have erred in not granting set off of the profit already declared in the return of income on alleged bogus purchases against the estimated profit. 6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 7. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s. 234A/B/C/D of the Act. 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s. 270A of the Act. 9. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. In Assessee’s appeal – ITA No. 276/Ahd/2024 – A.Y. 2021-22 1. The Ld. CIT(A) has erred in law and on facts in confirming the action of the Ld. AO in rejecting books of accounts u/s. 145(3) of the Act. 2. The Ld. CIT(A) has erred in law and on facts in partly confirming the addition of bogus purchases made by Ld. AO without providing information/ document/ material used against the appellant and opportunity of cross-examination resulting in gross violation of principles of natural justice. 3. The Ld. CIT(A) has erred in law and on facts in partly confirming the addition of bogus purchases to the extent of Rs.24,74,90,582/- [6% of Rs.412,48,43,029/-] 4. Alternatively, and without prejudice, the estimation of profit at the rate of 6% is highly excessive and does not reflect the real income earned of the appellant. 5. Both the lower authorities have erred in not granting set off of the profit already declared in the return of income on alleged bogus purchases against the estimated profit. 6. Both the lower authorities have passed the orders without properly appreciating the facts and they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant ITA No.254 to 256 and 274 to 276 /Ahd/2024 8 from time to time which ought to have been considered before passing the impugned order. The action of the lower authorities is in clear breach of law and Principles of Natural Justice and therefore deserves to be quashed. 7. The Ld. CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in levying interest u/s. 234A/B/C/D of the Act. 8. The learned CIT(A) has erred in law and on facts of the case in confirming action of the ld. AO in initiating penalty u/s. 270A of the Act. 9. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 8. Though the assessee had taken other grounds of appeal also, however, the sole and common issue raised by both the parties is relating to estimation of GP rate on the alleged bogus purchases of the assessee. 9. During the course of hearing before us, the learned Departmental Representative (DR) placed reliance upon the assessment orders passed by the Assessing Officer for all three assessment years under consideration. 10. The learned Authorised Representative (AR), appearing on behalf of the assessee, reiterated the factual matrix as recorded in the orders of the lower authorities. it was further submitted that the application of an arbitrary gross profit (GP) rate of 12.5% was excessive and without any basis in the business history of the assessee. The learned Authorised Representative (AR) also invited attention to the year-wise trend of gross profit (GP) and net profit (NP) ratios from A.Y. 2016–17 to A.Y. 2021–22 to contend that the GP ratios applied by the AO were wholly ITA No.254 to 256 and 274 to 276 /Ahd/2024 9 unjustified and excessive. It was submitted that the assessee has maintained consistent profitability over the years and that the impugned purchases were duly accounted for and supported by documentation. The AR emphasised that the average GP and NP ratios for the period A.Ys. 2016–17 to 2018–19 stood at 5.50% and 2.12%, respectively, whereas for the extended period A.Ys. 2016–17 to 2021–22, the average GP and NP ratios were 5.34% and 2.14%, respectively. These, according to the assessee, demonstrate consistency and rule out any unusual inflation or suppression. To further support this contention, the AR demonstrated the impact of the addition made by the AO for A.Y. 2018–19 on the profitability ratios. It was contended that if the addition of ₹11.61 crore made by the AO is factored in, the GP and NP ratios shoot up to 10.35% and 8.75%, respectively, which are abnormally high and uncharacteristic of the assessee’s line of business. This variation, the AR submitted, was a clear indication of excessive estimation made by the AO, warranting its moderation. 11. We have carefully considered the rival submissions, perused the orders of the lower authorities, and examined the material placed on record. In all three assessment years, the core issue pertains to the addition made by the AO towards alleged non-genuine purchases from certain flagged entities, based on third-party information and report from the Investigation Wing. The AO rejected the books of account under section 145(3) and applied a GP rate of 12.5%, resulting in substantial additions. The CIT(A), however, granted partial relief by restricting the GP ITA No.254 to 256 and 274 to 276 /Ahd/2024 10 rate to 6%, which has been challenged in cross appeals. Before the CIT(A), the assessee submitted that it is engaged in the business of manufacturing copper and copper-based products and had made purchases from suppliers after due verification, supported by copies of purchase invoices, ledger confirmations of parties, PAN and GST registration details, quantitative records of input/output, stock registers and evidence of payment through regular banking channels. The assessee pointed out that the purchases were duly accounted for in its books and that the sales arising therefrom were never doubted by the AO. It was emphasized that the purchases were subject to TDS where applicable, and that the quantitative tally of consumption and closing stock was fully maintained and verified by statutory auditors. The assessee also submitted comparative GP/NP ratios for past years and argued that the GP rate of 12.5% applied by the AO was wholly arbitrary and unsupported by historical data. 12. We note that the CIT(A) while giving partial relief, relying on various judicial precedent, has noted that complete disallowance of purchases is not sustainable when corresponding sales are accepted and stock position is not disturbed. The CIT(A) also held that the books may be rejected u/s 145(3) due to failure to conclusively prove supplier identity, but reasonable estimation should follow. Applying an industry-consistent GP rate of 5% and 6% was considered fair in light of past performance, industry margin trends, and judicial tolerance. The relevant paras from the order of CIT(A) for the A.Y. 2018-19 are reproduced as under: 6.1 This is a fact on record that the AO has not rejected the sales affected by the appellant. In fact, AO has taken into account the net profit declared on sales, even after rejecting the ITA No.254 to 256 and 274 to 276 /Ahd/2024 11 books of accounts, and has made the GP rate addition thereto relating to alleged bogus purchase. As such, it is only logical to conclude that without corresponding purchases being made, the appellant could not have affected the sales. In view of the contemporaneous evidence brought on record by the appellant, the entire purchase transaction cannot be treated as unexplained expenditure. This is a case where the payment to the concerned suppliers has been made through proper banking channel, and there is no evidence on record thatthe payments made were again routed back to the appellant company. In such a situation, the only logical view that can be taken is that the appellant company could have obtained the accommodation bills for the material purchased locally. In other words, the seller entities may not be the actual suppliers, but may have provided the bills for the material purchased locally. This is not a case wherein the signed blank cheque books etc. have been found with the buyer (the appellant company) to indicate that the purchase of material was not at all made, or the purchases were inflated, and the purchase consideration, in full or in part, was routed back to the appellant company. As such, the decision of the Supreme Court in the case of N K Proteins Ltd (250 Taxman 22) (SC) would not apply to facts of the instant the case. 6.2 In the case of Pr. CIT Vs Surya Impex (2023) (148 taxmann.com 154) (Gujarat), AO had received report from Investigation Wing that assessee-firm received accommodation entries in form of bogus purchases from Shri Bhanwarlal Jain Group. However, assessee filed detailed evidence consisting of details of purchase, PAN and addresses of parties, purchase invoice, stock register, etc. On these facts, Hon’ble Gujrat High Court has upheld the findings of Tribunal in limiting addition in hands of assessee at the rate of 6 per cent of impugned purchases, taking note of the fact that sales was not disputed by the Assessing Officer and books of accounts were not rejected. 6.3 Hon’ble Bombay High Court in the case of Pr. CIT Vs S. V. Jiwani (2022) (145 taxmann.com 230) (Bombay) has held that where assessment was reopened on the basis of information received from Sales Tax Department that assessee had made purchases which seemed to be accommodation entries, entire purchase made by assessee could not be added back as income, but only profit element embedded therein was to be treated as income of assessee. 6.4 Hon’ble Gujrat High Court in the case of Pr. CIT Vs Rakesh Kailashchand Jain (2023) (156 taxmann.com 82) (Gujarat) has held that where Assessing Officer received report from Investigation Wing that assessee was beneficiary of accommodation entries in form of bogus purchases from a group and made 100 per cent addition with respect to said purchases, Tribunal was justified in limiting addition in respect of bogus purchases at the rate of 6 per cent of total purchases considering only income component of disputed transaction. 6.5 Hon’ble Bombay High Court in the case of Pr. CIT Vs Tirupati Earth Neerprima JV (2023) (154 taxmann.com 197) (Bombay) where Assessing Officer treated purchases made by assessee as bogus and made addition in respect of same, since assessee had maintained inventory of stock and payments for such purchases were made by account payee cheques and tax invoices were obtained, such purchases could not be rejected and addition to be restricted to the extent of profit element. 6.6 Hon’ble Bombay High Court in the case Pr. CIT Vs Hiren Parekh (2023) (153 taxmann.com 470) (Bombay) has held that where Assessing Officer added entire amount of purchases to income of assessee on ground that same were bogus purchases, since it was not disputed that purchases were actually made and payments for same were made through account payee cheque and further, assessee ITA No.254 to 256 and 274 to 276 /Ahd/2024 12 had already declared 7.5 per cent as gross profit, Tribunal was justified in restricting addition to 8 per cent of gross profit on impugned purchase transactions. 6.7 On similar facts, Hon’ble ITAT, Mumbai in the recent case of JMD Corporation of India Limited Vs ITO (ITA No. 2241/Mum/2023) has reiterated the view that only the profit embedded in such transaction can be brought to tax. The relevant findings are as under – “…After perusal of the material on record we find that before the Ld. CIT(A) assessee has produced copy of purchase register, sale register, ledger, purchase invoices, stock movement, copy of bank statement etc. to prove the genuineness of the purchases. It is also noticed that assessing officer has not doubted the corresponding sales made by the assessee. If such purchases are treated as non-genuine then the corresponding sales should also be considered as nongenuine. Therefore, we consider that in such types of transaction only the profit margin embedded in such transaction could be taxed. In such type of cases, the assessee procures the material from the grey market by paying cost and as the bills are not available for such transaction, obtaining bills from third party who after receipts of cheque from the assessee making him available the cash after deducting its commission. Since the sales were not doubted therefore it was proved that assessee was actually in possession of goods. The assessee has benefitted by receiving margin of grey market. The gross profit for the F.Y. 2009-10 to 2011-12 as provided in the order of Ld. CIT(A) in the case of the assessee is reproduced as under, …. …..After taking into consideration the aforesaid facts we consider that the addition to the extent of profit element embedded in the amount of purchases made from the said party is to be added. After considering the above facts and findings we consider it fair and reasonable to restrict the disallowance in the case of the assessee to the extent of 4 percent of the impugned purchases made by the assessee from the said party.” 13. We also noted that the CIT(A) considered the trend of profit rates as under: Assessment Year GP Rate Average GP Rate NP Rate 2016-17 6.02% 2.01% 2017-18 4.44% 5.62% 1.58% 2018-19 3.47% 4.64% 1.87% 2019-20 6.05% 4.65% 2.78% 2020-21 7.91% 5.81% 3.00% 2021-22 4.13% 6.03% 1.59% ITA No.254 to 256 and 274 to 276 /Ahd/2024 13 14. The CIT(A) observed that the assessee’s gross profit (GP) rate has historically ranged between 3.47% and 7.91%, with an average falling between 4% and 6%. For the year under consideration, the GP rate was noted at 3.47%, while the three- year average stood at 4.64%. Considering these trends, the CIT(A) found it fair and reasonable to estimate profit by applying a 5% GP rate (for A.Y. 2018-19) on the aggregate purchases from the five flagged suppliers and accordingly restricted the addition to that extent. 15. In view of the foregoing discussion, we find no infirmity in the well-reasoned and judicious findings recorded by the Learned CIT(A), for the assessment years under consideration. The CIT(A), while sustaining the rejection of books of account under section 145(3), has correctly applied a fair and industry-consistent gross profit (GP) rate after appreciating the nature of the assessee’s business, the consistency in profitability ratios over the years, and the evidentiary material placed on record. The CIT(A) has also drawn support from multiple binding judicial precedents, including those rendered by the Hon’ble Gujarat and Bombay High Courts, to hold that full disallowance of purchases is not justified when corresponding sales are accepted and no discrepancy is found in the stock records or turnover. We further note that the additions sustained by the CIT(A) at 5% (for A.Y. 2018–19) and 6% (for A.Ys. 2020–21 and 2021–22) are in line with past adjudications in similar cases and take into account the profit element embedded in disputed purchases. The application of an inflated GP rate of 12.5% by the AO, in our ITA No.254 to 256 and 274 to 276 /Ahd/2024 14 considered view, lacks justification and fails to account for business realities and past profit margins of the assessee. Accordingly, we uphold the orders of the CIT(A) for all three years. No other grounds are pressed by the ld.counsel for the assessee. 17. In the result, all six appeals, three by the Revenue and three by the assessee, stand dismissed. Order pronounced in the Court on 25th June, 2025 at Ahmedabad. Sd/- Sd/- (SANJAY GARG) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER Ahmedabad, dated 25/06/2025 "