Mumbai ITAT Confirms Gross Profit Margin @ 12.5% On Alleged Bogus Purchase Since Sales Are Not Disputed: Mumbai ITAT

Finding that the Settlement Commission has not discarded the evidentiary value of the statement of witness (Rajesh Doshi) who has admitted to the modus operandi of availing bogus purchase bill from the assessee, the Mumbai ITAT confirmed the addition made by I-T Authorities on the gross profit margin @ 12.5% on the alleged bogus purchase by assessee. The Bench of Amarjit Singh (Accountant Member) and Kavitha Rajagopal (Judicial Member) observed that “The assessee has failed to rebut the said statement of Shri Rajesh Doshi by any documentary evidence neither before the lower authorities nor before us. In the absence of any such contradictory evidences, we do not find any infirmity in the order of the ld. CIT(A) in making an addition on the gross profit margin @ 12.5% on the alleged bogus purchase where the sales are not in dispute”. (Para 12) As per the brief facts of the case, the assessee company is engaged in the business of construction and development of property. Pursuant to a search and seizure action in the case of Bharat Shah Group and Tank Group, notice u/s. 153A was issued to the assessee. The AO observed that the assessee was one of the beneficiaries of accommodation entries by way of bogus purchases availed from the concerns. The AO then passed the assessment order u/s. 153A r.w.s 143(3) determining the total income at Rs.13,97,10,580/- after making an addition on bogus purchases and towards on-money received by the assessee. On appeal, the FAA restricted the bogus purchases to 12.5% on the gross profit margin and deleted the addition towards on-money received by the assessee on the ground that the Settlement Commission had in assessee's related concerns disregarded the seized material, documents and the statements recorded which are also the basis in the assessee's case. The Bench noted that the AO failed to consider the assessee's contention on the premise that the criminal case lodged by the assessee against Daxesh Parmar is still pending before the court of law and that the cross examination of Daxesh Parmar was not granted for the reason that Nilesh Tank had already confirmed the statement of Daxesh Parmar in his statement recorded u/s. 131 in which Nilesh Tank had accepted the role of Daxesh Parmar, explaining the modus operandi of the impugned transactions though the same was retracted on a later date. The AO made an addition on the entire bogus purchase of Rs.8,00,67,017/- on the ground that the assessee has failed to furnish the details by way of documentary evidence to contradict the seized material, and the CIT(A), on the other hand, had restricted the impugned addition to 12.5% on the gross profit margin of the impugned bogus purchases on the ground that the AO has not disputed the sales made by the assessee, added the Bench. The Bench point out that the assessee has not raised this contention that Rajesh Doshi was neither an employee nor a partner and that the assessee had not transacted with the said person before the Settlement Commission and the fact that Rajesh Doshi has also not denied the transaction between him and the assessee. The assessee has failed to rebut the said statement of Rajesh Doshi by any documentary evidence neither before the lower authorities nor before the Tribunal, added the Bench Counsel for Appellant/ Revenue: Ramakrishna Bandi Counsel for Respondent/ Assessee: None Case Title: DCIT verses Shri Nilesh Shantilal Tank Case Number: ITA Nos.3607 & 3598/M/2023 Click here to read/ download the Order

Mumbai ITAT Confirms Gross Profit Margin @ 12.5% On Alleged Bogus Purchase Since Sales Are Not Disputed: Mumbai ITAT

Pankaj Bajpai

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