Suraj Narang Vs Assessing Officer (ITAT Delhi)
Assessee, Suraj Narang (HUF), engaged in yarn trading under the name “Love Kush Yarn”, filed return for AY 2018-19 declaring ₹7,11,350. Based on departmental information, AO reopened assessment u/s 147 on 29.03.2022 alleging that Assessee had made bogus purchases of ₹4,65,88,878 from five hawala entities—Shree Balaji Wooltex, Radha Kanheya Export, Sri Rameshwaram International, Soni Textiles & Shree Bankey Bihari Enterprises.
Assessee did not file return in response to 148, nor comply with repeated 142(1) notices. AO rejected books u/s 145(3) & made an ex-parte estimation of 12.5% profit on the alleged bogus purchases. CIT(A) upheld the additions, holding the purchases as non-genuine and noting that Assessee himself alleged that one Rajesh Mittal had issued fake invoices to evade GST.
Before Tribunal, there was again no appearance from Assessee. Tribunal examined the record & noted:
- assessee failed to substantiate any of the purchases;
- five suppliers did not respond to statutory notices;
- allegation of fake invoicing reinforced non-genuineness;
- AO & CIT(A) rightly treated the purchases as bogus.
However, Tribunal found the 12.5% profit rate on ₹4.65 crore excessive in the peculiar facts. Without creating precedent, Tribunal considered it reasonable—given Assessee’s line of business, margin history (0.51% in AY 2017-18 vs 0.77% in AY 2018-19), & the nature of unverifiable purchases—to estimate profit at 8% instead.
AO was accordingly directed to recompute income by applying 8% profit on the bogus purchases, instead of 12.5%.
The appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
