Kanta Devi Jalan Vs DCIT (ITAT Delhi)
The Income Tax Appellate Tribunal (ITAT), Delhi, partly allowed the assessee’s appeals for Assessment Years 2013-14 to 2016-17 concerning additions made on alleged bogus purchase and sale transactions. The Assessing Officer had treated transactions with certain alleged dummy concerns as accommodation entries, rejected the books of account under Section 145(3), and estimated additional gross profit (GP) at 2.88% by adopting the highest GP rate of AY 2019-20. The Tribunal observed that the assessee’s sales had been accepted, transactions were routed through banking channels, and the assessee had furnished VAT registration documents and bank account details establishing the identity and creditworthiness of the parties. At the same time, the Tribunal held that the assessee was still required to establish the genuineness of the purchases and the source of funds. Finding the AO’s adoption of the AY 2019-20 GP rate excessive and unrelated to the relevant years, the ITAT restricted the addition to 1% GP, clarifying that the relief should not be treated as a precedent.
Core Issue. The principal issue before the Tribunal was whether the entire addition made on account of alleged bogus purchases could be sustained where the sales declared by the assessee had been accepted, the purchases were supported by banking transactions, VAT registration documents and bank account details of the suppliers, but the assessee could not fully establish the genuineness of the purchases. The Tribunal also considered the reasonableness of adopting the gross profit rate of AY 2019-20 for estimating income pertaining to AYs 2013-14 to 2016-17.
