Bhagwana Ram Bishnoi Vs DCIT (ITAT Mumbai)
Mumbai ITAT Restricts Bogus Purchase Addition to 2% for Ferrous Metal Trader; 12.5% Estimation Held Excessive Where Sales and Stock Records Were Accepted
The Mumbai ITAT held that where an assessee engaged in the trading of ferrous and non-ferrous metals had substantiated purchases through purchase invoices, delivery challans, bank payments, stock records, GST details and corresponding sales, and the Assessing Officer had accepted the sales and quantitative stock records, the entire purchases could not be treated as bogus merely because the supplier was found to be non-genuine. The Tribunal observed that while the assessee could not conclusively establish procurement from the named supplier, only the profit element embedded in such purchases could be brought to tax. It rejected the Revenue’s mechanical application of a 12.5% profit rate, holding that precedents such as N.K. Proteins, Simit P. Sheth and Mohommad Haji Adam & Co. do not prescribe any fixed percentage and that estimation must depend upon the nature of business, actual profit margins and surrounding facts. Considering the assessee’s low-margin ferrous metal trade, disclosed net profit of 2.80%, and earlier co-ordinate bench decisions in Sterling Steel Industries and Kishorkumar M. Vyas, the Tribunal directed the Assessing Officer to restrict the addition to 2% of the disputed purchases, reducing the addition from ₹37.78 lakh to ₹6.04 lakh.
