DCIT Vs Amar Ghanasingh (ITAT Mumbai)
ITAT Mumbai Upholds 3% Profit Addition on Alleged Bogus Purchases – Sales Accepted, Entire Disallowance Unsustainable
Assessee, engaged in manufacturing & trading of jewellery under the name M/s Amar Ghanasingh, was alleged to have made purchases worth ₹9.40 crore from five entities linked to the Bhanwarlal Jain Group, identified as accommodation entry providers. AO held these purchases to be non-genuine, rejected books u/s 145(3), & made an addition of ₹75.24 lakh (8%) as estimated profit from bogus purchases. During the assessment, Assessee had furnished extensive documentation- purchase & sales registers, quantitative details, bank statements, confirmations, sales-tax registration, & ITR copies of the suppliers. Despite this, AO made a blanket rejection of the books.
On appeal, CIT(A)/NFAC examined all evidences & found that AO had accepted Assessee’s sales & closing stock figures, implying purchases were actually made. Citing that “without purchases, sales cannot exist,” CIT(A) restricted the addition to 3% of the alleged bogus purchases following consistency with earlier & subsequent years & relying on Trustar Diamonds v. ACIT (ITA Nos. 748 & 1278/Mum/2023).
Department contended that CIT(A) erred in reducing the addition to 3% without appreciating that Assessee had routed its transactions through hawala operators & that the entire 8% addition deserved to be upheld.
