K L Tambi & Company Vs DCIT (ITAT Jaipur)
Conclusion: Tribunal upheld 20% addition instead of 25% on alleged bogus purchases due to unverified sellers agreeing that assessee failed to prove the genuineness of the transactions, and confirmed penalty proceedings.
Held: AO disallowed 25% of bogus purchase, which came to Rs. 15,13,844/-, added the same to the income of the assessee, and calculated the total income at Rs. 62,32,210/-.Notice for initiating preceedings u/s 271(1)(c) r.w.s 274 , also came to be issued by AO separately. AO rejected the books of accounts of the assessee u/s 145(3) and while applying GP rate of 17.50% on the declared turnover of Rs. 12,14,470/-and having regard to the past history of the assessee, calculated the same at Rs. 2,17,02,532/-. Also, AO disallowed certain expenses, namely, vehicle- running- expenses, telephone expenses and miscellaneous expenses, to the tune of Rs. 6,50,752/-. The assessment order initially passed, was challenged by assessee before CIT(A). Vide order dated 18.06.2008, the same was upheld and AO was directed to estimate the gross profit at 17.5% on exports sales of Rs. 11,26,64,469 as against 15.16% declared by assessee by allowing a relief of Rs. 50,50,137/- sustaining the trading addition to the tune of Rs. 26,36,608/-. Since the department and assessee both felt aggrieved by the above said order passed by CIT(A). Appellate Tribunal allowed the assessee’s appeal however, the High Court remitted the case for a fresh decision. AO passed the assessment order disallowing 25% on the purchases and adding a sum of Rs. 15,13,844/- by way of trading addition to the total income of the assessee. The assessment order had been upheld by CIT(A), vide impugned order. Hence, the appellant was before the Appellate Tribunal for the second time. It was held that nothing had been placed on record to prove that there was decrease in the price of US Dollar as against Rupee or that said fact affected the G.P. rate. As the books of accounts was rejected for the third time, and assessee having failed to prove the claim put forth before this Appellate Tribunal in the written submission about decrease in US dollar or its any effect on the G.P.rate, the turnovers and GP rates of previous 2 years as well, and that assessee had debited purchase account with fictitious invoices in order to inflate expenditure and lower the taxable profits, it was deemed a fit case to apply Gross Profit at the rate of 20% for the AY 2005-6, as regards the bogus purchases.
