Prime Steel Industries Private Limited Vs DCIT (ITAT Chandigarh)
ITAT Chandigarh held that addition by applying gross profit rate on alleged bogus purchases not justified since it was proved that alleged purchases were made at par and were not under-valued or inflated. Thus, appeal of assessee allowed.
Facts- The assessee company is engaged in manufacturing “TMT Bars and M.S. Billet”. During the course of assessment proceedings, AO arrived at the figure of alleged bogus purchases to the tune of Rs.68,26,38,327/- on the basis of information given by the GST department, giving the names of the parties and other particulars and it was informed by the GST department, that in respect of the above purchases from certain parties, the GST department had cancelled the registration of the parties with retrospective effect and some of the parties had even voluntarily surrendered the GST registration.
CIT(A) directed for applying gross profit ratio @5.94% on the alleged bogus purchases. Being aggrieved, the present appeal is filed.
Conclusion- Held that CIT(A) has accepted the books of account presented by the Assessee which was earlier rejected by the Assessing Officer and he has also accepted that the alleged purchases were made at par of other purchases made or even at lower rates. In such a situation, we find no reason to sustain any addition made on this ground, it is because if such alleged purchases were either at par to the rate of other purchases or at lower rate than the purchases made in the books of account, then, where is the possibility of earning extra income ( i.e. from so called profit embedded purchases ) from such purchases?. Thus, the findings of the CIT(A) of restricting the disallowance @ 5.9% for such alleged purchases from bogus parties cannot be sustained. Accordingly, Assessee’s appeal on this ground is allowed.
