Goodone Traders Private Limited Vs CIT (Appeals) (ITAT Delhi)
ITAT Delhi: Bogus Sales Addition under Section 68 Remanded — AO to Apply Average 3-Year Gross Profit Rate Instead of Taxing Entire Sales
Assessee filed its return declaring ₹4.46 crore for AY 2014-15, which was originally assessed u/s 143(3) on 07.12.2016. Later, based on information flagged by the DIT (Systems) through the “Insight Portal” indicating bogus import transactions investigated by the Enforcement Directorate (ED), AO reopened the assessment u/s 147. A notice u/s 148 was issued on 30.06.2021 (validated later as per Union of India v. Ashish Agarwal, SC). On completion of reassessment, AO made an addition of ₹605.07 crore u/s 68, treating certain foreign inward remittances as accommodation entries.
CIT(A)/NFAC upheld the reassessment & addition without detailed reasoning.
Assessee’s Contentions
- The reopening was invalid — purely based on borrowed satisfaction from ED without independent verification or tangible material, contrary to Divya Capital One (P) Ltd v. ACIT (2022) 139 taxmann.com 461.
- The same income cannot be taxed twice since the alleged foreign remittances were already disclosed in audited accounts & offered to tax (Laxmipat Singhania v. CIT 72 ITR 291 SC).
- Total sales of ₹867.48 crore, including exports to Al Khat Al Fizi Trading LLC, were genuine & matched with audited export turnover.
- Invoking s.68 was erroneous as the transactions were part of regular business sales, not unexplained cash credits (Suwalka & Suwalka Properties Builders Pvt. Ltd., ITAT Jaipur 2024).
- AO never rejected the books nor doubted the sales but still made massive addition under s.68.
- Alternatively, requested that only average 3 years’ gross profit rate be applied.
Tribunal’s Findings /Decision
- AO did not reject books or specifically disprove the reported sales.
- ED’s investigation pointed to possible bogus entries, but AO failed to establish nexus or quantify genuine vs. doubtful transactions.
- Since the Assessee had sought estimation based on past gross profits, such a reasonable basis deserved acceptance.
- In the interest of justice, the ITAT set aside both CIT(A)’s & AO’s orders & restored the matter to AO to recompute income by applying 3 years’ average gross profit rate on the reported sales after granting opportunity of hearing.
- The appeal was allowed for statistical purposes — assessment remanded to AO to apply average GP rate instead of blanket addition u/s 68.
Key Takeaway
