ITO Vs Shankar Metal & Alloys (ITAT Delhi)
ITAT Restricts Bogus Purchase Addition to 5% Profit Element; Revenue’s Plea for Entire Addition Rejected
The Delhi ITAT dismissed the Revenue’s appeal seeking addition of the entire bogus purchases as unexplained expenditure under section 69C. The assessee, engaged in trading of non-ferrous metal scrap and manufacturing of aluminium ingots, was alleged to have made purchases from a paper concern controlled by an accommodation entry provider. Based on this information, the Assessing Officer reopened the assessment and added ₹1.64 crore as unexplained expenditure under section 69C.
In appeal, the CIT(A) accepted that the purchases from the alleged supplier were not genuine but held that only the profit element embedded in such purchases could be brought to tax and accordingly estimated income at 10% of the bogus purchases.
Before the Tribunal, it was pointed out that in the assessee’s own appeal for the same assessment year, the ITAT had already adjudicated the issue and held that only 5% of the bogus purchases represented taxable profit, rejecting the Revenue’s stand that the entire purchase amount should be added under section 69C. Since the issue had already attained finality in the assessee’s own case, the Tribunal held that the Revenue’s appeal no longer survived.
Accordingly, the Revenue’s appeal was dismissed and the assessee’s cross-objection was also dismissed as infructuous, leaving intact the earlier ITAT direction restricting the addition to 5% of the alleged bogus purchases.
FULL TEXT OF THE ORDER OF ITAT DELHI
