Kamal Kumar Agarwal vs ITO, Ward 43(6)

PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal by the assessee is directed against the order of the National Faceless Appeal Centre (NFAC) Delhi [hereinafter referred to as (“Ld. NFAC)”] vide order dated 05-01-2026 arising out of the order of the Assessing Officer vide order dated 18-03-2024 for A.Y. 2019-20.

The assessee has raised the following grounds in appeal:-

The brief facts of the case are that assessee filed return of income for A.Y.2019-20 under section 139(1) of the Act on 25-10-2019 declaring total income of Rs.11,15,160/-. As per the information available with the Department, a survey action under section 133A of the Act was carried out in the case of Ashok Kumar Gupta on 30-11-2018. During course of survey proceedings Shri Ashok Kumar Gupta has admitted on oath that the he is engaged in providing accommodation entries of non-genuine purchases and non-genuine sales through various entities managed by Shri Ashok Kumar Gupta and his family members. The case of the assessee was reopened based on the information gathered during survey action conducted under section 133A of the Act and the statement of the Shri Ashok Kumar that the assessee has taken the accommodation entry from Shri Ashok Kumar Gupta for Rs. 3,10,50,000/-. Statutory notices were issued to the assessee. According to AO the assessee made the transaction with Mandal Lal Madho Prasad (firm managed by father in-law of Shri Ashok Kumar Gupta’s son for providing entries) claimed as purchases in the books of assessee are bogus. The Assessing Officer completed the assessment proceedings after making the addition of Rs. 3,10,50,000.- on account of disallowance of bogus expenses. Aggrieved the order, the assessee preferred the appeal before the Ld. CIT(A), who vide his order dated 31-10-2025 partly allowed the appeal of the assessee. The Ld. CIT(A) has observed in his order as under:

Being aggrieved the order of the Ld. CIT(A), the assessee is in appeal before the Tribunal.

Ld. AR of the assessee submitted that assessee has maintained the proper stock register and books of account was audited by the chartered Accountant. The assessee has sold the goods purchased from Madan Lal Madho Prasad to the various parties and payment was received in bank account of the assessee. The AO accepted the sales made by assessee. Without purchases no sale can be made. He further submitted that the 12.5 % gross profit on the alleged purchases was wrongly made. The Ld. Departmental Representative submitted that the because the AO has disallowed the bogus purchases on account of bogus expenses under business head then taxation should be made as per slab rates. In the written submission the Ld. DR submitted that Ld. CIT(A) has erred by restricting purchases to be taxed at 12.5% over and above the business income already offered. He relied the order of the AO. We have heard the parties and perused the material available on record. The Ld. AR submitted that this is the appeal of the assessee than the Department cannot demand to increase the profit rate. It is evident from the order of the Ld. CIT(A) that the AO has not disputed the sales or rejected the books of account of the assessee. The Ld. CIT(A) relying the decision of (Kimaya Impex (P) Ltd. Vs. CIT [2022]136 taxmann.com 117 (Mumbai -trib.) {24-01-2022} estimated the gross profit 12.5% under the head business. The Ld. AR submitted that the estimated rate is so high and the books of account not rejected by the AO, therefore, we deem fit and proper to restrict the gross profit element from 12.5 % to 5% under the head business on the total purchase of Rs.3,10,50,000/-. The Assessing Officer is directed to calculate the income of the assessee as indicated above. The ground raised by the assessee is partly allowed accordingly.

In the result, the appeal of the assessee is partly allowed in very terms.