Shyam International vs ITO Ward 59(5)

PER AMITABH SHUKLA, AM:

This appeal by the assessee is directed against the order of National Faceless Appeal Centre/Ld. Commissioner of Income Tax(Appeals), New Delhi, [hereinafter referred to as ‘ld. CIT(A)] dated 09.07.2025 arising out of assessment order dated 17.12.2019 passed under section 143(3) of the Income Tax Act, 1961, for the Assessment Year 2012-13. The word ‘Act’ herein this order would mean Income Tax Act, 1961.

At the outset, the ld. Counsel for the assessee submitted that it wishes to pursue only ground of appeal no.9 raised by it. Accordingly, grounds of appeal no.1 to 8 raised by the assessee are dismissed as withdrawn.

The only issue raised by the assessee through ground of appeal no.9 is regarding addition of Rs.97,03,300/- made on account of bogus purchases.

Heard both the parties. Material available on record perused.

The Ld. Counsel for the assessee took us through brief factual matrix of the case. Order under section 143(3) was passed in the case of the assessee engaged in the business of manufacturing of Cotton bags, etc. As per facts recorded by the AO, information was received from Investigation Wing regarding suspected transactions in the bank account belonging to Shri Raghubir Prasad Sharma, proprietor of M/s Ganpati Traders. During enquiries, it transpired that Ganpati Traders is a bogus concern giving accommodation entries. The assessee was reported to have paid an amount of Rs.97.03 lakhs to Ganapati Traders for obtaining bogus purchase bills. In the absence of satisfactory explanation from the assessee qua Ganpati Traders, the ld. AO treated the amount of Rs.97,03,300/- as bogus.

It is the case of the assessee that in its case, the ld. AO has not rejected the books of accounts and that therefore as per settled principles of law addition have to be restricted to GP rate only. In support of its contentions, the assessee has placed reliance upon a catena of judgments including those from this Tribunal holding that in such cases addition have to be restricted to GP rate only.

The ld. DR placed reliance upon the order of lower authorities though he concurred with the fact that the books of accounts have not been rejected while making the impugned addition.

We have noted that the ld. First Appellate Authority has confirmed the findings of the ld. AO in a summary manner without properly analyzing the facts of the case and rejecting assessee’s arguments. We have also noted that the ld. AO in its order dated 17.12.2019, also passed an order largely by relying upon the enquiries of the Investigation Department and the non-availability of M/s Ganapati Traders. We concur with the view that in the absence of rejection of books of accounts by the ld. AO and bringing on records specific facts, addition of the entire purchase amounts was unwarranted. Be that as it may be, we are of the considered view that an estimation of profit of Rs.10 lakhs qua impugned bogus purchases of Rs.97,03,300/- would suffice. We therefore restrict the addition to Rs.10 lakhs and delete the balance of Rs.87,03,300/-. Ground no.9 raised by the assessee is therefore partly allowed.

In the result, the appeal of the assessee is partly allowed.