Suraj Narang, HUF vs The Assessing Officer

PER NAVEEN CHANDRA, AM :-

This appeal by the assessee is directed against the order of the NFAC, Delhi dated 16.02.2024 pertaining to A.Y 2018-19.

None appeared on behalf of the assessee. We decided to proceed ex-parte. The ld. DR was heard at length. Case records carefully perused.

Brief facts of the case are that the assessee is a HUF and running his business under the name as “Love Kush Yarn” under the HUF. The assessee filed a return declaring an income of Rs 7,11,350/- om 15.10.2018 for AY 2018-19. The assessment in case of the assessee was re-opened under section 147 r.w.s 144 read with section 144B of the Income-tax Act, 1961 (herein after referred as 'The Act') on 29.03.2022 on the basis of information that the assessee made bogus purchases of Rs. 4,65,88,878/- from 5 different parties i.e M/s Shree Balaji Wooltex, M/s Radha Kanheya Export, M/s Sri Rameshwaram International, M/s Soni Textiles, and M/s Shree Bankey Bihari Enterprises.

The assessee submitted before the Assessing Officer that they had properly shown the net profit as compared to the last year. In the A.Y. 2017-18 net profit ratio i.e. 0.51% was shown as against 0.77% in A.Y. 2018-19, i.e which is higher than the previous year.

The Assessing Officer found that the assessee did not file any return in response to notice u/s 148 nor it made any response to several notices u/s 142(1). The AO finally rejected the books of account u/s 145(3) of the Act and estimated profit rate @ 12.5% on the total purchases made from the five parties amounting to Rs. 4,65,88,878/- in this instant case.

Aggrieved, the assessee went in appeal before the ld. CIT(A) who confirmed the order of the Assessing Officer.

Before us, the ld DR assisted us with the facts of the case.

We have heard the submissions of the ld DR and carefully perused the materials on record. The Assessing Officer made ex-parte assessment u/s 147 r.w.s. 144 of the Act and has considered the purchases made by the assessee to the tune of Rs. 4.65 crores as unexplained purchases as the assessee has not been able to verify the veracity of the purchases.

From a perusal of the record, we find that the assessee in his grounds of appeal has alleged that Shri Rajesh Mittal had issued fake invoices to the assessee against the goods purchased to evade payment of GST @ 5% on taxable value. We find that the ld. CIT(A) had held the purchases made from the said 5 firms as non-genuine purchases. Coupled with the facts that this fact of fake invoices as well as non-response from these 5 parties in front of the Assessing Officer to verify the purchase, action of the Assessing Officer and the ld. CIT(A) is considered as valid. However, we consider it fit, in the present factual matrix, without creating any precedence, to estimate the income from this non genuine/bogus purchase @ 8%. Accordingly, the Assessing Officer is directed to estimate the income of the assessee at 8% of these bogus purchases.

In the result, appeal of assessee in ITA No. 1593/DEL/2024 is partly allowed.