Vineet Agarwal vs ACIT-2, Moradabad

PER SUDHIR KUMAR, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. CIT(A-3), Lucknow dated 28-10-2025 for the Assessment Year 2017-18 on the following grounds:-

Brief facts of the case are that the assessee is an individual carrying trading business of bullion and jewellery and enjoys the business income besides income from house property and interest income. The accounts of the assessee were audited u/s. 44B of the Income Tax Act, 1961. Assessee submitted during the assessment proceedings all the books of accounts alongwith quantitative details duly maintained by the assessee. The books of accounts including quantitative details as submitted before the AO from time to time have been accepted by the AO and not rejected by invoking the provision of section 145(3) of the Act. Further the quantitative details with respect to purchases etc. have also been accepted by the concerned VAT authorities. The return of income was e-filed on 19.9.2017 showing total income of Rs. 1688080/-. The AO completed the assessment u/s. 143(3) on income of Rs. 20935870/- after making addition of Rs. 19247792/- for bogus purchases against which the assessee preferred appeal before the Ld. CIT(A). The Ld. CIT(A) upheld the action of the AO by dismissing the appeal of the assessee. Aggrieved, assessee is in appeal before us.

Ld. AR submitted that Ld. CIT(A) has erred in sustaining disallowance of Rs. 1,92,47,792/- on account of purchase of jewellery when as a matter of fact the said purchases have been incorporated in sales to the extent of Rs. 53,88,946/- inclusive of gross profit and in the closing stock to the extent of Rs. 1,48,74,451/- and that the quantitative details with respect to purchase of jewellery have also been accepted by the concerned VAT authorities and the books of accounts of assessee having also been accepted by the AO in the course of assessment proceedings. It was the further submission that there can be no disallowance of Rs. 1,92,47,792/- on account of purchases of jewellery as made by alleging the same to be in the nature of bogus purchase when the sale and closing stock emanating from the same have been duly accepted by the AO alongwith the books of accounts as furnished by the assessee in the course of assessment proceedings. It was further submitted that once the books of accounts have been accepted and more particularly the figures of sales and closing stock have also been accepted then the maximum disallowance which can be made with respect to alleged bogus purchase would be confined to the gross profit ratio.

Ld. DR relied upon the orders of the authorities below.

We have heard both the parties and perused the records. Before us, during the hearing, Ld. AR to support his aforesaid contentions has filed a small paper book containing pages 1-70 of the compilation of following case laws:

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