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2015 (6) TMI 763 - AT - Income TaxBogus purchases - AO made the addition only on the basis of statement of Sh. Surendra Kumar Sharma which was retracted later on by stating that no bogus entries were provided either to the assessee or any other person - CIT(A) directed the AO to apply net profit rate of 5% on the said unverifiable purchases - Held that:- AO made the addition merely on the basis of statement of one Sh. Surendra Kumar Sharma, Proprietor of M/s Riddhi Siddhi Enterprises which was later on retracted and it was stated that he was not indulged in providing the entries to the assessee or to any other person. The AO did not provide any opportunity to the assessee to cross examine Sh. Surendra Kumar Sharma. In the present case, it is also noticed that the turnover of the assessee was accepted by the Trade Tax Department and it is not the case of the AO that proper books of accounts were not maintained by the assessee in regular course of business or the same method of accounting was not followed consistently. The ld. CIT(A) examined the bank accounts as well as books of accounts of the assessee and categorically stated that the purchases as well as the sales were through banking channel and there was no cash deposit in the bank account of the assessee. In the present case, the AO has not pointed out any defects in the books of accounts, therefore, the ld. CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. As regards to the additions sustained by the ld. CIT(A) by applying the net profit rate of 5% of the alleged unverifiable purchase. We are of the view that when the ld. CIT(A) himself accepted the trading results of the assessee and also held that the payment for purchases of material had been made through banking channel, GP rate declared by the assessee was progressive then there was no occasion to make the addition by applying the net profit rate of 5% by considering the purchases of ₹ 1,39,70,618/- as unverifiable. We, therefore, by considering the totality of the facts as discussed herein above delete the addition sustained by the ld. CIT(A). - Decided against revenue.
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