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TMI Blog2025 (5) TMI 610X X X X Extracts X X X X X X X X Extracts X X X X ..... ned on the basis of information flagged on the Insight Portal under the High-Risk CRIU/VRU category, indicating that the assessee had allegedly availed bogus input tax credit on purchases of Rs. 20,14,258/- from M/s. Vishnu Gold, an entity flagged by the CBIC and GST authorities as a non-genuine biller involved in accommodation entries. Notice u/s 148A(b) was issued on 17.03.2023, and after considering the reply of the assessee, order u/s 148A(d) was passed on 27.03.2023. A notice u/s 148 was issued on 28.03.2023. The assessee refiled its return on 17.04.2023 declaring income of Rs. 5,45,850/-. 3. During the reassessment proceedings, the AO observed that the assessee had allegedly made purchases of Rs. 20,14,258/- from M/s. Vishnu Gold, flagged as a high-risk entity issuing fake invoices. The AO treated the purchases as unverifiable and unsupported by actual movement of goods. The AO relied upon the judgment of the Hon'ble Gujarat High Court in N.K. Industries Ltd. v. DCIT [2016] 72 taxmann.com 289 and added the entire purchase amount u/s 69C r.w.s. 115BBE as unexplained expenditure and concluded the reassessment by determining the total income at Rs. 25,60,108/-. Penalty proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the department. The appellant had shown gross profit on such sales. However, the CIT(A) observed that the supplier, M/s. Vishnu Gold, was found by the GST Department to be engaged in providing accommodation entries without actual movement of goods, and its GST registration was subsequently cancelled. The CIT(A) further observed that the appellant had not requested cross-examination of the said party. In view of these facts, the CIT(A) concluded that the possibility of inflation in the purchase price or the transaction being in the nature of accommodation entries could not be ruled out. Therefore, while holding that disallowance of the entire purchase amount was not warranted, the CIT(A) held that an estimate of income embedded in the said purchases was required to be made. Accordingly, the CIT(A) sustained an addition at the rate of 10% of the purchase value to account for the possible inflation or accommodation nature of the transaction and directed the Assessing Officer to verify the actual purchase amount-whether it was Rs. 18,00,000/- or Rs. 20,14,258/- and compute the addition accordingly. 7. Aggrieved by the order of CIT(A) the assessee is in appeal before us raising follo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .Y. 2021-22, the return was selected for complete scrutiny under CASS, specifically for the reason of "Purchase from High Risk Biller (CBIC)", covering vendors similarly flagged as in the current case. The AR submitted that in that scrutiny proceeding, the AO thoroughly examined the genuineness of purchases, verified the books of account and related documents, and accepted the returned income without making any adverse inference or disallowance. It was strongly urged that this consistent stand of the Department in a subsequent scrutiny year directly undermines the Revenue's allegation of bogus purchase in the year under appeal and supports the assessee's bona fides. 9. The Ld. Departmental Representative (DR), on the other hand, supported the assessment order and relied upon the detailed findings recorded by the Assessing Officer, particularly the reliance placed on information from the Insight Portal, the status of the vendor as an accommodation entry provider, and the case law of N.K. Industries Ltd. v. DCIT [2016] 72 taxmann.com 289 (Gujarat), affirmed by the Hon'ble Supreme Court. 10. We have carefully considered the rival contentions, perused the assessment order, the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rejected under section 145(3), and the assessee has disclosed gross profit of Rs. 19,26,317/- (as disclosed in clause 40 of the annexure to tax audit report in form 3CD at paper book page No.35) on turnover of Rs. 1.44 crore, resulting in a GP rate of 13.32% and net profit of Rs. 3.04 lakh (NP rate 2.10%). The Assessing Officer disallowed the entire purchase by treating it as unexplained expenditure u/s 69C solely on the basis that the vendor was flagged by GST authorities as a high-risk entity. The Ld. CIT(A), while accepting the genuineness of sales and the documentation submitted by the assessee, noted that the vendor's GST registration was subsequently cancelled, and the assessee did not seek cross-examination. 14. On that basis, he observed that the possibility of accommodation entries or inflated purchases could not be ruled out and sustained an addition @10% of the purchase value to reflect embedded income. 15. We find that the facts of the case do not warrant full disallowance of the purchases under section 69C, particularly where books are not rejected, sales are accepted, and payments are made through banking channels. However, the nature of the vendor and the failure o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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