No addition warranted for bogus purchases where GP rate was better than the average GP rate declared by assessee for earlier years
ABCAUS Case Law Citation:
ABCAUS 3008 (2019) (06) ITAT
In the instant case, the revenue had challenged the deletion of the addition by the CIT(A) in respect of the addition made by the Assessing Officer (AO) on account of bogus purchases in the assessment framed u/s 143(3) read with Section 148 of the Income Tax Act, 1961 (the Act).
There was an information with the department regarding the assessee having made bogus purchases. Accordingly, the AO reopened the assessment for two years and finally made addition by estimating of 25% profit on alleged bogus purchases.
However, the addition made for bogus purchases was deleted by the CIT(A) after following the decision of the Tribunal in assessee’s own case.
Before the Tribunal, the assessee relied upon the order of the Tribunal in his own case wherein the Tribunal had dealt with the identical issue and held that when the Gross Profit (G.P.) rate declared by the assessee for the year under consideration was more than the G.P. for the earlier assessment year which was accepted by the Department, no further addition was warranted on account of bogus purchases.
In the instant case also, the assessee contended that the G.P. rate declared for both the relevant years were better than the average G.P. for earlier assessment years therefore no further addition was warranted.
The Tribunal directed the AO to verify the correctness of G.P. rate calculated by the assessee and not to make any addition if the G.P. for the A.Y. under consideration was found to be more than the average G.P. rate declared by the assessee in earlier years.
