Estimation of Net Profit 12 % on bogus purchase

 M/S. ANAM PESTICIDES PVT. LTD. VS. ITO, WARD-1(1)(1), AHMEDABAD (ITAT AHMEDABAD-2025)

The main issue was to the estimation of income bogus purchases additions made to the returned income by estimating net profit at 12% on total turnover. CIT(A) estimated the net profit rate of 12% of the bogus purchases, without giving any specific finding as to why the net profit rate of 12% was attracted in the assessee’s set of facts. Assessee had relied on several judicial precedents in which the net profit rate of 1% to 2% had been taken by various Courts/Tribunals. While passing the order, CIT(A) did not give any specific finding on the applicability/non-applicability of the judicial precedents relied upon by the assessee. It is a well settled law that just because the parties from whom purchases have been made are unverifiable does not mean that the purchases itself are bogus, specifically when the figure of sale/turnover have not been disputed by the Tax Authorities. Matter is hereby restored to the file of Ld. CIT(A) to give a specific finding on assessee’s challenge to rejection of books of accounts u/s 145(3) and also to give a finding/basis of the correct net profit rate, taking into consideration the assessee’s set of facts and the judicial precedents on the subject. Appeal of the assessee is allowed for statistical purposes.