The assessee an Individual had filed return for relevant AY. During assessment the AO made addition @12.5% of the alleged bogus purchases. The notices sent u/s 133(6) of the Act were returned back by the postal authorities, therefore, the assessee had not proved the genuineness of the purchases. On appeal, CIT(A) upheld the order of AO. Aggrieved assessee filed appeal before Tribunal and submitted that assessee had made purchases through brokers and the assessee had already paid the Sales Tax/VAT, therefore, a lenient view may be taken.

Tribunal held that,

++ Gujarat High Court in Sanjay Oilcakes Industries vs. CIT, 2008-TIOL-267-HC-AHM-IT held that apparent sellers, who issued the bills were not traceable and the goods received from parties other than the persons, who had issued the bills for such goods. The purchases were shown to have been made by making payments, through banking channel and thus the apparent sellers were not genuine or were acting as conduit between the assessee and the actual seller. In such a situation, the conclusion drawn by the Ld. Commissioner of Income Tax (Appeal) as well as by the Tribunal was affirmed. Apex Court in Kachwala Gems vs JCIT, 2006-TIOL-200-SC-IT observed that an element of guesswork is inevitable in cases, where estimation of income is warranted;

++ in the present case, it is noted that the assessee is trading in pipes, iron tubes and steel etc and declared total income of Rs. 57,59,000/- in his return filed on 23/09/2010 (AY 2010-11) and identically Rs.61,46,530/- on 06/09/2011 for Assessment Year 2011-12. The assessee claimed to have made purchase from certain parties. The Assessing Officer asked the assessee to prove the genuineness of the purchases. Notices under section 133(6) of the Act were issued to such parties, which were returned unserved by the postal authorities. The assessee was asked to produce the parties so that the genuineness of the purchases can be ascertained. The Assessing Officer also analyze the statement on oath tendered before the Sales Tax Department, wherein, it was found that the concerned parties issued bogus bills without actual delivery of goods. It was also found that the cash was returned back against the check. Even before this Tribunal, the assessee was asked to produce the parties, if the assessee is claiming that the purchases are genuine. The counsel for the assessee contended that he is not in a position to produce the parties. In such a situation, the genuineness of the purchases could not be established by the assessee. However, in such type of cases, it was noted that there cannot be any sale without purchases, therefore, only option available is to estimate the profit. Since, the assessee has already declared gross profit more than 9% in both the Assessment Years, therefore, we deem it appropriate to estimate the profit @ 11% in place of 12.5% estimated by the Commissioner of Income Tax (Appeal). Thus, the appeals of the assessee are partly allowed.

(See 2019-TIOL-264-ITAT-MUM)