The Respondent-Assessee carried on business as a
Civil Contractor.. The assessment was reopened under
Section 147 of the Income Tax Act. Information was received
from the Sales Tax Department that Respondent-Assessee had
taken bogus purchase entries of Rs.1,69,48,368/- from the
different parties. The reassessment order was accordingly passed
on 17 February, 2014 determining the total income of
Rs.2,18,13,430/. On appeal CIT (A) who partly allowed the
Appeal  and sustained addition of  based on the net profit @ 5.76 % on the contracted amount . On appeal by the revenue the Tribunal affirmed the order of the CIT(A) . dismissing the appeal of the revenue the Court held that , even if the purchases made by the assessee are to be treated as bogus, it does not mean that entire amount can be disallowed- As the AO did not dispute the consumption of the raw materials and completion of work, only a percentage of net profit on total turnover can be estimated.   Court also held that assuming that the Respondent-Assesssee thepurchasers from whom the purchases were made were bogus, inview of the finding of fact that the material was consumed, thequestion would be of extending the percentage of net profit ontotal turnover. This would be a matter of calculations by the
concerned authority. In this context, if the CIT (A) and the Tribunal chose to follow thepercentage arrived by the Settlement Commission in the
Respondent-Assessee’s own case for the other years, this exercise
cannot be considered as irregular or illegal. Followed   PCIT v . Mohommad Haji Adam   & Co ( Bom) (HC) www. itatonline.org , PCIT v .   Paramshakti Distributors Pvt Ltd  ( Bom) (HC)  www.itatonline .org .(ITA No 1453 of 2017 dt 8-1-2020 ) (AY. 2019-10)