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2022 (11) TMI 520 - AT - Income TaxEstimation of income - Bogus purchases - HELD THAT:- The purchase price mentioned in the alleged sales bills cannot be accepted. The obvious reason is that the assessee did make purchases but at a lower price so as to increase its overall profits. In these circumstances, the entire amount of alleged bogus purchases cannot be disallowed / added, but only profit element embedded therein needs to taxed. As the books of account of the assessee was not rejected by the AO and had accepted the sales of the assessee. The assessee maintained proper books of accounts including purchase register, sales register, stock register, etc. and not specific defect or irregularity observed by the AO. But on the other hand, assessee dealt with an entity of entry provider Mr. Bhanwarlal Jain, this is also not in dispute. In similar facts of the case, the Hon'ble ITAT, Mumbai in the case of Amy Diam Vega Jewellery P Ltd [2017 (10) TMI 236 - ITAT MUMBAI] has upheld the order of the CITIA), who in view of report of the Task Group for Diamond sector submitted to Department of Commerce, had reduced the profit margin in such suspicious purchases to 4% as against estimation of 8% made by the AO. Thus we are of the considered view that addition made by AO should be restricted upto 4% of the total addition made. We delete the addition made by the AO and restrict the same upto 4%. Appeal filed by the assessee partly allowed.
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