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2014 (3) TMI 897 - ITAT AHMEDABADRestriction of disallowance - Bogus purchases - Restriction of disallowance @30% of total disallowance – Held that:- The assessee is in trading of steel on wholesale basis - AO verified the purchases and two parties and had denied having been made any sales to the assessee - assessee’s purchases were found bogus - without purchase, no sales can be made - The assessee has shown GP @ 3.86% during the year - In the trading of steel, the margin is less compared to other business - The assessee is not able to prove that he has obtained the bill from these parties but actual purchase the goods were from other parties from grey market – The decision in CIT vs. Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] followed - estimation of profits on bogus purchases in case of trading in steel on wholesale basis and purchases were found bogus but CIT(A) found that these purchases were made from the grey market from other parties - The ld. CIT(A) confirmed the addition on 30%, however, ITAT reduced it to the extent of 12.5% - the assessee held that 12.5% net profit on bogus purchase could be added to the assessee’s income as a profit element - 12.5% net profit on bogus purchase is reasonable – Decided against Revenue.
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