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2017 (5) TMI 1626 - AT - Income TaxBogus purchases - purchase could not be confirmed as from the respective sellers because of business either closed or shifted - Held that:- We are of the opinion that the Assessing Officer's action in treating the purchases as bogus and adding the entire cost of purchases in the assessment ought not to have been restored by the Tribunal. The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. CIT [1996 (1) TMI 144 - ITAT AHMEDABAD-C] has been approved. In that view of the matter, keeping in mind the fact that not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax, we find that it shall be appropriate to restrict the disallowance made in this regard to 25% of the cost of such purchases in each year. 25% of the payments made to the parties shall be disallowed on account of possible inflation of purchase price. Consequently, the impugned judgment and order passed by the ITAT is modified to the aforesaid extent. Appeal of the assessee is partly allowed.
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