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2017 (12) TMI 1757 - AT - Income TaxBogus purchase - CIT(A) considering the GP @ 3% instead of adding 9% as was done by the AO - HELD THAT:- Only because the amount has been routed through banking channel would not establish the genuineness of the transaction as held by Hon’ble Jurisidictional High Court in the case of Naresh K. Pahuja [2015 (2) TMI 284 - BOMBAY HIGH COURT] - Considering the peculiar facts and circumstances of the present case and while relying upon judgments ClT vs Bholanath Poly Fab Ltd. [2013 (10) TMI 933 - GUJARAT HIGH COURT], CIT v Simit P, Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] and CIT vs. Sanjay Oil Cake Industries [2008 (3) TMI 323 - GUJARAT HIGH COURT]and taking into consideration the facts of the present case, and to account for the profit element embedded in these purchase transactions to factorize profit earned by assessee against purchase of material in the grey market and undue benefit of VAT against bogus purchases, we are of the considered view that restricting the additions @ 3% of purchases by Ld. CIT(A) is unreasonable. The ends of justice would be met in case the additions are restricted @ 6 % of bogus purchases. Consequently orders passed by Ld. CIT(A) are set aside. Issue of accommodation entries is a reality, to arrest such rampant malpractices, a restraint is always inevitable as we cannot encourage such malpractice of obtaining accommodation entries to avoid the impact of levies and defrauding revenue. Since it is proved on record that assessee was indulged in bogus purchases, therefore the assessee is not being given benefit to reduce already GP declared from GP ratio of 6%. Hence no benefit of GP is being given. Direct the AO to restrict the additions to the extent of 6% of the bogus purchases for adding u/s 69C over and above the regular profits disclosed by the assessee. Accordingly this ground raised by the revenue is partly allowed.
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