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2022 (2) TMI 1226 - AT - Income TaxEstimation of income - Bogus purchases - assessee could not establish the genuineness of the purchases from the non-existent vendors as per information received from Law enforcement agency of State Govt. of Maharashtra i.e. Sales Tax Department - HELD THAT:- Where though the purchases found to be bogus by the Revenue Authorities but sales by the assessee have been accepted as genuine as against these bogus purchases, we are of the considered view that when sales have been accepted being genuine the entire purchases cannot be treated as non genuine to make addition of the entire bogus purchases amount. Hon’ble High Court of Bombay in the case of JK Surface Coatings Pvt. Ltd. [2021 (10) TMI 1323 - BOMBAY HIGH COURT] upheld the view taken by the Tribunal that in such circumstances gross profit should be in the range of 5% to 12.5% as reasonable estimation of profit element embedded in the bogus purchases Thus in the light of gross profit earned by the assessee in the last five years the average gross profit comes to 5% which is a reasonable gross profit earned by the assessee on the bogus purchases, hence, we direct the AO to charge the assessee at the gross profit @ 5% on the bogus purchases.
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