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2021 (11) TMI 1073 - AT - Income TaxEstimation of income - Bogus purchases - assessee is unable to justify various expenses including purchases with supporting evidence - CIT-A restrict the disallowance on purchases to the extent of 2.5% - HELD THAT:- AO had made adhoc disallowance on purchases without recording any adverse comments on books of accounts maintained by the assessee for the relevant assessment year - AO has not disputed pleading of the assessee that the auditor has given clean chit to the books of accounts maintained by the assessee and has not made any adverse comments on purchases debited into P&L account. Under these circumstances, we are unable to subscribe to the reasons given by the AO to make adhoc disallowance on purchases CIT(A), after considering relevant facts and also taken note of fact that there is a decline in gross profit declared by the assessee for the impugned assessment year compared to earlier financial year, has directed the AO to restrict the disallowance on purchases to the extent of 2.5%, fall in rate of gross profit on total turnover for the year. The said findings recorded by the Ld. CIT(A) appears to be logical and on the basis of estimation of gross profit. Therefore, we are of the considered view that there is no error in the reasons given by the Ld. CIT(A) to sustain additions made by the AO towards disallowance on purchases on the basis of fall in gross profit rate declared by the assessee on total turnover. Appeals filed by the assessee and Revenue are dismissed.
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