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2017 (10) TMI 1250 - AT - Income TaxBogus purchases - Profit estimation - Held that:- As noticed that the Sales tax official has written a reply to the AO, wherein, he was mentioning about the failure of the suppliers to remit the sales tax liability. Since the assessee was dealing in products of reputed companies, whose rates are standardized one, we are of the view that the possibility of making any profit out of such products is also remote. However, there is a possibility that the assessee might have saved VAT tax from such purchases. Keeping in view the facts surrounding the case, we are of the view that the profit that would have been made by the assessee may be estimated at 5% of the value of alleged bogus purchases of both the years and in our view, the same would take care of revenue leakage, if any in both the years. The assessee has submitted that the value of purchases made from the suspicious suppliers was only ₹ 1,13,28,156/- in AY 2009-10 and ₹ 3,77,84,783/- in AY 2010-11. The AO is directed to verify the same and accordingly estimate the profit at 5% on the actual value of purchases made from the suspicious dealers in the years under consideration. The orders passed by Ld CIT(A) would stand modified accordingly.
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