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2017 (11) TMI 502 - AT - Income TaxBogus purchases - G.P. determination - CIT-A concluded that the profit element in all fairness was liable to be reduced from the aforesaid estimated profit rate of 17.5% as estimated earlier - Held that:- CIT(A) in the backdrop of the facts of the case should have in all fairness restricted the initial estimation of profit at 12.5% (supra), as against the profit rate of 17.5% (supra) so adopted by him. We thus substitute the estimation of the initial profit rate of 17.5% adopted by the CIT(A), by a rate of 12.5%. We are further of the considered view that in the backdrop of the order of the coordinate bench of the Tribunal in the case of Madhukant B. Gandhi (2010 (2) TMI 1211 - ITAT MUMBAI)the CIT(A) should have directed reduction of the gross profit rate declared by the assessee during the year under consideration, from the aforesaid initial profit rate so estimated by him, and not the average gross profit rate for the last three years. We have been informed by the ld. A.R that the G.P. rate for the year under consideration stood reflected at 6.32%. We thus in the backdrop of our aforesaid observations direct the A.O to reduce the estimated profit rate of 12.5% (supra) by the profit percentage of 6.32% (supra) pertaining to the year under consideration. We thus in the backdrop of our aforesaid observations sustain the consequential addition at 6.18% [i.e. 12.5% (-) 6.32%] of the aggregate value of purchases made by the assessee from the aforesaid parties, viz. (i). M/s Rajendra Impex India; and (ii). M/s Newzone Multitrade Private Limited. That before parting we direct the A.O to verify the claim of the ld. A.R that the G.P rate declared by the assessee during the year under consideration worked out at 6.32%(supra)
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