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2018 (4) TMI 8 - AT - Income TaxBogus purchases of diamonds - Addition u/s 69C - Held that:- AO has placed his reliance fully on the statement given by Shri Hiren Raval and accordingly disallowed entire purchases made from M/s Zalak Impex. We also notice that the AO has also added the sales value of ₹ 10.17 lakhs also. With regard to the addition of ₹ 10.17 lakhs, we agree with the contentions of Ld A.R that the said addition is liable to be deleted, as the assessee itself has already offered the same as its income in the form of sales. Accordingly we direct the AO to delete the addition. Disallowance of purchases made from M/s Zalak Impex, Task force committee has recommended profit range of 1.5% to 4.5% for manufacturing activities and profit range of 1% to 3% was recommended for trading activities. The assessee has undertaken both trading and manufacturing activities. Accordingly we are of the view that the profit element embedded in the impugned purchases may be estimated at 3%. Accordingly we set aside the order passed by CIT(A) and direct the AO to sustain the addition to 3% of the value of alleged bogus purchases and in our view, the same would meet the ends of justice. We order accordingly.
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