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2018 (11) TMI 503 - AT - Income TaxBogus purchases - computation of income - estimating 12.5% as profit on bogus purchases - assessee engaged in the business of trading in timber and plywood - AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties - Held that:- CIT(A) has applied the profit rate at the rate of 12.5%, which according to me is on higher side going by the nature of business of the assessee i.e. timber and Plywood in which the profit rate is low. Thus in full agreement with the argument of the learned Counsel for the assessee and according to me a profit rate of 8% will meet the end of justice in view of the decision of CIT vs. Smith P. Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] as the assessee has also paid the VAT element on these bogus purchases. On this account, a further deduction in estimation of profit to the extent of 4.5% can be allowed. Hence, direct the AO to recompute the income after applying profit rate at the rate of 8% and computer the income accordingly. Assessee's appeal partly allowed.
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