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2019 (2) TMI 358 - AT - Income TaxReopening of assessment - bogus purchases - Held that:- It is the profit embedded in these purchases which is required to be brought to tax wherein the assessee had obtained bogus bills from these parties to avoid paying taxes and to inflate costs , while the material/goods were actually purchased from grey market at lower costs and also without paying taxes while the sales were made by the assessee which is recorded in books of accounts and reconciliation statement also reveals that purchases of these materials were supported by sales. The estimation of embedded profits in these purchases has to be an fair & honest estimation as stipulated by Hon’ble Supreme Court in the case of Kachwala Gems v. JCIT (2006 (12) TMI 83 - SUPREME COURT). We are of the considered view that if 12.5% of these alleged bogus purchases are brought to tax as an income embedded in these purchases in addition to and over & above income declared by the assessee will meet end of justice and will be an fair and honest estimation of income. Disallowance of 20% of the aggregate expenditure after adjusting for disallowance towards bogus purchases - Held that:- We have also considered the nature of these expenses and we are of the considered view that out of these expenses of ₹ 1,33,253/- disallowed by the authorities below , an amount of ₹ 4,001/- incurred towards Donations could not be allowed in the absence of supporting bills/details and its connection with business of the assessee or in the absence of requisite confirmatory details to be eligible for allowability as deduction u/s 80G or other relevant provisions of the 1961 Act. In the absence of supporting invoice/details , the disallowance of expense of donation of ₹ 4,001/- stood confirmed. Rent expenses allowability - Held that:- The assessee has only submitted self supporting vouchers with respect to payment of rent in cash without any details as to the premises on which rent its paid and its user for business purposes and under these circumstances, we disallow the claim of the assessee and confirm additions to the tune of ₹ 54,000/- claimed to be incurred by the assessee for alleged rent of which no details are filed even before us. This is the third stage of litigation before us after framing of assessment by the AO and first appeal adjudicated by learned CIT(A) wherein at both the stages claim of the assessee was rejected by authorities below. Before us also there is no evidence filed towards rent expenses paid by the assessee. Allowability of expenses on account of Printing and Stationary, Tea and Refreshment, Mobile charges, Labour charges, Travelling charges and Sundry Expenses - Held that:- Keeping in view nature of these expenses and also noting that these expenses represents miniscule amount vis-a-vis total expenses incurred by the assessee , we found no reason and justification for doubting the contentions of the assessee as the assessee in any case submitted supporting self made vouchers prepared by the assessee. Thus we accept contention of the assessee keeping in view factual matrix of the case and keeping in view smallness of the amount involved and our decision shall not have precedential value for adjudicating appeals in the case of other assessee’s. Thus , these expenses of ₹ 75,253/- stood allowed.
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