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2019 (4) TMI 273 - AT - Income TaxProfit estimation on bogus purchases - assessee was the beneficiary of accommodation entries in form of bogus purchase bills as well as unsecured loans - addition towards 12.5% profit on alleged bogus purchases - HELD THAT:- considering the fact that sales are not doubted and also there is no mismatch between quantity of goods purchased and sold, the AO has estimated fair amount of profit by considering various parameters including amount of VAT applicable to the goods and also the probable percentage of amount saved by the assessee by obtaining accommodation entries. Keeping these facts in mind, if you examine percentage of profit applied by the AO, i.e. 12.5% on alleged bogus purchases, we find that the AO was fair enough to adopt a reasonable percentage of profit on alleged bogus purchases - No error in the finding recorded by the AO in arriving at 12.5% profit on alleged bogus purchases. Addition towards unsecured loan taken - HELD THAT:- Mere furnishing of confirmation letter, ledger extract and bank statement is not sufficient enough to come out of the shadow cast upon the assessee and what is required to be proved is genuineness of transactions. In this case, the AO has brought out number of reasons to doubt transactions between the parties, but the assessee failed to file any evidence to contradict the facts brought out by the AO while making addition towards unsecured loan. Therefore, we are of the considered view that the lower authorities were right in making addition towards unsecured loan taken from three companies belonging to Shri Bhanwarlal Jain and hence, we are not inclined to deviate from the findings recorded by the Ld.CIT(A). Accordingly, the ground of appeal taken by the assessee is rejected. Disallowance of interest u/s 14A r.w.r. 8D(2)(ii) - assessee claims that no interest bearing funds have been used for investment - HELD THAT:- We find that the assessee’s capital is more than the amount of investments in shares which yielded exempt income. Therefore, AO was erred in quantifying disallowance of interest u/r 8D(2)(ii) of I.T. Rules, 1962. Accordingly, we direct the AO to delete addition towards interest expenditure. Disallowance of expenditure u/r 8D(2)(iii) we find that the assessee has incurred various common expenditure including salaries, conveyance, telephone and other overhead expenses. Since the assessee has not disputed the fact of earning exempt income, the possibility of incurring certain expenditure towards such income cannot be ruled out. Further, since the assessee has not filed any apportionment of expenses in respect of exempt income, we find no reason to interfere with the findings of AO and Ld.CIT(A) in confirming the disallowance of expenditure u/r 8D(2)(iii) @0.5% of average value of investments amounting to ₹ 26,049. - Decided partly in favour of assessee.
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