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2019 (4) TMI 497 - AT - Income TaxTaxability of Bogus purchase - Estimation of profit - AO alleged that Maharashtra Sales Tax Department, investigation proved that certain parties were involved in providing accommodation entries without actual business - notices issued to parties u/s. 133(6) were returned un-served - ex-party order - HELD THAT:- on perusal of findings of the lower authorities where it was categorically observed that the assessee could able to file only purchase bill and payment proof for such purchases through proper banking channel. The assessee neither could controvert the findings of fact recorded by the lower authorities in the backdrop of clear finding of sales-tax authorities that those parties are involved in providing accommodation entries. The assessee was not able to file complete details as required by the AO except purchase bill and payment proof. Further, the assessee could not able to produce the parties in person before the AO for examination. Under these facts, it is difficult to accept the arguments of the assessee that purchases from the above parties are genuine which are supported by evidences. When the purchases are considered to be bogus and also when the assessee is not able to prove the purchases to the satisfaction of the AO, what needs to be taxed – whether the total amount of alleged bogus purchases or only a profit element embedded on those purchases is a question of fact. The Courts and Tribunals in number of cases have come to the conclusion that in cases where purchases are not proved with necessary evidences, only profit element embedded on those purchases needs to be taxed. The Hon’ble Gujarat High Court in the case of COMMISSIONER OF INCOME-TAX-I VERSUS SIMIT P SHETH [2013 (10) TMI 1028 - GUJARAT HIGH COURT] has held that no uniform yardstick can be applied for estimation of profit and it depends upon facts of each case. The co-ordinate bench of ITAT, Mumbai Benches in several cases have taken a consistent view and directed the AO to estimate profit ranging from 5% to 12.5% depending upon facts of each case - AO to adopt a profit percentage of 12.5% on the alleged bogus purchases
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