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2020 (1) TMI 854 - AT - Income TaxBogus purchases - case of purchases made from unverifiable parties - not a case of simple trading but it is a case of contract wherein the purchases were supposed to be consumed - CIT(A) after rejecting the books of account estimated the profit at 30% of the impugned expenses/purchases - HELD THAT:- Under Income Tax Act only real income can be taxed by the Revenue. We may further note that even if the transaction is not fully verifiable, due to any circumstances beyond the control of the assessee, the only taxable is the taxable income component. And in order to fulfill the gap of revenue leakage the disallowance of reasonable percentage of such purchases can meet the end of justice. Similar view was taken by Hon’ble Bombay High Court in CIT Vs Hariram Bhambhani [2015 (2) TMI 907 - BOMBAY HIGH COURT] that revenue is not entitled to brought the entire sales consideration to tax, but only the profit attributable on the total unrecorded sales consideration alone can be subject to income tax. Considering the aforesaid factual and legal discussion and the submission of ld. AR of the assessee that average Gross Profit for four preceding year declared by assessee were 13.01%. For the year under consideration, the assessee has declared Gross Profit at 20.26%, if the further disallowance @ 30% of the total purchases/expenses is upheld, the Gross Profit of assessee would be increased drastically i.e. more than 36%, which is unrealistic. Therefore, considering the totality of the facts and to avoid to possibility of revenue leakage, we are of the view that if the disallowance of alleged purchases/expenditure is restricted to 10%, that would meet the end of justice. - Decided partly in favour of assessee.
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