2020 (7) TMI 462 - AT - Income Tax

Bogus purchases - GP estimation - HELD THAT:- It would make it a fit case to make estimated additions to account for profit element embedded in these suspicious / unverified purchases to factorize for profit earned by assessee against possible purchase of material in the grey / unorganized market and undue benefit of VAT against such bogus purchases, which CIT(A) has rightly done so - assessee was dealing in low-margin commodity like iron & steel which attracts lower VAT rate, the estimation of 12.5% with set-off of already declared GP was on higher side.

The coordinate bench in the cited decision of assessee’s son, found merits in the contentions of the assessee and observed that the assessee took all possible steps and produced relevant documents to prove the genuineness of the purchases made from M/s RTIPL. The evidences furnished by AO were not disproved by AO and therefore, the view taken by Ld. AO was not based on any material. In the said background, the bench directed Ld.AO to restrict the estimation to 0.11% on purchases made from M/s RTIPL. This rate was nothing but the GP rate earned by the assessee on other purchases.

Drawing analogy from the same & keeping in view the GP rates reflected by assessee in preceding as well as in succeeding years, we direct Ld. AO to estimate the additions against suspicious / unverified purchases @1% on net basis, without any other benefit. The additions would come to ₹ 3,81,027/-. The balance additions would stand deleted. Accordingly, the revenue’s appeal stands dismissed whereas the assessee’s appeal stands partly allowed.