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2020 (11) TMI 131 - AT - Income TaxEstimation of income - bogus purchases - Purchases from grey market - CIT(A) sustaining 12.5% disallowance - HELD THAT:- In this case the sales have not been doubted. It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. In the present case the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. As regards the quantification of the profit element embedded in making of such bogus/unsubstantiated purchases by the assessee it is the submission of the learned counsel of the assessee that it will be doubled prejudice if the gross profit already declared is not reduced from the standard 12.5% being disallowed on account of bogus purchases. Accordingly direct that disallowance in this case be restricted to 12.5% of the bogus purchase as reduced by the gross profit already declared by the assessee.
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