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2021 (3) TMI 787 - AT - Income TaxEstimation of income - bogus purchases - AO estimated the profit @ 12.5% of the disputed purchases - HELD THAT:- In the instant case, the AO has recorded the statement of Shri Hiten Parekh, proprietor of M/s Hiten Enterprises, from whom the assessee claimed to have made the purchases. In that statement, Shri Parekh has stated before the AO categorically that he had done genuine business with M/s Smita Electrical Industries (the assessee) and the entries were through Jain Sahakar Bank Ltd., Mandvi Branch, Mumbai-400003. AO could have made further inquiries/investigations to dislodge the above statement of Shri Parekh. However, the AO has not done even preliminary inquiry to verify the contentions of Shri Parekh. AO has also noted in the assessment order at page 6 that the assessee was able to correlate the purchases of materials with the allocation of raw materials and sale of finished goods. CIT(A) has rightly deleted the estimated profit @ 12.5% on purchases of ₹ 18,93,737/- from Hiten Enterprises. He has rightly restricted the disallowance to 12.5% of purchases of ₹ 26,719/- from Raj Traders.
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