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2021 (4) TMI 333 - AT - Income TaxEstimation of income - bogus purchases - CIT (A) confirming the action of the AO in making addition on adhoc basis @ 12.50% - 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. This proposition is supported in the case of Nikunj eximp enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT]as upheld hundred percent allowance for the purchases said to be bogus when sales are not doubted. However in that case all the supplies were to government agency. 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, learned counsel pleaded that as held in M/S MOHOMMAD HAJI ADAM & CO. [2019 (2) TMI 1632 - BOMBAY HIGH COURT] the addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases. We set aside the matter to the file of the assessing officer with the direction to restrict the addition as regards the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other genuine purchases - Assessee's appeal is partly allowed.
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