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2021 (7) TMI 667 - AT - Income TaxEstimation of income - Bogus purchases of diamonds - HELD THAT:- It is apparent that the assessee has made parallel entries in his books of accounts with respect to the bogus purchases identified at the time of search in the case of Bhanwarlal Group of concerns wherein similar entries were also recorded in their books of accounts. Assessee has also conceded that the payments were made to Bhanwarlal Group of concerns by cheque for purchases of diamonds. Also revealed from the search conducted in the case of Bhanwarlal group of concerns that the assessee had paid cheque to Bhanwarlal Group of concerns for purchase of diamonds though actually diamonds did not exist. It is also apparent that the assessee has not maintained proper stock recorded corroborating the opening stock of diamonds and purchase of diamonds with the corresponding sale of diamonds and closing stock. In this circumstance, the amount debited in the P & L Account of the assessee towards purchase of diamonds is nothing but bogus claim of deduction in order to reduce the profit of the assessee. It will not be proper to estimate the income of the assessee on the basis of presumption that the assessee would have sold the diamonds when the so-called diamonds said to have been purchased by the assessee never existed ab-initio. - Decided against assessee. Estimation of income - bogus purchase of diamonds at 5% of the alleged bogus purchases - HELD THAT:- This is a case where the assessee has claimed bogus purchases of diamonds as its expenditure when the diamonds did not exist at all - assessee has neither disclosed the sale of these diamonds in its P & L Account nor shown the unsold diamonds as closing stock. Therefore, the corresponding revenue from sale of diamonds and the stock position is not disclosed in the P & L Account. There is evidence received by the Revenue that the entire purchases made by the assessee is bogus i.e., the assessee has not received any diamonds though it has debited the purchase value of diamonds in his books of accounts. This fact is not disproved. When no diamonds are received by the assessee there is no possibility of those diamonds being sold. Hence estimation of profit on sale of diamonds which never existed is not appropriate. For the above stated reasons, we do not find any merit in the order of the Ld. CIT (A) on this issue. Accordingly, we hereby reinstate the order of the Ld. AO. Appeal of the Revenue is allowed.
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