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2021 (12) TMI 496 - AT - Income TaxEstimation of income - Bogus purchases - AO received information from Maharashtra Sales Tax Department that certain parties are issuing accommodation entries/bogus bills which were availed by various assessee - AO estimated the profit rate at 12.5% of the bogus purchases - CIT- A enhanced the addition of bogus purchases to 100% as against the addition made by the Assessing Officer at 12.5% - HELD THAT:- We noted that the assessee could not produce the parties or the addresses given by the assessee of the parties from whom assessee had made purchases remained unverified. The Income Tax Department issued notices under Section 133(6) of the Act to the parties from whom purchases were made, but same returned unserved. As noted that neither the Assessing Officer nor the CIT(A) tried to carry out any exercise of verification of these parties from the Sales Tax Department or by issuing notices by other modes despite the fact that a plethora of information was available with the Assessing Officer/CIT(A) as noted above. In such situation, the only remedy left is, even though we hold that assessee has received bogus bills from the parties, application of profit rate. The assessee is engaged in reselling of ferrous and non-ferrous metals and in such circumstances we have to apply profit rate suitable to the trade. In this nature of business, i.e. reselling of ferrous and non-ferrous metals, VAT is at 5% and assessee might have made purchases from the grey market for which assessee might have saved some element of profit. Hence, we estimate the profit rate at 5% of the bogus purchases and reverse the orders of the authorities below to that extent. Thus, the appeal of the assessee is partly allowed.
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