2023 (2) TMI 166 - AT - Income Tax

Estimation of income - Bogus purchases from benami concerns - HELD THAT:- Admittedly assessee in this case has engaged in bogus purchase entries while sales have not been doubted. When sales are not doubted purchases alone cannot be disallowed at 100%. Making purchases through grey market gives the assessee benefits at the expense of exchequer. The assessee is engaged in the business of diamond trading. As per the report of task force of diamond sector constituted by Ministry of Commerce & Industry, after considering capital BAP (Benign Assessment Procedure), net profit was prevalent at 1% to 3% in case of trading of diamonds and 1.5% to 4% for those who engaged in manufacturing of diamonds.

As per the facts of the present case, it is clear that this is a case of trading in diamonds and sales have not been doubted. AO has made no enquiry whatsoever. The prevalent net profit as noted above was at 1% to 3%. The net profit declared by the assessee as per tax audit report is 1.24% for both the years. Although the net profit declared falls within the range recommended, in our considered opinion, the interest of justice would be served if the rate of net profit is taken at 2% of sales, Hence bringing to tax, difference between 1.24% net profit shown and the 2% net profit recommended by the above Task Force will, in our considered opinion, serve the ends of justice - Appeal of revenue partly allowed.