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2023 (11) TMI 1188 - AT - Income TaxEstimation of income - bogus purchases in diamond business - assessee is engaged in the business of purchase, sale, manufacturing and trading of gold jewellery with diamond and color stones, diamond and gems stones - HELD THAT:- Considering the nature of business of the assessee whether the same are at inflated or are at prevalent market rate. The sales and quantity records are not disputed. Estimating the profit @ 25 % based on the facts that the purchase is tainted - So far as the decision relied upon for estimate of the profit @ 25 % we note that there were issues as to quality of the goods and in fact in some cases observed that the goods in fact not been delivered or denied to have purchased. Not only that, the rate @ 25 estimated is related to the food and oil industries where the prices are very low and always in demand. The case of the assessee relates to the costlier jewellery items where the profit margins are very thin and thought cut competition exist and profit margin are very low. Referring to instructions no. 2/2008 dated 22.02.2008 the board clarified that the profit in this business if disclosed @ 6 % is desirable. As regards the exception we note that in the case of the assessee there is no search conducted only the information shared and it is not disputed that the assessee is in receipt of the goods. In this line of business the Board has clarified that Diamond business, if an assessee declare a sum equal or to higher than 6 % of his turnover from such business. Since this being the first year there is no opening stock. Thus, the profit as worked for this business is 5.96 % [ 19,01,950/- /3,19,10,125/-= 5.96 % ]. Since, the assessee has already disclosed profit @ 5.96 % we considered deem it fit to estimate @ 6 % as against the 25 % estimated by the lower authorities. The exemption of the circular cannot be applied as the premises of the assessee is not subjected search and even the assessment is not re-opened based provision of section 153A / 153C of the Act - Appeal of the assessee is partly allowed.
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