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2023 (11) TMI 1191 - AT - Income TaxEstimation of income - bogus purchases - CIT(A) has restricted the addition to the extent of 25% of the bogus purchases - revenue has filed appeal before the ITAT Pune which was dismissed because of low tax effect - HELD THAT:- After perusal of the material on record we find that before the CIT(A) assessee has produced copy of purchase register, sale register, ledger purchase invoices stock movement, copy of bank statement etc. to prove the genuineness of the purchases. It is also noticed that assessing officer has not doubted the corresponding sales made by the assessee. If such purchases are treated as non-genuine then the corresponding sales should also be considered as non-genuine. Therefore, we consider that in such types of transaction only the profit margin embedded in such transaction could be taxed. In such type of cases the assessee procures the material from the grey market by paying cost and as the bills are not available for such transaction, obtains bills from third party who after receipt of cheque from the assessee making him available the cash after deducting its commission. Since the sales were not doubted therefore it was proved that assessee was actually in possession of goods. The assessee has been benefitted by receiving margin of grey market. We consider that the addition to the extent of profit element embedded in the amount of purchases made from the said party is to be added. We consider it fair and reasonable to restrict the disallowance in the case of the assessee to the extent of 4% of the impugned purchases made by the assessee from the said party. Accordingly, the appeal of the assessee is partly allowed.
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