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2018 (11) TMI 262 - AT - Income TaxDisallowance on account of bogus purchases - purchases/sales without any actual delivery of goods - hawala purchases - AO added 12.5% of such purchases - CIT(A) restricted the disallowance to 9%. - Held that:- In the present case, the facts of the case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation, on the facts and circumstances of the case, 12.5 % disallowance out of the bogus purchases meets the end of justice. However in this regard it is further noteworthy that when only the profits earned by the assessee on these bogus purchase transaction is to be taxed the gross profit already shown by the assessee and offered to tax should be reduced from the standard 12.5% being directed to be disallowed on account of bogus purchase, as otherwise there will be double jeopardy to the assessee. Accordingly, modify the order of the CIT(A) and direct that the disallowance in this case be restricted to 12.5 % of the bogus purchases as reduced by the gross profit rate already declared by the assessee on these transaction. - Decided partly in favour of assessee.
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