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2020 (9) TMI 410 - AT - Income TaxEstimation of income - bogus purchases - CIT-A sustained 12.5 % disallowance out of the bogus purchases - HELD THAT:- It is settled law that when sales are not doubted, hundred percent disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from case of Nikunj Eximp Enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT]. Facts of the present 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 in our considered opinion on the facts and circumstances of the case the 12.5 % disallowance out of the bogus purchases done by the learned CIT-A meets the end of justice. Accordingly we uphold the order of learned CIT-A. Disallowance u/s 43B - assessee had not paid an amount on account of VAT before filing the return of income of the year under consideration - HELD THAT:- As decided in own case [2017 (8) TMI 1288 - ITAT MUMBAI] CIT (A) has deleted the addition on the ground that section 43B would attract only to a case where an item is allowable as deduction but because of failure to make payment such deduction would not be allowed. Section 43B is applicable in the case of sales tax and excise duty but same could not be in case of service tax: CIT (A) held that assessee never allowed deduction on account of service tax which is collected on behalf of government and paid to government account, therefore service provider is merely acting as the agent of the government and is not entitled to deduction on account of service tax. CIT (A) has also considered that as per rule 6 of Service Tax Rules, the service provider becomes liable to make payment of service tax by 5th of the month immediately following the calendar month which the payments are received towards value of taxable service. Therefore, Ld. CIT (A) has correctly deleted the addition. - Decided against revenue.
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