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2020 (12) TMI 988 - AT - Income TaxEstimation of income - Bogus purchases - closing stock computation - claim of the assessee that when assessee has already disallowed the bogus purchases, it should also get benefit by reducing the amount in the closing stock, because of the reason that inventory is to be valued, if found in existence as the bogus purchases inventory - Double addition - HELD THAT:- It is not in existence, the consequent closing stock shown also to be reduced by the above amount. This claim of the assessee has been correctly rejected by the CIT(A) by stating that the opening stock in the subsequent year i.e. AY 2013-14, assessee has shown it to be ₹ 4,74,01,230/- and therefore, in that particular year the stock is debited to the profit and loss account. If the claim of the assessee is accepted then assessee must necessarily proved that items shown as bogus purchases were also carried on in the closing stock. The same has not been shown by proving the quantity of such goods as well as the price on which it is carried on in the inventory. Admittedly, no inventory is furnished in the opening and closing stock by the assessee. In this view, we do not find any infirmity in the order of the Ld. CIT(A), so far as it relates to rejecting the claim of the assessee of double addition. Alternative arguments of the Ld. AR that in the case of bogus purchases, if they are not written off or reduced from the closing stock then, necessarily in the sale price the same is included and therefore, only gross profit on the same can be added - We find that the above arguments also supported by relying on Simit P. Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] - The assessee has shown that in the year ending March, 2012, the gross profit ratio of the assessee is 9.25%. We direct the Ld. Assessing Officer to retain the addition @9.25% of ₹ 2.44 crores of ₹ 22,57,000/- deserve to be retained and the balance addition of ₹ 2,21,43,000/- deserve to be deleted. The reasons being that once the bogus purchases have gone into the profit and loss account, and necessary sales have not been doubted, only option left with the revenue is to make the addition of the gross profit embedded in the bogus purchases. Accordingly, the ground no. 1 of the appeal is partly allowed.
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