INCOME TAX ACT, 1961

Section 145

Accounting method - Estimation of income - Bogus purchases - CIT(A) scaled down addition to 8% profit on alleged bogus purchases

Assessee was engaged in business of interior decorators and real estate developers. The basis of information received from DGIT, (Investigation), as per which, Sales Tax Authorities had taken actions against number of Hawala dealers, who had issued bogus purchase bills to various parties. As per list of beneficiaries, assessee was one of the beneficiaries, who had taken accommodation bills of bogus purchases from various parties as listed by AO and determined total income after making 100% addition on alleged bogus purchase from those parties. Held: Tribunal in number of cases had considered an identical issue and depending upon facts of each case, directed AO to estimate gross profit of 10% to 15% on total alleged bogus purchases. In this case, AO made 100% addition, whereas CIT(A) had scaled down addition to 8% profit on alleged bogus purchases. Although, both authorities have taken different rate of profit for estimation of income from alleged bogus purchase, but no one could support said rate of gross profit with necessary evidences or any comparable cases. Therefore, 8% rate of profit adopted by CIT(A) appeared to be reasonable and appeal filed by the Revenue was dismissed.

Followed:CIT v. Simit P Sheth (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC) and N.K. Proteins Ltd. v. DCIT 2017 TaxPub(DT) 1860 (SC)

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2010-11

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