The Tax Publishers2020 TaxPub(DT) 4747 (Mum-Trib)

INCOME TAX ACT, 1961

Section 250(6)

Where assessee had declared substantial gross profit year after year and the GP declared for the year is 14.40% and fastening with high gross profit on the alleged bogus purchases would increase the gross profit of the assessee to abnormal percentage, therefore keeping in view the totality of facts, disallowance made by AO was restricted to 5% of such disputed purchases correctly.

Appeal to CIT(A) - Estimation of income - Bogus purchases - CIT(A) restricting the disallowance to 5%

Assessee was engaged in business of trading in pneumatic fittings. AO received information from the DGIT (Inv.,) about the accommodation entries provided by various dealers and assessee was also one of beneficiaries from those dealers. Assessments were reopened under section 147 on the ground that assessee had availed accommodation entries from various dealers who were said to be providing accommodation entries without there being transportation of any goods. Assessee furnished various details regarding purchases made, however, parties were not produced before AO and no explanation was offered. CIT(A) considering the evidences and various submissions of the assessee restricted the disallowance to extent 5% of the non-genuine purchases.Held: Assessee had declared substantial Gross profit year after year and the GP declared for the year is 14.40% per cent. Fastening with high gross profit on the alleged bogus purchases would increase the Gross profit of the assessee to abnormal percentage, which is not possible in trading, particularly in small engineering items in which assessee was engaged in a competitive market. Therefore disallowance made by AO was restricted to 5% of such disputed purchases correctly.

Followed:CIT v. Simit P. Sheth [Tax Appeal 553 of 2012 (Guj)] : 2013 TaxPub(DT) 2115 (Guj-HC), CIT v. Bholanath Poly Fab Pvt. Ltd. (2013) 355 ITR 290 (Guj) : 2013 TaxPub(DT) 1852 (Guj-HC) and Sanjay Oil Cake Industries v. CIT (2009) 316 ITR 274 (Guj) : 2009 TaxPub(DT) 370 (Guj-HC). Relied:CIT v. Rajesh P. Soni [Tax Appeal No. 1107 of 2006, dt. 27-2-2007], Dy. CIT v. Adinath Industries. (2001) 252 ITR 476 (Guj.) : 2001 TaxPub(DT) 0226 (Guj-HC), CIT v. M.K. Brothers (1987) 163 ITR 249 (Guj.) : 1987 TaxPub(DT) 359 (Guj-HC), N.K. Proteins Ltd. v. Dy. CIT (2017) 250 Taxman 22 (SC) : 2017 TaxPub(DT) 1860 (SC), CIT v. Precious Jewels Corporation (2011) 17 Taxmann.com 264 (Raj.) and Asstt. CIT v. Akruti Dyeing & Printing Mills Pvt. Ltd. [ITA No. 997 of 2008, dt. 27-1-2019].

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2011-12



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