INCOME TAX ACT, 1961

Section 145

Accounting method - Estimation of income - Bogus purchases - AO made 12.5% addition towards alleged bogus purchases

Assessee was engaged in the business of manufacturing engineering goods and labour job work. On 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 12.5% addition on alleged bogus purchase from those parties. Held: Authorities have taken uniform 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. Further, the rate of profit adopted by AO was appears to be on higher side when compared to nature of business of assessee. Considering facts and circumstances of this case, rate of profit adopted @ 12.50% on alleged bogus purchases was on higher side going by the nature of business of assessee and hence, AO was ordered to restrict the addition at the rate of 5% on alleged bogus purchases.

Followed:CIT v. Simit P Sheth (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC)

REFERRED :

FAVOUR : Partly in assessee's favour

A.Y. : 2009-10

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