INCOME TAX ACT, 1961

Section 145

Accounting method - Estimation of income - Bogus purchases - Nothing on record in respect of any comparable third party data

Assessee was engaged in the business of manufacturing and trading of jewellery studded with diamond and other precious stones items. AO stated purchases made by assessee from two companies were in the nature of bogus purchases being made from concerns which are related to a Group concern on whom the Investigation Wing of the Department had carried out search operations and his statements were recorded wherein he has admitted that he was not selling the goods but providing the bills and after receipt of the payment of the bill, the same was refunded back in cash. Assessee filed its submissions which were considered but not accepted by AO and he proceeded to make addition by disallowing 25% of such purchases. Held: For the purposes of making the best judgment assessment, past history of the assessee was held as reliable and reasonable basis for estimation of profits. Though assessee was incorporated on 15-12-2011, no business was carried out in the said year and the current financial year 2011-12 was effective first year of operations and question of applying assessee's past history did not arise for consideration as not relevant. There was nothing on record in respect of any comparable third party data and therefore, matter was remanded back to AO for the limited purposes of identifying the comparable third party data and the comparison thereof with gross profit of 8.5%.

Relied:Sanjay Oil Cake Industries v. CIT 2009 TaxPub(DT) 0370 (Guj-HC) Malani Ramjivan Jagannath v. ACIT (2009) 316 ITR 120 (Raj) : 2009 TaxPub(DT) 0038 (Raj-HC) CIT v. Gotan Lime Khanij Udhyog (2002) 256 ITR 243 (Raj) : 2002 TaxPub(DT) 0479 (Raj-HC)

REFERRED :

FAVOUR : Matter remanded

A.Y. :

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