The Tax Publishers2020 TaxPub(DT) 4795 (Mum-Trib)

INCOME TAX ACT, 1961

Section 69

Where assessee was engaged in business of trading in ferrous and non-ferrous metals, in such case, 12.5% profit percentage was very high in the said business activity, therefore, AO's estimation of profit on purchases @12.5% was not justified. Hence, CIT(A) was justified in restricting the disallowance to the extent of 6.5% of non-genuine purchases.

Income from undisclosed sources - Addition under section 69 - Bogus purchases - Estimation of income--Assessee engaged in business of trading in ferrous and non ferrous metals

Assessee was engaged in business of trading in ferrous and non-ferrous metals. AO found that the assessee obtained accommodation entries of bogus purchases from three Hawala parties. Assessee furnished copy of ledger account, copy of invoices, copy of delivery challans, etc., and submitted that the purchases made from the said parties were genuine. Not convinced with the submissions of assessee, AO treated the purchases as non-genuine. However, the AO estimated the profit element from such purchases at 12.5% and disallowed the same. Further, CIT (A) considering the evidences and various submissions of the assessee, restricted the disallowance to the extent 6.5% of the non-genuine purchases. Aggrieved, Revenue was in appeal. Held: Assessee submitted that expenditure incurred on purchases, was duly accounted in its books of account and it furnished all the required documents before the AO to show that the purchases were genuine. It appeared that the assessee could not substantiate its claim with supporting documents, although the onus of the proof was on the assessee. In such circumstances, the issue to be decided was that what would be the correct percentage of profit in the line of the assessee's business. As the assessee was engaged in business of trading in ferrous and non-ferrous metals, 12.5% profit percentage was very high in such business activity, therefore, AO's estimation of profit on the purchases @12.5 per cent was not justified. Hence, CIT(A) was justified in restricting the disallowance to the extent of 6.5% of the non-genuine purchases.

REFERRED :

FAVOUR : Against the appellant/Partly in favour of assessee.

A.Y. : 2009-10



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