The Tax Publishers2020 TaxPub(DT) 4826 (Mum-Trib)

INCOME TAX ACT, 1961

Section 69

Where AO made addition towards peak amount of investments made for unproved or alleged bogus purchases and CIT(A) scaled down addition to 12.50% gross profit rate, considering business of assessee, trading in ferrous and nonferrous metals, wherein rate of profit is very low, AO was directed to estimate 6% gross profit on alleged total bogus purchases.

Income from undisclosed sources - Bogus purchases - Estimation of profit embedded in bogus purchases -

Assessee was engaged in business of trading in ferrous and non-ferrous metals. To verify genuineness of purchases, AO issued section 133(6) notices to parties, and same returned unserved. AO made addition towards peak amount of investments made for unproved or alleged bogus purchase from said parties. CIT(A) scaled down addition to 12.50% gross profit rate on total alleged bogus purchase. Held: Although, both lower authorities took different method and 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. Assessee was into business of trading in ferrous and nonferrous metals and rate of profit in such kind of business is very low. Considering facts and circumstances of case, AO was directed to estimate 6% gross profit on alleged total bogus purchases.

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

FAVOUR : Partly in assessee's favour.

A.Y. : 2011-12



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