INCOME TAX ACT, 1961

Section 145

Accounting method - Estimation of income - Bogus purchases - CIT(A) restricting the disallowance to 12.5%

Assessee was engaged in the business trading in industrial tools and accessories like bearings belts, bits drills. AO received information from the DGIT (Inv.) about the accommodation entries provided by various dealers and assessee was also one of the beneficiaries from those dealers. Assessments were reopened under section 147 and in the reassessment proceedings, assessee was required to prove the genuineness of the purchases made from various parties referred in Assessment Order. Assessee furnished 3CD audit report along with Schedule and ROI and bank statements and submitted that purchases made are genuine. Assessee further submitted that payments were made through account payee cheques as such contended that all purchases are genuine. CIT(A), however, restricted the disallowance to 12.5%. Held: High Court in the case of CIT v. Simit P. Sheth, (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC) has held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed. Court in this case had held that profit margin of 12.5% of the bogus purchases would be reasonable. Following the Order in the case of CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC), the addition was restricted to 12.5% of the 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 to 2011-12

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