INCOME TAX ACT, 1961

Section 37(1)

Business expenditure - Allowability - Bogus purchases - Calculation

Assessee was engaged in business of trading and manufacturing of diamonds. Assessee had made purchases from certain parties who were treated as tainted dealers as per information gathered from search carried out. However, sales made out of purchases made from disputed parties, were not doubted by Revenue. Accordingly, AO concluded that assessee could have made purchases from grey market in order to have some savings in indirect taxes and incidental profit element thereon and observed that only profit element embedded in value of such purchases could be brought to tax in interest of justice. Accordingly, AO estimated profit element embedded in value of such disputed purchases at 5% which was reduced to 3% by CIT(A). Hence this appeal. Held: In instant case, assessee was engaged in business of both trading as well as manufacturing of diamonds. Considering same, CIT(A) was duly justified in estimating profit percentage at 3% on which no interference was required.

REFERRED :

FAVOUR : Against the assessee

A.Y. : 2010-11, 2011-12, and 2013-14

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