The Tax Publishers2021 TaxPub(DT) 0480 (Ahd-Trib)

INCOME TAX ACT, 1961

Section 68

Where CIT(A) held that assessee had merely shown Gross Profit of 1.66% of sales and in absence of any material evidence, CIT(A) ought to have followed the decision of Mayank Diamonds Pvt. Ltd. [Tax Appeal No. 200 of 2003, dt. 7-11-2014], therefore, AO was directed to restrict the disallowance to 5% of the gross profit and accordingly, appeal of the revenue was partly allowed.

Income from undisclosed sources - Addition under section 68 - Disallowance of non-genuine purchases - CIT(A) restricted the disallowance of bogus purchases to 12.5%

Assessee was engaged in the business of imports, exports, manufacturing, trading and financial activities of rough and polish diamonds. AO while passing the assessment order made addition on account of bogus purchases. AO noted that some of purchasing parties, from which assessee had shown purchases, belong to a Group who was engaged in providing accommodation entries without actual delivery of goods. AO observed that merely transaction routed through banking channel was not sufficient evidence and finally concluded that assessee failed to prove the genuineness of purchases. AO made addition of 100% of the alleged bogus purchases. CIT(A) restricted disallowance of bogus purchases to 12.5% only. Held: CIT(A) had not referred to GP for earlier or subsequent years or Net Profit in assessee's own case. CIT(A) held that assessee had merely shown Gross Profit of 1.66% of sales. In absence of any material evidence, CIT(A) ought to have followed the decision of Mayank Diamonds Pvt. Ltd. [Tax Appeal No. 200 of 2003, dt. 7-11-2014]. Therefore, AO was directed to restrict the disallowance to 5% of the gross profit, accordingly, appeal of the revenue was partly allowed.

Followed:Mayank Diamonds Pvt. Ltd. v. ITO [TA No. 200 of 2003, dt. 7-11-2014] and Bholanath Poly Fab P. Ltd. v. ITO [ITA No.137/Ahd/2009, dt. 26-7-2011].

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2012-13



IN THE ITAT, AHMEDABAD BENCH

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT

TaxPublishers.in

'Kedarnath', 7, Avadh Vihar, Near Nirali Dhani,

Chopasni Road

Jodhpur - 342 008 (Rajasthan) INDIA

Phones : 9785602619 (11 am - 5 pm)

E-Mail : mail@taxpublishers.in / mail.taxpublishers@gmail.com