The Tax Publishers2021 TaxPub(DT) 0549 (Mum-Trib)

INCOME TAX ACT, 1961

Section 68

Tribunal by placing reliance on decision in the case of Simit P. Sheth [(2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC)] had categorically held that profit percentage of disputed purchases for the persons engaged in similar line of industry in which assessee was engaged should be reasonably estimated at 12.5% of value of disputed purchases, therefore, AO was directed to restrict the disallowance made on account of bogus purchases to 12.5% of value thereon.

Income from undisclosed sources - Addition under section 68 - Bogus purchases -

Assessee was engaged in business of repairs and maintenance of oil and gas refineries and made purchases from five parties listed in page 2 of assessment order whose names appeared to be tainted dealers in website of Sales Tax Department of Government, which information was passed on by Sales Tax Department to the DGIT Investigation. Assessee to substantiate its genuineness of purchases had filed copies of purchase invoices from alleged parties, copy of ledger accounts and copy of bank statements showing payments made to them through account payee cheque as proof of transactions entered into with parties. AO observed that assessee did not file any evidences in the form of transportation bills, etc., to justify the proof of delivery of goods to the assessee. Accordingly, AO proceeded to disallow 100% of value of purchases made from those parties. Held: It was not in dispute that assessee should have made purchases from the grey market in order to have some savings in indirect taxes and incidental profits thereon. Tribunal by placing reliance on decision in the case of Simit P. Sheth [(2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC)] had categorically held that profit percentage of disputed purchases for the persons engaged in similar line of industry in which assessee was engaged, should be reasonably estimated at 12.5% of value of disputed purchases. Accordingly, AO was directed to restrict the disallowance made on account of bogus purchases to 12.5% of value thereon.

Followed:CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj-HC) : 2013 TaxPub(DT) 2115 (Guj-HC).

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2009-10



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