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| The Tax Publishers2021 TaxPub(DT) 0792 (Mum-Trib) INCOME TAX ACT, 1961
Section 68
In respect of sustaining addition @ 12.5% of alleged bogus purchase by CIT(A), it would be just and appropriate to estimate the income @ 3% considering the higher margin that assessee might have earned in the alleged transaction and in trading activities it is expected to earn margin around 3-5%.
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Income from undisclosed sources - Addition under section 68 - Alleged bogus purchases -
Assessee filed appeal against the order of CIT(A) sustaining addition @ 12.5% of alleged bogus purchase made by AO on the ground that addition sustained was too high. Held: CIT(A) had sustained the addition made by AO by estimating @ 12.5% of the alleged bogus purchases, was too high considering the fact that assessee was dealing in trading activities. Assessee has declared margin this assessment year @ 2.11% and in previous assessment year @ 1.42%. On an average, assessee has declared margin of 2% (approx). In the trading activities, it is expected to earn around 3-5%. Taking the higher margin that assessee might have earned in the alleged transaction and as per the decision of Heeramaneck & Son GF case [[ITA. No. 1862/Mum/2017, dt. 5-12-2018]] and Simit P Sheth [(2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC)] AO was directed to estimate the income @ 3% (5% - 2%) of the alleged purchases. Accordingly, the grounds raised by assessee were partly allowed.
Followed:Heeramaneck & Sons v. ACIT [[I.T.A. No. 1862/Mum/2017, dt. 5-12-2018]] and CIT v. Simit P Sheth [(2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC)].
REFERRED :
FAVOUR : Partly in favour of assessee.
A.Y. : 2010-11 & 2011-12
IN THE ITAT, MUMBAI BENCH
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