2017 (9) TMI 1640 - HC - Income Tax

G.P. addition - admitted facts in the statement of Director u/s 132(4) - Held that - Taking into account the average GP rate which will be applied in the present case will be 12 per cent. It is made clear that where ever the profit is more than 12 per cent, the same will not be refunded to the assessee but where it is less than 12 per cent, the income will be assessed on the basis of 12 per cent GP.

Summary

Issues:
Identical questions of law and facts in appeals challenging Tribunal's judgment and order allowing the appeal of the assessee.

Detailed Analysis:

1. The appeals raised questions of law related to the deletion of trading additions by the ITAT, despite evidence of bogus purchase bills and admitted facts from the Director's statement under section 132(4) of the IT Act. The appeals questioned the perversity of the ITAT order in deleting trading additions of significant amounts in each case.

2. The background of the case involved a search action on the Clarity Group, revealing the issuance of bogus purchase bills by Clarity Gold Pvt Ltd. and its sister concerns. The assesses company, engaged in the jewelry manufacturing and gemstone trading business, faced assessment under Section-143(3) r.w.s.153A, resulting in a declared income of &8377; 17,86,470 and an assessed income of &8377; 98,87,157.

3. The High Court considered the evidence on record and noted that the Tribunal had completely deleted the additions based on the GP rate of the industry in which the business operated. The Court determined an average GP rate of 12% to be applied in the present case. Any profit exceeding 12% would not be refunded to the assessee, while profits below 12% would be assessed based on the 12% GP rate.

4. After evaluating the industry standards and the GP rates of previous years, the Court allowed all the appeals to the extent that the income would be assessed based on a 12% GP rate. The judgment clarified the methodology for assessing income based on the GP rate and the implications for profits exceeding or falling below the specified percentage.