2021 (6) TMI 349 - AT - Income Tax

Estimation of income - bogus purchases - as per CIT-A profit element embedded in these transactions was to be brought to tax. The estimation was made @12.68% which was nothing but Gross Profit rate shown by the assessee during the year - HELD THAT - We find that the Sales Turnover was not in doubt and there could be no sale without actual purchase of material keeping in view the assessee's nature of business. The facts of the case made it a fit case to estimate the profit element embedded in these transactions. The Ld. CIT(A), after due consideration of assessee's submissions as well as material on record, estimated the additions @12.68% which is more than enough to take care of the leakage of revenue. Therefore, the estimation could not be termed as unjustified, in any manner. Finding no reason to interfere in the impugned order, we dismiss the appeal.

Summary

Issues:
1. Recalled appeal due to low-tax effect case disposal
2. Disallowance of alleged bogus purchases
3. Assessment based on lack of documentary evidence
4. Dispute over Gross Profit Rate estimation

Analysis:
1. The appeal was recalled as it was initially disposed of as a low-tax effect case, but later recalled due to being covered by an exception in a CBDT Circular. The case was reheard by the bench.

2. The revenue challenged the CIT(A)'s order granting relief to the assessee regarding alleged bogus purchases. The original assessment was reopened based on information regarding these purchases.

3. The assessee failed to provide documentary evidence to support the alleged purchases, leading to the disallowance of the amount in question by the assessing officer.

4. The CIT(A) considered the case, including the assessee's arguments and relevant judicial decisions, and concluded that the assessee had obtained accommodation bills from suppliers while procuring goods in cash from other parties. The CIT(A) estimated the profit element at 12.68%, aligning with the Gross Profit rate shown by the assessee. The tribunal upheld this estimation, finding it reasonable to address revenue leakage.

5. Given the factual findings and nature of the business, where sales turnover is dependent on actual material purchases, the tribunal found the profit estimation justified. The appeal was dismissed, upholding the CIT(A)'s order.

6. The tribunal pronounced the order on June 2nd, 2021, dismissing the appeal.