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2021 (10) TMI 948 - AT - Income TaxEstimation of income - Bogus purchases - CIT-A estimation of income @12.5% on the genuine transactions of purchases - HELD THAT - Gross profit rate disclosed in the financial statement is @3.25% and the assessee is in the Civil construction business and the margin of profit as mentioned by the AR is comparatively very much lower than 12.5% estimated by the CIT(A) - Accordingly, to meet the ends of Justice, we restrict the profit percentage to 6% as against 12.5% and modify the order of the CIT(A) - we make it clear that this reduced percentage is applicable only to the AY. Reopening of assessment u/s 147 - Estimation of commission - HELD THAT - We are of the opinion that the A.O. has only estimated the commission payment without any evidence and the addition was solely made on the basis of statement recorded - the addition is without evidence and the revenue has not discharged the burden with any incriminating material and we direct the AO to delete the addition and allow this ground of appeal - appeal of validity of re-assessment proceedings, we find the reopening was made with proper information from DCIT(Central circle) and we are not convinced with submissions of the AR and we dismiss this ground of appeal of the assessee. Gross profit/ profit embedded in the non genuine purchases and has restricted the addition to the extent of 12.5% of bogus purchases - AO has not doubted the sales and we rely on the ratio in the case of M/s Nikunj Eximp Enterprises 2014 (7) TMI 559 - BOMBAY HIGH COURT - we are not inclined to interfere with the order of the CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue.
Issues Involved:
1. Addition of 12.5% of purchases as income. 2. Addition of commission for purchases. 3. Validity of reopening assessment. Issue 1: Addition of 12.5% of purchases as income: The case involved the appellant and the revenue filing a cross appeal against the Commissioner of Income Tax (Appeals) order. The Assessing Officer (A.O.) had made a 100% addition of bogus purchases, leading to a dispute. The CIT(A) estimated the suppressed profit at 12.5% of the purchases made from bogus entities. The appellant contended that the profit margin was low due to operational delays and capitalization costs, arguing for a lower profit percentage. The Tribunal considered the facts and circumstances, noting the appellant's gross profit rate of 3.25%. The Tribunal reduced the profit percentage to 6%, disagreeing with the CIT(A)'s estimation of 12.5%, and modified the order accordingly, applicable only for the assessment year in question. Issue 2: Addition of commission for purchases: Regarding the addition of commission payments, the A.O. estimated the commission without concrete evidence, solely based on a statement. The Tribunal found this addition lacking evidence and directed the assessing officer to delete it, allowing this ground of appeal by the appellant. Issue 3: Validity of reopening assessment: The appellant raised concerns about the validity of the reassessment proceedings. The Tribunal noted that the reopening was based on information from DCIT (Central Circle) Mumbai, finding it proper. Dismissing the appellant's arguments, the Tribunal rejected this ground of appeal. In summary, the Tribunal partially allowed the appeal by the assessee, reducing the estimated profit percentage on purchases and deleting the addition of commission. The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision on the addition of suppressed profit. The reassessment proceedings were deemed valid based on information received.
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