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2021 (12) TMI 923 - AT - Income TaxEstimation of income - Bogus purchases - estimation of gross profit at 12.5% - HELD THAT - As relying in assessee's ow case 2021 (12) TMI 52 - ITAT MUMBAI we direct the Assessing Officer to estimate the Gross Profit element from tainted purchases at 1% as against 12.5% estimated by the Ld.CIT(A). Accordingly, the grounds raised by the assessee are partly allowed.
Issues: Estimation of Gross Profit element from purchases made by the assessee for different assessment years.
In this judgment, the Appellate Tribunal, Mumbai, heard three appeals filed by the assessee against orders of the Commissioner of Income Tax (Appeals) for different assessment years. The Tribunal noted that a similar issue had been considered for a previous assessment year, where the Gross Profit element from purchases was estimated at 1% due to the nature of the supplies and absence of VAT eligibility on fabrics. The Tribunal found that the suppliers only provided fabrics to the assessee, and after examining sample invoices, concluded that there was no VAT applicable on fabrics. The Tribunal also observed that the sales from these purchases were not questioned by the Revenue. The Tribunal considered the logic behind estimating the profit element and concluded that only the incidental profit from cash purchases in the grey market should be taxed, excluding the VAT portion. Referring to a previous decision, the Tribunal directed the Assessing Officer to add only 1% of the value of ingenuine purchases and delete the remaining portion, thereby partly allowing the assessee's appeal. The Tribunal applied the findings from the previous assessment year to the current appeals, as the parties and facts were similar. Consequently, the Tribunal directed the Assessing Officer to estimate the Gross Profit element from tainted purchases at 1% instead of the 12.5% estimated by the Commissioner of Income Tax (Appeals). As a result, the appeals of the assessee were partly allowed. The order was pronounced on 25.11.2021 in accordance with ITAT Rules.
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