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2022 (9) TMI 972 - AT - Income TaxEstimation of income - bogus purchases - HELD THAT - We are of the considered view that in the present case, the lower authorities though correctly agreed that only profit embedded in the sales could be brought to tax, however, placed reliance upon the aforesaid decision of Hon ble Gujarat High Court 2013 (10) TMI 1028 - GUJARAT HIGH COURT to restrict the disallowance to 12.5% without appreciating the basis on which such percentage of addition was arrived at in the facts of that case. In the present case, reliable industry data was also not brought on record to prove the prevailing profit margin of the ferrous and non-ferrous industry during the relevant assessment year. We deem it fit to modify the impugned order only to the extent that the disallowance on account of bogus purchases should be restricted to the total of rate of VAT applicable during the year under consideration in the State of Maharashtra on the goods traded by the assessee and gross profit earned by the assessee during the year under consideration. We, accordingly, direct the AO to recomputed the disallowance. The sole ground raised in assessee's appeal is partly allowed.
Issues:
Challenge to impugned orders under section 250 of the Income Tax Act for assessment years 2009-10 and 2010-11. Issue of addition on account of alleged bogus purchases. Analysis: Issue 1: Addition on account of alleged bogus purchases (A.Y. 2009-10) - The assessee challenged the addition of Rs. 8,60,860, representing 12.50% of alleged bogus purchases. - The assessee, a proprietor dealing in metal reselling, faced reassessment due to suspicion of bogus bills. - Despite opportunities, the assessee failed to prove the genuineness of purchases from non-existent parties. - The Assessing Officer (AO) disallowed part of purchases as non-genuine based on lack of evidence. - The AO relied on the decision of Hon'ble Gujarat High Court to make the addition. - The CIT(A) upheld the AO's decision, leading to the current appeal. - The AR argued for a restriction of addition based on VAT defaults by vendors. - The Tribunal referred to the Gujarat High Court's decision in a similar case and upheld the 12.5% addition. - The Tribunal modified the order to restrict the disallowance based on VAT rate and industry profit margin. - The appeal for A.Y. 2009-10 was partly allowed. Issue 2: Addition on account of alleged bogus purchases (A.Y. 2010-11) - The assessee challenged the addition of Rs. 16,06,021, representing 12.50% of alleged bogus purchases. - The issue mirrored that of A.Y. 2009-10 with a different amount. - The Tribunal applied the same reasoning and decision from the A.Y. 2009-10 case to partly allow the appeal for A.Y. 2010-11. - Both appeals by the assessee were partly allowed. In conclusion, the Tribunal partly allowed both appeals by the assessee, addressing the issue of addition on account of alleged bogus purchases for the assessment years 2009-10 and 2010-11. The Tribunal relied on the decision of the Hon'ble Gujarat High Court to restrict the disallowance percentage and modified the order based on VAT rates and industry profit margins.
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