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2023 (9) TMI 1225 - HC - Income TaxEstimation of income - bogus purchases - information received from the Investigation Wing which stated that assessee was one of the beneficiaries of bogus purchase bills obtained through hawala operators - HELD THAT - ITAT as relying on case of Vijay Proteins Ltd. 2015 (1) TMI 828 - GUJARAT HIGH COURT and also Smith P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT and held that no uniform yardstick can be applied for estimating gross profit on bogus purchases which is depending upon the facts of different cases. ITAT held that the Co-ordinate Bench in number of cases has taken a consistent view and directed AO to estimate gross profit of 12.5% on alleged bogus purchases and therefore, in the case at hand also directed AO to estimate gross profit at 12.5% on the bogus purchases. Thus view taken by the ITAT is a reasonable and possible view and hence, no substantial question of law arises
Issues involved:
The judgment involves an Appeal under Section 260A of the Income Tax Act, 1961 filed by the Revenue challenging an order passed by the Income Tax Appellant Tribunal regarding the assessment of income based on alleged bogus purchases. Issue 1 - Assessment of Income: The Respondent-assessee initially declared 'nil' income for the Assessment Year 2009-2010, but later an order was passed assessing income at Rs. 20,00,050 due to an addition of Rs. 1,97,35,311 on account of bogus purchases. The Commissioner of Income Tax (Appeals) allowed the Appeal stating that the addition was made without sufficient evidence, but the ITAT partly allowed the Revenue's Appeal by estimating the profit element embedded in the bogus purchases at 12.5%. Issue 2 - Substantial Questions of Law: Several substantial questions of law were proposed, including whether the ITAT was justified in estimating the profit element of bogus purchases at 12.5%, ignoring relevant judgments, and allowing relief to the assessee despite lack of evidence establishing genuineness of the transactions. Issue 3 - Addition towards Gross Profit: The AO made an addition towards gross profit on alleged bogus purchases based on information from the Investigation Wing, stating that the assessee benefited from bogus purchase bills obtained through hawala operators. The assessee argued that all necessary details were provided to justify the purchases and that the estimation of gross profit at 60.24% was arbitrary. Issue 4 - ITAT's Decision and Merits: The ITAT relied on previous judgments and directed the AO to estimate gross profit at 12.5% on the alleged bogus purchases, stating that no uniform yardstick can be applied in such cases. The ITAT also found fault with the AO's approach in re-opening the assessment, leading to the dismissal of the Appeal as the ITAT's view was considered reasonable and valid. In conclusion, the High Court dismissed the Appeal, upholding the ITAT's decision regarding the estimation of profit element in bogus purchases and finding no substantial question of law for further consideration.
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