9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2017 (11) TMI 183 - AT - Income TaxAddition of bogus purchases - estimating of profit - Held that - Hon ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd 2013 (10) TMI 933 - GUJARAT HIGH COURT held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken by the Hon ble Gujarat High Court in the case of CIT v. Simit P. Seth (2013 (10) TMI 1028 - GUJARAT HIGH COURT). Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp 2013 (1) TMI 88 - BOMBAY HIGH COURT . Thus, following the above decision of the Hon ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd (supra), We direct the Assessing Officer to restrict the disallowance to 12.5% of the purchases treated as non-genuine by estimating profit element in such bogus purchases.
Issues:
Sustainability of disallowance made by the Assessing Officer towards bogus purchases. Analysis: The appeal was filed against the order of the Commissioner of Income Tax (Appeals) for the Assessment Year 2010-11. The main issue was the disallowance of purchases made by the assessee from a specific party, M/s. Ronak Industries, amounting to ?86,89,450. The Assessing Officer treated these purchases as non-genuine due to lack of satisfactory details and explanations provided by the assessee. The Assessing Officer relied on information from the Sales Tax Department and the failure to serve notices to M/s. Ronak Industries. The Assessing Officer concluded that the purchases were accommodation entries. The Assessing Officer rejected the books of accounts and estimated the Gross Profit at 13.76%, adding the amount to the assessee's income. The assessee contended that it was engaged in trading ferrous and non-ferrous metals and provided various documents to support the genuineness of the purchases, including invoices, challans, stock registers, ledger extracts, and bank statements. The assessee argued that the Assessing Officer's conclusion was erroneous and that the Gross Profit margin was consistent over the years. The assessee also highlighted that the sales were accepted, indicating the genuineness of the transactions. The assessee cited relevant case laws to support its position. The Tribunal noted that the Assessing Officer's basis for treating the purchases as non-genuine was solely information obtained from the Sales Tax department, which was not shared with the assessee. The Tribunal emphasized that the Assessing Officer did not prove that the purchases were bogus and failed to conduct further investigations to verify the transactions' genuineness. Referring to a similar case, the Tribunal held that without conclusive evidence, the addition under Section 69C could not be sustained. Citing decisions from the Hon'ble Gujarat High Court, the Tribunal directed the Assessing Officer to restrict the disallowance to 12.5% of the purchases treated as non-genuine to account for the profit element. The appeal was partly allowed, emphasizing the need for proper investigation and evidence before disallowing purchases as non-genuine. In conclusion, the Tribunal found that the Assessing Officer's reliance on information from the Sales Tax department without conducting thorough investigations and without conclusive evidence was insufficient to treat the purchases as bogus. The Tribunal emphasized the importance of verifying transactions and providing proper justification before making additions to the assessee's income.
|
