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2020 (9) TMI 1122 - AT - Income TaxEstimation of income - bogus purchases - addition made on account of @8% on the value of alleged bogus purchases - HELD THAT - Assessee had disclosed total gross profit of 3.6%. Since, assessee is engaged in the business of export of cut and polished diamonds, there is no question of any VAT portion incurred by the assessee on the purchases. Gross profit disclosed by the assessee on the disputed purchases was 2.42%. These facts were not controverted by the revenue before us. Profit element determined @8% is on the much higher side and we deem it fit to estimate the profit @3% on the value of purchases treated as non-genuine by placing reliance on Ralf Jems Pvt. Ltd 2019 (9) TMI 1402 - ITAT MUMBAI . Ground raised by the assessee is partly allowed.
Issues:
1. Dismissal of ground Nos. 1 & 2 raised by the assessee. 2. Justification of confirming the addition made on account of alleged bogus purchases. Analysis: 1. The appeal in ITA No.2306/Mum/2019 for A.Y.2007-08 was against the order by the ld. Commissioner of Income Tax (Appeals)-3, Mumbai. Ground Nos. 1 & 2 raised by the assessee were not pressed and were dismissed. The only issue remaining was whether the ld. CIT(A) was justified in confirming the addition made on account of alleged bogus purchases. 2. The assessee, engaged in the export of cut and polished diamonds, had made purchases from certain parties belonging to Bhanwarlal Jain Group. The ld. AO treated these purchases as bogus due to lack of physical delivery of goods, despite payments being made by account payee cheques. The ld. AO added a profit element of 8% on the value of alleged bogus purchases, which was confirmed by the ld. CIT(A). 3. The assessee had disclosed a total gross profit of 3.6%, with no VAT portion incurred on the purchases due to the nature of the business. The gross profit disclosed on the disputed purchases was 2.42%. The ITAT found the profit element of 8% to be on the higher side and estimated the profit at 3% based on a Co-ordinate Bench decision. Consequently, the ground raised by the assessee was partly allowed. 4. The ITAT, in its final decision, partly allowed the appeal of the assessee, concluding the judgment on 13/08/2020.
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