2021 (1) TMI 943 - AT - Income Tax

Estimation of income - Bogus purchases - HELD THAT - It is not in dispute that the assessee should have made purchases from the grey market in order to have some savings in indirect taxes and incidental profits thereon. We find that this Tribunal in series of decisions by placing reliance on the decision in the case of Simit P. Sheth 2013 (10) TMI 1028 - GUJARAT HIGH COURT had categorically held that profit percentage of disputed purchases for the persons engaged in similar line of industry in which assessee is engaged in should be reasonably estimated at 12.5% of value of disputed purchases. Respectfully following the same, we direct the ld. AO to restrict the disallowance made on account of bogus purchases to 12.5% of value thereon. Accordingly, the ground raised by the assessee are partly allowed.

Summary

Issues Involved:
Delay in filing appeal, Disallowance of bogus purchases

Delay in Filing Appeal:
The appeal in ITA No.6188/Mum/2017 for A.Y.2009-10 involved a delay of 104 days in filing by the assessee. The reason for the delay was attributed to the company being under liquidation and the Director's unavoidable absence due to personal reasons. The Tribunal, considering the reasons provided, condoned the delay and admitted the appeal for adjudication.

Disallowance of Bogus Purchases:
The case revolved around disallowance made on account of alleged bogus purchases by the assessee. The company, engaged in the business of repairs and maintenance of oil and gas refineries, had made purchases from suppliers listed as tainted dealers by the Sales Tax department. The Assessing Officer disallowed 100% of the value of purchases as unverifiable, citing lack of evidence regarding delivery and consumption of materials. The Commissioner of Income Tax (Appeals) acknowledged that the materials were indeed consumed for business purposes and estimated the suppressed profit at 32.07% of the disputed purchases, granting partial relief to the assessee. The Tribunal, noting that the revenue did not appeal against the CIT(A)'s order, directed the AO to restrict the disallowance to 12.5% of the value of the disputed purchases, following precedents and principles established in similar cases. Consequently, the appeal was partly allowed.

In conclusion, the judgment addressed the delay in filing the appeal and the disallowance of alleged bogus purchases, providing detailed analysis and reasoning for each issue while upholding certain aspects and granting partial relief to the assessee based on legal precedents and established principles.