Case Law Details
DCIT Vs Silmohan Gems Private Limited (ITAT Mumbai)
ITAT Mumbai held that reasonable amount of addition should be made in case of bogus purchase. Accordingly, CIT(A) has justifiably made addition on the reasonable estimate basis @ 5% of the bogus purchase.
Facts- On receipt of information from the Investigation Wing of the Income-tax Department that assessee obtained accommodation entry of bogus purchases from some of the entities controlled by ‘Shri Bhanwarlal Jain’ who during the course of search at his premises, admitted to have engaged in issuing bogus bills. AO in the assessment order passed u/s 147 of the Act estimated 3% of the invoice amount of said purchase made from M/s Millennium Stars amounting to Rs.2,82,88,673/ -, which was computed at Rs.8,48,660/- and added accordingly.
Subsequently, the CIT called for the assessment records and after examination and providing opportunity of being heard to the assessee, passed order u/s 263 of the Act, holding that the assessment order passed by the Assessing Officer u/s 147 of the Act was erroneous and prejudicial to the interest of the Revenue and directed the Assessing Officer to make fresh inquires. AO after considering the material available before him made the addition for the entire amount of bogus purchases and further commission @ 3% for violation of the provisions of section 40A(3) of the Act.
CIT(A) restricted the disallowance of bogus purchases @ 5 % of the purchase value of Rs.2,82,88,673/ – which is computed to Rs.14,14,434/ -. As far as the issue of disallowance u/s 40A( 3) of the Act is concerned, same has been sustained by the Ld. CIT(A).
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