Case Law Details
ACIT Vs Armee Infotech (ITAT Ahmedabad)
In the case of Gujarat Ambuja (supra), the AO disallowed 25% of the bogus purchase, which has been reduced to 5% at the level of ITAT. This decision of the ITAT was challenged before the Hon’ble Gujarat High Court, the Hon’ble Court did not interfere in the finding of the Tribunal. Similarly, in the case of Mayank Diamonds P.Ltd. (supra), GP rate of 5% was taken by the Tribunal, which has been upheld by the Hon’ble High Court. In the case of Lulubi Steel (supra), the Tribunal has again restricted the addition at 12.5%. In all these cases, Vijay Proteins (supra) has been considered. A perusal of the decisions would reveal that major factor which weighed with the ITAT as well as Hon’ble High Court was estimation of profit in a particular transaction after considering particular line of business. Here, in this case, the assessee has purchased batteries and replaced. Quantity was not in dispute. In the past, whatever provisions remained unutilized was offered as income by the assessee. Therefore, we are of the view that there is nothing with the ld.CIT(A) to estimate the profit at 17% of the alleged bogus purchase. The ld.CIT(A) has made reference to the GP percentage shown by the assessee in the different assessment years. But while working out 17%, he has nowhere referred wither it is net profit of Rs.3.48 crores or GP out of this. GP has been shown by the assessee at 14.35% in this assessment year. But net profit is only 2.38%. The assessee has not disputed if 2.38% is being estimated as undue profit earned by it from purchase of these batteries amounting to Rs.1.56 crores. Calculation by the ld.CIT(A) are not based on any scientific formula or any evidence. There is no reference that in purchase and sale of computer batteries there could be profit margin is of 17%. It is also pertinent to note that whenever any estimation is required to be made guess-work would always be there. But such guess-work should be in consonance with overall profit shown by the assessee. It has achieved a turnover of more than Rs.102 crores, and returned income of Rs.4.13 crores. These factors are also to be kept in mind. Taking into consideration all these facts, we estimate disallowance out of these bogus purchase at 7%. In other words, 7% of the alleged bogus purchase of Rs.1,56,78,802/- will be disallowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
In assessment year 2012-13 assessee and the Revenue are in cross-appeal against order of the ld.CIT(A) dated 28.4.2016; whereas in the asstt.Year 2014-15, the assessee alone has impugned order of the ld.CIT(A)-6 dated 20.9.2018. The issues in all these three appeals are inter-connected with each other, and therefore, we heard them together and deem it appropriate to dispose of them by this common order.
2. First we take appeal of the Revenue in the Asstt.Year 2012-13 i.e. ITA No.1778/Ahd/2016. However, if any ground is found to be interconnected with any other issues agitated in rest of two appeals, then same will be taken up together.
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