An ad hoc estimation made by the Assessing Officer restricting the profit element in purchases.

Last updated: 02 March 2021

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The Income Tax Appellate Tribunal heard an appeal concerning the Assessing Officer's estimation of profit on purchases deemed non-genuine. The Assessing Officer treated purchases from a specific trader as invalid due to the inability to verify the party or the movement of goods. An estimated profit of 12.5% was added to the assessee's income based on these purchases.

Court :
ITAT Mumbai

Brief :
This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)–12, Mumbai [hereinafter in short“Ld.CIT(A)”] dated 27.06.2018 for the A.Y. 2011-12 in deleting the penalty levied u/s. 271(1)(c) of the Act made by the Assessing Officer.

Citation :
ITA 5389/MUM/2018

IN THE INCOME TAX APPELLATE TRIBUNAL (VIRTUAL COURT)
“C” BENCH, MUMBAI

BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND

SHRI N.K. PRADHAN, HON'BLE ACCOUNTANT MEMBER
ITA NO. 5389/MUM/2018 (A.Y: 2011-12)

ACIT – Circle - 6(2)(1)
Room No. 504, 5th Floor
Aayakar Bhavan
M.K. Road
Mumbai – 400 020
PAN: AADCC4035H
(Appellant)

vs.

M/s. Creative Electrical Innovative Pvt. Ltd.,
Unit No. 12, 18B, Hammer Smith Indl. Estate
Pathare Marg, Off. Sitala Devi Temple Road
Mahim (W), Mumbai - 400016
(Respondent)

Assessee by : None
Department by : Ms. Shreekala Pardeshi

Date of Hearing : 11.02.2021
Date of Pronouncement : 11.02.2021

O R D E R

PER C.N. PRASAD (JM)

1. This appeal is filed by the Revenue against the order of Learned Commissioner of Income Tax (Appeals)–12, Mumbai [hereinafter in short“Ld.CIT(A)”] dated 27.06.2018 for the A.Y. 2011-12 in deleting the penalty levied u/s. 271(1)(c) of the Act made by the Assessing Officer.

2. Briefly stated the facts are that, assessee firm engaged in the business of executing electrical contracts and filed return of income on28.09.2011 declaring income of ₹.9,16,510/- for the A.Y. 2011-12.Assessment was reopened u/s. 147 of the Act and re-assessment wascompleted on 30.09.2016 u/s. 143(3) r.w.s 147 of the Act determiningthe income at 10,51,910/-. While completing the reassessment theAssessing Officer treated purchases of ₹.1,25,374/- made from M/s. VitrajTraders Impex as non-genuine and ₹.10,030/- towards unexplainedcommission expenditure on bogus purchases for the A.Y. 2011-12 on thebasis of the information received from DGIT (Inv.,), Mumbai that assesseehas received accommodation entries from M/s. Vitraj Traders Impexwithout making any purchases but made purchases only in gray market.The Assessing Officer treated such purchases from M/s. Vitraj TradersImpex as non-genuine as the assessee could not produce the party andalso could not establish the movement of goods. However, the AssessingOfficer estimated the profit element from non-genuine purchases at12.5% and brought to tax an amount of ₹.1,25,374/- out of purchases of ₹.10,02,988/-.

To know more in details find the atatchment file