In case of disputed purchases, only profit element embedded in the value of such disputed purchases shall be brought to tax

Last updated: 07 August 2021

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This judgement clarifies that when purchases are disputed, only the profit element within the value of those purchases is subject to tax. The assessee, a diamond manufacturer and exporter, had purchases disallowed due to concerns about the suppliers being paper companies. However, since the assessee provided details of corresponding sales and the revenue did not dispute them, the tribunal ruled that taxing only the profit was fair. A profit margin of 3% was deemed appropriate, aligning with previous tribunal decisions and government guidelines.

Court :
ITAT Mumbai

Brief :
This appeal in ITA No.40/Mum/2020 for A.Y.2007-08 arises out of the order by the ld. Commissioner of Income Tax (Appeals)-30, Mumbai in appeal No.CIT(A)-30/19(1)(2)/13153/2015-16 dated 26/09/2016 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961.

Citation :
CIT(A)-30/19(1)(2)/13153/2015-16

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1 Year PLAN

1999

(Excl. of GST ₹359)

BEST VALUE

2 Years PLAN

3499

(Excl. of GST ₹629)

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Attached File : 1442821_4080_ashinihi_04_08_2021.pdf

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Judgement posted by

Poojitha Raam Vinay

Practice

I simplify complex income tax, TDS, banking, and investment updates into practical insights for taxpayers, salaried professionals, pensioners, and senior citizens. I regularly write on ITR filing, tax compliance, savings schemes, and the latest financial rule changes in India.

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