ITAT directs 3% GP tax on tainted purchases under section 80HHC

The ITAT partly allowed the revenue's appeal, directing the AO to tax 3% of GP on the tainted purchases under section 80HHC. The disallowance by the AO was deemed incorrect, as PAN verification revealed matching details in several confirmations. The ITAT upheld the CIT (A)'s decision based on prior cases limiting GP estimation to 3% of non-genuine purchases. Furthermore, the ITAT permitted the assessee to challenge double addition on peak cash deficit under rule 27, pending further assessment by the AO.

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Issues involved: Appeal against deletion of amount on account of non-genuine purchases u/s 80HHC.

Summary:
The appellant, a proprietor of M/s Nitin Impex engaged in export business, claimed deduction u/s 80HHC. The Assessing Officer disallowed purchases from 35 parties as non-genuine, totaling to Rs. 7,48,42,474. The CIT (A) deleted the disallowance after considering additional evidence. The ITAT upheld the CIT (A)'s decision based on previous cases where GP estimation was restricted to 3% of tainted purchases. The ITAT found the disallowance by the AO to be incorrect and noted that PAN verification showed matching details in many confirmations. The ITAT directed the AO to tax 3% of GP on the tainted purchases, consistent with previous years. The ITAT also allowed the assessee to contest double addition on peak cash deficit under rule 27, subject to further examination by the AO.

In conclusion, the revenue's appeal was partly allowed, with directions given to the AO regarding GP estimation and consideration of set off for peak cash deficit.

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