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Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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AI Drafter - (New and Powerful) ✕ Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter.
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Issues: Whether the disallowance on account of bogus purchases could be sustained at 12.5% and whether the gross profit already declared was to be reduced from such disallowance.
Analysis: The assessee had produced purchase vouchers and banking-channel payments, while the suppliers were not produced. The sales were not doubted, and in such circumstances a 100% disallowance of purchases was held to be unsustainable. The purchases were treated as having been made from the grey market, implying only the embedded profit element could be brought to tax. The computation of such element had to take into account the gross profit already declared by the assessee.
Conclusion: The disallowance was restricted to 12.5% of the bogus purchases after reducing the gross profit already declared, which is in favour of the assessee to that extent.
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