2023 (1) TMI 849 - AT - Income Tax

Tax Tribunal Rules on Profit Percentage for Disputed Purchases

The Tribunal partially allowed the Assessee's appeals for A.Y. 2009-10 and 2010-11, directing a profit percentage of 2% to be taxed on disputed purchases, ... Estimation of income - bogus purchases - CIT(A) restricting the addition to the extent of profit percentage embedded in the value of disputed purchases @12.5% - HELD THAT:- AR had placed on record the copy of the decision of this Tribunal in the case of Shri Prateek Gupta [2019 (9) TMI 1067 - ITAT MUMBAI] - AR also stated that Shri Prateek Gupta is a relative of the assessee. In the said order, this Tribunal under similar facts and circumstances, by considering the profit percentage earned by the assessee on disputed purchases as well as the overall purchases, had estimated the profit percentage to 2% of value of disputed purchases. AR before us also placed on record the statement showing gross profit earned by the assessee in percentage terms both on disputed purchases and overall purchases for the A.Y. 2009-10 and 2010-11. As the factual matrix is exactly identical with the facts prevailing in the case of Shri Prateek Gupta we direct the ld. AO to estimate the profit percentage at 2% of value of disputed purchases. Accordingly, the grounds raised by the assessee as well as by the Revenue are disposed of in the above mentioned manner. Issues involved:Cross appeals for A.Y. 2009-10 and 2010-11 regarding the addition of profit percentage in disputed purchases.Analysis:The appeals in question arose from the order of the ld. Commissioner of Income Tax (Appeals)-52, Mumbai against the assessment order passed by the ld. Dy. Commissioner of Income Tax, Central Circle - 4(2), Mumbai. The primary issue to be decided was whether the ld. CIT(A) was justified in limiting the addition to the profit percentage embedded in the value of disputed purchases at 12.5%. The parties agreed that the facts of A.Y. 2009-10 would apply to A.Y. 2010-11 as well, with variations in figures. The assessee, a proprietor of a trading business, was found to have made purchases from tainted dealers during the relevant assessment years. The ld. AO disallowed the entire value of disputed purchases as unverifiable, citing lack of evidence regarding goods movement and delivery details.The ld. CIT(A) upheld the disallowance but determined that only the profit element embedded in the disputed purchases should be taxed, estimating it at 12.5%. Both the assessee and the Revenue appealed this decision. The Tribunal noted that since the corresponding sales from the disputed purchases were not disputed, only the profit element should be taxed. The Tribunal referred to a previous case involving similar facts and circumstances where a profit percentage of 2% was estimated on disputed purchases. The Tribunal directed the ld. AO to apply the same 2% profit percentage in this case as well.Therefore, the Tribunal partially allowed the appeals of the Assessee for both A.Y. 2009-10 and 2010-11, and partially allowed the appeal of the Revenue for A.Y. 2009-10. The decision was pronounced on 09/01/2023.