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of <h1>Gujarat HC upholds ITAT decision restricting bogus purchase disallowance to 6% instead of 12.5%</h1> <h3>THE PRINCIPAL COMMISSIONER OF INCOME TAX 1, SURAT Versus DEEPAK BANWARILAL AGARWAL</h3> THE PRINCIPAL COMMISSIONER OF INCOME TAX 1, SURAT Versus DEEPAK BANWARILAL AGARWAL - TMI Issues:1. Estimation of addition in respect of bogus purchases at 6% vs. 100% disallowance made by the Assessing Officer.2. Justification of estimating the addition in respect of bogus purchases at 6% based on previous court decisions.Analysis:Issue 1: Estimation of addition in respect of bogus purchasesThe case involved the respondent-assessee engaged in diamond trading, where non-genuine purchase bills were obtained from a group involved in providing accommodation entries. The assessment resulted in an addition of Rs. 3,40,03,788 on account of bogus purchase bills. The CIT (Appeals) confirmed the addition at 5%, which was further restricted to 6% by the Tribunal. The Tribunal relied on a Co-ordinate Bench judgment, directing the Assessing Officer to make the addition at 6% of bogus purchases. The Court dismissed the appeal, upholding the Tribunal's decision based on the precedent set by the Co-ordinate Bench.Issue 2: Justification based on previous court decisionsThe Tribunal's decision to estimate the addition at 6% was supported by the judgment in a similar case involving Principal Commissioner of Income Tax vs. Pankaj K. Choudhary. The Court cited the decision in Pankaj K. Choudhary's case, where the disallowance was reduced from 100% to 12.5% based on the GP rate shown by the appellant. The Tribunal's decision to reduce the disallowance to 6% was deemed reasonable, considering the turnover and GP rate declared by the assessee. The Court further highlighted a similar case, Principal Commissioner of Income Tax 1, Surat vs. M/s. Surya Impex, where the court ruled in favor of the assessee regarding accommodation entries provided by the same group involved in the present case.In conclusion, the Court found no substantial questions of law arising from the facts presented and dismissed the appeal. The decision was based on the precedents set by previous judgments and the analysis of facts and figures available before the Tribunal. The Court upheld the Tribunal's decision to estimate the addition at 6% of the disputed purchases, considering the overall circumstances and to prevent revenue leakage.
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