S.37(1): Business expenditure-Bogus purchases-Estimation of profit-Tribunal applying twelve and half per
cent held to be justified.
The assessee isin the business of trading in iron and steel. During the reassessment proceedings, it was found that
purchases worth Rs. 61.40 lakhs were not supported by sufficient evidence. Purchase of such goods from various
suppliers was verified, but it was found that such parties had not supplied the goods as named by the assessee. The Assessing Officer made an addition of the entire amount of purchase of Rs. 61.40 lakhs. The Commissioner (Appeals) found that though the purchases were not made from the parties from whom the assessee claimed, there was complete quantitative tally of the materials purchased and sold. He was of the view that such materials were purchased from the open market incurring cash payment and bills were procured from various sources. He added only the profit element and not the entire amount of the purchases, for the limited addition to 30 per cent of the total amount and reduced the amount to Rs. 18.42 lakhs. The Tribunal allowed further relief to the assessee and retained the addition to the level of twelve and half per cent in pursuance of the various purchases. On appeal, dismissing the appeal, the Court held that the assessee was a trader and the Tribunal having retained twelve and half per cent of the purchase towards its possible profit, there was no reason to interfere in the order of the Tribunal. (A. Y. 2003-2004)
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