Friends International was in business of precious and semi precious stones. It filed its return declaring total income of Rs 18,08,070. AO u/s 145(3) rejected books of accounts. AO held that purchases from various parties for Rs. 30,96,965 could not be verified. AO disallowed 25% of unverifiable purchases and made addition. CIT(A) upheld AO’s action. ITAT directed AO to recalculate income by disallowing 15% of unverifiable purchases.-500603
1. Friends International was into manufacturing and trading of precious and semi precious stone.
2. The assessee filed its return declaring total income of Rs. 18,08,070.
3. The case was scrutinized u/s 143(3).
4. Assessee had disclosed gross profit of Rs. 1,04,64,751 on total turnover of Rs. 22,50,16,735 which gave a G.P. rate of 4.65%.
5. AO u/s 145(3) held that assessee’s stock register could not be verified, and assessee had also not maintained the quantitative, qualitative, rate-wise details, and thus AO rejected the books of accounts.
6. AO noticed that assessee had made purchases from various parties for Rs. 30,96,965.
7. The purchases could not be verified, and AO disallowed 25% of unverifiable purchases and made addition of Rs. 7,74,241 to the income of assessee.
On appeal, the ITAT held as under:
8. Similar line of cases, this Bench has decided in the case of Shri Anuj Kumar Varshney vs. ITO and other cases where on unverifiable/bogus purchases 15% net income has been decided.
9. Accordingly, we also apply 15% on unverifiable purchases in this case also as net income. 10 The AO is directed to recalculate the income as per above direction.
Case Reference - M/s. Friends International vs The Additional CIT.
IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
BEFORE: SHRI T.R.MEENA, AM & SHRI LALIET KUMAR, JM
ITA No. 154/JP/2014
(Assessment Years : 2008-09)