INCOME TAX ACT, 1961

Section 69C

Income from undisclosed sources - Addition under section 69C - Bogus purchases -

Assessee-company was engaged in business of trading and sale of furniture and allied items. AO doubted the expenditure stated to be on account of purchases from two parties namely 'I' and 'V'. He acted on the basis of information received from the Sales Tax Department that in the list of bogus sales parties, the names of the said two parties were included. Further, the AO observed that the assessee did not produce lorry receipts and other related documents to reflect movement of goods sold and purchased which were crucial for determining genuineness of the purchase transaction. In absence thereof, the purchases made from the said two parties were treated as bogus purchases. Held: Assessee filed copies of purchase/sale invoices, challan cum tax invoices in respect of purchases, extracts of stock ledger showing entry/exit of the materials purchased etc., which proved that sale and purchases had taken place. Further, all the payments against the purchases were made through banking channel by way of account payee cheques. Further, mere reliance by the AO on information obtained from the Sales Tax Department would not be sufficient to treat the purchases as bogus. If the AO doubted the genuineness of the purchases, it was incumbent upon the AO to have caused further enquiries in the matter to ascertain genuineness of the transactions. Without causing such further enquiries in respect of the purchases, it was not open to the AO to make addition under section 69C and hence, the same was deleted.

REFERRED : The CIT-I v. M/s. Nikunj Eximp Enterprises (P) Ltd. (2015) 372 ITR 619 (Bom): 2015 TaxPub(DT) 1855 (Bom-HC) and Krishna Textiles v. CIT (2009) 310 ITR 227 (Guj): 2009 TaxPub(DT) 0659 (Guj-HC).

FAVOUR : In assessee's favour.

A.Y. : 2010-11

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