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| The Tax Publishers2021 TaxPub(DT) 1134 (Mum-Trib) INCOME TAX ACT, 1961
Section 68
Where purchases were not bogus but were made from parties, other than those mentioned in books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of assessee, since CIT(A) restricted the disallowance to 12.5% of non-genuine purchases, therefore, there was no infirmity in order passed by CIT(A) in restricting the addition/disallowance to the extent of 12.5% of purchases.
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Income from undisclosed sources - Addition under section 68 - Bogus purchases - CIT(A) restricted the disallowance of purchases to 12.5%
Assessee was engaged in the business of trading in plastic bags. Subsequently, AO received information from the Sales Tax Department that assessee availed accommodation entries from various dealers who are said to be providing accommodation entries without there being transportation of any goods. Assessee was required to prove the genuineness of the purchases made from various dealers. Assessee submitted that purchases made are genuine and that payments were made through account payee cheques as such contended that all the purchases are genuine. However, parties were not produced before AO. Not convinced with the submissions of assessee, AO treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials. Held: High Court in case of CIT v. Simit P.Sheth (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC) had held that where purchases were not bogus but were made from parties other than those mentioned in books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of assessee. CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and restricted the disallowance to 12.5% of non-genuine purchases. Therefore, there was no infirmity in order passed by CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases.
Followed:CIT v. Jansampark Advertising & Marketing (P) Ltd. ITA No.525/2014 : 2015 TaxPub(DT) 992 (Del-HC), CIT v. SIMIT P SHETH (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC) and CIT v. Vir Bhan & Sons. (2005) 273 ITR, 206 (P&H-HC) : 2005 TaxPub(DT) 426 (P&H-HC), CIT v. Precision Finance Pvt. Limited (1994) 208 ITR 465 Cal. : 1994 TaxPub(DT) 0368 (Cal-HC) Dy. CIT v. M.P. Recycling Co. Pvt. Ltd. ITA No.6358/Mum./2016 : 2018 TaxPub(DT) 1480 (Mum-Trib) and Meru Impex v. ACIT [I.T.A. No. 2660/Mum/2017, dt. 1-11-2017]
REFERRED :
FAVOUR : In assessee's favour.
A.Y. : 2009-10
IN THE ITAT, MUMBAI BENCH
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