INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Estimation of income - Bogus purchases

Assessee was engaged as dealer of chemicals. Pursuant to receipt of certain information from DGIT (Inv.), it transpired that assessee made suspicious purchases from three entities as detailed in assessment order. The three suppliers were listed as Hawala dealers by Sales Tax Authorities. Accordingly, case was reopened as per due process of law and the assessee was required to file requisite details to substantiate the purchases. Assessee failed to produce any of the suppliers. Consequently, an opinion was formed by AO that assessee could not discharge the onus of establishing these purchases. Finally, total purchases made by assessee from seven suppliers were added back to its income while framing assessment. Assessee filed additional evidences under rule 46A which were subjected to remand proceedings. After considering the remand report, CIT(A) noted that part of purchases were accepted by AO. Thus, CIT(A) estimated additions of 12.5%.Held: Issue was rightly clinched in proper perspective by CIT(A). The Sales Turnover was not in doubt and assessee was in possession of primary purchase documents. The payment to the supplier was through banking channels. There could be no sale without actual purchase of material keeping in view the assessee's nature of business. The facts of the case made it a fit case to estimate the profit element embedded in these transactions. Therefore, estimation of 12.5% as made by CIT(A) was quite fair and reasonable on the facts of the case.

Relied:CIT v. Simit P Sheth (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10

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