INCOME TAX ACT, 1961

Section 250(6)

Appeal [CIT(A)] - Estimation of income - Bogus purchases - Entire purchase cannot be brought to tax

AO received information that some businessmen had accepted bogus purchase bills from some parties. Therefore, assessment was re-opened and re-assessment was framed under section 147 after making an addition being the difference between 12.5% of bogus purchases and the gross profit of 6.04% offered by the assessee as his income. However, the Re-assessment Order was set aside by Pr. CIT under section 263 as he was of the view that entire amount of 'bogus purchase' should have been added to the returned income. CIT(A) against Post-Revision Assessment Order who granted relief to the assessee by restricted the addition made by AO to 10% of the purchases. Held: Purchases were held to be bogus as the same were made from open/grey market, sales have been accepted by AO and CIT(A) had returned a finding that assessee was able to explain the source of expenditure from his bank account statement, purchase invoices and payments made through cheques. There was no reasons to take any other view of the matter than the view so taken by Tribunal. Entire amount purchases cannot be brought to tax. CIT(A) had confirmed addition to the extent 10% of bogus purchases which was in addition to profits already offered by the assessee to tax. Thus, there was no reason to interfere with the order passed by CIT(A).

Followed:CIT-I v. Simit P Sheth 2013 TaxPub(DT) 2115 (Guj-HC), Ashwin Purshotam Bajaj, C/o Shri Prakash Jhunjhunwala v. The ITO [ITA No. 4736/MUM/2014 & ITA No. 5207/MUM/2014, dated 14-12-2016] : 2017 TaxPub(DT) 74 (Kol-Trib) and Simit P Sheth L/R of Shri Pankaj J Sheth C/o Manish G Shah v. ITO [ITA No. 3238 and 3293/Ahd/2009, dt. 24-2-2012]

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2011-12

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