The Tax Publishers2013 TaxPub(DT) 1852 (Guj-HC) : (2013) 053 (I) ITCL 0040 : (2013) 355 ITR 0290

Income Tax Act, 1961

--Income from undisclosed sources--Addition under section 69 Unexplained purchases--Assessee was engaged in the business of trading in finished fabrics. Assessing officer made addition under section 69 on account of unexplained purchases. Tribunal adverted to the facts and data on record and came to the conclusion that the entire quantity of opening stock, purchases and the quantity manufactured during the year under consideration were sold by assessee. Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases themselves were not bogus. In that view of the matter, Tribunal was also of the opinion that not the entire amount, but the profit margin embedded in such amount would be subjected to tax. Revenue challenged the order of Tribunal. Held: Whether the purchases themselves were bogus or whether the parties from whom such purchases were allegedly made, were bogus was essentially a question of fact. Tribunal having examined the evidence on record came to the conclusion that the assessee did purchase the cloth and sell the finished goods. In that view of the matter, as natural corollary, not the entire amount covered under such purchase, but the profit element embedded therein would be subjected to tax.

Income Tax Act, 1961, Section 69

In the Gujarat High Court

Akil Kureshi & Harsha Devani J.J.

CIT v. Bholanath Poly Fab (P.) Ltd.

Tax Appeal No. 63 of 2012

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