INCOME TAX ACT, 1961

Section 4

Income - Addition - Bogus purchases -

AO was of view that assessee had availed of accommodation entries for purchases from some parties. When AO asked assessee to furnish supporting documents for corresponding sales effected, barring ledger account and cheque payment, no other documents were produced. Moreover, these parties had admitted that they have not made any sale or purchase transaction. AO held that since assessee could not prove the genuineness of purchases, these goods must have been purchased from grey market at a lesser price to inflate prices of goods and made addition of profit @12.5% of total purchases. Held: Revenue had not doubted sales carried out of bogus purchases by assessee. Assessee also maintained stock tally, payments were made by cheque. But, assessee could not produce delivery challans, lorry receipts, transportation details, etc. Moreover, seller parties had admitted that they had not made any sale or purchase transaction and in that eventuality only inference could be drawn was that assessee might have made purchases from grey market and made sales. In this entire process, assessee might have saved VAT payment and made purchases at a lower rate from grey market and earned higher profit. AO had estimated profit rate @ 12.5%, which was confirmed by CIT(A) and was quite reasonable.

Relied:CIT-I v. Simit P Sheth (2013) 356 ITR 451 (Guj-HC) : 2013 TaxPub(DT) 2115 (Guj-HC), CIT--I v. Bholanath Poly Fab (P) Ltd. (2013) 355 ITR 290 (Guj-HC) : 2013 TaxPub(DT) 1852 (Guj-HC),

REFERRED :

FAVOUR : Against the assessee

A.Y. :

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