The Tax Publishers2020 TaxPub(DT) 5375 (Mum-Trib)

INCOME TAX ACT, 1961

Section 69

The addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as that of other genuine purchases.

Income from undisclosed sources - Addition under section 69 - Alleged bogus purchases -

Assessee's assessment was reopened upon receipt of information from the sales tax department that assessee has made bogus purchases and hence, 100% disallowance was made of purchases. Held: In the instant case assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. As regards the quantification of the profit element embedded in making of such bogus/unsubstantiated purchases by the assessee, it was held in the case of PCIT v. M Haji Adam & Co. in ITA No. 1004 of 2016, dated 11-2-2019 in paragraph 8 there off), the addition in respect of bogus purchases is to be limited to the extent of bringing the gross profit rate on such purchases at the same rate as of other genuine purchases. Following the same, matter was remanded to the file of AO with the direction to restrict the addition as regards the bogus purchases by bringing the gross profit rate on such bogus purchases at the same rate as that of the other genuine purchases.

Followed:PCIT v. M Haji Adam & Co. in ITA No. 1004 of 2016, dated 11-2-2019

REFERRED :

FAVOUR : Matter remanded.

A.Y. : 2011-12



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