The Tax Publishers2021 TaxPub(DT) 0077 (Hyd-Trib)

INCOME TAX ACT, 1961

Section 132

Since there was no materials on record to justify that the stock was reconciled with respect to purchases, sales and closing stock item-wise and there was every possibility for assessee to make payment through banking channel and receive the same back by way of cash and obtain bogus purchase bills, therefore, addition made by AO was justifiable on account of bogus purchase.

Search and seizure under section 132 - Bogus purchases - Purchase of diamonds shown from bogus entities -

Assessee was engaged in the business of trading in jewellery. A search and seizure operation under section 132 was carried out in the case of group concern wherein it was revealed that they are operating 70 Benami Concerns through which they had provided accommodation entries towards unsecured loans and bogus purchases to various beneficiaries. During the course of scrutiny assessment proceedings, assessee had explained that one of the partners of firm travelled in their own car and contacted the traders. After verifying the quality of the diamonds, etc., they were purchased from M/s. J. Diamonds by assessee on credit due to trustworthiness. However, AO treated the same as bogus transaction and it was revealed that seller of diamonds issued bogus bills to the assessee without delivery of diamonds. Held: Just because the assessee had made payments through banking channels to the vendors and recorded diamonds purchased in its stock book did not make the transactions to be genuine with conclusive evidence. Further there was no materials on record to justify that the stock was reconciled with respect to purchases, sales and closing stock item wise. There is every possibility for the assessee to make payment through banking channel and receive the same back by way of cash and obtain bogus purchase bills. It is also obvious that in the nature of business carried out by the assessee, 0.33% net profit declared by the assessee is too low and cannot be accepted. Therefore, addition made by AO was justifiable.

REFERRED :

FAVOUR : Against the assessee.

A.Y. : 2007-08



IN THE ITAT, HYDERABAD BENCH

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