The Tax Publishers2021 TaxPub(DT) 0432 (Mum-Trib)

INCOME TAX ACT, 1961

Section 69

Where information was received by AO to the effect that assessee made bogus purchases from a party, however, as the assessee filed copy of ledger account of the said party in its books of account and also the purchase bills; the entire purchases could not be added as bogus and only profit element embedded in such transaction had to be added to the total income of the assessee.

Income from undisclosed sources - Addition under section 69 - Bogus purchases - Estimation of income

AO found that assessee-company obtained bogus purchase bills from an entity 'J'. Assessee filed copy of ledger account of 'J' in its books of account and also purchase bills of the said party. AO issued notice under section 133(6) to 'J'; however, there was no response from 'J'. Accordingly, the AO treated the purchases made from 'J' as non-genuine and estimated profit @12.5% on such disputed purchases. Held: AO treated the non-compliance by 'J' as evidence that the purchases claimed by the assessee were not genuine. Clearly, the non-compliance by 'J' could not be considered as evidence against the assessee as the assessee filed copy of ledger account of the said party in its books of account and also the purchase bills. Therefore, the entire purchases could not be added as bogus and only profit element embedded in such transaction had to be added to the total income of the assessee. Further, considering the nature of business of the assessee of manufacturing and selling of agricultural equipments and implements, the AO was directed to estimate profit @4% on the disputed purchases.

REFERRED : Pr. CIT v. Jakharia Fabric Pvt. Ltd. (2020) 118 taxmann.com 406 (Bom) : 2020 TaxPub(DT) 1538 (Bom-HC).

FAVOUR : Partly in favour of assessee.

A.Y. : 2010-11



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