INCOME TAX ACT, 1961

Section 69

Income from undisclosed purchases - Addition under section 68 - Bogus purchases -

AO on the basis of information received from the Sales Tax Department through DGIT held that purchases made by assessee were non-genuine and proceeded to estimate the profit on the alleged non-genuine purchases by applying the rate of 25%. CIT(A), however, restricted the additions to 12.5%. Held: Assessee failed to conclusively prove the fact that the purchases were made from the declared source. However, considering the fact that the assessee had effected corresponding sales, doubt was only with regard to the source of purchases. For this reason alone, AO had estimated the profit element embedded in non-genuine purchases @ 25% and CIT(A) had restricted to 12.5%. This is solely for the reason that the assessee must have purchased the goods from unverified sources/grey market by not paying VAT and thereby suppressing the true profit. Considering the nature of business of the assessee and the profit rate generally adopted by the Tribunal in such type of cases no infirmity was found in decision of CIT(A) in restricting the addition to 12.5% of the alleged non-genuine purchases.

REFERRED :

FAVOUR : Partly in favour of assessee.

A.Y. : 2009-10 to 2011-12

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