The Tax Publishers2019 TaxPub(DT) 2676 (Mum-Trib)

INCOME TAX ACT, 1961

Section 69C

Treatment of entire purchases of rough diamond as bogus without disputing corresponding sales, could not be sustained and addition under section 69C was restricted to the extent of 2% profit element embedded in purchases.

Income from undisclosed sources - Addition under section 69C - Assessee found to be provider of bogus purchase invoices - No dispute as regards corresponding sales

Assessee engaged in diamond business was found to be beneficiary of providers of bogus invoices. Accordingly, AO treated entire purchases as claimed by the assessee as bogus and made addition under section 69C, however, without disputing corresponding sales. Held : Without making purchases, it was not possible to sell goods. As sales remained undisputed, it could be inferred that assessee had made purchases from grey market and obtained bogus bills to inflate purchase price so as to suppress profits. Accordingly, entire purchases could not be held as bogus and addition was restricted to the extent of 2% profit element embedded in such purchases.

Relied on :CIT-I v. Simit P Sheth 2013 TaxPub(DT) 2115 (Guj-HC) : (2013) 356 ITR 451 (Guj)

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2007-08



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