INCOME TAX ACT, 1961

Section 68

Income from undisclosed source - Addition under section 68 - CIT(A) restricted addition to 10% - Validity

Assessee was engaged in manufacturing of electrical equipment and was a Government Contractor. Information received from Sales Tax Department that assessee was engaged in bogus purchases. During the course of survey, statement of brother of assessee was recorded on oath under section 131, wherein he admitted that in absence of supporting bills, octroi receipts and transport receipts etc., genuineness of the purchases made from eight parties could not be proved. AO made addition on account of bogus purchases. CIT(A) upheld the purchase of goods from bogus parties and however restricted the addition to 10% of the alleged bogus purchases. Held: Undoubtedly, the primary onus to prove genuineness of purchase transactions was on assessee and he should have in first place furnished cogent evidences to prove genuineness of the purchases and suppliers. CIT(A) after considering entire facts came to the conclusion that it is a case of purchases from gray market and thereafter, bills have been procured from hawala operators. In the given facts, the entire purchases could not be considered as bogus. Tribunal in the case of M/s. Chhabi Electricals (P) Ltd. v. DCIT in (ITA 795/PUN/2014, dt. 28-4-2017) had held that in the cases of purchases from suspicious dealers, addition of 10% of the bogus purchases over and above the GP declared by assessee should be made. Hence, addition was restricted to 10% of alleged bogus purchases over and above the GP declared by assessee.

Followed:M/s. Chhabi Electricals (P) Ltd. v. DCIT in (ITA 795/PUN/2014, dt. 28-4-2017)

REFERRED :

FAVOUR : Partly in assessee's favour

A.Y. :

INCOME TAX ACT, 1961

Section 271(1)(c)

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