INCOME TAX ACT, 1961

Section 68

Income from undisclosed sources - Addition under section 68 - Bogus purchases - disallowance @ 12.5% restricted by CIT(A)

AO received information from the DGIT (Inv.,) about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. Assessee had availed accommodation entries from M/s. V who was said to be providing accommodation entries without there being transportation of any goods. Assessee submitted that goods purchased were used in manufacturing of furnaces and thus become part of final product. Assessee further submitted that the payments are made through account payee cheques as such contended that all purchases are genuine. Being not convinced with submissions of assessee, AO treated purchases as non-genuine and he was of opinion that assessee had obtained only accommodation entries without there being any transportation of materials and assessee might have made purchases in the gray market. CIT(A) restricted the disallowance to an extent of 12.5% of non-genuine purchases. Held: CIT(A) considered the aspect of the matter concerning accommodation entries elaborately with reference to the submissions of assessee and averments in the Assessment Order and following in the case of CIT v. Simit P. Sheth [(2013) 356 ITR 451 (Guj-HC) : 2013 TaxPub(DT) 2115 (Guj-HC)], restricted the disallowance to 12.5% of the non-genuine purchases. Therefore, no infirmity was found in the order passed by CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases.

Followed:CIT v. Nangalia Fabrics Private Ltd. 2013 40 Taxmann.com 206 (Guj-HC) : 2014 TaxPub(DT) 4017 (Guj-HC), CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj-HC) : 2013 TaxPub(DT) 2115 (Guj-HC), Salim Ebrahim Petiwala v. ITO [ITA. No. 4772/Mum/2017, dt. 13-12-2017], Tubes India v. Asstt. CIT & Vice-Versa ITA No. 2230 to 2232/Mum/2016 : 2017 TaxPub(DT) 5462 (Mum-Trib), Asstt. CIT v. Nocil Steel [ITA. No. 4505/Mum/2015, dt. 7-12-2017], Satish R. Rathod v. ITO [ITA. No. 567/MUM/2016, I.T.A. No.534/MUM/2016, dt. 27-11-2017], Vinod H. Sanghvi v. Dy. CIT & Vice-Versa [ITA. Nos. 125 to 127/Mum/2016, ITA. Nos.121 to 123/Mum/2016, dt. 27-10-2017], Pentagon System & Services Pvt. Ltd. v. Dy. CIT [ITA No.4804/Mum/2015, ITA No.5318/Mum/2015, dt. 26-10-2017], Turnkey Electrical Engineers P. Ltd. v. Dy. CIT [ITA Nos.1936, 1937, 1938 & 1939/Mum/2015 And ITA No.1976/Mum/2015, dt. 13-9-2017], Montex Glass Fibre Industries Pvt. Ltd. v. Dy. CIT [ITA. No. 1520/Mum/2017, dt. 1-9-2017] and RA Industrial Metals v. ITO [I.T.A. No.1850/Mum/2015, dt. 12-6-2017].

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2010-11

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