INCOME TAX ACT, 1961

Section 69C

Income from undisclosed source - Addition under section 69C - Unexplained expenditure -

Assessee was engaged in the business of trading in iron and steel. On the basis of information received from DGIT (Inv.), AO having found that assessee was a beneficiary of accommodation bills issued by certain parties identified has hawala operators by the Sales Tax Department. AO called upon assessee to establish the genuineness of the purchases through supporting evidence. As alleged by AO, neither assessee was unable to prove genuineness of purchases conclusively nor the notices issued under section 133(6) could elicit any information as they returned back un-served by the postal authority. Thus, AO treated the purchases made to be non-genuine held them as unexplained expenditure under section 69C. CIT(A) restricted the addition to 12.5% of non-genuine purchase. Held: There was no dispute to the fact that assessee was unable to prove with conclusive evidence, the source of the disputed purchases made from certain parties. However, it was evident from the order of CIT(A), during appeal proceedings assessee had furnished quantitative details of purchases and sales with sample copies of bills to establish the nexus between the purchases and corresponding sales. Entire purchase could not be treated as income of the assessee, but profit element embedded therein can be considered for addition. Thus, decision of CIT(A) in restricting the addition to 12.5% of the non-genuine purchases was good enough to take care of leakage of revenue on account of suppression of profit.

REFERRED :

FAVOUR : In assessee's favour

A.Y. : 2009-10, 2010-11 & 2012-12

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