INCOME TAX ACT, 1961

Section 148

Reassessment - Validity - Bogus purchases - Estimation of income

Assessee was a civil contractor and executed his contract awarded by Municipal Corporation in his capacity of sub-contractor. AO received information from DGIT that assessee had obtained bogus bills of purchase from various parties and thereby assessment was reopened by notice under section 148. Assessee submitted on its own that total purchases from the 10 suspected parties was actually to the tune of Rs.1,50,25,860 as against Rs.1,09,12,929 about which AO had received the information. In-spite of submitting all the evidences regarding the genuineness of the purchases AO estimated the income of assessee at 8.17%. Held: AO had already disclosed the gross profit amounting to Rs.62,54,161 but purchase from the parties are to the tune of Rs.1,50,25,860 which were included in the total turnover. Assessee itself declared the profit rate at the rate of 9.69% but the purchase made from these suspected parties on which profit accounted for was only to the tune of Rs. 9.69% but profit rate in the case of bogus purchase or purchase made from suspected parties should have been at the rate of 12.5%. Hence, AO was directed to restrict the addition being differential amount as profit on bogus purchases from suspected parties.

REFERRED :

FAVOUR : Partly in assessee's favour

A.Y. :

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