INCOME TAX ACT, 1961

Section 69C

Income from undisclosed source - Addition under section 69C - Bogus purchases - Profit element to be added

Assessee was engaged in the business of manufacturing in excisable goods. AO received information from DGIT that assessee had made purchases from hawala parties, who were providing bogus bills of purchase. AO issued notice under section 133(6) to the parties which returned back as unserved and assessee failed to produce these parties. The hawala traders admitting before the sales tax authorities in their deposition that they were providing only accommodation purchase bills on commission basis without being actual purchase/sale of goods. According to AO, assessee failed to establish the genuineness of the purchase and accordingly, he made addition under section 69C of entire purchases. Held: Assessee has filed purchase bills, challan for receipt of goods, details of payment through cheque and bank statement etc. The notice 133(6) the Act was also issued but the supplier replied that due to raid by the department the information could not be furnished. Under these facts and circumstances the order of Commissioner (Appeals) upholding the order of assessing officer wherein 100% bogus purchases were added could not be sustained. A percentage can be applied to bring to tax the profit element in the said purchases. Accordingly, assessing officer directed to apply rate of 12.50% on the said purchases.

REFERRED :

FAVOUR : Partly in assessee's favour

A.Y. : 2011-12

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