INCOME TAX ACT, 1961

Section 69

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AO received information from Sales Tax Department that assessee-company was engaged in practice of inflating purchases through Hawala parties by taking bogus bills without delivery of goods from parties. Accordingly, the AO made addition at 100% of alleged bogus purchases in respect of three assessment years, i.e. assessment years 2009-10 to 2011-12. Further, CIT (A) confirmed such addition. Assessee contended that no addition could be made merely on basis of information from the Sales Tax Department. It further contended that when the sales were accepted, which arose by virtue of the purchases made, hence, such purchases by no means were questionable or to be disputed. Held: It was found that assessee paid VAT on the goods so purchased. Further, looking to the GP ratio declared by the assessee, it was clear that the assessee had shown very reasonable GP ratio in all the years under consideration. Further, the Tribunal relying on various judicial pronouncements concluded that in case GP shown by the assessee was 15% or more no addition was warranted. In instant case, the assessee declared GP of 16.47% in assessment year 2009-10, accordingly the AO was directed not to make any addition. However, in assessment years 2010-11 and 2011-12, the GP shown by the assessee was 12.75% and 14.88%. Accordingly, the AO was directed to make addition to the extent of shortfall in the GP in those two years as compared to the GP of 15%, i.e. 2.25%, in assessment year 2010-11 and 0.12% in assessment year 2011-12.

REFERRED :

FAVOUR : Partly in favour of assessee

A.Y. : 2009-10 to 2011-12

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