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| The Tax Publishers2020 TaxPub(DT) 3749 (Hyd-Trib) INCOME TAX ACT, 1961
Section 69
Though payments made by assessee towards purchases were through banking channels, it was also revealed that the suppliers from which said purchases were made, were issuing bogus bills and vouchers; therefore, producing the bills and vouchers and evidencing the payments made through cheques alone would not establish that the transactions were genuine. Accordingly, the AO was justified in estimating the additional income of 10% on the bogus purchases.
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Income from undisclosed sources - Addition under section 69 - Bogus purchases - Assessee failed to prove genuineness and creditworthiness of suppliers/sellers--- Payments towards purchases being made through banking channels
Assessee was engaged in business of trading in gold ornaments. AO found that the assessee obtained accommodation entries for purchase of gold/gold jewellery. Further, the assessee could not prove genuineness and creditworthiness of the persons who sold the gold / gold jewellery to him. The assessee could only furnish bank statements to substantiate his claim that payments were made by cheques. Therefore, AO held that the purchases made by the assessee from those individuals were bogus transactions. Thereafter, the AO estimated 10% of the bogus purchases as the undisclosed income of the assessee. However, CIT (A) opined that the entire bogus purchases had to be added to the income of the assessee and accordingly, enhanced the addition. Held: Though payments made by assessee towards purchases were through banking channels, it was also revealed that suppliers were issuing bogus bills and vouchers to various parties. Thus, producing the bills and vouchers and evidencing the payments made through cheques alone would not establish that the transactions were genuine. Accordingly, the AO was justified in estimating the additional income of 10% on the bogus purchases. However, the order of the CIT(A) to enhance the addition by treating the entire bogus purchases as the income of the assessee was not appropriate because it was evident that the assessee made purchases from his accounted money as the payments were made through banking channels. Further, the gold/gold jewellery purchased were either sold by the assessee or remained with the assessee as his closing stock. Therefore, the order passed by the CIT (A) was set aside and the order passed by the AO was confirmed.
REFERRED : Kachwala Gems v. JCIT (2007) 288 ITR 10 (SC): 2007 TaxPub(DT) 0837 (SC).
FAVOUR : Partly in favour of assessee
A.Y. : 2009-10
IN THE ITAT, HYDERABAD BENCH
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