INCOME TAX ACT, 1961

Section 69

Income from undisclosed sources - Addition under section 69 - Bogus purchases - Sales declared being not disputed

AO found that assessee obtained accommodation entries through bogus bills from three parties. Accordingly, he made enquiry in respect of purchases made from the said parties. On the reason that the notices under section 133(6) could not be served on the said three parties and the report of the Inspector that the said parties did not function in their given addresses, the AO made addition of the purchases made from such parties by treating them as bogus. However, CIT(A) restricted the addition to 10% of bogus purchases towards element of profit in such purchases. Held: It was found that CIT (A) had not given any reasons for retaining 10% of the purchases by way of ad-hoc addition; therefore, said addition was deleted. Further, Revenue had not disputed the assessee's sales. There was no discrepancy between the purchases shown by the assessee and the sales declared. Therefore, the purchases could not be rejected without disturbing the sales. Accordingly, the AO was directed to restrict the addition limited to the extent of bringing the G.P. rate on disputed purchases at the same rate of other genuine purchases.

Followed:Pr. CIT v. Mohommad Haji Adam & Co. [ITA No. 1004 of 2016 with 1013 of 2016 with 1059 of 2016 with 1064 of 2016 with 1075 of 2016 with 1095 of 2016 with 1204 of 2016 with 1012 of 2016, dt. 11-2-2019].