INCOME TAX ACT, 1961

Section 69C

Income from undisclosed sources - Addition under section 69C - Unexplained expenditure - Estimation of income---Sales being not doubted

AO found that assessee-company took accommodation bills from a Hawala dealer. Accordingly, the AO asked the assessee to establish genuineness of purchases by furnishing transport bills, goods receipt note, etc. Assessee submitted ledger account and copy of invoices and contended that materials were genuinely purchased by it. However, the AO rejected the contention of the assessee and treated such purchases as unexplained expenditure under section 69C. Further, CIT (A) confirmed the said addition. Held: Assessee failed to adduce cogent and convincing evidence to prove genuineness of purchases in question; therefore, the same were rightly treated as unexplained. However, 100% addition of non-genuine purchases was not justified because sales made by the assessee were not doubted. In the cases of bogus purchases, not the entire amount of bogus purchases but only profit embedded in such transaction should be added to the total income of the assessee. Further, considering the fact that the assessee had shown GP of 12.06% in assessment year under consideration and GP of 16.81% in preceding assessment year, the AO was directed to make the addition to the extent of shortfall to make the GP @ 16.81%, which was the GP of the assessee in previous assessment year holding that the expected GP could not be less than the GP achieved in the previous assessment year.

Followed:Abhijeet Plastic (India) Pvt. Ltd. v. DCIT [ITA No. 1426 to 1428/Mum/2019] : 2020 TaxPub(DT) 3088 (Mum-Trib)

REFERRED :

FAVOUR : Partly in favour of assessee

A.Y. : 2012-13

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