INCOME TAX ACT, 1961

Section 69

Income from undisclosed sources - Addition under section 69 - Alleged bogus purchases - Estimation of income

AO found that assessee obtained bogus purchase bills from a party 'D'. Assessee filed details of bank statements, ledger copy of party and other information. Further, to verify genuineness of purchases, the AO issued notice under section 133(6). But, the notice issued was returned unserved and also the assessee failed to produce the party. Hence, the AO estimated the income @12.5% of bogus purchases and made addition of the same. CIT(A) upheld the addition as made by the AO. It was submitted on behalf of the assessee that the CIT(A) erred in confirming the action of the AO, irrespective of the fact that, the assessee maintained GP ratio of 7.58% in the financial year and the same had to be applied for the bogus purchases. Held: In assessee's own case for earlier assessment year on identical issue, the Tribunal remanded the said issue to the AO after relying on the decision of High Court in the case of PCIT v. Mohommad Haji Adam & Co. [Income Tax Appeal 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]. Further, in the said case of the High Court, the High Court deleted the ad hoc disallowance of 10% on bogus purchases and upheld the addition on bogus purchases to the extent of GP as per books of account on undisputed purchases. Accordingly, the order of the CIT(A) was set aside and the issue was remanded to the AO to verify and examine the facts and apply the ratio of the said decision.

REFERRED :

FAVOUR : Matter remanded

A.Y. : 2010-11

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