The Tax Publishers2020 TaxPub(DT) 5194 (Mum-Trib)


Section 69

Where the fact of consumption/ sales had not been doubted, it would be said that the assessee made alleged purchases from grey market by way of inflation of some purchase price so as to suppress the true profits and accordingly, the CIT(A) was justified in resorting to estimate the profit @12.5% on account of alleged bogus purchases.

Income from undisclosed sources - Addition under section 69 - Alleged bogus purchases - Estimation of income--Consumption/ Sales not being doubted

AO found that assessee-company made certain purchases from hawala dealers. Assessee submitted all the invoices in connection with the said parties and bank statement showing payment to such parties via account payee cheques and detailed explanation stating that said materials were used in manufacturing and subsequently invoices had been raised supplying manufactured goods as per the order of customers. However, AO was of the view that the assessee was not able to produce delivery challans, octroi receipts, etc., and further, the assessee was unable to produce the purchase parties for verification, therefore, he alleged that the assessee bought goods from the grey market and obtained bogus bills of other parties to support the grey purchases. Accordingly, he estimated the addition on account of bogus purchases @36.5% of gross profit. Further, CIT (A) resorted to estimate the profit @12.5% as against 36.5% made by the AO. Aggrieved, Revenue was in appeal. Held: CIT (A) observed that the assessee produced necessary evidence to prove the fact that payments were made by cheque to those parties, evidences regarding the consumption of materials/purchases but the assessee was not able to produce the parties for verification about genuineness of the purchases made. To that extent, the CIT (A) took the view that the assessee had not discharged the burden of proof casted on him. Further, the CIT (A) also observed that the AO was not able to give any adverse finding to the fact that assessee had not shown consumption/ sales of goods in respect of purchases made from the said parties. Since, the fact of consumption / sales had not been doubted by the AO, the CIT (A) resorted to estimate the profit @12.5% as against 36.5% made by the AO. Further, the Tribunal in series of decisions held that profit percentage of 12.5% would meet the ends of justice on the alleged bogus purchases in similar industries in which the assessee was engaged into. Accordingly, the CIT (A) was justified in granting relief to the assessee.


FAVOUR : In assessee's favour/Partly in favour of assessee.

A.Y. : 2011-12



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