The Tax Publishers2020 TaxPub(DT) 5551 (Mum-Trib)

INCOME TAX ACT, 1961

Section 68

Where CIT(A) had considered the entire modus operandi of the assessee and had accepted the fact that assessee had indeed made sales out of disputed purchases and hence, it could be safely presumed that assessee could have only made purchases from the grey market in order to have some saving in indirect taxes and incidental profits thereon, therefore, there was no infirmity in the order of CIT(A) and accordingly, ground raised by the revenue was dismissed.

Income from undisclosed sources - Addition under section 68 - Bogus purchases - CIT(A) restricted addition made by AO to 3% as against 10%

Assessee was engaged in the business of Ship Chandelling and are General Merchants of shipping supplies. AO observed that assessee had made purchases from the certain parties whose names appeared in the website of Sales Tax Department. Assessee had made its entire sales only to Shipping Corporation of India with low margins, he observed that assessee had made purchases in grey market and had made sales to Shipping Corporation of India. By making purchases in grey market, assessee would have derived profit in form of saving in indirect taxes with incidental profits thereon which was estimated at 10% by AO and accordingly, AO made addition. CIT(A) restricted disallowance made on account of unverifiable purchases to the extent of 3%. Held: CIT(A) had considered the entire modus operandi of the assessee and had accepted the fact that assessee had indeed made sales out of the disputed purchases and hence, it could be safely presumed that the assessee could have only made purchases from the grey market in order to have some saving in indirect taxes and incidental profits thereon. In case of Mercury International [ITA No.7584 to 7588/Mum/2014 for assessment years 2007-08 to 2011-12, dated 24-8-2016], wherein under identical facts and circumstances this Tribunal had restricted the profit element embedded in the value of disputed purchases at 3%. Hence, there was no infirmity in the order of CIT(A) and accordingly, the ground raised by revenue was dismissed.

Relied:Mercury International v. CIT(A) [ITA No.7584 to 7588/Mum/2014 for assessment years 2007-08, 2011-12 dated 24-8-2016].

REFERRED :

FAVOUR : Partly In assessee's favour.

A.Y. : 2007-08 & 2008-09



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