The Tax Publishers2021 TaxPub(DT) 0481 (Mum-Trib)

INCOME TAX ACT, 1961

Section 68

Where assessee had filed all relevant details like copies of bills, bank statements and delivery challans and where purchases were not bogus but were made from parties, other than those mentioned in the books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of the assessee, therefore, CIT(A) had rightly brought to tax the profit element embedded in such disputed purchases by estimating @ 30%.

Income from undisclosed sources - Addition under section 68 - Bogus purchases - CIT(A) upheld the addition to 30%

Subsequently, on receipt of information from Sales Tax Department, that assessee had obtained bogus purchase bills from two parties, AO reopened the assessment by issuing notice under section 148. Assessee filed a letter before AO, pleading original return to be treated as returned in response to the notice under section 148. During course of reassessment proceedings, AO issued notice under section 133(6) to the above two parties. However, those notices were returned un-served by postal authorities. AO asked assessee to produce the above two parties before him for examination of their books of account. Since there was no compliance by assessee, AO having considered the findings of Sales Tax Department made an addition. CIT(A) upheld the addition to 30%. Held: Assessee had filed all relevant details like copies of bills, bank statements and delivery challans. CIT(A) had rightly brought to tax the profit element embedded in such disputed purchases by estimating @ 30%. In the case of CIT v. Simit P. Sheth [(2013) 38 Taxmann.com (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC)] had held that where purchases were not bogus but were made from parties other than those mentioned in books of account, not entire purchase price but only profit element embedded in such purchases can be added to income of assessee. Not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee.

Followed: CIT v. Simit P. Sheth (2013) 38 Taxmann.com (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC), CIT v. Bholanath Poly Fab Pvt. Ltd. (2013) 355 ITR 290 (Guj) : 2013 TaxPub(DT) 1852 (Guj-HC) and CIT v. Vijay M. Mistry Construction Ltd. (2013) 355 ITR 498 (Guj) : 2011 TaxPub(DT) 819 (Guj-HC).

REFERRED :

FAVOUR : Partly in assessee's favour.

A.Y. : 2010-11



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