Income Tax Act, 1961
--Income from undisclosed sources--Addition under section 69Alleged bogus purchases--Assessee was engaged in the business of trading in steel on wholesale basis. During the course of reassessment proceedings, assessing officer noted that some of the suppliers of steel had made their statements on oath to the effect that they had not supplied the steel to the assessee but had only provided sale bills, receiving a small commission. Assessing officer treated such purchases from suppliers of steel to be bogus and added the entire amount to the gross profit of the assessee. Commissioner (Appeals) held that assessee had made purchases from other parties in the open market, therefore, he retained 30 per cent of the purchase cost as the probable profit of the assessee. According to Tribunal, twelve and half per cent of disputed purchases should be retained in the hands of assessee as business profits. Held: Commissioner (Appeals) believed that when as a trader in steel, the assessee sold certain quantity of steel, he would have purchased the same quantity from some source, therefore, the purchases were not bogus but were made from the parties, other than those mentioned in the books of account. That being the position, not the entire purchase price but only the profit element embedded in such purchases could be added to the income of the assessee. If the yardstick of 30 per cent., as adopted by the Commissioner (Appeals) was accepted, the gross profit rate would be much higher. In essence, the Tribunal only estimated the possible profit out of purchases made through non-genuine parties. No question of law in such estimation would arise. The estimation of rate of profit return must necessarily vary with the nature of business and no uniform yardstick could be adopted.
Income Tax Act, 1961 Section 69
In the Gujarat High Court
Akil Kureshi & Sonia Gokani J.J.
CIT v. Simit P. Sheth
Tax Appeal No. 553 of 2012
16 January, 2013
Appellant by :K. M. Parikh, Advocate
Akil Kureshi J.
The judgment of the court was delivered by The Revenue is in appeal against the judgment of the Income Tax Appellate Tribunal ('the Tribunal' for short) dated 24-2-2012, raising the following substantial question of law for our consideration :