Addition Towards Business Disallowance When Purchases Have Been Sold and Sales Have Been Accepted, Whether the Corresponding/Same Purchases Can be Added to Income?

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The Tax Publishers Income Tax--Additon towards Business Disallowance When Purchases Have Been Sold and Sales Have Been Accepted, Whether the Corresponding/Same Purchases Can be Added to Income? Akhilesh Kumar Sah There should be reasonable income estimation by assessing authorities in the case, when un-accounted entries are found of a person, for example, the Gujarat High Court in the case of PCIT v. Rameshwar Textile Mills Ltd (ITA Nos. 527 & 528 of 2015) has held that the entire sales cannot be added as income of the assessee but addition can be made only to the extent of estimated profits embedded in the sales and that the income from suppressed sales should be determined by AO by assessing the gross profit of the assessee. In this Article, the addition to income has been viewed from a reasonable angle taking the case of a recent judgment in 2024 in an international taxation case before Delhi ITAT. 1. Introduction When the bogus purchases have been found but the relevant sales have been accepted by taxing authorities, then it is not justified that the same purchases and sales both be added to the income of the concerned assessee. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Income Tax--Additon towards Business Disallowance

When Purchases Have Been Sold and Sales Have Been Accepted, Whether the Corresponding/Same Purchases Can be Added to Income?

Akhilesh Kumar Sah

There should be reasonable income estimation by assessing authorities in the case, when un-accounted entries are found of a person, for example, the Gujarat High Court in the case of PCIT v. Rameshwar Textile Mills Ltd (ITA Nos. 527 & 528 of 2015) has held that the entire sales cannot be added as income of the assessee but addition can be made only to the extent of estimated profits embedded in the sales and that the income from suppressed sales should be determined by AO by assessing the gross profit of the assessee. In this Article, the addition to income has been viewed from a reasonable angle taking the case of a recent judgment in 2024 in an international taxation case before Delhi ITAT.

1. Introduction

When the bogus purchases have been found but the relevant sales have been accepted by taxing authorities, then it is not justified that the same purchases and sales both be added to the income of the concerned assessee.