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2017 (7) TMI 1327 - AT - Income TaxBogus purchases u/s 69C - assessee failed to furnish documentary evidence to prove that purchase made were genuine - AO has also added the GP @8% on the total bogus purchases - CIT(A) has applied GP margin at 5.07% and restricted the addition - HELD THAT:- We find that there are divergent views of various High Courts on what amount of GP should be applied in such bogus purchases. We find that in the case of Smith and Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] held that a trader sold some goods and he would purchase the same from other sources. When the total sale is accepted by the AO he could not have questioned the very basis of purchase. Therefore purchases are not bogus but they are made from parties other than those who are mentioned in the books of account. This being the decision not the entire purchase price but only the profit element in such purchases can be added to the income of the assessee. Disallowance to the extent of 12.5% of such bogus purchase will be justified in the facts of this case also. Therefore, we modify the order of the CIT(A) and direct the AO to restrict the disallowance the extent of 12.5% of such bogus purchases - Appeals filed by the Revenue are allowed for statistical purposes.
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