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2019 (9) TMI 496 - AT - Income TaxAddition of Bogus Purchases u/s 69C - peak credit theory applicability - HELD THAT:- AO had placed heavy reliance on the seized document of Shri Bhanwarlal Jain relating to the period 1.1.2008 to 31.12.2008 for making addition in the hands of the assessee. But we find from Annexure C to the assessment order which contains the workings of peak credit for purchases, those are transactions of purchases made by the assessee and payments made by the assessee to the disputed parties. Those transactions are not at all reflected in the seized document of Shri Bhanwarlal Jain. Hence the entire allegations of the ld AO vanishes on this count itself as no addition has been made by the AO using the contents of the said seized document for the period 1.1.2008 to 31.12.2008. AO had made addition by considering the peak credit of purchases. The theory of peak credit could be used only when the transactions are carried out outside the books. Entire purchase transactions are duly reflected in the regular books of accounts of the assessee and payments for the same were made by account payee cheques from disclosed sources. Hence the peak credit theory cannot be made applicable and the addition deserves to be deleted on this count. Addition has been made by the AO u/s 69C - The basic principle of section 69C of the Act is that the incurrence of an expenditure is not in dispute whereas the source for such expenditure is in dispute. In the instant case, since the addition is made u/s 69C of the Act, it could be safely concluded that the purchases has been accepted as genuine by the ld AO and only the source is disputed. We find that the source for such purchases have been explained from the regular books of accounts by making payment by account payee cheques. Hence there cannot be any addition u/s 69C of the Act. Hence the addition deserves to be deleted on that count also. Addition made in the hands of assessee for the Asst Year 2009-10 deserves to be deleted for more than one reason as could be evident from above and has been rightly deleted by the CIT-A. Deletion of addition made on account of alleged disputed purchases, correspondingly, the addition made towards commission at 0.1% also requires to be deleted which was rightly deleted by the ld CITA. - Decided in favour of assessee.
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