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2022 (7) TMI 175 - AT - Income TaxAddition u/s 68 - large increase of sundry creditors during the year - AO doubted the genuineness of the trade creditors shown by the assessee in the balance sheet on account of the purchases made by the assessee - HELD THAT:- Entire business affairs reported by the assessee is in accordance with the normal practice followed and therefore, it appears that the assessee is engaged in showing these transactions which the AO considered as only as paper entries with alleged sundry creditors without any real purchase and sales. Therefore, the book results shown by the assessee do not reveal the correct state of affairs and business results. When the AO has clearly made out a case of non genuine purchase made by the assessee then instead of making the addition U/s 68 of the Act the income of the assessee ought to have been estimated after rejecting the books of accounts and applying appropriate and reasonable rate of GP/NP. It is a regular practice of the assessee to show that the purchases on credit and then settlement of account by showing the sales to the same trade creditors who have supplied the goods to the assessee. Therefore, in the facts and circumstances of the case we are of the view that when the assessee’s books of account are not reflecting the correct affairs and book results are not rejected at most the income of the assessee is required to be estimated after rejecting the books of accounts. This is view taken by us is based on the decision of Hon’ble Bombay High Court in the case of PCIT Vs. Mohmmad Haji Adam & Co. [2019 (2) TMI 1632 - BOMBAY HIGH COURT] As the assessee has not placed the details of the profit of its regular business turnover via a vis the turnover of these bogus entry provider purchase and sales. The said details may be verified by the assessing officer and the AO is directed to add appropriate rate of profit in these transactions. Accordingly, we set aside this matter to the record of the AO to estimate the income of the assessee on the basis of the turnover shown by applying a proper and reasonable basis being GP/NP rate. Accordingly Ground No. 1 is partly allowed.
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