2016 (6) TMI 1139 - HC - Income Tax

Addition on account of alleged bogus purchases at 25% of the total purchases - Held that:- On consideration of the matter, we find that the facts of the present case are identical to those of M/s. Indian Woollen Carpet Factory (2002 (7) TMI 39 - RAJASTHAN High Court) or M/s. Vijay Proteins Ltd. [2015 (1) TMI 828 - GUJARAT HIGH COURT] in the present case the Tribunal has categorically observed that the assessee had shown bogus purchases amounting to ₹ 2,92,93,288/- and taxing only 25% of these bogus claim goes against the principles of Sections 68 and 69C of the Income Tax Act. The entire purchases shown on the basis of fictitious invoices have been debited in the trading account since the transaction has been found to be bogus. The Tribunal having once come to a categorical finding that the amount of ₹ 2,92,93,288/- represented alleged purchases from bogus suppliers it was not incumbent on it to restrict the disallowance to only ₹ 73,23,322/-.

Additions in respect of purchases from M/s. Somnath Industries from M/s.Krishna Marketing in assessment which has been framed u/s.158BC of the Act, despite the fact that in proceedings under Section 132 of the Act no material was found in relation to said two parties to warrant such additions is concerned, we are of the view that the Tribunal is justified in holding the same against the assessee and in favour of the revenue.

Addition as gross profit on sales made despite the fact that the said sales had admittedly been recorded in the regular books during Financial Year 1997-98 is concerned, we are of the view that the assessee cannot be punished since sale price is accepted by the revenue. Therefore, even if 6% gross profit is taken into account, the corresponding cost price is required to be deducted and tax cannot be levied on the same price. We have to reduce the selling price accordingly as a result of which profit comes to 5.66%. Therefore, considering 5.66% of ₹ 3,70,78,125/- which comes to ₹ 20,98,621.88 we think it fit to direct the revenue to add ₹ 20,98,621.88 as gross profit and make necessary deductions accordingly.