Bogus Purchase Addition Restricted to Profit Element: ITAT Grants Relief

DCIT Vs Somnath Vaijnath Sakre (ITAT Pune) The AO treated the entire purchases as bogus based on information from investigation wing/suspicious dealers and made full addition. The CIT(A) partly upheld the addition. The ITAT observed that although the suppliers were doubtful, the sales were accepted and corresponding purchases could not be entirely disallowed. In such cases, only the profit element embedded in such purchases can be brought to tax. Following settled judicial precedents, the Tribunal held that estimation of profit is appropriate instead of 100% disallowance, and accordingly restr...