Indra Trading Corporation Vs DCIT (ITAT Ranchi)
Entire Bogus Purchase Can’t Be Disallowed Without Rejecting Books; Only Profit Element Taxable- ITAT Ranchi
Facts
- Assessee filed return declaring income of ₹18.22 lakh.
- AO reopened assessment u/s 148 alleging escaped income.
- AO disallowed purchases of ₹16,28,109/- as bogus since purchase bills were not produced.
- CIT(A)-NFAC sustained the disallowance despite granting partial relief on other additions.
Assessee’s Contention
- Disallowance of entire purchases is bad in law since:
- Books of accounts were not rejected.
- Sales were accepted as genuine.
- Purchases cannot be singled out & disallowed in isolation.
- To avoid further litigation, Assessee agreed to estimation by applying Gross Profit (GP) rate @ 7.92% on disputed purchases.
Tribunal’s Findings
- When books are not rejected & sales are accepted, purchases cannot be fully disallowed merely for want of bills.
- At best, an element of profit embedded in such purchases can be brought to tax.
- Since Assessee offered GP @ 7.92%, Tribunal found it fair & reasonable.
Decision
- Addition of ₹16,28,109/- deleted in full.
- Instead, GP @ 7.92% (₹1,28,950/-) sustained.
- Balance addition of ₹14,99,159/- deleted.
- Appeal partly allowed in favour of Assessee.
Tribunal reiterates that without rejecting books of account, entire purchase cannot be treated as bogus. Only the profit element on disputed purchases is taxable.
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