Anshu Sahai (HUF) Vs ACIT (ITAT Jaipur)
Bogus Purchase Allegation Fails – Only Profit Element to Be Taxed, Rules ITAT Chennai- Entire Purchase Can’t Be Disallowed When Sales Are Accepted – Mere Non-traceability of Suppliers Not Enough- ITAT Chennai Restricts Addition to 12.5%
Assessee, engaged in trading of pulses, appealed against disallowance of purchases treated as bogus on the ground that suppliers were found to be “non-existent” during verification. AO held that Assessee failed to produce delivery challans, lorry receipts, & confirmations from parties. AO, therefore, disallowed the entire purchase amount & added gross profit element. CIT(A) confirmed the addition.
Before Tribunal, Assessee contended that purchases were fully supported by tax invoices, entries in books, & payments through banking channels. The sales corresponding to such purchases were accepted, & quantitative details matched. Assessee argued that mere non-availability of suppliers at the given address during later investigation cannot ipso facto make purchases bogus, relying on judicial precedents.
Tribunal noted that AO had not disputed the sales declared by Assessee, nor found any inflation in stock records. It observed that once sales are accepted, corresponding purchases cannot be wholly disallowed, & at best, an estimated profit element can be added if there is suspicion of over-invoicing. Tribunal referred to rulings of Gujarat High Court in CIT v. Simit P. Sheth (356 ITR 451) & CIT v. Bholanath Polyfab (355 ITR 290) where only profit element on such purchases was sustained.
