Addition restricted to 25% in case of bogus purchase

Sumer Chand Jain Vs ITO (ITAT Delhi)

ITAT Delhi held that addition in case of bogus purchases is restricted to the extent of 25% of the purchases. As lower authorities made addition of 25% of bogus purchase, the same is sustainable.

Facts- The assessee individual is engaged in the business of trading in export handicraft goods and jewellery. For AY 2010-11, the assessee filed his return on 28.09.2010 declaring income of Rs. 6,31,180/-. It was processed under section 143(1) of the Income Tax Act, 1961 (the “Act”). Subsequently, the assessment was reopened by issue of notice under section 148 of the Act on 30.03.2017 after approval from Pr. CIT.

AO disallowed 25% of alleged bogus purchase amount on account of inflation of purchase price which he added to the income of the assessee.

Conclusion- Held that the finding of the Ld. AO/CIT(A) is that the assessee did purchase goods without bills from some other suppliers otherwise sales could not be effected and that he has been benefitted by providing margin of grey market. It was in this backdrop that the Ld. AO/CIT(A) instead of treating the entire impugned purchases as bogus and adding the same to the income of the assessee restricted the addition to 25% of such purchases following the decision in Vijay Protein Ltd.(supra) and Sanjay Oil Cake Industries (supra). The above findings remain uncontroverted before us. We find no infirmity in the order of the Ld. CIT(A) and sustain the same. In the result, appeal of the assessee is dismissed.

Please become a Premium member. If you are already a Premium member, login here to access the full content.