Bogus Purchases: Only Profit Element Taxable – ITAT Reworks Addition Based on Industry Margins

ITO Vs Sahen Enterprises (ITAT Mumbai) Bogus Purchases: Only Profit Element Taxable – ITAT Reworks Addition Based on Industry Margins The ITAT Mumbai held that in cases of alleged bogus purchases, entire purchases cannot be added as income when corresponding sales are accepted, and only the profit element embedded in such purchases is taxable. In this case, the assessee (diamond trader/exporter) was alleged to have made bogus purchases of ₹84.48 lakh from entities linked to the Bhanwarlal Jain group. The AO added 100% of purchases, while CIT(A) restricted it to 6%. The Tribunal observe...