Bogus Purchases: Only Profit Element Taxable – ITAT Upholds 12.5% Estimation

ITO Vs Arvind Ratanchand Jain (ITAT Mumbai) The Mumbai ITAT upheld the restriction of addition to 12.5% of alleged bogus purchases, rejecting the AO’s higher addition of 25%, and reaffirmed the settled principle that only profit element embedded in such purchases can be taxed. The AO had treated purchases of ₹54.27 crore as non-genuine due to: Suppliers having cancelled GST registrations, Circular trading patterns, Lack of proper transport and documentation, Non-commensurate banking transactions. Accordingly, AO made 25% addition (₹13.56 crore). However, the CIT(A): Noted that sales w...