Pushpa Saluja Vs ITO (ITAT Delhi)
Bogus Purchases Not Taxable u/s 68 – Only 10% Profit Element Sustained on Estimation Basis
The Delhi ITAT partly allowed the assessee’s appeal and substantially reduced the addition of ₹55.54 lakh made on account of alleged bogus purchases/sundry creditors for AY 2014-15. The Tribunal held that the additions could not be made under Section 68, as the disputed amounts represented purchases recorded in the trading account and not unexplained cash credits. Following the directions of the Delhi High Court in the assessee’s own case, the Tribunal ruled that at best only the profit element embedded in such purchases could be brought to tax.
The Tribunal noted that the assessee had produced bills, vouchers and ledger accounts and that sales corresponding to the purchases were fully accepted by the Department. The addition was mainly based on the denial by one supplier (Dabur Exclusives), but no opportunity of cross-examination was granted to the assessee, rendering the evidence incomplete. Considering the nature of garment trading/manufacturing business and earlier history, the Tribunal adopted a balanced approach and directed the AO to estimate profit @10% of the alleged bogus purchases instead of disallowing the entire amount.
Accordingly, the addition under Section 68 was rejected and restricted to 10% of ₹55.54 lakh as estimated profit, and the appeal was partly allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
