The Hon’ble Tribunal upheld the decision of the Commissioner (Appeals), who had restricted the addition by estimating a gross profit (GP) rate of 12.5% on the total bogus purchases. The Hon’ble Tribunal reasoned that since the source of purchases had been debited in the books of account and corresponding sales were accepted, it could not be held that these purchases were outside the books. That at most, it could be a case of purchases made from hawala dealers to inflate costs and suppress the GP rate. The Hon’ble Tribunal dismissed the Revenue’s appeal, affirming that a GP rate of 12.5% was reasonable in such cases, following the principle laid down by the Bombay High Court in Pr. CIT v. Vishwashakti Construction(2023) 454 ITR 448 (Bom)(HC). (AY. 2009-10)
ITO v. Rajesh Amulakhrai Sanghvi, (2024) 111 ITR 500 (Mum)(Trib.)
S. 69C : Unexplained expenditure-Bogus purchases-Purchases are recorded in the books and corresponding sales are accepted-The entire amount of alleged bogus purchases should not be added to income-Gross profit rate of 12.5% on such purchases is reasonable. [S.133(6), 147]