The assessee had shown purchases from parties subsequently identified as hawala dealers, though the corresponding sales were accepted by the Revenue. The AO disallowed the full amount of purchases as bogus and taxed it as income. On appeal, it was observed that since sales were recorded and purchases supported sales, only the profit element embedded in such purchases could be added. Following PCIT v. Mohammad Haji Adam & Co(2019) 103 taxmann.com 459 (Bom)(HC)the addition was restricted to GP element.
PCIT v. Dhondiram Naryan Limbhore [2023] 153 taxmann.com 539 (Bom)(HC) Editorial : SLP of revenue dismissed due to delay of 628 days and also on merits, PCIT v. Zahira R. Khatun [2025] 304 Taxman 514 (SC).
S. 69C : Unexplained expenditure-Bogus purchases-No discrepancy between purchases and sales-Entire bogus purchases could not be treated as income; addition restricted to GP element. [S. 260A]