Even if it is held that the purchases from sales parties are bogus, then also, the proper course would be to determine the profit arising from the purchases by looking at corresponding sales and what amount of gross profit is earned on alleged bogus purchases. If the alleged bogus purchases show gross profit higher than the regular gross profit shown by the assessee, no further addition is required to be made in the hands of the assessee. The logic behind this is that sale is already accounted for on the credit side of the profit and loss account. If the purchases are to be removed, the corresponding sale is also required to be removed from the profit and loss account, sales is higher than the purchases in rupees terms, therefore, the addition would be only required to be made to the extent of lower gross profit on alleged bogus purchases then the regular gross profit. This also takes the care of the argument that no proof of delivery of goods purchased are shown by the assessee, similarly, the sales are also bogus. It is not the case of the AO that amount invested in acquiring the bogus purchases should also be considered as an addition, because the only addition is disallowance of bogus purchases, no further addition is warranted. The order of the learned CIT – A follows the decision of honourable jurisdictional High Court which binds him as well as us. In view of this, ground number 1 and 2 of the appeal of the AO are dismissed. PCIT vs. M/s Mohommad Haji Adam & Co. [ITA NO. 1004 OF 2016 (Bombay High Court)(103 taxman.com 459) followed.
|Counsel(s):||CA. Suchek Anchaliya and CA. Vaishali More|
|Dowload Pdf File||Click here to download the file in pdf format|
|Date of upload:||October 2, 2023|