Facts of the case

During the course of reassessment proceedings, the Assessing Officer, after considering the depositions and affidavits filed before the Sales Tax Authority, came to a conclusion that the entities from whom the assessee had made purchases were only indulged in bogus accommodation entries without supply of goods. Accordingly, the purchases amounting to Rs.90,33,191/- was treated as bogus and the same was added to the returned income of the assessee.

Observations of the Court

The Hon’ble High Court observed that the Assessing Officer did not doubt the sales made by the assessee against the purchases and himself had held that purchases were made from someone else while bogus bills were organized by Hawala Traders. Also the assessee had reconciled the quantitative details of stock as per sales invoices.

Decision

It was held that since the sales were not doubted and quantitative details of stock was reconciled, only the profit element in these accommodation entries are to be added to the income and not the entire purchase amount.