NIKITA SANJAY SHETH,THANE vs. ITO WD 3(1), THANE

This appeal by the assessee has been filed against the order of the CIT(A)-2, Thane dated 17.03.2017 for A.Y. 2009-10.

In this appeal the only issue is with regard to the addition of `3,02,255/- made by the AO on account of bogus purchases from two parties. 3. The relevant discussion in the orders of the authorities below reveals that based on the information from the Sales Tax Department of Government of Maharashtra as also the verification exercises carried out, purchases made by the assessee of `3,02,255/- from two parties, namely Blue Nile Enterprises and Pooja Corporation have been held to be bogus. Accordingly the said amount has been added to the returned income. 4. Before me the assessee has contended that addition, if any, be made to the extent of the profit attributable to the bogus purchase and not the entire purchases itself.

After considering the rival stands I am of the opinion that it would be appropriate if addition to the extent of 12,5% of the unproved purchase is added to the income of the assessee to plug the leakage of revenue, if any, on account of unproved purchases. Notably, the assessee was able to show before the lower authorities that though the purchases from the two parties were unproved but in fact the material was purchased, may be from other parties in gray market, since corresponding sales have been accepted. Therefore, under these circumstances the entire amount of purchases cannot be assessed as income. It is, therefore, hereby directed that 12.5% of the total purchases be treated as income relatable to the impugned transactions and the balance of the addition be deleted.

In the result, the appeal filed by the assessee is partly allowed.