“Section 132(6)”
The decision most relied on for Section 132(6) is CIT v. Simit P. Sheth (356 ITR 451), cited in 1,465 judgments on BharatTax.
Leading authorities on Section 132(6)
Additions for alleged bogus purchases should be restricted to the profit element, not the entire turnover. The profit element is often estimated at 12.5% of the purported bogus purchases.
If an assessee makes purchases from bogus parties, but the underlying goods are genuinely acquired and sold, only the profit margin embedded in such purchases, and not the entire value of the bogus purchases, should be added to the assessee's income.
The onus to prove that an apparent transaction or explanation is not real lies with the person who claims it to be so. If an assessee provides a plausible explanation for a transaction, the revenue must establish that the apparent transaction is not genuine.
An assessee discharges the initial onus under Section 68 for cash credits by providing creditor details like PAN and addresses, proving creditworthiness via banking transactions, and demonstrating genuineness, especially when loans are repaid through cheques.
The Assessing Officer cannot add share capital or share premium amounts if the assessee provides the identity and creditworthiness of the subscriber and establishes the genuineness of the transaction. The court may admit additional evidence under Rule 46A, such as the PAN identity of the creditor.
Income tax additions cannot be sustained merely on the basis of uncorroborated statements or allegations. The Revenue must bring on record sufficient material and allow the assessee to produce evidence to prove such additions.
For interest on borrowed capital to be deductible under Section 36(1)(iii), there must be a nexus between the use of the borrowed funds and the purpose of the business. This decision has been overruled by the Supreme Court in Munjal Sales Corporation v. CIT (2008).
When explaining cash credits under Section 68, the assessee must establish the identity of the creditor, their creditworthiness or financial capacity, and the genuineness of the transaction. Merely proving identity does not discharge this initial onus, which shifts to the Assessing Officer once these three elements are prima facie proven.
