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“bogus purchases”

DisallowancesSection 69CSection 69C9,532 judgments

The decision most relied on for bogus purchases is CIT v. Bholanath Poly Fab. Pvt. Ltd. (355 ITR 290), cited in 712 judgments on BharatTax.

Leading authorities on bogus purchases

CIT v. Bholanath Poly Fab. Pvt. Ltd.
355 ITR 290 · 2013 · High Court
712
citing judgments

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.

Sanjay Oilcake Industries v. CIT
316 ITR 274 · 2009 · High Court
460
citing judgments

In cases of alleged bogus or unverifiable purchases, rather than disallowing the entire purchase value, a reasonable profit element or a proportionate percentage of the purchases should be added back to the assessee's income.

Vijay Proteins Ltd. v. Asst. CIT
58 ITD 428 · 1996 · ITAT
430
citing judgments

Where purchases are found to be non-genuine or fictitious, a reasonable disallowance of 25% of such purchases or the peak credit, whichever is higher, can be made. This is applied to address unexplained expenditure under Section 69C when actual goods are likely procured from the grey market.

CIT v. Odeon Builders Pvt. ltd.
418 ITR 315 · 2019 · Supreme Court
408
citing judgments

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.

Nikunj Eximp Enterprises v. CIT
216 Taxmann 171 · 2013 · High Court
325
citing judgments

Purchases may be treated as genuine even if the purchase parties are untraceable or not available for verification, as long as there is no specific evidence from the parties themselves denying the transactions or proving them to be bogus.

CIT v. Shyam R. Pawar
54 Taxmann.com 108 · 2015 · High Court
279
citing judgments

Transactions involving the purchase and sale of shares cannot be considered bogus where the assessee provides documentary evidence, unless the revenue brings substantial evidence on record to reject such proof. This principle is consistently applied in cases concerning claims of bogus long-term capital gains arising from penny stock transactions.

CIT v. Simit P. Seth
38 Taxmann.com 385 · 2013 · High Court
278
citing judgments

When an assessee obtains accommodation bills for purchases but the corresponding sales are genuine, the addition to income is limited to the gross profit margin embedded in such purchases. This principle acknowledges that the underlying sales were real, but profit was suppressed through bogus invoices.

CIT v. Vijay M. Mistry Construction Ltd.
355 ITR 498 · 2013 · High Court
252
citing judgments

In cases of alleged bogus or hawala purchases where the existence of transactions is not entirely denied, only the profit element embedded in such purchases, and not the entire purchase price, can be added to the assessee's income. The focus is on determining a reasonable profit percentage for such additions.

Judgments citing bogus purchases

Mr. Mahesh C Shah, Mumbai vs. CIT(A)-6, Mumbai

In the result, the appeal of the assessee is partly allowed

ITA 838/MUM/2023[2009-10]Status: DisposedITAT Mumbai14 Jul 2023AY 2009-10

Bench: Shri Aby T. Varkey, Jm आयकर अपील सं/ I.T.A. No.838/Mum/2023 (निर्धारण वर्ा / Assessment Year: 2009-10) M/S. Mahesh C Shah बिधम/ Cit(A)-6 3Rd Floor, Room No. 10, A B-208, Ramdev Park Chsl, Vs. Chandavarkar Road, Next To Wing, Mittal Court, Sp Mukherjee Garden, Nariman Point, Mumbai- Borivali (West)-400002. 400021. स्थधयी लेखध सं./जीआइआर सं./Pan/Gir No. : Aadps1521R (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) Assessee By: None Revenue By: Shri Dharmvir D Yadav (Sr. Dr) सुनवाई की तारीख / Date Of Hearing: 28/06/2023 घोषणा की तारीख /Date Of Pronouncement: 14/07/2023 आदेश / O R D E R Per Aby T. Varkey, Jm: This Is An Appeal Preferred By The Assessee Against The Order Of The Ld. Cit(A)-06, Mumbai Dated 15.03.2019 For Ay. 2009-10. 2. None Appeared On Behalf Of The Assessee. 3. Brief Facts Are That The Assessee Is A Proprietor Of A Firm Named M/S. Haresh Trading Co, Which Is Dealing With Trading Of Electrical Components. The Assessee Had Filed The Return Of Income On 30.09.2009 For Ay. 2009-10 Declaring Total Income Of Rs.3,09,973/-. Later, The Assessment Was Reopened U/S 147 Of The Income Tax Act, 1961 (Hereinafter “The Act’) By Issuance Of Notice U/S 148 Of The Act After Recording The Reasons. The Ao Noted That He Received Information From The Dgit(Inv.), Mumbai That During The Relevant Year, The Assessee Had Dealt With Thirteen (13) Parties Who Were Hawala Operators Which Information The Investigation Wing (Dgit) Received

For Appellant: NoneFor Respondent: Shri Dharmvir D Yadav (Sr. DR)
Section 144Section 147Section 148

circumstances nothing could be considered to be factually demonstrated. Therefore, it is concluded that the entire transaction shown appellant’s motive to claim bogus purchases to inflate the expenses. Hence, AO’s action of addition of 100% purchases is upheld. Accordingly, Ground No. 1 & 2 are dismissed.” 4. Aggrieved ... such sales need only be taxed. It is noted that since assessee is trading in electrical component, reasonable estimate of 12.5% of the bogus purchases need only be brought to tax rather than 100% disallowed by AO. The AO is directed to give relief accordingly to assessee