The Bombay High Court consisting of Justice K.R.Shriram And Justice Firdosh P. Pooniwalla has held that the purchases were not being treated as bogus or sham rather the expenditure incurred on such purchases is treated as unexplained.
BACKGROUND
The ITAT confirmed the action of the CIT(A) in restricting the addition to 12.5% of the bogus purchase amount without appreciating the fact that the assessee failed to substantiate the claim of genuineness of purchases.
RULING
The court held that Assessing Officer in all fairness stated that the purchases by assessee, per se, are not the issue and these purchases were not being treated as bogus. He also admits that goods have entered into assessee’s regular business. But AO says, assessee has not been able to give any convincing or cogent explanation as to how these goods happened to come in his possession.
“The CIT(A) and ITAT are correct in coming to the conclusion that only the profit element embedded in such purchases should be added to the income of assessee. The CIT(A) has added 12.5% which has been sustained by ITAT,” the court ruled.
Case Title: PCIT Vs. Synergy Infrastructures
Citation: JUNE 28, 2023