Deepen Drugs vs. ITO

Parties Involved

Facts Summary

The assessee, Deepen Drugs, is a trader in pharma intermediates. The Assessing Officer (AO) received information that the assessee had made purchases from a party involved in providing bogus sales and purchase invoices. The AO called for the assessee to furnish details to prove the genuineness of the purchases. The assessee provided evidence including purchase bills, sales bills, and confirmation from the sales party and the party to whom the products were further sold. However, the AO was not satisfied with the evidences and held that the purchases in question were bogus, making an addition of Rs. 22.97 lakhs. The Commissioner of Income Tax (Appeals) confirmed the addition. The assessee appealed against this decision, arguing that the entire purchases could not be disallowed as the corresponding sales were accepted and not disturbed. The Tribunal considered the submissions and found that the assessee had sufficiently proved the sales made. The Tribunal restricted the addition to 10% of the disputed amount, ordering the remaining addition to be deleted.…

Legal Issues

• 1. The Ld. CIT(A) erred in law and on facts in confirming the addition of Rs. 22,97,000 as unexplained expenditure under Section 69C read with section 115BBE.
• 2. The Ld. CIT(A) failed to appreciate that the Appellant is a trader and that the corresponding sales were accepted and not disturbed, and therefore, purchases could not be disallowed in entirety.

Judgment Outcome

Decided in favour of Assessee.

Precedents Relied Upon

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