Entire amount of bogus purchases cannot be disallowed – ITAT Ahmadabad distinguishes Bombay HC decision
Hon’ble Bombay HC has recently issued few judgements directing disallowance of entire amount of bogus purchases which is in contraction to well settled theory of real income. Consequently, the Departmental Representatives across the nation have started relying on such judgements.
Recently we got to deal with a case of bogus purchases where the Bench suo-moto asked us to clarify the applicability of one such judgement of Bombay HC issued in the case of “Shree Ganesh Developers”. After extensive submissions, we were able to distinguish such judgement and convince the Bench that only profit embedded in bogus purchases (real income) can be added.
The Bench also appreciated that it is bound by the judgements of Hon’ble Gujarat HC being the jurisdictional HC taking consistent view of real income theory in cases of bogus purchases.
This judgement will be helpful atleast for the assessees situated in Gujarat.
The copy of the order is as under:
