PCIT vs. Paramshakti Distributors Pvt. Ltd (Bombay High Court)

Section 68 of the Income Tax Act – 1961 & Bogus Purchases:

 Despite admission by the assessee that the purchases were mere accommodation entries, the entire expenditure cannot be disallowed.

 Only the profit embedded in the purchases covered by the bogus bills can be taxed. The GP rate disclosed by the assessee cannot be disturbed in the absence of incriminating material to discard the book results

The Department had not rejected the instance of the purchases since the sales out of purchase of such raw material was accounted for and accepted.

 With above position, the Tribunal applied the principle of taxing the profit embedded in such purchases covered by the bogus bills, instead of disallowing the entire expenditure.

We do not find any error in the view of the Tribunal