Case:Assistant Commissioner of Income-tax vs. Shanti Swarup Jain

Where assessee purchases from a firm running dummy business then such purchases shall be considered as bogus and be added to his income.  

Facts:

The assessee was engaged in the business of zips for shoes etc. During the assessment proceedings, the Assessing Officer noted that the assessee had made the purchases from M/s. Gopal Enterprises. The A.O. after recording the statement of Sri Ram Gopal Sharma, proprietor of M/s. Gopal Enterprises, treated the said purchases as bogus. Thus, the AO made the respective additions.

On appeal, the Tribunal deleted the additions made.

Revenue appealed to the High Court.

Held:

The High Court viewed that as per the statement recorded, Sri Ram Gopal Sharma made the purchases from the local market without any bill. In addition to this, it was very clear that from last one year, he is not doing any business and only for the year 2007-08 he had received a payment of Rs. 7,50,000/-. He has nothing to do with the business of the assessee, so the liability shown by the assessee is not connected with him. In other words, he clearly stated that no money is due on the assessee. It was evident that Sri Ram Gopal Sharma was running a dummy business.

Thus, the AO rightly rejected the books of account and made the additions on estimate basis. Hence purchases made from person carrying dummy business shall be added to the income of assessee u/s 69C.

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