Section 68 of the Income-tax Act, 1961—Cash credit— Tribunal concluded that assessee did make the purchase and as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax.

Facts: Whether Tribunal is justified in restricting the disallowance to 5% of the gross purchases when it is established that none of the supplier parties are in existence and the assessee has just taken accommodation entries without getting actual supplies from the said parties?"

Held, that Tribunal noted that it was an admitted fact that AO did not object to the sales made by the assessee. Therefore, it was evident that they were corresponding purchases. Tribunal examined the books of accounts of assessee wherefrom it was found that the assessee had made payments on account of the purchases through account payee cheques and the purchases were entered in its books of account. Thus, assessee was able to prove that the purchases were made only in the alternative way. If that be so, then Revenue was only required to estimate the profit at a particular rate. Referring to the figure of 2% arrived by the CIT(A), Tribunal observed that assessee's gross profit varied from 5% to 8.77%. Since the purchases were made from the grey market, the corresponding profit element would be little higher. Therefore, Tribunal directed AO to make further addition of 3% on the bogus purchases and to estimate the income on such basis. On thorough consideration of the matter, we do not find any error or infirmity in the view taken by the Tribunal. No substantial question of law arises from the order passed by the Tribunal. - PR. CIT V/s RISHABHDEV TECHNOCABLE LTD. - [2020] 424 ITR 338 (BOM)