Section 69C Prohibits Estimating Profit on Bogus Purchases as It Grants Partial Deduction for Unexplained Expenditures

The HC ruled against the approach of estimating profit (at 12.5%) on bogus purchases, finding it contradictory to Section 69C of the Income Tax Act. The court reasoned that estimating profit on unproven purchases effectively grants partial deduction for those purchases, which Section 69C expressly prohibits for unexplained expenditures. The court partially ruled in favor of the revenue department regarding purchases from Neptune Trading Co. and Hari Om Traders, while ruling in favor of the assessee regarding purchases from other suppliers. The court capped the total additions at Rs. 1,00,10,773, representing the total purchases from the two specified parties, and reversed the CIT(A) and Tribunal orders to that extent. .....

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