The profit element embedded in a purchase can be treated as income of the assessee.

JUDGMENT

Dhiraj Singh Thakur, J. - The present appeal has been preferred under Section 260A of the Income Tax Act, 1961 ('the Act') against the order dated 03rd May, 2017 passed by the Income Tax Appellate Tribunal, Bench 'E', Mumbai (ITAT), in Income Tax Appeal No.4549/Mum/2015, relevant to the assessment year 2009-10.

2. The following questions of law have been proposed for our consideration:

''6.1 Whether on the facts and in the circumstances of the case and in law, the order of the Hon'ble ITAT is perverse in not considering the order of Hon'ble Supreme Court in the case of N K Protein Ltd. dated 16.01.2017, which is on the similar issue of bogus purchases and when the Hon'ble Apex Court order was already the law of the land when the Hon'ble ITAT has pronounced its order on 03.05.2017?

6.2. Whether on the facts and in the circumstances of the case and in law, the Honble ITAT erred in ignoring the decision in the case of N K Proteins by Hon'ble Ahmedabad High Court, further affrmed by Hon'ble Supreme Court, as mentioned at ground No. 1 above, wherein Hon'ble High Court, relying on the fndings of the Hon'ble ITAT, Ahmedabad, that the suppliers are bogus, has given a fnding that once the suppliers are held bogus, then it is not correct to tax only 25% of the bogus claims? This is further supported by the fact that in this case also, the AO has categorically and conclusively held that the parties from whom the purchases are shown to be made are bogus purchases as the concerns are providing bogus bills and this fnding of the AO has been further strengthened by the fndings of the higher appellate authority which is never controverted by Hon'ble ITAT?

6.3 Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in overlooking the fact that addition made by AO based on details of scam unearthed by Sales Tax Department wherein it was established that the assessee had taken bills from bogus parties without actually making purchases from them?

6.4 whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in ignoring that the purchases from bogus parties are debited in P & L Account for which the assessee had not submitted any evidences, and the same was not allowable?

6.5. Whether on the facts and in the circumstances of the case and in law, the Hon'ble ITAT erred in upholding the order of the Ld.CIT(A) who had limited and disallowance to the extent of 12.5% of the total alleged purchase without verifcation and confrmation of quantitative data of material sourced and its subsequent movement during the year?''

3. Briefly stated the material facts are as under:

The Assessee undertakes civil contract works awarded mostly by Municipal Corporation of Greater Mumbai (MCGM). Return of income was fled for the assessment year 2009-10, declaring a total income of Rs.92,36,071/-. The assessment was completed under Section 143(3) of the Act, at a total income of Rs.93,72,290/-. The case of the assessee was reopened on the basis of information received from Sales Tax Department through DGIT (Inv.), Mumbai, that the assessee had made purchases of Rs.4,50,08,383/-, which seemed to be accommodation entries. An order under Section 143(3) r/w Section 147 was passed on 26th March, 2014, making an entire addition of Rs.4,50,08,383/- as bogus purchase under Section 69C of the Act, thereby determining the assessee's income at Rs.5,43,80,670/-.

4. An appeal was preferred before the Pr. Commissioner of Income Tax, (Appeals), who allowed the appeal partly vide its order dated 19th May, 2015. The Appellate Authority held that payments made by the assessee were through banking channels and that there was no evidence to prove that the cash had flowed back to the appellant. Purchase invoices and ledger statements also appear to have been produced before the Appellate Authority. It was held that what was taxable under the Income Tax Act, was only the real income. Even when the transaction was not verifa