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2009 (6) TMI 601 - AT - Income TaxGenuine/ Bogus Purchases - A search operation was carried out by the Department and it was found that there are several entities which were created only to issue purchase bills where no actual supply of precious and semi-precious stones were ever made - Supreme Court of India in the case of Kachwala Gems vs. Jt. CIT (2006 -TMI - 3365 - SUPREME COURT) and Tribunal, Jaipur Bench decision in the case of Shri Shrikishan Malpani, bogus purchases was considered as a defect in the maintenance of accounts and therefore, books of account were rejected after applying the provisions of s. 145(3) of the Act - The AO applied higher GP rate of 25 per cent on declared sales of2,68,65,383 and made trading addition of60,44,714 -There is no justification for application of 25 per cent. GP rate on the total turnover of about Rs. 8.91 crores and in making an addition of Rs. 2.33 crores. In such circumstances and facts of the case, the learned CIT(A) is not justified in sustaining the complete addition of doubtful purchases. To meet both the ends of justice and to plug the leakage of revenue, we direct the AO to sustain the addition of Rs. 5 lacs. Therefore, the assessee gets the part relief ll the transactions were made by account payee cheque including interest payment and therefore, there can be no adverse view regarding the cash creditor. The confirmation in respect of transaction under consideration has already been submitted. - Addition can not be made Interest – Section 234B and 234D is mandatory and consequential in nature - Appeal is partly allowed and partly dismissed
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