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2019 (4) TMI 1722 - AT - Income TaxBogus purchases - purchases have been made from one party in grey market and bills have been obtained from another party i.e. accommodation entry provider - HELD THAT:- It is no doubt true that cheques issued by the assessee in the name of M/s. Meet Enterprises had been deposited in the account of M/s. Meet Enterprises, Ghaziabad instead of Meet Enterprises, Haridwar. But the sales made by the assessee have not been doubted by the Assessing Officer. It is impossible to make sales without corresponding purchases. In the stock register corresponding to the sales, purchases have been duly recorded. In the circumstances of no irregularity observed in the inventory record, entire purchases of ₹ 32,76,741/- cannot be disallowed . It would be inappropriate to deny the entire expenditure claimed by the assessee. We are of the opinion that at best it would be a case that purchases have been made from one party in grey market and bills have been obtained from another party i.e. accommodation entry provider. Thus, the purchases themselves cannot be said to be bogus as the same is duly recorded in the books of account of the appellant and such books stands accepted even in the impugned order of assessment. In the instant case, the assessee is engaged in dealing in MS Bar (Iron/Steel Product) and has shown gross profit rate of 5.22%. We find that in the case of Sh. Sanjay H. Shah, Mumbai Vs. Income Tax Officer [2018 (2) TMI 1632 - ITAT MUMBAI] who was also engaged in trading of Iron & Steel product, the Tribunal restricted the disallowance to 5% of the total alleged bogus purchases - thus we direct the learned Assessing Officer to restrict the disallowance to 5% of the impugned purchase - Appeal of the assessee is partly allowed.
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