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2017 (8) TMI 1599 - AT - Income TaxValidity of Reopening of assessment u/s 147 - bogus purchases - HELD THAT:- Returns were processed u/s 143(1) of the Act and notice u/s 148 of the Act in both the years were issued on 03-12-2012 within four years. The re-opening was done on the basis of information from DGIT investigation, Mumbai that the assessee has claimed bogus purchases and therefore income has escaped assessment. Accordingly, we also confirmed the action of the AO as confirmed by CIT(A). Bogus purchases - CIT(A) restricting the profit rate at 12.5% - HELD THAT:- Assessee might have made purchases from grey market and obtained these bogus bills from hawala parties by paying some commission. In these circumstances the assessee might have saved VAT and also purchased material from grey market at a lower price. For that the CIT(A) has restricted the addition made by the AO of unproved purchases by estimating and applying the profit rate @ 12.5% as against addition made by the AO of 100% of the bogus purchases. According to us, the profit rate applied by CIT(A) at 12.5% is quite reasonable and accordingly a reasonable profit rate is estimated. We find that the in the decision of the Hon’ble Gujarat High Court in the case of CIT vs. Smith P Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] wherein the profit rate is estimated at 12.5%. We find that the CIT(A) has rightly restricted the profit rate on unverified purchases and we are of the view that he has rightly estimated the profit. - Decided against assessee.
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