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2017 (9) TMI 1887 - AT - Income TaxBogus purchases - addition restricted by CIT(A) being 25% of total non-genuine bogus purchases - Payment towards VAT on the purchases from hawala dealers made - as submitted by assessee disallowance made by Assessing Officer is inclusive of VAT and further the credit of VAT was denied by the sales tax department and raised a demand which was recovered from the assessee - HELD THAT:- Merit in the submission of the ld.AR that the sustenance of 25% of bogus purchases is excessive and unreasonable particularly when the VAT credit was not allowed to the assessee by the sales tax department and demand of VAT on behalf of hawala suppliers was realized from the assessee. If we look at the gross profit disclosed by the assessee, it is 16.78 % which is much more than the disallowance @ 11.50% which is normally made by the coordinate benches in the case of hawala purchases. But to discourage the practice of bogus trading some deterrent has to be there. I Ends of justice would be met if the addition is sustained equal to an amount arrived at by calculating 11.50% of bogus purchases minus the VAT credit denied to the assessee by the Sales Tax Deptt which comes to ₹ 6,66,690/- (₹ 31,29,564 minus 24,62,874). Accordingly the AO is directed to delete the additions of ₹ 61,36,710/-. Assessee's appeal is partly allowed.
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