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2017 (11) TMI 1906 - AT - Income TaxBogus purchases - addition was restricted to 12.5% of the purchases by CIT-A - as argued AO has not conducted any enquiry on his behalf, to prove the above purchases made from concerns to be non-genuine - HELD THAT:- Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account. No such exercise has been done or findings recorded. There was no detailed investigation made by the AO himself - payments have been made by account payee cheque which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash back from the suppliers. AO has not brought any material on record to show that there is suppression of sales. It is basic rule of accountancy as well as of taxation laws that profit from business cannot be ascertained without deducting cost of purchase from sales. After giving these observations, CIT(A) has directed AO to estimate profit at 12.5%. Assessee has already declared GP of 6.40% on the total sales. The GP declared by the assessee with respect to the alleged bogus purchases were better than the GP declared in respect of remaining sales. Therefore we modify both the orders of the lower authorities and direct the AO to restrict addition to the extent of 2% of the alleged bogus purchases so as to cover leakage of revenue if any. - Decided partly in favour of assessee.
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