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2019 (10) TMI 1424 - AT - Income TaxEstimation of income - Bogus purchases - parties were declared bogus by the Maharashtra Vat Department as providing Hawala entries - CIT(A) confirmed the order of the AO by observing that the onus lies on the assessee to justify the expenses incurred by him by producing the parties besides the documentary evidence - HELD THAT:- The assessee has claimed to have made sales against such purchases which have been admitted by the Revenue. As such in our considered view, such sales cannot be executed without having the corresponding purchases. There was no defect pointed out by the authorities below insofar the sales made against such purchases. Moreover, there is also no allegation regarding the genuineness of the books of accounts which were duly audited under the Income Tax Act. Before parting we cannot ignore the practice prevailing in the business industries to purchase the goods from the grey market and subsequently justify such purchases by obtaining a purchase bill from the parties engaged in providing accommodation entries. It is because the assessee in the present case has claimed to have purchased the goods from the parties not having valid VAT/CST registration certificate though he is claiming to have purchased goods from the registered party. Moreover, there was no submission from the side of the assessee against the finding of the Maharashtra Sales Tax Department wherein it was alleged that the parties are not genuine. In view of the above, we can presume that the actual purchases were made by the assessee from the grey market but shown in the name of impugned parties. Assessee has already declared the GP in its books of accounts by recording the sales and the corresponding purchases. But to prevent the possible leakage of the Revenue, as the purchases from the local/grey market is normally cheaper, we are inclined to make the ad hoc addition at the rate of 5% of such purchases in order to meet the end of justice and to stop the ongoing dispute. In holding so, we find support and guidance from the judgment of ITAT Ahmedabad in case of ITO vs. Sun steel [2004 (6) TMI 236 - ITAT AHMEDABAD-B] We direct the AO to make the ad-hoc addition on such purchases as discussed above. Hence the ground of appeal of the assessee is partly allowed.
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