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2020 (3) TMI 1387 - AT - Income TaxUnexplained investment in respect of bogus purchases - As argued sales have been accepted as genuine from out of these purchases and hen the sales have been accepted as genuine the entire purchases cannot be treated as non-genuine - HELD THAT:- Hon’ble Gujarat High Court in the case of Bholanath Polyfab Pvt. Ltd [2013 (10) TMI 933 - GUJARAT HIGH COURT] held that when the assessee made purchases and sold the finished goods as a natural corollary not the entire amount covered under such purchases would be subject to tax but only the profit element embedded therein. Similar view has been taken in the case of CIT v. Simit P. Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] -Simply because the parties were not produced the entire purchases cannot be added as held by the Bombay High Court in the case of CIT v. Nikunj Eximp [2013 (1) TMI 88 - BOMBAY HIGH COURT] - However, at the same time keeping in view the nature of business of the assessee and the fact that the assessee is making some local purchases without any transportation bills, lorry receipts etc, the possibility of making purchases in gray market on cash cannot be ruled out. Taking the totality of facts and circumstances into consideration and the nature of business carried on by the assessee we direct the Assessing Officer to restrict the disallowance/addition to 4% of the bogus purchases. Accordingly, we direct the Assessing Officer to restrict the disallowance of purchases to 4% and compute the income accordingly. Appeal of the assessee is partly allowed.
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