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2016 (11) TMI 1716 - AT - Income TaxBogus purchases - assessee had obtained bogus purchase bills from 14 parties which were stated to be hawala operators - assessee contended that he was engaged in extensive projects and in need of huge quantity of materials to speed up the work of the projects towards completion which made the assessee to make purchases from dealers who offered fine quality of material at rational rates along with early delivery of the goods and thus the assessee, in hasten, did not inquire much about the genuineness of the dealers and their background in respect of default with the sales tax / VAT department - HELD THAT:- The Tribunal, in all such cases, has invariably taken a stand that when GP/NP rates are comparable and sales figures are not disputed by the revenue then entire purchases do not deserve disallowance rather some ad hoc disallowance ranging from 5% to 12.5% has been found to be a reasonable estimation of profit element embedded in the bogus purchases particularly when material consumption factor do not show abnormal deviations. We also observe that CIT(A) has enhanced the amount of bogus purchases with respect to three more parties aggregating to Rs.1,58,00,987/- without confronting the same to the assessee. We direct that assessee shall suffer disallowance with respect to bogus purchases to the extent of 10% of Rs.2,47,15,690/- as against full disallowance made by AO. The same comes to Rs.24,71,569/-. CIT(A) has enhanced bogus purchases with respect to three parties, two of which already figure in the list of AO. Therefore, no further additions shall be made against party at Serial No. 2&3 of the above table. Qua first party namely “M/s Ramex Trading Impex Pvt. Ltd.” for Rs.69,90,308/-, the matter is remitted back to the file of CIT(A) for fresh adjudication after providing suitable opportunity of being heard to the assessee. The assessee is directed to substantiate its claim before CIT(A) forthwith, failing which CIT(A) shall be at liberty to decided the issue on the basis of material available on record. The appeal of the assessee is thus partly allowed.
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