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2017 (6) TMI 1365 - AT - Income TaxEstimation of income - Bogus purchases - HELD THAT:- Even in case due to the reasons that either the assessee failed to prove the genuinity of purchases or the parties not appeared on the notices issued by the AO, under the Income Tax Act, the tax authority must tax the only real income. Thus, if the transaction is not verified, the only taxable is a taxable income component not the entire transaction. We are of the opinion that in order to fulfil the gap of Revenue leakage, disallowance of reasonable percentage of the impugned purchase will meet the end of justice. In the present case, the assessee has total purchase of Rs.2,09,75,237/- and the alleged bogus purchases are only of Rs.9,21,532/- which is hardly 4.39% of total purchases. The GP percentage in the present case is 23.4% which is much higher than the VAT rate charged by the Maharashtra Government. As a matter of fact, the VAT department is charged from 4% to 12.5% by the Govt. of Maharashtra on various purchases. Considering the totality of the fact and in order to fulfil the gap of Revenue leakage, the disallowance of reasonable percentage will meet the end of justice in the present case. Thus, considering the peculiarity of the present case, we deemed it appropriate to reduce the disallowance @ 10% of impugned purchases (10% of Rs. 9,21,532/-). Hon’ble Bombay High Court in the case of CIT vs Shri Hariram Bhambhani [2015 (2) TMI 907 - BOMBAY HIGH COURT] also held that Revenue is not entitled to brought the entire disputed sale consideration, but the only profit attributable on the unrecorded sale consideration can alone be the subject to tax. With this observation, the appeal of assessee is partly allowed.
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