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2022 (6) TMI 1347 - AT - Income TaxReopening of assessment u/s 147 - bogus purchases - HELD THAT:- As decided in assessee own case [2017 (9) TMI 181 - ITAT DELHI] as relying on Unique Metal Industries [2015 (10) TMI 2753 - ITAT NEW DELHI] case we observe that the AO had recorded similarly worded reasons and name of the parties form whom the assessee alleged to have made bogus purchases were also same except the amount mentioned therein in the reasons recorded in the tabular form, as in the case of the present assessee. We, therefore, respectfully following the above hold that the initiation of reassessment proceedings as well as issuance of notice u/s. 148 of the Act was not valid and the same was void ab initio. Addition of bogus purchases @ 20% - Estimating profit @ 20%) by taking into consideration the or visions of section 40A(3) will not lead to determination of correct real income. Section 40A(3) is meant for a different purpose when the assessee has made purchases in cash. This provision cannot be applied in such cases. Once the purchases are held to be bogus then the trading results declared by the assessee cannot be accepted and right course in such case is to reject books of accounts and profit has to be estimated by applying a comparative profit rate in the same trade. Though there can be a little guess work in estimating profit rate but such profit rate cannot be punitive. Thus respectfully following the decision of the Tribunal in the case of Unique Metal Industries (supra), whereby the addition of 20% of the purchases sustained by the Ld. CIT(A) has been deleted in the identical facts and circumstances of the case, are not inclined to sustain the similar addition in the instant case. Appeal of the assessee is allowed.
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