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2017 (6) TMI 1145 - AT - Income TaxAddition u/s 69C - bogus purchases - estimation of profit - Held that:- The suppliers stated in their affidavits before the Sales Tax authorities that they were merely engaged in supply of bills for commission and therefore, they never supplied or delivered the material to the buyers. The reason being that, the revenue never doubted the sales and AO never disturbed the sales account of the assessee in the year under consideration, addition of entire purchases is not valid. Therefore, the addition of entire such purchases as done by the AO is not correct and thus, the decision of the CIT(A) in deleting the same is upheld. Resultantly, the appeals filed by the revenue are decided protanto. The profit portion of the suspected purchases is required to be taxed. We proceed to apply the same the facts of the present case. Genuity of purchases - Held that:- In the present case, considering the affidavits failed by the suppliers before the Sales Tax authorities and the enquiry results u/s 133A, the onus is on the assessee to demonstrate the facts with the evidences. Merely stating that the purchases are genuine and quality of the contract is undisputed by the government is not enough and therefore, the same are unacceptable. To that extent, the arguments of the assessee's AR are dismissed. Correctness of adopting 8% of suspected purchases for addition by FAA - Held that:- It is the claim the assessee without prejudice that the profit rate, if any, should be restricted to the said profit internal rates. But the same cannot be accepted considering the said Gujarat High Court's judgement in the case of Simit P Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) wherein 12.5% is confirmed. We also cannot confirm the ill conceived profit rate of 8% as the same is not in tune with the reasoning given by the Hon'ble HC/Tribunal in the case of Simit P Sheth (supra). As such, AO never applied his mind to this aspect of the profit rate on the suspected purchases. CIT (A) did not remand this aspect to the file of the AO before adopting the profit rate of 8%. AO shall note that the 12.5% was confirmed in the case of Simit P Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT ) when its internal profit is only 3.56%. It is a case of Steel Trader and the said profit rate may not apply to the facts of the present who is in the business of Civil Contractor / real estate. In the remand proceedings, AO shall grant reasonable hearing opportunity to the assessee before arriving at the reasonable profits on the suspected purchases as applicable to the facts of this case. Assessee is also allowed to supply the AO appropriate documents and data to arrive at appropriate profit rate. With the said directions, we allow the grounds of both the assessees for statistical purposes.
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