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2017 (8) TMI 118 - AT - Income TaxIssue of bogus purchases - net profit rate application - Held that:- We find that the assessee is engaged in the business of Fabrication on contract basis. For this he makes purchases and sales and the sales made by him are not at all doubted. It is also a fact that the assessee has procured bills from hawala parties and made payments by account payee cheques to these parties. Further, the assessee also produced the stock register for raw material and purchases. Once this is a fact that the payments are by account payee cheques, the stock register is maintained and produced the bills from hawala parties, the assessee has used the material for sale which he might have purchased from grey market. It is common presumption which has not be rebutted by the Revenue. Hon’ble Supreme Court in the case of Kanchwala Gems (2006 (12) TMI 83 - SUPREME COURT) wherein Hon’ble Supreme Court has held that the disallowance of bogus purchases is to be restricted to certain percentage of profit, wherein it is held that the purchases from grey market is made. Accordingly, we direct the AO to apply net profit rate @ 8% of the bogus purchases made by the assessee and recompute the income accordingly. These appeals of the assessee are partly allowed.
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