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2017 (9) TMI 729 - AT - Income TaxBogus purchases from alleged hawala operators - information received from DGIT (Inv) further supported by the list prepared by Maharashtra Sales-tax department - estimation of net profit on bogus purchases - Held that:- In the absence of any finding as to the incorrectness in books of account and stock registers, purchases cannot be doubted. Under these facts and circumstances it can be concluded that the assessee has obtained bills to reduce profits. Hence, what needs to be taxed in this case is only the profit element embedded in such purchases, but not the entire purchases from the above parties. Hon’ble Gujarat High Court in the case of CIT vs Smit P Sheth (2013 (10) TMI 1028 - GUJARAT HIGH COURT) has taken a view that no uniform yardstick can be applied for estimation of net profit which depends upon facts and circumstances of each case. The Hon’ble High Court further observed that in such cases, the profit element embedded in such purchases can only be added to the income of the assessee. The ITAT, Mumbai Benches in several cases has upheld estimation of net profit at 12.5% on such purchases. Therefore, considering the overall facts & circumstances of the case and also relying upon the ratio of case laws discussed above, we are of the view that in the case of bogus purchases, only profit element embedded in such purchases needs to be taxed but not total purchases. Accordingly, we direct the AO to estimate net profit at 12.5% on total alleged bogus purchases. - Decided in favour of assessee partly .
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