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2020 (10) TMI 1084 - AT - Income TaxBogus purchases - enquiries from the VAT Department - AO also found that both the parties have not reported any sales to the assessee in their respective returns filed to the VAT Department for the sales made to the assessee - HELD THAT:- We are disallowing the purchases but on the other side we are treating the sales of such purchases as genuine - none of the authorities below has doubted on the sales made by the assessee against such purchases. We find force in the contention of the Learned AR that an element of profit can be added to the total income of the assessee prevent the loss if any to the revenue on account of such purchases. In the construction activity, it is the prevailing practice that the assessee makes purchases of the raw materials from the grey market and further made bogus purchases to record the same in the books of accounts. Accordingly, we don’t incline to disallow purchases treating them as bogus in the given facts and circumstances. Determine the element of profit embodied in such purchases - In the interest of justice and fair play and to prevent any leakage to the revenue, we are of the view that the justice will be served the assessee as well as to the revenue if income of the assessee is enhanced by 5% on such purchases. Accordingly, we direct the AO to make the addition @ 5% on such bogus purchases. Addition on account of commission expenses - HELD THAT:- AO was aware of all the details of the commission agents such as the addresses, PAN but he has not taken any confirmation from such agents about the genuineness of the commission received by them. The assessee by furnishing the requisite details about the commission agent shifted its onus upon the AO to prove that commission expenses was not incurred in the course of the business. AO was under the obligation to provide the opportunity for the cross-examination of the statement obtained from the flat owners to the assessee as well as to the commission agents before arriving at the conclusion that there was no involvement of the commission agents in selling the flats to the flat owners. In our considered view, the statement obtained at the back of the assessee of the flat owners cannot be a ground for making the disallowance in the given facts and circumstances - Decided in favour of assessee. Addition on account of on money - random enquiries from ten persons who have purchased flats/shops in the projects developed by the assessee, found that the buyers have made the payment for the purchase of the flats/shops through cash and cheques in the ratio of 40% to 50% - HELD THAT:- AO in the remand proceedings vde letter dated 16thJune 2014 has verified all the ten owners of the flats/shops in response to the summon issued under Section 131 of the Act and reached to the conclusion that there was no cash involved in the purchase of flats/shops. Assessee has not received any cash against the sale of the flats/shops from the buyer. Accordingly, we do not find any infirmity in the order of the Learned CIT(A) and, thus, we decline to interfere in his order. Hence, the ground of appeal of the Revenue is dismissed.
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