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2020 (11) TMI 926 - AT - Income TaxBogus purchases - estimation of income - HELD THAT:- As relying on M/S MOHOMMAD HAJI ADAM & CO. [2019 (2) TMI 1632 - BOMBAY HIGH COURT] addition in respect of purchases which were found to be bogus in the case of the assessee before them was to be worked out by bringing the G.P. rate of such bogus purchases at the same rate of other genuine purchases. We thus respectfully following the aforesaid judgment of the Hon’ble High Court direct the A.O to restrict the addition insofar the bogus/unproved purchases aggregating to ₹ 2,08,51,002/- in the case before us is concerned, by bringing the G.P. rate on the amount of such bogus purchases at the same rate as that of other genuine purchases. Accordingly, for the limited purpose of giving effect to our aforesaid directions the matter is restored to the file of the A.O. Disallowance u/s 40A(3) - cash purchases against which payments in excess of ₹ 20,000/- on any single day were made - HELD THAT:- In the case of Western India Bakers (P) Ltd. [2002 (10) TMI 231 - ITAT BOMBAY-E] had concluded, that when a provision of law is to be applied, it is to be seen that all the circumstances alliunde to the application of such provision did exist. It was observed by the Tribunal, that if it was not possible to find out how the violation of the provision was done, then addition could not be made on the basis of inferences and surmises. Observing, that in the case before them, as it was not known at what point of time and how the assessee had violated the provisions of Sec. 40A(3), therefore no addition on that count was warranted. Accordingly, in the backdrop of our aforesaid observations, we are of the considered view that as the revenue had failed to dislodge the claim of the assessee, and therein prove to the contrary that he had made payments towards purchase of goods from the open/grey market exceeding the prescribed limits contemplated in Sec. 40A(3), therefore, the disallowance made by the A.O cannot be sustained and is liable to be vacated. Deduction u/s 80IB - Increase in profit due ot disallowance of expenses - HELD THAT:- Claim of the assessee for deduction u/s 80IB is in order and the disallowance of the same by the A.O cannot be sustained. Accordingly, the order of the CIT(A) is ‘set aside’ and the disallowance of the assessee’s claim for deduction u/s 80IB is vacated - there is substantial force in the claim of the assessee that deduction u/s 80IB has to be allowed on the amount of profits and gains derived by him the eligible business within the meaning of the said statutory provision, as finally determined.Disallowance of expenses claimed by the assessee as regards his eligible business would increase its income which again will be exempt u/s 80IB. Penalty u/s 271(1)(c) as regards such addition/disallowance above which in itself is backed by a process of estimation cannot be sustained and is therefore deleted.
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