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2021 (4) TMI 799 - AT - Income TaxEstimation of income - bogus purchases - assessee is engaged in the business of trading in cut and polished diamonds - HELD THAT:- It is not in dispute that the assessee is engaged in the business of trading in cut and polished diamonds. The report of the task group for diamond sector submitted to Department of Commerce suggested that the net profit that could be derived in the diamond manufacturing ranges from 1.5% to 4.5% and in trading activity thereof, the profitability range is 1% to 3%. As average of gross profit for each of the years works out to only 0.6% for the assessee. But it is pertinent to note that assessee had made purchases in the instant case from grey market thereby having saving in VAT as well as incidental profit element thereof. Considering the totality of these facts and circumstances and also considering the report of the task force submitted to Department of Commerce, we deem it fit and appropriate to estimate the profit percentage at 1% of value of purchases in the peculiar facts and circumstances of the instant case. The ld. AO is accordingly directed to make addition only to the extent of 1% of value of tainted purchases for each of the assessment years under consideration. Accordingly, the ground raised by the assessee in this regard is partly allowed.
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