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2021 (11) TMI 361 - AT - Income TaxAddition on profits of the project 'Ellora Castle' - the said project has been completed on 26.10.2010 i.e during the F.Y.2010-H relevant to A.Y.2011-12" and during the year under consideration, the assessee has not declared any profit on one unit sold for total consideration - CIT-A deleted the addition - HELD THAT:- AO cannot take up an arbitrary figure of undisclosed profit. Moreover, as rightly pointed out by Ld.CIT(A), AO is not mentioning as to under what method of project accounting he is computing the profit. Moreover when Ld.CIT(A) is giving a finding that AO has accepted the actual profit in respect of the project in AY 2013-14, there is no reason to make a further addition without any cogent basis for the year. Hence uphold the order of Ld.CIT(A) Addition u/s. 41(1) - CIT-A deleted the addition - HELD THAT:- AO has invoked the provision of section 41(1) without bringing on record any cogent material. For how long the account is outstanding and on what basis of his enquiry, AO has come to the conclusion that these accounts are not payable. Devoid of these details, the assessment is simply based upon conjecture & surmise not sustainable in law. Hence, we do not find any infirmity with the order of Ld.CIT(A). Estimation of income - bogus purchases - CIT(A) directing the A.O, to restrict the addition of bogus purchases to 12.5% as against 100% addition made by the AO - HELD THAT:- Sales have not been doubted it is settled law that when sales are not doubted, 100% disallowance for bogus purchase cannot be done. The rationale being no sales is possible without actual purchases. This proposition is supported from Hon’ble jurisdictional High Court decision in the case of Nikunj Eximp Enterprises [2014 (7) TMI 559 - BOMBAY HIGH COURT] In this case, the Hon’ble High Court has upheld 100% disallowance for the purchases said to be bogus, when sales are not doubted. However, the facts of the present case indicate that assessee has made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of the exchequer. In such situation, in our considered opinion on the facts and circumstances of the case the 12.5% disallowance out of the bogus purchases done by the Ld.CIT(A) meets the end of justice. Accordingly, we uphold the order of Ld.CIT(A). Assessee appeal allowed.
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