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2019 (3) TMI 800 - AT - Income TaxBogus purchases - addition @ 12.5% on the value of the alleged bogus purchases - Hawala transactions - estimation of profit - AO has drawn conclusion that the assessee had actually purchased materials from open market, but procured bills from the hawala parties - HELD THAT:- Under the Income tax Act, the profit earned from the business transactions is alone taxable. Since the sales has been accepted, the corresponding purchases is required to be deducted for the purpose of arriving at profit. The assessee has shown that it has purchased materials from certain dealers, but the same has not been accepted for the reason that the said dealers have admitted before the Sales tax authorities that they have not supplied materials. Even though the AO has presumed that the assessee might have received cash back from such dealers, the same has not been substantiated with any material. On the basis of available facts, the AO has drawn such presumption and in the absence of any material to support the view so taken, it may not be proper to presume that unaccounted cash would have been introduced. Another important factor, which has been rejected by the AO is the submission of the assessee that they were getting credit period of 90 days for making payment to the suppliers. If the same is factored in, then the addition computed by the AO would go down drastically. CIT(A) was justified in directing the AO to assess the profit element embedded in the alleged bogus purchases by taking the rate of profit as 12.50%. As noted earlier, his view also gets support from the decision rendered in the case of Simit P Sheth [2013 (10) TMI 1028 - GUJARAT HIGH COURT]. Hence we do not find any infirmity in the orders passed by him and accordingly we uphold the same. - Decided against revenue
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