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2009 (12) TMI 992 - ITAT AHMEDABAD

2009 (12) TMI 992 - ITAT AHMEDABAD - TMI - ITA No. 541/Ahd/2007 - Dated:- 18-12-2009 - SHRI BHAVNESH SAINI, JM AND N. S. SAINI, AM Appellant by Shri J.P. Shah, AR Respondent by Shri Sheley Jindal, DR O R D E R PER BHAVNESH SAINI: This appeal by the assessee is directed against the order of the CIT(A)-III, Surat dated 10-11-2006 for the assessment year 2003-04 challenging the order of the learned CIT(A) in upholding the entire purchase of ₹ 3,97,63,022/- as bogus and nongenuine. 2. We have .....

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les at ₹ 3,19,67,923/- with gross profit of 0.49% as against total sales and gross profit of ₹ 5,01,80,990/- and 0.79% respectively shown in the earlier year of the assessment. As regards small suppressed sales and profit, the assessee submitted that in the preceding assessment year 2002-03, the gross profit rate of 1.50% was applied which is confirmed by the Tribunal. The AO issued notices to 7 parties u/s 133(6) of the Income Tax Act from whom the assessee had made the entire purch .....

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prove the genuine expenses incurred on the purchases, therefore, the books of accounts of the assessee was rejected u/s 145 of the Income Tax Act and the addition of the entire purchases was made treating them to be unexplained, non-genuine and bogus purchases. The AO has also applied gross profit rate of 1.50% as is applied in the earlier year against sales and worked out profit of ₹ 4,79,518/-. Since this amount was lesser than the bogus purchases, therefore, no separate addition was ma .....

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e Income Tax Act, the proper course of action would have been applied for gross/net profit rate to determine the income of the assessee instead of making huge addition on account of unexplained purchases. He has submitted that without purchase, there could not be any sale made by the assessee. The learned Counsel for the assessee conceded that in the preceding assessment year 2002-03, the Tribunal confirmed the application of gross profit rate of 1.50% in the case of the assessee on rejection of .....

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at such disallowances were made with the aid of section 40A (3) of the Income Tax Act. The learned DR, therefore, submitted that such order may not be applicable in the case of the assessee. However, the learned DR submitted that since the entire purchases were found to be bogus and not explained, therefore, higher gross profit rate should have been applied to make the addition. 6. We have considered the rival submissions and the material available on record. The AO made the addition on account .....

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e that the assessee might have made the purchases from other parties other than the 7 parties from whom the assessee obtained the purchase bills. But it is highly unbelievable that without making any purchase, the assessee has made sale in ordinary course. In such circumstances, the AO has rightly rejected the book results of the assessee u/s 145 of the Income Tax Act and when book results are rejected, proper course of action should have been taken to determine the income of the assessee by con .....

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