TMI Blog2017 (9) TMI 1215X X X X Extracts X X X X X X X X Extracts X X X X ..... essee and the entire purchases cannot be disallowed. We find that the AO had invoked the provisions of section 69C of the Act. But, he has not deliberated upon the issue as to how the provisions of said section were applicable. It is one of the deeming sections and has to be construed strictly. In our opinion, the order of the FAA, estimating the profit at the rate of 12.5% of the total purchases is a better estimate than the estimate made by the AO wherein he had disallowed the hundred percent of the purchases. - Decided against AO. - I.T.A./858/Mum/2017 - - - Dated:- 22-8-2017 - Sh. Rajendra,Accountant Member And Ravish Sood, Judicial Member For The Revenue : Shri Saurabhkumar Rai-DR For The Assessee : Shri Keyuri Desai-AR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me were not reflecting complete picture of the assessee s business, that the books of accounts were to be rejected as per the provisions of section 145 (3)of the Act. Invoking the provisions of section 69C of the Act, he made an addition of ₹ 46.47 lakhs to the total income of the assessee under the head unexplained expenditure. 3 . Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA)and made elaborate submissions before him. After considering the available material, he held that where purchase was held as bogus then the corresponding sales must also be held non-genuine, that without the material being purchased no production or sales would take place, that purchase from bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prises(216 taxman 171) and held that the AO had not brought any material on record to show that there was suppression of sales, that profit from business could not be ascertained without deducting cost of purchase from the sales, that estimation of profit ranging from 12.5% to 15% had been upheld by the honorable Gujarat High Court in the case of Simit P Seth(356 ITR 451), depending upon the nature of the business. Finally, he held that the AO had disallowed and amount of ₹ 46.48 lakhs on account of bogus purchases, that estimated profit @12.5% would meet the end of Justice. He directed the AO to estimate profit of 12.5% on total purchases in question which worked out ₹ 5.80 lakhs (12.5% of ₹ 46.47 lakhs). Thus, the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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