TMI Blog2018 (11) TMI 503X X X X Extracts X X X X X X X X Extracts X X X X ..... ding to me a profit rate of 8% will meet the end of justice in view of the decision of CIT vs. Smith P. Seth [2013 (10) TMI 1028 - GUJARAT HIGH COURT] as the assessee has also paid the VAT element on these bogus purchases. On this account, a further deduction in estimation of profit to the extent of 4.5% can be allowed. Hence, direct the AO to recompute the income after applying profit rate at the rate of 8% and computer the income accordingly. Assessee's appeal partly allowed. - ITA No. 391/Mum/2018 - - - Dated:- 9-5-2018 - Sri Mahavir Singh, Judicial Member For the Assessee : Ruchi M Rathod, AR For the Revenue : P.R. Chauhan, DR ORDER PER MAHAVIR SINGH, JM: This appeal by the assessee is arising out of the ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mumbai that the assessee has made purchases from hawala parties, as listed in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to ₹ 1,07,96,421/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - Sl No. Name of party Amount 1. Polaris Sales Agency Pvt. Ltd 8,62,484/- 2. Shivraj Traders 14,82,202/- 3. Real Traders 11,50,216/- 4. Rumggt Enterprises 7,64,727 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who estimate the disallowance at 12.5% of the bogus purchases by observing in para 5.3.5 and by following the decision of Hon ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) by observing as under: - 5.4.5 In View of the facts and circumstances of the case and the judicial pronouncements cited above, what can be disallowed or taxed in the instant case, is the excess profit element embedded in such purchases shown to have been made from aforesaid parties. As narrated earlier, the AO in this case has held that the parties from whom the purchases were made by the appellant were found to be bogus, estimations ranging from 12.5% to 25% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 25% made by the AO, as profit embedded in impugned purchases shown from the alleged hawala parties and adding the same to the total income returned, would meet the ends of justice. Therefore, I direct the AO to estimate the profit @ 12.5% of the alleged bogus purchases, which works out to ₹ 13,49,553/- (@12.5% of ₹ 1,07,96,421/-) and restrict the addition to ₹ 13,49,553/- instead of 25% as estimated by the Assessing Officer. The appellant gets a relief for the balance amount of ₹ 13,49,554/-. In the result, the appeal of the appellant is partly allowed. 3. I have considered the issue and gone through the facts and circumstances of the case. I find from the facts of the case and argument of both the sides, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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