TMI Blog2017 (7) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... the very basis of purchase. Therefore purchases are not bogus but they are made from parties other than those who are mentioned in the books of account. This being the decision not the entire purchase price but only the profit element in such purchases can be added to the income of the assessee. Disallowance to the extent of 12.5% of such bogus purchase will be justified in the facts of this case also. Therefore, we modify the order of the CIT(A) and direct the AO to restrict the disallowance the extent of 12.5% of such bogus purchases - Appeals filed by the Revenue are allowed for statistical purposes. - ITA Nos.3659, 3578 & 3579 /Mum/2015 (Assessment Years: 2010-11, 2009-10 & 2011-12) - - - Dated:- 11-7-2017 - Shri P K Bansal, Vice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uce the books. 3. The brief facts of the case are that the assessee is an individual and is the proprietor of M/s. Giriraj Enterprises, engaged in the business of trading in Rubber Rubber chemicals. The assessee made purchases from the following parties who were found to be hawala parties by the Sales Tax Department of the Government of Maharashtra: - S.No. Name of the Party Amount 1 M/s. Balaji Traders 1,89,32,986/- 2 M/s. Mahaveer Enterprises 1,54,90,497/- 3 M/s. Ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is in possession of purchase invoices and payments are through banking channels. Therefore, if at all the purchases are found to be bogus we note that the sales turnover has not been disputed by the Revenue. Therefore, in such a case the addition can be made only on the profit element embedded in these purchase transactions to factorise the profit earned by the assessee against the purchase of material in gray market. We find that there are divergent views of various High Courts on what amount of GP should be applied in such bogus purchases. We find that in the case of Smith and Sheth the Hon'ble Gujarat High Court has held that a trader sold some goods and he would purchase the same from other sources. When the total sale ..... X X X X Extracts X X X X X X X X Extracts X X X X
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