TMI Blog2017 (8) TMI 1599X X X X Extracts X X X X X X X X Extracts X X X X ..... m hawala parties by paying some commission. In these circumstances the assessee might have saved VAT and also purchased material from grey market at a lower price. For that the CIT(A) has restricted the addition made by the AO of unproved purchases by estimating and applying the profit rate @ 12.5% as against addition made by the AO of 100% of the bogus purchases. According to us, the profit rate applied by CIT(A) at 12.5% is quite reasonable and accordingly a reasonable profit rate is estimated. We find that the in the decision of the Hon ble Gujarat High Court in the case of CIT vs. Smith P Seth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT] wherein the profit rate is estimated at 12.5%. We find that the CIT(A) has rightly restricted the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances of the case. We find that in both the years returns were processed u/s 143(1) of the Act and notice u/s 148 of the Act in both the years were issued on 03-12-2012 within four years. The re-opening was done on the basis of information from DGIT investigation, Mumbai that the assessee has claimed bogus purchases and therefore income has escaped assessment. Accordingly, we also confirmed the action of the AO as confirmed by CIT(A). 4. The next common issue in these appeals of assessee is as regards to the orders of CIT(A) restricting the profit rate at 25% as against added by the AO 100% of the bogus purchase. For this assessee has raised identical worded grounds in both the years except the quantum. 5. Briefly stated facts are tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shreeji Traders 36,89,674/- Mumbai Metal Corporation 24,21,093/- Total 1,24,08,096/- 6. The AO issued noticed under section 133(6) to the parties which returned back with the remark as left and assessee failed to produce these parties. During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque. It was also argued that the AO has not doubted the consumption of goods /sales and it is not possible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties. In such a situation, it is logical to conclude that the assessee has taken bogus bills and the inflation of purchase and the extent of inflation has to be estimated based on facts of this case. 5.9 In view of above it is held that the appellant has failed to establish that the goods were purchased from the parties which had issued the bills. Natural inference is that either it was purchased from different source or the same were out of suppressed stock of past period because sales are not in dispute. Since the said source is not known, the extent of inflation of purchase cannot be ascertained. It will be 100% if the sale is made out of own suppressed stock of past period or it will be the difference of billed amount and actual pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchased material from grey market at a lower price. For that the CIT(A) has restricted the addition made by the AO of unproved purchases by estimating and applying the profit rate @ 12.5% as against addition made by the AO of 100% of the bogus purchases. According to us, the profit rate applied by CIT(A) at 12.5% is quite reasonable and accordingly a reasonable profit rate is estimated. We find that the in the decision of the Hon ble Gujarat High Court in the case of CIT vs. Smith P Seth 365 ITR 451(Guj), wherein the profit rate is estimated at 12.5%. We find that the CIT(A) has rightly restricted the profit rate on unverified purchases and we are of the view that he has rightly estimated the profit. We find no infirmity in the order of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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