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TMI Blog2020 (8) TMI 302X X X X Extracts X X X X X X X X Extracts X X X X ..... he only issue in this appeal of Revenue is against the order of CIT(A) restricting the addition made by the Assessing Officer by applying the profit rate at 12.5% of the bogus purchase. For this Revenue has raised following ground: - "1. Whether on the facts and in the circumstances of the case and in law, the Learned CIT(A) has erred in directing the A.O. to restrict the addition of bogus purchases to 12.5% as against 100% addition made by the A.O., relying on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Seth, 356 ITR 451? 3. Briefly stated facts are that the assessee engaged in the business of development of real estate properties. The AO received information from DGIT (Investigation), who in turn received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) by observing as under: - "8.1 Ground No. 1 of the appeal are against addition of Rs, 10,14,743/- as bogus purchases. As per the investigations carried out by the Sales Tax Authorities, the aforementioned party was found to be involved in giving accommodation entries only without actually supplying the goods. The logical inference is that the purchases made by the appellant would also be in the nature of accommodation entries only. To verify the same, the AO had made enquiries by issuing notices u/s 133(6) which were returned unserved by the postal authorities. This party was found to be non-existent at the address given by the appellant. The appellant also failed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing made from the impugned parties to suppress its profits. In such a situation, the various Courts including the Hon'ble Gujarat High Court in the case of CIT vs Simit P. Sheth, 356 ITR 451 have held that not the entire purchases but only the profit element embedded in these purchases was to be disallowed and accordingly held that 12.5% of the purchases will be reasonable as profit on margin against the bogus purchases. In view of this decision of Hon'ble Gujarat High Court (supra), the addition made by the AO is restricted to 12.5% of the total alleged bogus purchases amounting to Rs.10,14,743/- which should sufficiently cover the profit element embedded in the impugned purchases. The appellant's grounds of appeal are 'Partly allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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