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2021 (9) TMI 1555 - AT - Income TaxEstimation of income - Bogus purchases - HELD THAT - CIT(A) has confirmed the order of AO by rejecting the evidences filed by the assessee in the form of bills, vouchers, bank statements, corresponding sales and stock register showing the movement of stock. CIT(A) instead harped on the finding of the AO that assessee has not responded to various notices issued by the AO and thus dismissed the appeal. AR argued before us that the assessee could not appear before the AO because the notices were not served upon the assessee. We find merit in the arguments of AR that in view of the nature of trade of trading in ferrous and non ferrous metals and GP rate during the year of 3.76%, a reasonable view may be taken. We are of the considered view that the it would reasonable if a profit rate of 4% is applied on the bogus purchases. Accordingly we set aside the order of CIT(A) and direct the AO to apply a rate of 4%. Appeal of the assessee is partly allowed.
Issues: Appeal against addition of bogus purchases by AO and confirmation by CIT(A) for assessment year 2009-10.
Analysis: 1. Background: The assessee filed a return declaring income, which was later reopened by the AO due to information about hawala purchase entries. The AO treated purchases as non-genuine, adding Rs.94,04,277 to the income. 2. AO's Decision: The AO framed an ex-parte assessment, adding 100% of the bogus purchases to the income. The CIT(A) upheld this decision, rejecting the evidences provided by the assessee, emphasizing non-response to notices. 3. Appellate Tribunal's Decision: After hearing arguments, the Tribunal found merit in the assessee's claim that notices were not served. Considering the trade nature and GP rate, a profit rate of 4% was deemed reasonable based on facts, arguments, and precedents from similar cases. 4. Conclusion: The Tribunal partly allowed the appeal, setting aside the CIT(A)'s order and directing the AO to apply a 4% profit rate on the bogus purchases, differing from the initial 100% addition. The decision was pronounced in the open court on 17.09.2021.
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