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TMI Blog2021 (7) TMI 1471X X X X Extracts X X X X X X X X Extracts X X X X ..... nd GP rate declared is reduced, then it comes to less than 2%.
Thus, it would be reasonable if a rate of 2% is applied on the bogus purchases. Accordingly we modify the order of Ld. CIT(A) and direct the AO to apply a rate of 2% of the bogus purchases. X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases. 4. The Ld. CIT(A) partly allowed the appeal of the assessee by directing the AO to make the addition @ 12.5% by relying on the decision of Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj). 5. Now the assessee is again in appeal before us challenging the said part confirmation of the addition. 6. After hearing both the parties and perusing the material on record, we observe that the assessee is a wholesale dealer and supplier of various type of paper. The Ld. A.R. submitted before us that the profit margin on these items is very meager and therefore the application of 12.5% on the bogus purchases is unfair and impractical as it was lead to unrealistic higher profit of the assessee. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e returned during the year was 1.44% whereas the GP was 6.25%. Considering all these facts of the case, we are not in agreement with the conclusion of Ld. CIT(A) on the application of GP rate of 12.5% as the assessee has already returned a GP of 6.25% since the applicable VAT is 4% and if a reasonable margin 2% is added to the VAT rate and GP rate declared is reduced, then it comes to less than 2%. Under these circumstances, we are of the view that it would be reasonable if a rate of 2% is applied on the bogus purchases. Accordingly we modify the order of Ld. CIT(A) and direct the AO to apply a rate of 2% of the bogus purchases. 9. Accordingly, the appeal of the assessee is partly allowed. ITA No. 2303/M/2016 & ITA No. 1601/M/2018 10. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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