Tribunal confirms 8% addition on alleged bogus purchases, rejecting appeal against 100% addition.

The Tribunal upheld the CIT(A)'s decision to confirm 8% of alleged bogus purchases, rejecting the appeal against the 100% addition made by the AO. The judgment highlighted the necessity of making a percentage addition to income in cases involving purchases from hawala dealers, considering savings from buying goods from the grey market. The Tribunal found the CIT(A)'s decision reasonable, leading to the dismissal of the appeal and affirming the 8% addition.

---

---

Issues:
Confirmation of 8% of alleged bogus purchases against 100% addition made by AO

Analysis:
The appeal was filed against the order of the CIT(A)-44, Mumbai for the assessment year 2011-12. The primary issue raised in this appeal was regarding the confirmation of Rs. 3,20,060 (8% of alleged bogus purchases) as opposed to the 100% addition of Rs. 40,00,753 made by the Assessing Officer (AO). The assessee, engaged in the business of builder and developer, provided a list of parties from whom purchases were made during the assessment proceedings. The AO issued a notice under Section 133(6) of the Income Tax Act, 1961 to these parties, but the notice sent to M/s. Global Trade Impex was returned unserved. Subsequently, it was discovered that this party was listed as a hawala dealer by the Sales Tax Department, Govt of Maharashtra. Despite the assessee's detailed submission, the AO added the entire amount of purchases from this party to the assessee's income, treating them as bogus. The CIT(A) partially allowed the appeal by sustaining the addition of 8% of the total bogus purchase amount, citing a decision of the Hon'ble Gujarat High Court. Dissatisfied with this decision, the assessee appealed to the Tribunal.

Upon hearing the submissions and examining the evidence, it was established that the assessee had availed bogus purchase bills amounting to Rs. 40,00,753 from M/s. Global Trade Impex, a party listed as a hawala dealer. The AO disallowed 100% of these purchases, which was reduced to 8% by the CIT(A) based on the acceptance of sales by the AO. The Tribunal noted that in cases involving purchases from hawala dealers, some percentage addition can be made to account for savings made by purchasing goods from the grey market. The CIT(A)'s decision to assess the income at 8% of the bogus purchases was deemed reasonable and well-founded by the Tribunal. Consequently, the appeal filed by the assessee was dismissed, upholding the CIT(A)'s order.

In conclusion, the Tribunal upheld the CIT(A)'s decision to confirm 8% of the alleged bogus purchases, rejecting the assessee's appeal against the 100% addition made by the AO. The judgment emphasized the need to account for savings from purchasing goods from hawala dealers by making a percentage addition to the income, as determined based on the GP ratio declared by the assessee.

---