Tribunal limits bogus purchase addition to 7.5% following hawala entries, upholding CIT(A) decision. The Tribunal upheld the CIT(A)'s decision to restrict the net addition on account of bogus purchases to 7.5% of total purchases, dismissing the appeal ...
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Tribunal limits bogus purchase addition to 7.5% following hawala entries, upholding CIT(A) decision.
The Tribunal upheld the CIT(A)'s decision to restrict the net addition on account of bogus purchases to 7.5% of total purchases, dismissing the appeal filed by the assessee. The Tribunal found that the assessee availed hawala entries and followed precedent in limiting the addition. The decision was pronounced on 7th Dec, 2017.
Issues: Challenge to restriction of net addition on account of bogus purchases to 7.5% of total purchases.
Analysis: 1. The appeal was filed by the assessee challenging the order passed by the ld.CIT(A)-30, Mumbai regarding the restriction of net addition to 7.50% of purchases from unproven parties. Neither the assessee nor its representative appeared before the Tribunal, leading to an ex-parte disposal of the appeal after hearing the ld. DR.
2. The main issue raised by the revenue was against the limitation of addition concerning bogus purchases to 7.5% of the alleged total purchases that were not proven genuine.
3. The facts of the case revealed that the assessee declared income of Rs. 28,38,950/- and was engaged in the business of ferrous and non-ferrous metals. The AO issued notices to parties from whom purchases were made, but one party was identified as a hawala dealer. The AO added Rs. 51,49,820/- to the total income under section 69C due to undisclosed cash used in such purchases. The ld.AR contended that payments were made through banking channels, and books were duly audited, but the AO did not accept the explanation.
4. The CIT(A) partly allowed the appeal, sustaining the addition at 7.5% of the total bogus purchases. The Tribunal found that the assessee availed hawala entries, and while restricting the addition to 7.5%, the CIT(A) followed precedent. The Tribunal noted that consistent views were taken by co-ordinate benches that some percentage addition should be made towards savings from purchasing material from the gray market. Therefore, the Tribunal affirmed the CIT(A)'s decision, dismissing the appeal.
5. The Tribunal dismissed the appeal of the assessee, upholding the CIT(A)'s order. The decision was pronounced on 7th Dec, 2017.
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