ITAT Pune overturns CIT(A) order on hawala purchases, remits for re-computation The appeal before the ITAT Pune arose from an order by the CIT(A)-2, Aurangabad regarding the confirmation of addition on account of hawala purchases for ...
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ITAT Pune overturns CIT(A) order on hawala purchases, remits for re-computation
The appeal before the ITAT Pune arose from an order by the CIT(A)-2, Aurangabad regarding the confirmation of addition on account of hawala purchases for the assessment year 2010-11. The Tribunal, following the Bombay High Court's ruling in a similar case, set aside the decision and remitted the matter back to the AO. The AO was instructed to recompute any addition based on the difference between the gross profit rate on genuine purchases and hawala purchases, allowing the assessee a fair opportunity to present their case. The appeal was allowed for statistical purposes.
Issues: Confirmation of addition on account of hawala purchases.
Analysis: The appeal before the Appellate Tribunal ITAT Pune arose from an order by the CIT(A)-2, Aurangabad for the assessment year 2010-11. The sole issue raised in the appeal pertained to the confirmation of addition on account of hawala purchases. The assessee had recorded purchases from a hawala dealer amounting to Rs. 76,20,165. Upon being asked to substantiate the genuineness of the transaction, the assessee provided certain details. The Assessing Officer (AO) acknowledged the quantity received from these hawala purchases but added Rs. 8,46,685 @12.5% for excess purchase price due to hawala transactions. The CIT(A) reduced this addition to 10%, leading the assessee to appeal before the Tribunal.
During the hearing, the Tribunal considered the issue of bogus purchases in light of a recent judgment by the Hon'ble Bombay High Court in Pr.CIT Vs. Mohommad Haji Adam & Co. The High Court ruled that no ad hoc addition of 10% of bogus purchases should be made. Instead, the addition should reflect the difference between the gross profit rate on genuine purchases and the gross profit rate of hawala purchases. As the necessary details for calculating these rates were not readily available to the ld. AR, the Tribunal set aside the impugned decision and remitted the matter back to the AO. The AO was directed to apply the High Court's ruling and recompute any addition after providing a reasonable opportunity for the assessee to present their case.
Ultimately, the appeal was allowed for statistical purposes, and the order was pronounced in the Open Court on 30th April 2019.
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