Tribunal Validates Assessment Re-Opening for Hawala Transactions, Reduces Disallowance Percentage

The Tribunal upheld the validity of re-opening the assessment under section 147 of the Income Tax Act based on hawala transactions involving certain parties. The Tribunal partially allowed the appeal by reducing the disallowance percentage on disputed purchases from Daksh Diamonds from 25% to 6%, considering the business nature of the assessee and the potential for revenue leakage.

---

---

Issues:
1. Validity of re-opening assessment under section 147 of the Income Tax Act.
2. Addition of 25% on account of disputed/bogus purchases from Daksh Diamonds.

Issue 1: Validity of re-opening assessment under section 147 of the Income Tax Act:
The appeal challenged the order of the ld. National Faceless Appeal Centre (NFAC)/Ld.CIT(A) dated 19.08.2021 for AY 2012-13, which arose from the assessment order passed by the Assessing Officer under section 143(3) r.w.s. 147 of the Income Tax Act, 1961. The case was reopened based on information received regarding hawala transactions involving Shri Bhanwarlal Jain & Others. The Assessing Officer had reasonable suspicion that income had escaped assessment due to the assessee's involvement in bogus purchases from Daksh Diamonds, managed by Shri Bhanwarlal Jain. The Hon'ble jurisdictional High Court precedent supported the re-opening based on similar facts. The Tribunal dismissed the appeal challenging the validity of re-opening, citing the binding decision of the High Court.

Issue 2: Addition of 25% on account of disputed/bogus purchases from Daksh Diamonds:
The Assessing Officer disallowed 25% of the purchases made from Daksh Diamonds based on information from the investigation wing. The ld. CIT(A) upheld this disallowance, considering the alleged bogus nature of the purchases. The assessee contended that the purchases were genuine, supported by complete evidence such as bills, invoices, and payment records. The Tribunal found the disallowance excessive and directed a reduction to 6% of the purchases, considering the business nature of the assessee and the possibility of revenue leakage. The Tribunal partly allowed the appeal, reducing the disallowance percentage.

In conclusion, the Tribunal upheld the re-opening of assessment under section 147 and partially allowed the appeal by reducing the disallowance percentage on disputed purchases from Daksh Diamonds.

---