TaxTMI 
TaxTMI 
2020 (1) TMI 992
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....d be made on entire purchases and not on profit element embedded in such purchases. (ii) On the facts and circumstances of case and in law, the Ld. CIT(A) erred in estimating the profit from Hawala purchases by disallowing only Rs. 24,672/- being 12.5% of the bogus purchases as even the basic onus of producing delivery challans, transport bills etc. were not fulfilled by the assessee. (iii) The appellant prays that the order of the CJT(A) on the above grounds be reversed and that of the Assessing Officer be restored. (iv) The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." 3. The brief facts of the case are that the assessee filed his return of income on 29.09.2009 declaring total income to the tune at Rs. 30,73,760/-. The return was processed u/s 143(1) of the I.T. Act, 1961. Thereafter, the case of the assessee was reopened after recording the reasons and according notice u/s 148 of the Act dated 13.03.2014 was issued and served upon the assessee. In pursuance of the notice, the assessee filed the return of income which he had already filed. Thereafter, notices u/s 143(2) & 142(1) of the Act were i....
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.... The AO, in his aforesaid assessment order has further mentioned that the Sales Tax Department had conducted independent inquiries in the case of each hawala operator, including in the case of above stated hawala operator and it was conclusively proved that these parties/operators were engaged in the business of providing accommodation entries only. These parties mostly indulged in following activities: a) issuing only bills and doing non-genuine business (Hawala Business); b) not maintaining stock and not keeping stock Register c) not effecting any purchase; and d) there was no transaction of goods. e) entries were being provided by the parties for commission." 5.1.3 During the course of re-assessment proceedings, in order to ascertain the genuineness of purchases made by the assessee, the AO conducted independent inquiries by issuing notice u/s. 133(6) of the Act dated 08.10.2014 to the parties which were returned unserved by the postal authorities. Thereafter, the AO brought this fact to the notice of the assessee during the course of assessment proceedings and the assessee was asked to produce the parties and also show cause....
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....n the information of the Sales Tax Department. The AO disallowed Rs. 87,464/- u/s. 69C on ground of peak of the credit standing in names of above parties as unexplained expenditure. The details of purchases from the party along with the ledger account, copy of purchase bills, delivery challans and copy of bank statement evidencing payment through the banking channels were submitted in the course of assessment proceedings. The A.R. of the assessee also submitted that material purchased has been sold/consumed. However, the assessee could not produce the suppliers and transport bills. The appellant has further contended that no copy of documents received by the AO on the basis of which he has made the additions have been furnished to the appellant company. Nothing has been brought on record by the AO to suggest that the payments made to purchase party were received back in cash by the appellant company. The appellant has relied on various case laws as mentioned in his aforesaid submissions. 5.3 Having considered the assessment order of the AO and the submissions of the assessee, it is seen that the main plank of assessee's arguments regarding the genuineness of the purcha....
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....es/turnover, there must be some corresponding purchases, whether effected from the alleged entry providers or from the grey market without bills. Thus, there ought to be some purchases made and hence, entire disallowance is not justified. In this regard, the ratio laid down by the Hon'ble Bombay High Court in the case of CIT v. NikunjEximp Enterprises (P.) Ltd., is quite relevant wherein Hon'ble High Court has held that - "When the assessee have filed letter of confirmations of the suppliers, Bank statements highlighting the payment entries through account payee cheque, copies of invoices, stock reconciliation statements before the AO; and merely because the suppliers did not appear before the AO, one cannot conclude that the purchase were not made by the assessee. The AO cannot disallow the purchases on the basis of suspicion because the suppliers were not produced before them." 5.4 In view of the discussion as above, it is clear that materials purchased and sold by the appellant cannot be doubted though it is not possible for the assessee to establish one to one nexus/link between purchases and sales. However, the fact of the matter remains that....
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....ed therein was to ascertain whether the purchases themselves were completely bogus and non existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. In the present case, CIT believed that when as a trader in steel the assessee sold certain quantity of steel, he would have purchased the same quantity from some source. When the total sale is accepted by the Assessing Officer, he could not have questioned the very basis of the purchases. In essence therefore, the Commissioner (Appeals) believed assessee theory that the purchases were not bogus but were made from the parties other than those mentioned in the books of accounts. That being the position profit element embedded in such purchases can be added to the income of the assessee. So much is clear by decision of this Court. In particular, Court has also taken a similar view in case of Commissioner of Income Tax-IV vs. Vijay M Mistry Construction Ltd. vide order dated 10.01.2011 passed in tax Appeal No. 1090 of 2009 and in case of Commissioner of Income Tax-I vs. Bholanath....
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....O & Anr., in ITA. No.4736/M/2014, 5207/M/2014 dated 14.12.2016 (iii) ITO & Anr. Vs. Manish Kanji Patel & anr. In ITA. No7299/M/2014, 7154/M/2012 & 7300/M/2014, 7627/M/2014 dated 18.05.2017 (iv) Metroplitan Eximchem Ltd. ITA. No.2935/M/2015, dated 29.03.2017 v) Ronak Metal Industries vs. ITO, ITA No. 722/Mum.2o17 dtd. 04.09.2017; vi) ITO vs. Jugraj R. Jain, ITA No. 2571 /Mum/2o16 & 257211VI12o16 dtd. 02.08 .2017; vii) B. J. Exports vs. Asstt. commissioner of Income tax, ITA No. 5442 & 5444/Mum/2016 dated 13.09.2017; viii) Batliboi Environmental Engineering Ltd. vs. Deputy commissioner of Income-tax, ITA No. 2840 & 3482/M/2015 dated 15.03.2017; ix) Deputy commissioner of Income-tax & Anr. Vs. Remi Process Plant & Machinery Ltd. & Anr., HA No. 1723/M/2o15, 1817/M/2015 dated 21.03.2017. X) Smt. Usha B. Agarwal Vs. ITO, ITA No. 70341Mum12016, dated 01.09.2017. 6. In view of the above discussed factual matric and precedents, I am of the view that estimation of 12.5% as profit embedded in impugned purchases shown from the alleged hawala party and adding the same to the total income returned, would meet the en....