M/S PRAJ ENGINEERS,NASHIK vs. INCOME TAX OFFICER, WARD-2(2), NASHIK, NASHIK

This appeal by the assessee arises out of the order dated 02-05-2023 passed by the CIT(A) in National Faceless Appeal Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also called ‘the Act’) in relation to the assessment year 2011-12.

This appeal is time barred by about 44 days. The assessee has filed an affidavit stating the reasons which led to the late filing of the appeal. The ld. DR did not seriously object to the delay. Therefore, the delay is condoned and the instant appeal is admitted for disposal on merits.

There is no appearance from the side of assessee despite notice.

The only issue involved in this appeal is against the confirmation of addition of Rs.3,51,088/- made by the Assessing Officer (AO) on account of bogus purchases.

Briefly stated, the facts of the case are that the assessee is engaged in the business of metal photo and all types of lable manufacturing. The AO, on verification of information received from the Maharashtra Sales Tax Department, observed that the assessee was one of the beneficiaries of Hawala purchases. He observed that the assessee made unsubstantiated purchases amounting to Rs.3,51,088/- from M/s. Dinesh Industrial Corporation, Mumbai, which were in the nature of accommodation entries. The assessee was called upon to prove the genuineness of the recorded purchases. The assessee submitted certain details. Notice u/s.133(6) was also issued to M/s. Dinesh Industrial Corporation, Mumbai (seller party) who had provided accommodation entries. However, it was returned by postal authority with remarks “Not known”. The AO has recorded in his order that the assessee expressed his inability to produce the above said party. This led the AO to make the addition equal to the amount of Hawala purchases, which got echoed in the first appeal. Aggrieved thereby, the assessee has approached the Tribunal.

Having heard the ld. DR and gone through the relevant material available on record, it is observed that the assessee allegedly purchased aluminum sheets from M/s. Dinesh Industrial Corporation and thereafter utilized the same in the manufacture of the finished goods. In such a situation, the entire amount of purchase bill does not requires addition, but only the profit element because the aluminum sheets must have been actually purchased albeit at lower prices in lieu of which hawala bills were recorded, which were used in producing the finished goods. The Hon’ble jurisdictional High Court in Pr.CIT Vs. Paramshakti Distributors Pvt. Ltd., vide its judgment dated 15.07.2019 in has sustained the addition @ 10% of the amount of purchases, being, the profit element involved therein. Respectfully following the precedent, I deem it appropriate to restrict the addition to 10% of the amount of purchases. It is ordered accordingly.