M/S ARIHANT CORPORATION,THANE vs. SHRI MUKESH PRAKASH, THANE

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ITA 5305/MUM/2026Status: DisposedITAT Mumbai29 July 2026AY 2009-104 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the entire amount of disputed purchases could not be added, and only the profit element embedded therein was taxable. Following a co-ordinate bench decision, the addition was restricted to 10% of the disputed purchases.

What were the facts?

The assessee, a partnership firm, declared a total income of Rs. 5,44,590/-. The Assessing Officer, however, completed the assessment under section 144 read with section 147, determining the total income at Rs. 23,44,440/-, including an addition of Rs. 16,02,235/- for purchases from alleged hawala dealers.

What were the issues?

Whether the entire amount of purchases from alleged hawala dealers should be added to the income, or only the profit element embedded therein.

Which sections of the Income-tax Act were involved?

Section 144,Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “J(SMC

Before: SHRI NARENDER KUMAR CHOUDHRY & SHRI JAGADISH

For Appellant: Shri Mohit Kishinchandani (Virtually present)
For Respondent: Ms. Jayshree Thakur (SR. DR)
Hearing: 24.07.2026Pronounced: 29.07.2026

Per: SHRI JAGADISH, A.M.:

1.

This appeal by the assessee is directed against the order dated 27.07.2020 passed by the learned Commissioner of Income Tax (Appeals), Thane [hereinafter referred to as “the learned CIT(A)”], for A.Y. 2009-10, arising out of the assessment order passed under section 144 read with section 147 of the Income-tax Act, 1961 [hereinafter referred to as “the Act”].

ITA No.5305/M/2026 M/s Arihant Corporation 2. Briefly stated, the assessee is a partnership firm engaged in the business of manufacturing and trading in engineering goods. It filed its return of income for A.Y. 2009-10 on 17.09.2009, declaring total income of Rs.5,44,590/-. The Assessing Officer completed the assessment under section 144 read with section 147 of the Act, determining the total income at Rs.23,44,440/-. The assessment included an addition of Rs.16,02,235/- in respect of purchases made from parties stated to be hawala dealers. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A).

3.

The learned CIT(A) confirmed the addition. The assessee is, therefore, in appeal before the Tribunal.

4.

The learned Authorised Representative (AR), at the outset, submitted that an identical issue had been considered by the Co-ordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2011-12 in ITA No.4407/Mum/2018, vide order dated 24.07.2019. In that year, the Tribunal restricted the addition to 10% of the disputed purchases. He accordingly prayed that the same view be followed for the year under consideration.

5.

The learned Departmental Representative (DR), on the other hand, relied upon the orders of the lower authorities.

6.

We have heard the rival submissions and perused the material available on record. We find that the issue is covered by the decision of the Co-ordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2011-12 in ITA No.4407/Mum/2018, order dated 24.07.2019.

7.

On materially similar facts, the Tribunal held that the entire amount of the disputed purchases could not be added and that only the profit element embedded therein was liable to be brought to tax. The relevant paragraph of the order is reproduced below: 2

ITA No.5305/M/2026 M/s Arihant Corporation “5. I have considered the issue and gone through the facts and circumstances of the case. I find from the facts of the case and argument of both the sides. The CIT(A) has confirmed the action made by the AO by applying whole amount of bogus purchases to the return of income of the assessee. I noted from the facts of the case that the Revenue has not disputed that the assessee has not carried out any sales out of the bogus purchases made by assessee from grey market. Hence, I am of the view that only a reasonable profit can be estimated. Going by the nature of the business and fact that the assessee’s profit rate has already been included in the sales made out of bogus purchases, the profit rate at the rate of 10% can be estimated of the bogus purchases. Hence, I direct the AO to re- compute the income after applying profit rate at the rate of 10% of the bogus purchases and compute the income accordingly. The issue of assessee’s appeal is partly allowed.”

8.

The Revenue has not brought on record any distinguishing feature for the year under consideration. Consistent with the decision of the Co- ordinate Bench in the assessee’s own case, we direct the Assessing Officer to restrict the addition to 10% of the disputed purchases of Rs.16,02,235/- and delete the balance addition. The grounds raised by the assessee are accordingly partly allowed.

9.

In the result, the appeal of the assessee is partly allowed.

Order pronounced in the open court on 29/07/2026.

Sd/- Sd/- (NARENDER KUMAR CHOUDHRY) (JAGADISH) Judicial Member Accountant Member

Mumbai, Dated: 29/07/2026 Ashwani Rao Sr. Private Secretary 3

ITA No.5305/M/2026 M/s Arihant Corporation

Copy of the order forwarded to: 1. Appellant 2. Respondent 3. The CIT 4. The CIT (Appeals) 5. The DR, I.T.A.T. By order

(Assistant Registrar) ITAT, Mumbai

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