MRS. BHARTI RAVILAL VORA ,MUMBAI vs. ACIT, CIRCLE 27(1), MUMBAI

The grounds of appeal are as under: ITA 5793/MUM/2025 (2009-10)

The assessee, an individual engaged in the business of supply of TMT bar on wholesale basis as Proprietor of M/s Universal Impex, Mumbai, filed return of income declaring an income of Rs.1,42,400/-.

We take up ground no.3 first which relates to the merits of the addition. The return of income was initially processed u/s. 143(1) of the Act and subsequently, the same was reopened on the ground that the Department had received information from the Maharashtra Sales Tax Department that the assessee was involved in Hawala transactions and had made purchases worth Rs. 86,24,497/- from Hawala dealers during the relevant year. Accordingly, notice u/s 148 of the Act was issued and the assessment was completed order u/s.143(3) r.w.s. 147 of the Act determining the income at Rs.87,66,900/- by making an addition of an amount of Rs.86,24,497/- being disallowance out of purchase. In the appeal, the ld.CIT(A) partly allowed the appeal by declaring the assessment order as invalid and void. Subsequently, once again the assessment was reopened on the very same ground that the assessee is a beneficiary of Hawala billings by issuing 2nd notice u/s. 148 dated 11.03.2016 and the assessment was completed U/s. 143(3) r.w.s. 147 of the Act determining the income at Rs.87,66,900/- by making the same addition of Rs.86,24,497/- as disallowance out of purchase expenses.

Aggrieved by the assessment order, the assessee filed further appeal before the ld.CIT(A) contesting the addition both on legal ground

1 He further noted that as per action taken by the VAT Department, Mumbai, these parties, M/S. Dhruv Sales Corporation, M/S. Navdeep Sales Corporation, M/S. Subh Laxmi Sale Corp., M/S. Naman Enterprises & M/S.Om Corporation had been declared as hawala billers amongst other Hawala billers who admitted that they issued bogus bills of sales as per the requirement of the different parties, received payment from them by account payee cheques by operating different bank accounts and returned the amount to the bill receiver party who had taken benefit as a bogus purchase expenses. They further admitted having received commission from such parties for issuing bogus sales bills. Thus, the purchases made from these Hawala billers were non-genuine and fictitious and with a view to taking benefit as purchase expenses to reduce profit and avoid the tax liability thereby. It was observed by the ld.CIT(A) that in the instant case, the purchases themselves were bogus as the assessee had not established that the goods purchased had been received. Further, she had also not proved that the goods purchased from these parties were sold to his customers.

Before us, the ld.AR has vehemently agitated the addition claiming that all relevant evidences were duly furnished to the authorities below but were considered in the right perspective.In a written submission made along with oral arguments, it was submitted that the assessee purchased the goods from the market as per requirement of the customers. The goods were, thereafter, transported directly to the place of the customer by the party from whom the goods were purchased. The goods did not come to the place of business of the assessee. The AO admitted the fact that the assessee produced copies of purchase bills from five parties, their confirmations of purchases from five parties, confirmation of the corresponding sale, payments of purchases made by account payee cheques and delivery challans for sale. The AO conveniently overlooked to mention that the assessee also furnished the copies of delivery challans from the parties to whom the goods were sold. Since, the materials were directly dispatched to the site of the customers, it was the delivery challans issued by the customers

1 It was further pleaded that despite having produced the above documentary evidences being in existence to establish that the purchases are genuine, the AO did not consider the above evidences sufficient to prove the genuineness of the purchases without giving any reasoning with positive and material findings and in consequence, which showed that he was pre-determined to add it as income of the assessee. The AO fully relies on the so-called declarations/affidavits of the above mentioned five parties stating that they had issued bogus sales bills. However, he has not made any independent enquiry about the truthfulness of their confession. Further, he failed to give the copy of P a g e | 9 Mrs. Bharti Ravilal Vora such declarations/affidavits to the appellant even though the same was requested for vide letter dated 17.01.2014.He did not issue summons these five parties for cross examination even though it was so requested.

2 It is also stated that sales of Rs. 1,77,59,051/- were disclosed in the Trading, Profit and Loss account and in the Income Tax Return as well. It is only by reason of AO‟s action to cancel the value of purchases from the five parties from the purchase account and not cancelling corresponding sale simultaneously from the sale account, the Gross Profit ratio had resulted into unrealistic and exorbitant gross profit ratio at 49.80% and the Net Profit ratio at 49.35% for which the AO had not been able to substantiate this position of gross profit result by leading any instance to prove that in the market, other dealers have earned the income in range of 49.80% Gross Profit ratio and 49.35% Net profit ratio from the similar trade as that of the appellant. In fact, in the case of. assessee, the Gross Profit result at 1.23% on the purchases which are considered as genuine for the year in appeal had been accepted as fair and reasonable, which means the gross profit at 49.80% on purchases from five parties can not by any stretch of imagination be considered is legally justifiable. The assessee submitted the reconciliation of purchases

We have carefully considered al relevant facts of the case and also perused the records. The ld.AR has submitted a Paper Book containing 182 pages incorporating inter alia copies of respective confirmations of the parties who supplied the goods, copies of confirmation of parties to whom goods were sold, copies of stock register, copies of bank statement, statement of goods purchased with quantity, copies of purchase bills, sales bills and delivery challans, PAN of suppliers, copy of Sales Tax (VAT) order, copies of audited accounts for the year etc. It is also noticed that the invoices submitted reflect specific vehicle numbers. It is undisputed that sales were accepted a such without any doubt. The AO did not make any adverse comments on the above evidences submitted. No independent enquiry has also been made to examine the said parties, rather than depending fully on the report of the Sales Tax authorities. It appears also the delivery challans and vehicle numbers have been ignored completely as well. Quantitative tally, stock register etc. were also not adversely commented upon by the both the lower authorities. Invoices, sales bills copies cannot be rejected

1 The ld.CIT(A) have heavily relied upon the decision in the case of Kanak Impex India P.Ltd (2025) 474 ITR 175(Bom) which to our mind is distinguishable as the assessee in this case, had placed on record all material evidences to support it contention regarding genuineness of purchases. The parties concerned have duly confirmed the transactions which have been rejected on the ground that the delivery challans were not produced thought the facts emanating from the details submitted before us which were also furnished before the lower authorities, belie such observation. In the cited decision, the assessee could not even explain the source of expenditure which is not the case here.

Considering the entirety of the facts and the circumstances of the case, we find no merit in the orders of the lower authorities and set aside the same. The AO is directed to delete the impugned addition. The ground no.3 is therefore, allowed.

The other ground nos. 1 and 2 challenging the validity of reassessment proceedings are rendered inconsequential as the P a g e | 13 Mrs. Bharti Ravilal Vora impugned addition stands deleted in toto. Therefore, we find no reason to adjudicate the same.

In the result, appeal of the assessee stands allowed.

ITA 5794/MUM/2025(2010-11)

The assessee filed return of income declaring an income of Rs.4,34,680/-. The return of income was initially processed u/s. 143(1) of the act and subsequently, the same was reopened on the ground that the Department has received information from the Maharashtra Sales Tax Department that the assessee was involved in Hawala transactions and had made purchases worth Rs.61,71,030/- from Hawala dealers during the F.Y. 2009-10 relevant to A.Y. 2010-11.The re-opening notice was issued u/s. 148 of the Act and finally the assessment was completed u/s.143(3) r.w.s. 147 of the act dated 14/03/2014 determining the P a g e | 14 Mrs. Bharti Ravilal Vora income at Rs.66,05,710/- by making an addition of an amount of Rs.61,71,030/- as “Disallowance out of Purchases Expenses”. The assessment order dated 14/03/2014 passed U/s. 143(3) r.w.s. 147 was appealed against to the ld. C.I.T.(A), who in turn, partly allowed the appeal by declaring the assessment order as invalid and void. Subsequently, once again the assessment was reopened on the very same ground that the assessee is a beneficiary of Hawala billings. This was done by issuing 2nd notice u/s. 148 dated 27/06/2016 and the assessment was completed by passing an u/s 143(3) r.w.s. 147 of the act determining the income at Rs.66,05,710/- by making the same addition of Rs.61,71,030/- as “disallowance out of purchase expenses”. The assessment order dated 05/12/2016 passed u/s. 143(3) r.w.s. 147 of the act was appealed against to the ld.CIT(A) who in turn, dismissed the appeal which is the subject matter for adjudication before us.

The issues in hand in the instant appeal are squarely covered by our decision rendered in the appeal for AY 2009-10 in para 9 (supra) which applies mutatis mutandis to the facts of the case as well. Accordingly, the appeal stands allowed.