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Facts
The assessee challenged an order upholding an addition of Rs. 74,61,350, representing 25% of purchases from alleged hawala parties. The Revenue's information indicated the assessee inflated purchases through fictitious invoices. The assessee failed to provide documentary evidence for refunds or prove the genuineness of transactions with parties whose TIN status was cancelled and who admitted to providing accommodation entries.
Held
The Tribunal held that the assessee's purchases from the listed parties were bogus. The assessee failed to discharge their burden of proof by providing documentary evidence for refunds and the genuineness of the transactions. The AO rightly rejected the books of account under Section 145(3) of the Act.
Key Issues
Whether the purchases from the alleged hawala parties were genuine, and if the AO was justified in making additions for non-genuine purchases.
Sections Cited
147, 143(3), 145(3), 250
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Income Tax Appellate Tribunal, “SMC” BENCH MUMBAI
Before: HON’BLE SHRI SANDEEP GOSAIN
Date of Hearing 06.05.2025 Date of Pronouncement 28.05.2025 आदेश / ORDER
PER SANDEEP GOSAIN, JM:
The present appeal has been filed by the assessee challenging the impugned order dt. 10.10.2024 passed u/s 250 of the Income Tax Act, 1961 (‘the Act’), by the National Faceless Appeal Centre, Delhi / CIT(A), for the A.Y 2010- 11.
Ground No.1, this ground raised by the assessee relates to challenging the order of Ld. CIT(A) in upholding the addition made by AO of Rs. 74,61,350 i.e 25% of the total purchases on account of fictitious invoices booked. As per the facts of the present case, on the basis of information received from O/o the DGIT (Inv), Mumbai that the assessee was engaged into the practice of inflating the purchases through hawala parties. Therefore the case was reopened. However, during the reassessment it was noticed that the assessee had entered into hawala transactions with the following parties.
S.No Name of the Hawala TIN Transaction Amount Trader/Bogus Biller 66,42,112 1 VM Udyog 27820645517V 2 Shradhha Trading Co. 27460624763V 64,03,338 3 Somnath International 27470616755V 69,47,423 4 SB Metal Corp 27780306524V 98,52,477 Total 2,98,45,400 3. The AO after carrying out necessary investigation / verification passed order of assessment u/s 143(3) r.w.s 147 of the Act thereby making additions being 25% of the non-genuine purchases.
Ld. AR stressed on the point that assessee had already placed on record all the relevant and necessary documents and had discharged its burden and also submitted table indicating gross profit / net profit percentage of last two years which is reproduced below:
2009-10 2010-11 Turnover 15,11,05,803 20,45,69,330 Gross Profit 69,35,931 1,21,19,645 Net Profit 13,88,594 26,03,121 Gross Profit 4.59% 5.92% Net Profit .92% 1.27
Ld. AR requested to make addition on the basis of net profit percentage instead of GP percentage for the year under consideration.
Whereas from the records, I noticed that the TIN status of all the parties from whom the alleged purchases were made by the assesse were found to be cancelled. In this regard the statement of the hawala operators were recorded on oath before the Sales Tax authorities, wherein it was confirmed by the said parties that they were engaged in the practice of giving accommodation entries on the basis of offered commission and no real transaction had taken placed. Apart, the assessee could not produce the parties and the parties were not even found on their respective addresses and therefore the AO had rightly exercised its power by rejected the books of account by invoking the provisions u/s 145(3) of the Act. There is no infirmity in the order of AO and Ld. CIT(A) in treating the purchases as bogus.
Even no new material or documents have been placed on record to rebut or controvert the findings recorded by the AO and Ld. CIT(A). Therefore I see no reasons to interfere in to or to deviate from the lawful findings so recorded by the Ld. CIT(A). Therefore, the grounds of appeal raised by the assessee stands dismissed
8. Ground No.2, raised by assessee relates to challenging the order of Ld. CIT(A) in not giving effect of purchase return to M/s. Somnath International. In this regard, after having heard both the parties, we found that assessee had not furnished any documentary evidences of refund of payment done on account of these purchases, moreover the figures arrived at by the AO on account of purchases from M/s Somnath International is a net figure and returns would have already been accounted for.
9. Even before the Bench no application for leading additional evidences has been filed, moreover no new facts or circumstances have been explained before the Bench to controvert or rebut the findings of Ld. CIT(A). Therefore I feel no reasons to interfere into the order passed by the revenue authorities and thus while dismissing this ground I uphold the decision of Ld. CIT(A). The other grounds raised by the assessee are general and consequential in nature.
In the result, the appeal filed by the assessee stands dismissed.
Order pronounced in the open court on 28.05.2025