PERRY IMPEX,MUMBAI vs. DCIT-CIRCLE 19(1), MUMBAI, MUMBAI

Facts

The assessee, Perry Impex, engaged in diamond trading, faced reassessment proceedings for AY 2009-10 and 2011-12 concerning purchases from alleged hawala dealers. The AO added 5% of these purchases as income, which was reduced to 3% by the CIT(A). The core issue revolves around the genuineness of these purchases.

Held

The Tribunal held that the purchases were indeed accommodation entries and not genuine. While the CIT(A) reduced the addition to 3%, the Tribunal directed the AO to estimate the profit at 2.5% of the non-genuine purchases, considering the nature of the diamond business and relevant profit margins, and also dismissed the Revenue's appeals.

Key Issues

Whether purchases from alleged hawala dealers were genuine or accommodation entries, and determination of the appropriate profit margin to be taxed on such non-genuine transactions.