SIDDHARTH STRUCTURALS,MUMBAI vs. ITO-29(3)(4), MUMBAI

The only issue in this appeal of assessee is against the order of CIT(A) in confirmed the addition made by the Assessing Officer by applying profit rate at the rate of 12.5% of the alleged bogus. For this assessee has raised the following ground:-

2 M/s. Siddharth Structurals; AY 10 -11 “3. In facts and in the circumstances of the case and in law, the learned CIT(A)-40, Mumbai has erred in upholding the adhoc addition of rs.10,68,861/- being 12.5% of alleged bogus purchases of ₹85,50,886/-, merely on surmises and conjectures.”

Briefly stated facts are that the assessee engaged in the business of trading and whole selling of Iron and steel. The AO received information from DGIT (Investigation), who in turn received information from Sales Tax Department, Mumbai that the assessee has made purchases from hawala parties, as listed by the Maharashtra Sales Tax Department who are providing bogus bills of purchase, including assessee amounting to Rs. 85,50,886/-, as admitted by these hawala dealers in their deposition before the authorities. The bogus bill obtained by assessee are as under: - Name of party Amount Parshva & Co 13,14,641 Renuka Sales corporation 3,31,425 Rekha Trading Co 13,17,833 Shyam Corporation 3,01,546 Daksha Enterprises 6,20,591 Amar Enterprises 6,94,865 Mercury Enterprises 3,30,850 Prayosha Trading Co 6,42,303 Shraddha Trading Co 7,17,450 MR corporation 22,79,382 Total 85,50,886 4. During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as Tax invoice purchases, bank statement highlighting the payments made to so called hawalla parties, the statement showing details of hawala purchases and 3 M/s. Siddharth Structurals; AY 10 -11 corresponding payments, the statements showing details of purchases and its corresponding sales. According to the AO, the assessee failed to establish the genuineness of the purchase in absence of delivery challans, octroi receipt and transport receipt of the purchases and accordingly, he made addition of unproved purchase at 12.5% of ₹ 10,68,861/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the disallowance made by the Assessing Officer by observing as under: - “4. Decision: I have gone through the reasons recorded by the AO and the submission made by the appellant.