ITO, WARD-1(1), KALYAN vs. M/S ARUDAYA CHEMICALS P. LTD., AMBERNATH

The only common issue in these cross appeals is as regards to the order of CIT(A) in restricting the addition of bogus purchases by estimating the profit rate at 12.5 % of the bogus purchases as against addition made by Assessing Officer at 100%.

I have heard the rival contentions and gone through the facts and circumstances of the case. The brief facts are that the Assessing Officer received information from Sales Tax Department that certain persons are providing bogus bills / accommodation entries to various parties and assessee is one of the beneficiaries. As per information received, the assessee has obtained bogus bills amounting to ₹ 3,17,304 from the following parties: - Sr. No. Name of the Party Amount 1. Cimco Corporation 64,064 2. Dhiren Mercantile Pvt. Ltd. 60,736 3. Ashu Mercantile Pvt. ltd. 71,240 4. Choksi Brothers 1,21,264 Total 3,17,304 4. The Assessing Officer rejected the claim of the assessee and held that the purchase made with the above mentioned hawala parties were non genuine and hence, he added the entire bogus purchases of ₹3,17,304/-. The assessee preferred the appeal before Commissioner of Income Tax (Appeals). The CIT(A) restricted the disallowance at 25% of the bogus purchase by observing in Para 6.4 as under: - CO No. 121/Mum/2021 M/s Arudaya Cemicals P. Ltd.; AY 10 -11 “6.4 From the above discussion, it can be concluded that, it is a case where the goods were received from the parties other than the persons who had issued the bills for such goods. Though the purchases were shown to have been made by making pay rent to Hawala dealers but goods must have come from grey market, therefore, under such circumstances, the chances of purchase cost being inflated cannot be ruled out, In all the parties i.e. Cimco Corporation, Dhiren mercantile Pvt. Ltd., Ashu Mercantile Pvt. Ltd. & Choksi Brothers, the return unserved.

Considering the totality of the facts of the case, I am of the considered opinion to disallow 25% of unverifiable purchases made from unverifiable/Hawala parties. Accordingly, the book result of the appellant is rejected u/s. 145(3) of the Act. The disallowance 25% out of unverifiable purchases from unverifiable/Hawala dealer had been upheld in the aforesaid case: