INCOME TAX OFFICER - 20(1)(5), MUMBAI vs. SHRI ISMAILBHAI M. LOKHANDWALA, MUMBAI

We have heard the rival submissions and perused the materials available on record. We find that the assessee is an individual engaged in the business of trading in Iron and Steel. It is not in dispute that the assessee had indeed made purchases from seven parties totaling to ₹1,75,16,051/-, the details of which are listed in page 2 of the assessment order. The learned Assessing Officer sought to examine the veracity of the said purchases. The assessee produced copy of ledgers, bank statements related to the purchase evidencing payments made to said parties by account payee cheques. The learned Assessing Officer issued notices under section 133(6) of the Act to all the parties, which were duly served but no replies were received from the said parties in response thereon. The learned Assessing Officer directed the assessee to produce the aforesaid parties, which was also not complied with by the assessee. Accordingly, the learned Assessing Officer proceeded to treat 100% of outstanding purchases (credit purchases) to the tune of ₹25,44,256/- and 25% of hawala purchases to the tune of ₹1,49,71,795/- as profit element embedded in the value of such purchases and accordingly, made addition of ₹62,87,205/- in the assessment.

The learned CIT(A) by giving the categorical finding that the sales made by the assessee out of the aforesaid purchases has not

With respect to the remaining purchases to the tune of ₹1,49,71,795/- made from other parties who were treated as tainted dealers, the learned CIT(A) observed that the assessee has already recorded gross profit of 2.42% in its books and directed the learned Assessing Officer to adopt the same as profit element embedded in the value of such purchases for the purpose of making addition. Aggrieved by this order, the Revenue alone is in appeal and assessee has not preferred any appeal.