NAVIN SIRAHMAL MUKIM,PUNE vs. INCOME TAX OFFICER,WARD NO.7(4), PUNE

The only issue involved in this appeal is against the confirmation of addition of Rs.27,91,507/- made by the AO on account of bogus purchases.

Briefly stated, the facts of the case are that the assessee is engaged in the manufacturing and trading of Jewellery items. The Assessing Officer, on verification of information received from the Maharashtra Sales Tax Department, observed that the assessee was one of the beneficiaries of Hawala purchases. Such amount of bills stood at Rs.27,91,507/-. The assessee was called upon to prove the genuineness of the purchases so made. The assessee submitted certain details. Not convinced, the AO made the addition equal to the amount of Hawala purchase bills, which got confirmed in the first appeal. Aggrieved thereby, the assessee has approached the Tribunal.

Having heard both sides and gone through the relevant material available on record, it is observed that the assessee allegedly purchased diamonds through the Hawala purchase bills and thereafter utilized the same in the manufacture of the jewellery.

In such a situation, the entire amount of purchase bills does not requires addition but only the profit element because the diamonds must have been actually purchased at lower prices in lieu of which costly hawala purchases were recorded, which were used in the jewellery-making,. The Hon’ble jurisdictional High Court in Pr.CIT Vs. Paramshakti Distributors Pvt. Ltd., vide its judgment dated 15.07.2019 in has sustained the addition @ 10% of the amount of purchases, being, the profit element involved therein. Respectfully following the precedent, I deem it appropriate to restrict the addition to 10% of the amount of purchases. It is ordered accordingly.