PUSHPA NARESHKUMAR DHANANIA,MUMBAI vs. INCOME TAX OFFICER WARD 17(2)(5), MUMBAI

The only issue in these appeal of assessee is against the order of CIT(A) confirming the addition made by the AO by applying the profit rate at the rate of 12.5% of the bogus purchase.

Briefly stated facts are that the assessee engaged in the business of manufacturing of Trading in Pipe Fittings. 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 in hawala dealers by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to ₹1,55,28,867/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - “Sl Name of party Amount No. 1. Asian Tube Trading 447200 2. Siddhivinayak Dteel 2360135 3. Sona Tools Traders 56056 4. Chanchal Tube Corporation 2250664 5. Asian Steel 1629784 6. Surat tube corporation 2390711 7. Laxmi Trading Co. 39800 3 | P a g e Pushpa N Dhanania 8. Revati Steel Traders 146068 9. Sagar Steel Traders 1482608 10. Rupani & Co 1536122 11. Maruti Steel Traders 1554942 12. Shiv Industries 1634777 13. Total 1,55,28,867 4. During the course of assessment proceedings and during appellate proceedings, the assessee submitted all the documentary evidences such as inward register, stock register, payment received against such sales, receipt of material purchases, account payee cheque. According to the AO, the assessee failed to establish the genuineness of the purchase and accordingly, he made addition of unproved purchase at 12.5% of ₹19,41,108/- to the return income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the disallowance made by the AO by observing as under: - “B2. The Tribunal Mumbai Bench in the case of Vijay C. Kamdar vs. ITO (2009) 120 TTJ (Mumbai) 475: (2008) 8 DTR (Mumbai) (Trib) 47: (2008) 305 ITR 163 (Mumbai) (AT) had an occasion to consider the allowability of deduction under s.80HHC. In that case goods were exported but these were destroyed at high sea at the instruction of exporter. Amount receivable from buyer was 4 | P a g e Pushpa N Dhanania neither refunded nor any claim of enforcing delivery received from buyer. Though the proceeds in the books were shown towards sale but such credits were not considered for claim of deduction under s. 80hhC. Hence on the basis of surrounding circumstances and considering the decision of Hon'ble apex court in the case of CIT vs. P. Mohanakala & Ors. (2007) 210 CTR (SC) 20: (2007) 291 ITR 278 (SC). The Tribunal held that Revenue has rightly taxed the receipt. In Arvind M. Kariya vs. ACIT (2013) 153 TTJ 422 (Mum) it was held as follows: Income tax proceedings- Burden of proof- Income tax proceedings are civil proceedings Degree of proof required is by preponderance of probabilities. vi. on aspect of 12.5% GP rate, following is noted: I. Kiran navin Doshi vs. ITO (2017) 49 CCH 20 (Mum) AY 2009-10 dated 18th January 2017 5 | P a g e Pushpa N Dhanania II. ITO vs. Shri Harish K. Chandak (ITAT Mumbai)