SMT.SAROJDEVI S JAIN,MUMBAI vs. INCOME TAX OFFICER WARD 9(3)(2), MUMBAI
What did the Tribunal hold?
The Tribunal acknowledged that the assessee benefited from bogus hawala purchases. However, it found the AO's addition of 12.5% to be excessive given the assessee's business profit margins. The Tribunal directed the AO to make an addition at 4% of the bogus purchases.
What were the facts?
The assessee, a metal trader, was found to have obtained hawala purchase bills from non-genuine parties totaling Rs. 68,13,504. The Assessing Officer (AO) made an addition of Rs. 8,61,073, which was sustained by the CIT(A).
What were the issues?
The primary issue was the validity of the reassessment proceedings and the quantum of addition for bogus purchases. The Tribunal focused on determining a fair addition rate for the non-genuine purchases.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC”, MUMBAI
Before: SHRI C.N.PRASAD & SHRI RAJESH KUMAR
O R D E R PER RAJESH KUMAR, A.M:
This appeal filed by the assessee is directed against the order of the Commissioner of Income Tax(Appeals)-5, Mumbai, dated 27-06-2018(hereinafter referred to as CIT(A).
Brief facts of the case are that, assessee, an individual, engaged in the business of trading of ferrous and non-ferrous metals has filed her return of income electronically on 09-09- 2010, declaring the total income at Rs.6,11,780/-. In this case, the Office of DGIT(Inv.), Mumbai, had communicated the information received from Sales Tax Department of : 2 : Maharashtra to the Assessing Officer that assessee has obtained hawala purchase bills from hawala parties and as a result the assessee is involved in taking entries from the following parties:
S.No. Name of the party Amount (Rs) 1 Amol Industries 6,26,080 2 Coral Trading Co., 11,04,002 3 Krishna Steel Industries 9,51,908 4 Asian Metal Industries 25,93,090 5 Littleworld Trade Impex Pvt. Ltd., 16,13,504 Total: 68,13,504 2.1. On the basis of evidence gathered on the non-genuine purchases and to verify the same, the case was re-opened by issuance of notice u/s.148 of the Income Tax Act after recording reasons for re-opening of assessment. The AO completed the assessment u/s.143(3) r.w.s.147 of the Act, determining the total income of Rs.14,72,850/- by making addition of Rs.8,61,073/-.
Aggrieved, assessee preferred an appeal before the CIT(A), who dismissed the appeal of assessee, by sustaining the addition made by the AO.
Aggrieved the appellate order , the assessee preferred the present appeal before us challenging the validity of the issuance of notice u/s.148 of the Act and consequent re- assessment order and also agitated the part confirmation of addition to the tune of Rs.8,61,073/- .
Ld.DR relied heavily on the orders of CIT(A) and AO, by submitting that the appeal of assessee may be dismissed as : 3 : the assessee was found to be engaged in availing bogus purchases from Hawala Parties, without physical delivery of materials thereby saving non-payment of VAT and various other levies. Therefore, ld DR prayed before the Bench that the addition confirmed by the Ld.CIT(A) may be sustained.
After hearing both the parties and perusing the material on record, we observe that in this case, undisputedly, assessee is beneficiary of bogus Hawala Purchase entries. The assessee challenges the part sustenance of addition on account of purchases by the AO @12.5% which is stated to be excessive and unreasonable in view of the profits of the assessee. The assessee is a dealer in iron and steel items in which the GP ranges from 2% to 4%. We are, therefore, of the view that it would be reasonable and fair if the addition is directed @ 4%, on the said bogus purchases of the assessee. Accordingly, we set aside the order of CIT(A) and direct the AO to make addition @ 4% .
Since we have decided the issue on merit , the grounds raised on legal issues not to be adjudicated.
In the result, the appeal of assessee is partly allowed.
Order pronounced in the open court on 30th September, 2019 (C.N. PRASAD) (RAJESH KUMAR) "याियक सद"य/JUDICIAL MEMBER लेखा सद"य/ACCOUNTANT MEMBER मुंबई/Mumbai; "दनांक/Dated : 30-09-2019 TNMM
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- Adj Agri International LLP, Rajkot vs The Income Tax Officer, Ward-1(1)(1), RajkotITA 1198/RJT/2026[2018-19]Status: Disposed21 Oct 2026AY 2018-19
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