ACIT- 18(1), MUMBAI vs. BHAIRAV METALS, MUMBAI

The only issue in on merits, in this appeal of Revenue is against the order of CIT(A) restricting the addition in estimating the profit rate at 12.5% of the bogus purchases instead of disallowed by the AO the entire bogus purchases.

Briefly stated facts are that the assessee is importers & suppliers of Ferrous and non-ferrous metals etc. 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 by the Maharashtra Sales Tax Department who are providing bogus bills of purchase amounting to Rs. 73,48,813/- as admitted by this hawala dealer in their deposition before the authorities. The same reads as under: - Name Amount Ramanand Sales Pvt. Ltd. 73,48,813/- 4. During the course of assessment proceedings and during appellate proceedings, the assessee submitted documentary evidences such as 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 whole of unproved purchase at ₹ 73,48,813/- to the returned income of the assessee. Aggrieved, assessee preferred the appeal 3 before CIT(A), who restricted the addition at 12.5% of the bogus purchase made by the AO by observing in para 3.3.6 by following the decision of Hon’ble Gujarat High court in the case of CIT vs. Smith P. Seth (2013) 356 ITR 451 (Guj) by observing as under: