MAFATLAL H. BOTHRA,MUMBAI vs. ITO 19(2)(3), MUMBAI

The only issue in on merits, in this appeal of assessee is against the order of CIT(A) confirming the action of the AO in estimating the profit rate at 12.5% of the bogus purchases.

Briefly stated facts are that the assessee is engaged in the business of ferrous and non-ferrous metals. 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 Rs.33,15,621/- as admitted by these hawala dealers in their deposition before the authorities. The same reads as under: - Name Amount Advance Steelage 2,19,314 Roopam Impex 4,03,738 Tyson Steel and Tubes 3,35,400 P. Ltd. Vighneswar impex 3,97,812 Shanti Pipes & Tubes 9,71,893 Osian Steel Impex 9,97,464 Total 33,15,621 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 unproved purchase at 12.5% of ₹ 4,14,453/- to the returned income of the assessee. Aggrieved, assessee preferred the appeal before CIT(A), who confirmed the action of the AO by observing in para 7 3 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: