What did the Tribunal hold?

The Tribunal held that the advances given to the parties, even if they are hawala parties, are reflected in the books of account and balance sheet and are not unexplained. Therefore, the deletion of addition by the CIT(A) was confirmed.

The Assessing Officer (AO) made an addition of ₹ 10,29,38,000/- on account of bogus accommodation entries and advances given to hawala parties. The CIT(A) deleted this addition.

What were the issues?

Whether advances given to parties identified as hawala dealers, which are reflected in the books of account, warrant an addition to income.

JCIT vs Vaibhav Dipak Shah | ITAT Mumbai 2019

Income Tax Appellate Tribunal, “F” BENCH, MUMBAI

For Appellant: Shri Sushil Kumar Poddar, DR

Hearing: 15.07.2019Pronounced: 15.07.2019

आदेश / O R D E R महावीर ससुंह, न्याययक सदस्य/ PER MAHAVIR SINGH, JM:

This appeal of Revenue is arising out of the order of the Commissioner of Income Tax (Appeals)]-48, in short CIT(A), in appeal No. CIT(A)-48/48/I.T-36/DCCC-2(3)/2016-17 dated 21.03.2018. The Assessment was framed by the Dy. Commissioner of Income Tax, Circle 2(3), Mumbai (in short DCIT/ITO/ AO) for the A.Y. 2013-14 vide order dated 31.03.2016, under section 143(3) of the Income-tax Act, 1961 (hereinafter ‘the Act’).

2. The only issue in this appeal of Revenue is against the order of CIT(A) deleting the disallowance made on account of bogus accommodation entries. The Revenue has alleged that CIT(A) erred in admitting the additional evidences in violation of Rule 46A of Income Tax Rules, 1962 (hereinafter the ‘Rules’). For this Revenue has raised the following grounds: -

“1. On the (acts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the disallowances of Rs.10,29,38,000/- made on account of bogus accommodation entries from Deep Enterprises and Payal Enterprises.

On the facts and circumstances of the case and in law the Ld.CIT(A) erred in admitting the additional evidence in the light of Rule 46A without appreciation the (act that sufficient opportunity was provided to the assessee to furnish the evidence in the form of purchases bills/invoices, lorry receipt, GRN, Weightment slip and delivery challan to prove the genuineness of the claim, during the course of assessment proceedings, however, assessee failed to furnish the requisite details.”

Brief facts are that the AO noted that the assessee has paid advances to the bogus parties amounting to ₹ 10,29,38,000/-. The AO also noted that the assessee had made purchase from hawala parties to inflate its expenses. According to AO, the advances are also given to the same parties during the year which are as under: -

Sr. Name of the TIN Number Total No. hawala Dealer Amount 1. Deep 27750595164V 5,74,46,000 Enterprises 2. Payal 27870658730V 4,54,92,000 Enterprises Total 10,29,38,000 4. According to AO, the assessee could not prove the genuineness of advances given to the bogus parties. He, therefore, added the amount of ₹ 10,29,38,000/-. Aggrieved, assessee preferred the appeal before CIT(A). The CIT(A) deleted the addition after going through the accounts statement of the assessee and noting that there is no purchase made from these two parties during the year. However, advances were given to them. It was also noted by the CIT(A) that once these advances are out of books of account and reflected in the balance sheet, the same are explained. The CIT(A) further noted that merely on the basis of advance given no addition is warranted even if parties are providing accommodation entries. Aggrieved, Revenue is in appeal before us.

We have noted from the audited accounts of the assessee that as on 31.03.2013 there are total advance made by assessee to the amount of ₹ 12,98,64,119/-, out of which advances given to two parties namely M/s Deep Enterprises and Payal Enterprises, which are declared as hawala parties by the sale tax authorities, the assessee has made advances to the tune of ₹ 10,29,38,000/-. We noted from the balance sheet and other financial details that the assessee has not made any purchase from these parties but given advances to them. These

JT. CIT (OSD)- CC-2(3), MUMBAI vs. VAIBHAV DIPAK SHAH, MUMBAI

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