ADARSH KAUL,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX 31(1), MUMBAI

ORDER

PER N.K. PRADHAN, AM

reads as under: On the facts and in the circumstances of the case & in law the Assessing Officer has erred in holding and the Ld. CIT(A) has erred in confirming the Adarsh Kaul Rs.11,83,913/- to the income of the appellant made by order u/s 143(3) r.w.s. 147 on account of alleged Hawala Purchases.

3. In a nutshell, the facts are that the assessee filed his return of income for the assessment year (AY) 2009-10 on 27.09.2009 declaring total income of Rs.67,97,632/-. The Assessing Officer (AO) completed the assessment u/s 143(3) on 22.12.2011 determining the total income at Rs.1,59,13,550/-. Subsequently, having received information from the Sales Tax Department, Government of Maharashtra that the assessee had obtained accommodation entries of Rs.11,83,913/- from a hawala operator (Tulsiani Trading Pvt. Ltd.), the AO reopened the assessment by issuing notice u/s 148 of the Act. During the course of reassessment proceedings, in response to the questionnaire issued by the AO along with notice u/s 142(1), the assessee failed to provide to the AO the item- wise day-to-day stock register and purchase consumption or sale details of the impugned assessment year. Further, the AO issued notice u/s 133(6) to the above party. However, the said notice was returned by the postal authorities with the remark ‘not known’ and ‘left address’. The AO again requested the assessee to prove the genuineness of the said purchase. In response to it, the assessee submitted only a copy of the ledger account of the party. The AO was not convinced with the above submission for the reason that the assessee failed to furnish the day-to-day item-wise stock register along with supporting documents like transport bills, octroi bills, stores register, stock movement register, evidence of consumption of materials purchased from the said party. Therefore, the AO treated Adarsh Kaul Rs.11,83,913/-.

4. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). It is observed by the Ld. CIT(A) that if the bogus purchases are unproved or where the alleged purchases are declared consumed by the assessee itself in its trading, manufacturing or non- trading activities and which is not substantiated by the assessee, the entire addition can be made as such bogus expenditure only goes to inflate the expenses of the assessee. The Ld. CIT(A) thus held that in the instant case the assessee was not in a position to prove the actual purchase from the hawala dealer and also he could not prove the purchase indirectly through his consumption/re-sale record. Therefore, the Ld. CIT(A) confirmed the addition of Rs.11,83,913/- made by the AO holding it as bogus expenditure.

5. Before us, the Ld. counsel of the assessee submits that only the profit element embedded in the so-called bogus purchases may be brought to tax instead of the full amount. On the other hand, the Ld. DR relies on the order passed by the Ld. CIT(A).