ASST CIT 10(1)(2), MUMBAI vs. KBA INFRASTRUCTURE P.LTD, MUMBAI

ORDER

PER N.K. PRADHAN, AM

read as under:

1. Whether on the facts and circumstances of the case and in the law the Ld. CIT(A) is justified in not upholding the total disallowance of alleged purchases ignoring the fact that assessee is one of the beneficiary of non-genuine transactions carried out with hawala dealers? 2. 'Whether on the facts and circumstances of the case and in the law the Ld. CIT(A) is justified in not upholding the total disallowance of alleged purchases ignoring the fact that AO has made the addition after carrying out necessary inquiries?

3. Whether on the facts and circumstances of the case and in the law the Ld. CIT(A) is justified in not upholding the total disallowance of alleged purchases while in para 11 of his order the Ld. CIT(A) has held that the assessee was unable to substantiate its purchases from the suppliers who had already been established as hawala dealers by the Sales Tax Department (Govt of Maharashtra) and Investigation Wing of the Department.

4. Whether on the facts and circumstances of the case and in the law the Ld.CIT(A) is justified in not upholding the total disallowance of alleged purchases ignoring the fact that hawala parties have given the statement on oath regarding their modus operandi?

5. Whether on the facts and circumstances of the case and in the law the Ld. CIT(A) is justified in directing to restrict the disallowance to 12.5% of the alleged purchases whereas it is clearly proved that the said purchases are non-genuine and therefore needs to be fully disallowed?

6. The appellant prays that the order of the CIT(A) on the above ground be set aside and that of the A.O. be restored.

3. The assessee filed its return of income for the assessment year (AY) 2011-12 on 29.09.2011 declaring total income of Rs.1,59,51,458/-. The assessee is basically engaged in the business of construction, infrastructure, repairs etc.

In a nutshell, the facts of the case are that the Assessing Officer (AO) received information from the Investigation Wing of the Income Tax Department that the assessee was having transaction of Rs.4,57,20,006/- from parties who were engaged in hawala transactions. During the course of assessment proceedings, the AO issued notice u/s 133(6) to the concerned parties to verify the purchases. However, the notices were returned back as unserved by the postal authorities. Also, during the course of assessment proceedings, the AO asked the assessee to produce these parties before him to ascertain the genuineness of purchases. However, the assessee failed to produce them. In response to a query raised by the AO to explain as to why the purchases from the above parties should not be held as bogus, the assessee submitted the copy of ledger accounts, sales invoices towards materials purchased from the parties along with account confirmations of some parties. It was the submission of the assessee before the AO that the payments have been made by cheque and the purchases are genuine. However, the AO was not convinced with the above explanation of the assessee. The AO referred to the investigation report prepared by the Sales Tax Department, Government of Maharashtra and the statement of the concerned persons providing accommodation entries. As the assessee failed to furnish the requisite evidence in the form of payment of VAT by the alleged supplier, evidence of goods held as per the stock register of the concerned suppliers, the AO made an addition of the full amount of Rs.4,57,20,006/-.