RAJENDRA AMRATLAL CHOKSI,MUMBAI vs. ITO WD 17(3)(1), MUMBAI

Facts of the case are that the case of the assessee was assessed u/s 143(3) of the Act vide order dated 30.11.2011 assessing the total income at Rs.15,45,490/- as against the returned income of Rs.13,19,760/-. Thereafter the case of the assessee was reopened u/s 147 and the notice u/s 148 of the Act was issued on 27.3.2014 after the AO received information from the DGIT(Inv), Mumbai and also from Sales Tax Department, Government of Maharashtra that the assessee is a beneficiary of hawala purchases to the tune of Rs.7,33,67,528/-. Upon verification during the course of re- assessment proceedings , the AO found on the basis of information provided by the assessee that TIN and other particulars were bogus and the suppliers were listed on the website of Sales Tax Department, GOM as hawala operators. Accordingly, the AO asked the assessee to furnish the details of the parties and also prove the genuineness of the purchases by filing the details of purchases, delivery challans, stock register etc. In reply to the notice, the assessee submitted before the AO that the purchases made from the hawala parties there were corresponding sales which have been offered to tax. The reply of the assessee did not find favour with the AO and he ultimately applied GP at the rate of 5% of the bogus purchases by treating the same as non-genuine thereby making the addition of Rs.36,68,363/-.

In the appellate proceedings, the FAA, after considering the submissions of the assessee, partly allowed the appeal of the assessee by sustaining the addition at the rate of 3.5% i.e.Rs.25,69,863/- Aggrieved by the order of the FAA, the assessee has filed this appeal before this Tribunal.

After hearing both the parties and on perusal of the records as placed before us , we find that the assessee undoubtedly has availed hawala entries from the hawala operators which were treated as bogus for want of non- verification of purchases to the tune of Rs.7,33,60,528/- and the AO added to the income of the assessee Rs. 36,68,363/- being GP at the rate of 5% on the said purchases. The ld. CIT(A) partly sustained the addition at 3.5% as against the 5% by the AO. Having considered the facts of the case and the rival contentions, we find that the coordinate benches have been taking a consistent view under same facts that some percentage addition ranging from 5% to 12.50% or a reasonable percentage of the bogus purchase should be made towards savings which the assessee may have made by purchasing the material from gray market thereby saving VAT and other incidental taxes. Therefore we are of the opinion that the ld.CIT(A) has taken a reasoned and cogent view in the assessee’s case by applying 3.50% of the bogus purchases and we find no reason to interfere in the same. Accordingly we affirm the order of CIT(A) by dismissing the appeal of the assessee.