TINA ANIL SHAH W/O ANIL SHAH,MUMBAI vs. ITO 24(3)(4), MUMBAI

In this appeal, assessee is aggrieved for addition of Rs.5,65,282/- u/s.69C of the IT Act on account of bogus purchases.

Rival contentions have been heard and record perused. Assessment of assessee was reopened on the information that assessee had made purchases from hawala dealers without physical delivery. Not being satisfied with the enquiry so made, the Assessing Officer added the entire amount of such purchases under section 69C. By the impugned order, the Smt. Tina Anil Shah CIT(A) confirmed the action of the Assessing Officer against which the assessee is in appeal before us.

It was contended by the learned A.R. that at the time of purchase i.e. during F.Y. 2008-09, appellant have made actual purchase from these parties and have made payment through account payee cheques for the same. Sales Tax department declaring these parties as Hawala do not invalidate the purchase made by appellant. This may be clarified from the judgment given by the Gujarat High court in case of CIT v/s Bholanath Poly Fab(P). Ltd [2013] 40 taxmann.com 494 (Gujarat).

Reliance was also placed on the decision of the Mumbai tribunal In the case of ACIT vs. Tristar Jewellery Exports Pvt. Ltd (ITAT Mumbai), held that Reliance on statement of supplier who confesses to providing accommodation entries without giving assessee right of cross- examination, violates principles of natural justice. A statement recorded at the back of a party cannot be used against such party without confronting such statement to the party. So addition based on such statement is not justified.

On the other hand the learned D.R. relied on the orders of the lower authorities.

I have considered the rival contentions carefully and gone through the orders of the authorities below. From the record I found that the AO has made the addition as some of the suppliers of the assessee were declared Hawala dealer by the Sales tax Department. This may be a good

Smt. Tina Anil Shah reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion. Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account. No such exercise has been done. The CIT(A) has also confirmed the addition made by the AO by going on the suspicion and the belief that the suppliers of the assessee are Hawala traders. We agree with the submissions of the Counsel that if there were no purchases, the assessee would not have been in a position to sale the Goods. In our considered opinion, the purchases are supported by proper invoices duly reflected in the books of account. The payments have been made by account payee cheques which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash back from the suppliers. The additions have been made merely on the report of the Sales tax Department.

Keeping in view the totality of facts and circumstances, we direct the Assessing Officer to restrict the addition to the extent of 12.5% of the alleged purchases in so far as the corresponding sales made by the assessee are not declined.

In the result, the appeal filed by the assessee is allowed in part.