2017 (7) TMI 1082 - AT - Income Tax

Disallowance u/s 69C - G.P. determination - Held that - The undisputed facts are that the assessee has made transactions with hawala operators who were not traceable on the addressed given by the assessee and even notice issued u/s 133(6) issued to the parties were returned unserved. Under these circumstances, we are of the opinion that the addition sustained by the ld.CIT(A) at the rate of 7.5% which was calculated at the rate of 12.5% (-) GP already declared which is 5% is most reasonable and justified and therefore the same is affirmed. Accordingly, the appeal of the revenue is dismissed.

Summary

Issues: Appeal against order of Ld. CIT(A)-30, Mumbai regarding disallowance of bogus purchases under section 69C of the Income Tax Act, 1961 for A.Y.2009-10.

Analysis:
1. The revenue appealed against the order of Ld. CIT(A)-30, Mumbai concerning the disallowance of bogus purchases amounting to &8377; 60,64,279 under section 69C of the Income Tax Act, 1961 for the assessment year 2009-10. The AO reopened the case under section 147 upon receiving information that the assessee engaged in transactions with hawala parties involving accommodation entries of bogus purchases. The AO added the peak balance of &8377; 69,49,410 to the total income of the assessee, which included the disallowed amount.

2. During the appellate proceedings, the ld.CIT(A) reduced the disallowance percentage to 7.5% by considering the rate of 12.5% minus the gross profit (GP) already declared by the assessee (5%). This adjustment resulted in a net addition of 7.5% over and above the regular profit declared by the assessee. The assessee challenged this decision by filing an appeal before the Appellate Tribunal ITAT, Mumbai.

3. The Appellate Tribunal, after hearing both parties and examining the facts, upheld the decision of the ld.CIT(A) to sustain the addition at the rate of 7.5%. The Tribunal found that the assessee's transactions with untraceable hawala operators, coupled with the failure to serve notices to these parties, justified the 7.5% addition. The Tribunal deemed this rate, calculated based on the 12.5% rate minus the declared GP of 5%, as reasonable and justified. Consequently, the appeal of the revenue was dismissed, affirming the 7.5% addition.

4. Therefore, the Appellate Tribunal ITAT, Mumbai, in its judgment dated 4th July 2017, upheld the decision of the ld.CIT(A) to sustain the net addition at 7.5% of the total bogus purchases, dismissing the appeal of the revenue.