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TMI Blog2016 (11) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... profit on purchases of Rs. 31,70,670/-. 2. The appellant requests to delete the addition confirmed by the Ld. CIT(A)." 3. The Brief facts of the case are that the assessee is a government electrical contractor working under the name and style of Shanti Electricals and Services. In this case, certain information was received by the AO from the DGIT (lnv.), Pune vide letter No.PN/DGIT/Sales Tax Hawala/2012- 13/2179 dated 6th February, 2013 to the effect that the Sales Tax Department, Mumbai has unearthed a racket involving more than 1935 hawala dealers involved in issuing bogus invoices to allow a trader to claim tax credits and there are more than 37,000 beneficiaries who claimed such bogus purchases as well as bogus tax credits. It was also revealed from the statements recorded by the Sales Tax Department u/s.14 of the Maharashtra Value Added Tax, 2002 of the hawala dealers and the affidavits filed by them, that the hawala dealers, in fact, did not do any genuine business and they have only issued the bogus sale bills to various parties without supplying any goods. There were no corresponding purchases to such bogus sale bills. The bogus sale bills were supplied on commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivinayak Steels AGVPS7889Q 2009-10 2113302 27120627472V Harish Metal & Tubes AHYPJ8223D 2009-10 1057368 Total 31,70,670 Notices u/s 133(6) of the Act were issued to the above vendors to verify the facts from whom the assessee had claimed to have made certain purchases and various details were called from them. However, the notices issued u/s 133(6) of the Act in respect of above parties were unserved with the reasons 'not known' and 'left'. In view of this, the assessee was asked by the AO to produce these hawala operators before the AO but the assessee failed to produce these vendors before the AO and expressed its inability to produce these vendors. The A.O. after considering submissions of the assessee observed that the assessee could not produce the related documentary evidences for verification such as octroi receipts, lorry receipts , stock register and escort receipts for the purchases made from these parties , and also failed to produce the vendors and as such the purchases made from the so called vendors cannot be considered as genuine. The AO observed that books of account are not complete and correct. The A.O. accordingly rejected the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of 12.5% of alleged Hawala purchases be made to the income of the assessee in order to buy peace of mind. The ld. CIT(A) after considering the submissions of the assessee held that the assessee had shown purchases amounting to Rs. 31,70,670/- from various parties which were from hawala operators as appearing in the list prepared by Sales Tax Department and which were not genuine purchases. These dealers only gave the purchase bills and there were no actual sale and purchase transactions and no transfer of goods. The assessee could not produce transportation and octroi payment receipts to shown that the assessee had made actual purchases from the said hawala dealers. The assessee could not produce either the parties or confirmation/ledger extract of the assessee in the books of accounts of the said hawala dealers. The learned CIT(A) observed that the assessee received the bills and made payments through account payee cheques , but the assessee along with thousands of other taxpayer in collusion with the selling dealers subverted and manipulated the system, wherein the selling dealers were only giving the bills and the amount paid by the purchasing dealer in the form of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount of alleged bogus purchases of Rs. 31,70,670/- by the AO with respect to purchases from two parties. The ld. CIT(A) confirmed the additions @12.5% of the amount of unproved purchases of Rs. 31,70,670/- , amounting to Rs. 3,96,333/-. It was submitted that in the previous year, the net profit ratio was 10.43% which was accepted by Revenue. The ld. Counsel submitted that the assessee could not produce the vendors before the authorities below, however, all the details were furnished before the A.O. 8. The ld. D.R., however, relied upon the orders of authorities below. 9. We have considered the rival contentions and also perused the material available on record including the judicial decisions cited by the parties. We have observed that the assessee is a government electrical contractor working under the name and style of Shanti Electricals and Services . We have observed that certain information was received by the AO from the DGIT (lnv.), Pune vide letter No.PN/DGIT/Sales Tax Hawala/2012-13/2179 dated 6th February, 2013 to the effect that the Sales Tax Department, Mumbai has unearthed a racket involving more than 1935 hawala dealers involved in issuing bogus invoices to allow a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partments. The ld. CIT(A) after considering the replies of the assessee held that if the sales were there purchases have to be there as held by the Mumbai Tribunal in the case of Ramesh Kumar & Co. v. ITAT, Mumbai (ITA No. 2959/Mum/2014), hence, the inference that can be drawn is that the assessee had made purchases in the open market but had obtained bills from the hawala operators , but however there is no one to one correlation with the material purchased from the said hawala dealers to have been completely used in the execution of work contracts. Thus, the assessee actually made the purchases from third parties and the invoices being inflated was the conclusion of the learned CIT(A) and accordingly addition was sustained by the learned CIT(A). It has not been brought on record that the Revenue has filed any appeal with the tribunal against the decision of learned CIT(A). The Revenue has accepted the profit rate of 10.43% earned by the assessee in the preceding year, while in the instant year the net profit rate was 9.22%. The turnover in the instant year is Rs. 90,70,063/- . Hence in our considered view , interest of justice will be best served keeping in view factual matrix of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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