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TMI Blog2020 (1) TMI 992X X X X Extracts X X X X X X X X Extracts X X X X ..... estion. - decided against revenue X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 1,97,383/- which had been made from two parties as mentioned below. The AO had received information from the Sales Tax Department, Mumbai as well as DGIT(Inv.) Mumbai that the assessee had taken accommodation bills for purchases from the party declared as hawala operators by Maharashtra Sales Tax Department. During the course of re-assessment proceedings, the AO has seen that the assessee had made purchases from various parties out of which ₹ 1,97.383/- effected from the parties as mentioned below: 5.1.1 The name of the above parties figured in list of suspicious dealers on the Maharashtra Sales Tax Department, who had issued accommodation entries without actual delivery of goods. S. No. Party who have issued bogus bills to the assessee Amount of such bogus bill (Rs.) 1 Parshva & CO 87,464/- 2 Mahavir Enterprises 1,09,919/- Total 1,97,383/- 5.1.2 The AO, in his aforesaid assessment order has further mentioned that the Sales Tax Department had conducted independent inquiries in the case of each hawala operator, including in the case of above stated hawala operator and it was conclusively proved that these parties/operators were engaged in the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usion that the purchases from the said hawala operator is proved to be bogus and the payments made by cheque against such bogus purchase bills to the hawala operator is received back in cash. Further, the AO held that since the sales are genuine therefore the entire amount of ₹ 1,97,383/- being bogus purchases cannot be added to the income of the appellant as undisclosed income. The AO has taken peak of the credit standing in the names of the bogus parties which works out to ₹ 87,464/-. Accordingly, the AO has disallowed an amount of ₹ 87,464/- being peak of the purchases, treated as unexplained expenditure u/s. 69C of the Act and added the same to the total income of the appellant. 5.2 On the other hand, it is the contention of the assessee that the AO has termed the said purchases as bogus transaction merely based on the information of the Sales Tax Department. The AO disallowed ₹ 87,464/- u/s. 69C on ground of peak of the credit standing in names of above parties as unexplained expenditure. The details of purchases from the party along with the ledger account, copy of purchase bills, delivery challans and copy of bank statement evidencing payment thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hawala operators. Further, the AO stopped his investigation with the return of his 133(6) notices and Inspector's field inquiry and his report. He did not go ahead with money trail of cheques debited in the appellant's bank account towards the alleged purchases though such investigation do not lead to concrete results in the case of hawala dealers and investigators often reach dead end in such cases. It is not the case of the AO that the impugned purchases have conclusively been established as not having been effected at all. The AO has only found the impugned supplier as a bogus party. 5.3.1 In the facts and the circumstances of the case, the total purchases shown to be made from the aforesaid parties cannot be held to be entirely bogus. It needs to be appreciated that in order to achieve the reported sales/turnover, there must be some corresponding purchases, whether effected from the alleged entry providers or from the grey market without bills. Thus, there ought to be some purchases made and hence, entire disallowance is not justified. In this regard, the ratio laid down by the Hon'ble Bombay High Court in the case of CIT v. NikunjEximp Enterprises (P.) Ltd., is q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icularly in such cases were not corresponding sales are not doubted. Alternatively the profit embedded' sales against the alleged bogus purchases should be brought to tax. 5.4.2 In the case of CIT-1 Vs Simit P. Sheth, ITA no. 553 of 2012, order dated 16/01/2013, while deciding a similar issue, the Hon'ble High Court of Gujarat has held that: "We are broadly in agreement with the reasoning adopted by the Commissioner (Appeals) with respect to the nature of disputed purchases of steel. It may be that the three suppliers from whom the assessee claimed to have purchased the steel did not own up to such sales. However, vital question while considering whether the entire amount of purchases should be added back to the income of the assessee or only the profit element embedded therein was to ascertain whether the purchases themselves were completely bogus and non existent or that the purchases were actually made but not from the parties from whom it was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. In the present case, CIT believed that when as a trader in steel the assessee sold certain quantity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case has held that the parties from whom the purchases were made by the appellant were found to be bogus, estimations ranging from 12.5% to 25% have been upheld by the Hon'ble Gujarat High Court, depending upon the nature of the business. 5.4.4.1 In a number/series of recent cases, involving the issue of bogus purchases carried out in a organized manner through some hawala operators and the modus operandi unearthed by the Maharashtra Sales tax department, the Hon'ble Mumbai Tribunal has estimated the G.P addition in the hands of the purchasers on account of such bogus purchases as 12.5%. Some of which are listed below: (1) Snit. Kiran Navin Doshi in ITA No. 2601 /Mum/2mo dated 18.01.24917. ii) Ashwin Purshotam Bajaj & Anr. Vs. ITO & Anr., in ITA. No.4736/M/2014, 5207/M/2014 dated 14.12.2016 (iii) ITO & Anr. Vs. Manish Kanji Patel & anr. In ITA. No7299/M/2014, 7154/M/2012 & 7300/M/2014, 7627/M/2014 dated 18.05.2017 (iv) Metroplitan Eximchem Ltd. ITA. No.2935/M/2015, dated 29.03.2017 v) Ronak Metal Industries vs. ITO, ITA No. 722/Mum.2o17 dtd. 04.09.2017; vi) ITO vs. Jugraj R. Jain, ITA No. 2571 /Mum/2o16 & 257211VI12o16 dtd. 02.08 .2017; vii) B. J. Exports v ..... X X X X Extracts X X X X X X X X Extracts X X X X
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