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TMI Blog2017 (9) TMI 1887X X X X Extracts X X X X X X X X Extracts X X X X ..... larly when the VAT credit was not allowed to the assessee by the sales tax department and demand of VAT on behalf of hawala suppliers was realized from the assessee. If we look at the gross profit disclosed by the assessee, it is 16.78 % which is much more than the disallowance @ 11.50% which is normally made by the coordinate benches in the case of hawala purchases. But to discourage the practice of bogus trading some deterrent has to be there. I Ends of justice would be met if the addition is sustained equal to an amount arrived at by calculating 11.50% of bogus purchases minus the VAT credit denied to the assessee by the Sales Tax Deptt which comes to 6,66,690/- ( 31,29,564 minus 24,62,874). Accordingly the AO is directed to delete the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not pressed. 4.Ground No. 6,7, and 8 are consequential and general in nature, therefore dismissed. 5.The only effective Ground is Ground No.5 which is with regard to upholding the addition of ₹ 68,03,400/- by CIT(A) being 25% of total bogus purchasesas against by Assessing Officer of ₹ 2,72,13,601/- on account of non-genuine bogus purchases. 5.1. During the reassessment proceedings the Assessing Officer observed that the assessee has made purchases from 10 parties to the tune of ₹ 2,72,13,601/-. The details thereof is given in para 4.1.1 of assessment order :- Sl.No. VAT-TIN No. Name of the entity Amount (Rs.) 1. 27080537284V Universal Trading Co. 50,39,144/- 2. 273540548975V Blue Nile Enterprises 13,92,196 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, when the assessee failed to produce these parties before AO he added entire amount of bogus purchases of ₹ 2,72,13,601/- by framing assessment under section. 143(3) r.w.s.147 of the Act vide order dated 28/01/2015. 5.3.In the appellate proceedings the Ld. CIT(A) partly allowed the appeal of the assessee by sustaining the addition to the extent of 25% on bogus purchases after considering various contentions and submissions of the assessee and by observing as under :- "10. In view of the above discussion it is seen that the assessee is unable to substantiate its purchases from the claim suppliers who had already established hawala dealers by the Sales Tax Department (Government of Maharashtra) and Investigation Wing of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72,13,601/-. During the assessment proceedings, the assessee produced before the Assessing Officer the bills, vouchers, delivery challans, bank statements, quantitative detail of purchases, goods manufactured and sold. However, assessee could not produce parties before the Assessing Officer for cross verification. The notice issued to these parties were either not served or were not replied to and hence, the Assessing Officer added 100% of the bogus purchases to the income of the assessee. The Ld.CIT(A) reduced the addition to 25% of the bogus purchases by observing that in case of hawala purchases where bills are obtained from hawala traders and simultaneously the goods are purchased from the grey market thereby saving VAT and other incide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s to ₹ 6,66,690/- (₹ 31,29,564 minus 24,62,874). Accordingly the AO is directed to delete the additions of ₹ 61,36,710/-. Appeal is partly allowed. 6.Facts of this appeal are identical to the one as decided in the ITA No.3611/Mum/2017. Therefore, our decision in ITA No.3611/Mum/2017 would mutatis mutandis apply to this appeal as well. In this appeal the assessee has shown gross profit rate of 17.80% besides the VAT payment raised by the Sales Tax department by not allowing the vat credit of ₹ 21,87,497/-.During the year the amount of alleged bogus purchases are ₹ 2,21,56,874/-.Accordingly assessee is allowed relief of ₹ 51,78,676/- after sustaining addition of ₹ 3,60,543/-. Appeal is partly allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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