The Tax Publishers2019 TaxPub(DT) 1660 (Mum-Trib)

INCOME TAX ACT, 1961

Section 68

Where assessee had made purchase from grey market which resulted in savings to him on account of non-payment of tax and others at the expense of exchequer, therefore, 12.5% disallowance out of bogus purchases would meet the end of justice.

Income from undisclosed sources - Addition under section 68 - Bogus purchases -

As per information received from Investigation Wing, assessee-company was one of the beneficiaries of Hawala transactions routed through the hawala dealers as informed by Sales Tax Department. Assessee-company had shown purchases from alleged hawala parties and was asked to furnish necessary documentary evidences. Assessee-company furnished the copies of ledger account of parties and copies of sales invoices raised by few parties. AO issued notices under section 133(6) to parties, calling for information and notices were sent but could not be served due to non-existence of parties at given addresses. Further, to offer an opportunity, assessee-company was asked to furnish the fresh addresses, if any, of the aforesaid parties. However, assessee-company did not furnish any such details or produce the parties for verification. Thus, such hawala purchases were considered as bogus and the same was disallowed accordingly. Held: Assessee had made purchase from the grey market. Making purchases through the grey market gives the assessee savings on account of non-payment of tax and others at the expense of exchequer. In such situation, 12.5% disallowance out of bogus purchases meets the end of justice. However, assessee pleaded that when only the profits earned by him on these bogus purchase transaction was to be taxed, the gross profit already shown by assessee and offered to tax should be reduced from 12.5% being directed to be disallowed on account of bogus purchase.

Relied:Nickunj Eximp Enterprises Pvt. Ltd. v. Asstt. CIT [Writ Petition No. 2860, dt. 18-6-2014] : 2014 TaxPub(DT) 3516 (Bom-HC) CIT v. Simit P. Sheth (2013) 356 ITR 451 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC) & Vijay Proteins Ltd. v. Assistant Commissioner (1996) 58 ITD 428 (Ahd) : 1996 TaxPub(DT) 0829 (Ahd-Trib)

REFERRED :

FAVOUR : partly in assessee's favour

A.Y. :



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