The Tax Publishers2021 TaxPub(DT) 0294 (Mum-Trib)

INCOME TAX ACT, 1961

Section 68

Ratio of the judgment of High Court in the case of Simit P. Seth (2013) 356 ITR 461 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC) was applicable to the facts and circumstances of assessee's case wherein it was held that disallowance of 12.5% of the purchases from such Hawala dealers would be justified, thus, disallowance made by AO was restricted from 25% to 12.5%.

Income from undisclosed source - Addition under section 68 - Bogus purchases - CIT-A restricting the addition to 12.5%

AO received information from the DGIT (Inv.,) about accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. He furnished partywise purchase details along with ledger account and submitted that purchases made were genuine. However, parties were not produced before AO and no explanation was offered. AO treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there being any transportation of materials and assessee might have made purchases in the gray market. It is finding of AO that assessee failed to discharge his prima facie onus of proving the identity of parties, genuineness of the purchases and purchase from the parties to prove claim of the assessee. Therefore, AO treated 25% of alleged bogus purchases as non-genuine. CIT(A) restricted the disallowance to an extent of 12.5% of the non-genuine purchases. Held: AO rightly disallowed part of the purchases claimed such hawala dealers. However, the ratio of the judgment of High Court in the case of Simit P. Seth (2013) 356 ITR 461 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC) was applicable to the facts and circumstances of assessee's case wherein it was held that disallowance of 12.5% of the purchases from such hawala dealers would be justified. Hence, the disallowance made by AO was restricted from 25% to 12.5%. Thus, appeal of Revenue was dismissed.

Followed:CIT v. Simit P Sheth (2013) 356 ITR 461 (Guj) : 2013 TaxPub(DT) 2115 (Guj-HC), Shoreline Hotel Pvt. Ltd. v. CIT [ITA No. 964/M/2015 darted 19-6-2015] : 2015 TaxPub(DT) 2982 (Mum-Trib) and Ganpatraj A. Sanghavi v. Asstt. CIT 2014 TaxPub(DT) 4174 (Mum-Trib).

REFERRED :

FAVOUR : In assessee's favour.

A.Y. : 2009-10 & 2010-11



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