Bogus Billing: Addition to be made upto difference between GP rate on genuine purchases and hawala purchases, says ITAT

Bogus Billing: Addition to be made upto difference between GP rate on genuine purchases and hawala purchases, says ITAT ITAT recently in the matter of Rajesh Prakash Singhavi vs ITO followed the precedent that addition should be made to the extent of difference between the gross profit rate on genuine purchases and gross profit rate on hawala purchases. The facts concerning Shri Rajesh Prakash Singhavi in ITA No.875/PUN/2019 for the A.Y. 2009-10 are that the Assessing Officer (AO) got information from Maharashtra Sales Tax Department about unearthing racket more than 1935 Hawala dealers and 33,700 beneficiaries. The assessee was one of the beneficiaries of the Hawala transactions. The information pertaining to the assessee indicated Hawala purchases from six parties totalling to Rs.95,49,023/-. Re- assessment proceedings were initiated on the basis of such information. The assessee filed return declaring total income of Rs.3,06,880/-. The AO found that the assessee was engaged in trading of Steel bars on wholesale and semi wholesale basis. Considering the assessee’s gross profit at 4.63%, the AO applied the same on such unproved Hawala purchases (excluding VAT) amounting to Rs.91,81,757/-, which resulted into an addition of Rs.4,25,115/-. The assessee challenged the addition before the ld. CIT(A), who after applying with procedural formalities, enhanced the addition to 10% gross profit rate as against the lower rate applied by the AO. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. The tribunal retreated the decision made by Hon’ble Bombay High Court in CIT Vs. Mohommad Haji Adam & Co. Vide its judgment dated 11-02-2019 in ITA No.1004 of 2016 and others, the Hon’ble jurisdictional High Court has held that no ad hoc addition for bogus purchases should be made. Respectfully following the precedent, Shri R.S. Syal set-aside the impugned orders and remitted the matter to the file of the respective AOs for applying the ratio laid down by the Hon’ble jurisdictional High Court in the above noted case and then recomputed the amount of additions, if any, after allowing a reasonable opportunity of hearing to the assessee. For Official Judgment Download PDF Given Below: