Hawala Transactions: ITAT Upholds Addition on Bogus Purchases Due to Absence of Evidence to Rebut [Read Order]

The Mumbai Bench of Income Tax Appellate Tribunal ( ITAT )  upheld the addition of Rs. 74,61,350 made by the Assessing Officer (AO) , being 25% of purchases treated as bogus due to hawala transactions, as the assessee failed to provide any evidence to rebut the findings.

Vinod Omprakash Kainya, appellant-assessee, challenged the Commissioner of Income Tax (Appeals)[CIT(A)] order that confirmed an addition of Rs. 74,61,350 by the AO. This amount was 25% of total purchases booked through fake invoices. The case was reopened after information from DGIT (Inv), showed the appellant inflated purchases using hawala parties. During reassessment, it was found that the appellant had transactions with these hawala parties.

The AO completed the investigation and verification before passing the assessment order under section 143(3) read with section 147 of the Act, adding 25% of the non-genuine purchases to the income.

The assessee counsel said all necessary documents were already submitted and the burden was met. A table was shown with gross and net profit percentages for the previous two years. The counsel asked that the addition be made using the net profit percentage, not the gross profit percentage, for the year in question.

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The single member bench comprising Sandeep Gosain ( Judicial Member ) observed that the TIN status of all parties involved in the alleged purchases was cancelled. The hawala operators gave sworn statements before the Sales Tax authorities admitting they provided accommodation entries for commission without any real transactions.

Read More: ITAT Upholds CIT(A)’s Deletion of Rs. 6.8 crore Addition for Bogus Purchase due to Submission of Valid Proof

The assessee failed to produce these parties, who were also not found at their registered addresses.Consequently, the AO correctly rejected the books of account under section 145(3) of the Act.

The appellate tribunal found no error in the orders of the AO and CIT(A) in treating the purchases as bogus. As no new evidence was brought forward to dispute these findings, the ITAT upheld the decision and dismissed the appeal.

To Read the full text of the Order CLICK HERE

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