The Income Tax Appellate Tribunal (ITAT), Pune Bench presided by Mr. R.S. Syal, Vice President has held that the profit element of hawala purchase would be subjected to tax, not the entire amount.
The appellant, Navin Sirahmal Mukim is engaged in the manufacturing and trading of Jewellery items. During the assessment, the Assessing Officer added an amount of Rs.27,91,507/- to the total income of the appellant alleging that the appellant was one of the beneficiaries of Hawala purchases. The addition got confirmed in the first appeal.
The Tribunal observed that the appellant purchased diamonds through the Hawala purchase bills and thereafter utilized the same in the manufacture of the jewelry.
The Tribunal further observed that the entire amount of purchase bills does not require addition but only the profit element because the diamonds must have been purchased at lower prices instead of which costly hawala purchases were recorded, which were used in the jewelry-making
The Tribunal by relying on the decision of the Jurisdictional High Court in Principal CIT Vs. Paramshakti Distributors Pvt. Ltd. has restricted the addition to 10% of the amount of purchases.
Mr. M.K. Kulkarni and Mr. Piyush Kumar Singh Yadav appeared for the appellant and the respondent.
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