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TMI Blog2017 (9) TMI 1887X X X X Extracts X X X X X X X X Extracts X X X X ..... in the business of manufacturing of welding machines and equipments and filed its return of income on 30/09/2009 declaring total income at Rs. 2,22,39,880/- Subsequently case was selected for scrutiny and assessment was completed u/s. 143(3) of the Act on 02/08/2011 assessing total income at Rs. 2,22,49,950/-. Thereafter the AO received information the assessee has availed the hawala purchase entries from the various parties to the tune of Rs. 2,72,13,601/- and the case of the assessee was re-opened u/w 147 r.w.s. 148 of the Act by issuing notice u/s. 148 on 22.03.2014.The Assessing Officer(AO)completed the re-assessment u/s.143(3) r.w.s. 147 of the Act on 28/01/2015 determining its income at Rs. 3,08,24,230/- by making addition of Rs. 2,7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and other documentary evidences to prove genuineness of purchases. Simultaneously Assessing Officer conducted physical enquires and these parties were not found at the addresses given by the assessee. The assessee replied to various enquiries as called for and submitted therein that all the purchases of hawala dealers were genuine and that assessee has been maintaining quantitative details of purchases, goods manufactured and sold to various parties. The assessee also submitted that when the sales were accepted as genuine, then how corresponding purchases were not genuine. The notice under section 133(6) by AO were issued to 10 parties out of which the parties mentioned at S.No.1-6 and 8 did not reply whereas parties at Sl.No.7,9,8 and 10 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Going by the ratio of various case laws particularly the discussion and finding of Hon'ble Gujarat High Court in case of Vijay Protein (supra) 25% of the purchases claimed from hawala dealers i.e. 25% of 2,72,13,601/- is disallowed. The Assessing Officer is directed to restrict the disallowance accordingly. As far the issues of VAT and commission paid for purchases are concerned, the above estimation of 25% of profit out of bogus purchases will cover all such related disallowance/additions. Charging of the interest u/s.234B, 234C and 234D of the Income Tax Act, 1961 are concerned, these are mandatory and automatic in nature, hence ground on these issues are Dismissed." 5.4.We have heard the rival submissions and perused the material o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the assessee. We find merit in the submission of the ld.AR that the sustenance of 25% of bogus purchases is excessive and unreasonable particularly when the VAT credit was not allowed to the assessee by the sales tax department and demand of VAT on behalf of hawala suppliers was realized from the assessee. If we look at the gross profit disclosed by the assessee, it is 16.78 % which is much more than the disallowance @ 11.50% which is normally made by the coordinate benches in the case of hawala purchases. But to discourage the practice of bogus trading some deterrent has to be there. In the present circumstances we are of the considered view that ends of justice would be met if the addition is sustained equal to an amount arrived a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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