Harshadray Vrajlal Sanghavi vs. ITO, Ward-41(2)(1), Mumbai

Parties Involved

Facts Summary

The assessee filed its return of income on 11/09/2010 declaring total income of Rs. 1,12,951/-. The return was processed under section 143(1) of the Act and subsequently on the basis of the information received from DGIT (Inv.), Mumbai, the assessment was reopened because the AO came to know that some businessmen had indulged in the acceptance of bogus bills from bogus purchase bills from bogus hawala bills providers. The AO also had the information that Sales Tax Department, Mumbai, carried out detailed enquiries which established that certain persons were into providing bogus bills. As per the information, the assessee was also found to be the beneficiary of such bogus purchase bills amounting to Rs. 1,84,30,266/-. The assessee was asked to furnish the details of the purchases and to prove the genuineness of the purchases. The assessee filed a detailed reply which did not find any favour with the AO. The AO was of the opinion that mere filing bills in support of purchases and showing payments through account payee cheques, cannot be conclusive in a case where genuineness of the transactions is in doubt. Drawing support from various judicial decisions, the AO disallowed 12.5% of the alleged bogus purchases of Rs.1,84,30,266/- and made addition of Rs. 23,03,783/-. The assessee challenged the assessment before the Commissioner of Income Tax (Appeals) and strongly contended that the gross profit of the assessee is 5.77% for the year ended 31/03/2007. Thereafter, the gross profi…

Legal Issues

• 1. Whether the entire purchase amount should be added by way of assessee's additional income or the assessee is correct in contending that such logic cannot be applied.

Judgment Outcome

Decided in favour of Revenue.

Precedents Relied Upon

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