ITO vs. Paresh Arvind Gandhi (ITAT Mumbai)

DATE: May 13, 2015 (Date of pronouncement)
DATE: May 29, 2015 (Date of publication)
AY: 2010-11
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S. 69C: Law on treating purchases as "bogus" because the supplier is treated as a "hawala" dealer by the VAT authorities explained

The AO had not doubted the genuineness of the purchase but had made the disallowance of Rs.1.37 crores invoking the provisions of 69C of the Act. AO made the addition as the supplier was declared a hawala dealer by the VAT Department. It was a good starting point for making further investigation and taken it to logical end. However, the addition is not sustainable as the purchases had been made through A/c payee cheques that were duly reflected in the bank statement of the assessee, the assessee had produced register of material purchased, copies of VAT returns, IT returns and confirmation of parties from whom the alleged purchases were supposed to have been made alongwith their MVAT reports, the assessee was engaged in the process of manufacturing equipment that required steel, the AO had at no stage countered the evidences produced by the assessee, he had not conducted any independent enquiry to establish that the purchases were not genuine, absence of delivery challan was not sufficient to prove non-genuineness of transaction. The assessee had produced the evidence of making payments from his bank account, the source of the said money was not doubted by the AO, the expenditure on purchases could not be treated as unexplained, that the assessee was not given any opportunity to cross examine the parties despite the fact that assessee had specifically asked the same. (Rajiv G Kalathil (ITA/6727/Mum/2012, dated 20.08.2014), Milk Food (65 TTJ848), M/s. Balaji Textile Ind. (49ITD117); M. K. Brothers (163 ITR 249); Premanand (25 SOT 11) Ponkunnam Traders (102 ITR 366) referred)

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