Recent Controversy on alleged Hawala Purchases
05.09.14
CA Devendra Jain
Analysis of DCIT v. Rajeev D. Kalathil (ITA
No. 6727/Mum/2012)
Assessee relied upon:
‒
‒
‒
‒
‒
copies of bills
suppliers carrying proper VAT registration
ledger accounts of the parties in assessee's books
payment was made by cheques
a certificate from the banker giving details of cheque
payment to the suupliers
‒ copies of the consignment note
‒ some material purchased from the said parties lying
as part of closing stock
Analysis of DCIT v. Rajeev D. Kalathil (ITA
No. 6727/Mum/2012)
Department relied upon:
‒ suppliers were not produced before the Assessing
Officer
‒ declared hawala dealer by VAT department,
‒ because of cheque payment made to the supplier
transaction cannot be taken as genuine.
Analysis of DCIT v. Rajeev D. Kalathil (ITA
No. 6727/Mum/2012)
ITAT was guided by the following factors:
‒ proof of transportation of goods
‒ fact that part of the goods received by the assessee
was forming part of closing stock,
‒ payment through banking channels
‒ No proof of immediate cash withdrawals by
suppliers
• However, these factors need to be evaluated
cumulatively along with the other facts of the
case. Mere absence of one of these factors
should not lead to a conclusion that the
transaction is not genuine. E.g. many a
times, the nature of goods is such that it is
delivered personally and there can not be a
separate proof of transportation.
• Other Rulings:
• The Honorable Gujarat High Court has in the case of CIT v.
M.K Brothers [1987] 30 TAXMANN 547 (GUJ.) held that
when the payments for purchases are made by cheques
and there is nothing to indicate that any part of the fund
given by the assessee to these parties came back to the
assessee in any form, the purchases can not be held to be
bogus.
• Similar view was taken by ITAT Jodhpur Bench in the case
of Jagdamba Trading Co. v ITO (2007) 16 SOT 66 (Jodh)
and ITO v. Permanand (2008) 25 SOT 11 (Jodh )(URO).
• Other Rulings:
• Babula Borana vs. Third ITO [(2005) 144 Taxman
674(Bom.)]
• Nikunj Eximp Enterprises (P) Ltd. [(2013) 216 Taxman
171(Bom.)].
• Other Rulings:
• ITO v. Arora Alloys Ltd. [2012] 25 taxmann.com 134
(Chandigarh - Trib.)
• The statement made before the Central excise authorities
in the context of levy of excise duty on unaccounted
production can not form the sole basis for making additions
by the Assessing Officer under the Income Tax Act.
• YFC Projects (P) Ltd. v. DCIT (2010) 37 SOT 130 (Delhi)
• Merely for non-filing of confirmation from suppliers, it
cannot be held that assessee has not received the goods
from these persons and the credit balance in the shape of
sundry credit appearing in the books of account is
unaccounted money of the assessee.
• Other Rulings:
• ITO v. Arora Alloys Ltd. [2012] 25 taxmann.com 134
(Chandigarh - Trib.)
• The statement made before the Central excise authorities
in the context of levy of excise duty on unaccounted
production can not form the sole basis for making additions
by the Assessing Officer under the Income Tax Act.
• YFC Projects (P) Ltd. v. DCIT (2010) 37 SOT 130 (Delhi)
• Merely for non-filing of confirmation from suppliers, it
cannot be held that assessee has not received the goods
from these persons and the credit balance in the shape of
sundry credit appearing in the books of account is
unaccounted money of the assessee.
• Other Rulings:
• Khandelwal gems Trading Corpn. Ltd. v. ACIT (1995) 83
Taxman 41 (Jaipur)(Mag.)
• Non-production of parties was not sufficient ground to draw
an adverse inference, particularly when the addresses
given by the assessee tallied with those available with the
bankers of those parties and with the sales tax authorities.
• J.H. Metals v. ITO (2001)77 ITD 71 (Asr.) (TM )
• In case of purchases which are not adequately
documented, if the gross profit declared is in line with the
past gross profit rates, no addition should be made.
Thank You
dhjainassociates@gmail.com
11