High Court of Judicature at Bombay · Judgments and reasoned final orders
Pr. Commissioner of Income Tax 2, Pune v. Amcon Construction
Income Tax Appeal No. 46 of 2024 ·
Alleged hawala/bogus purchases based on general Sales Tax Department information: restriction of disallowance to 10% profit element upheld where sales were accepted.
1. FACTS OF THE CASE
For AY 2011-12, on the basis of information forwarded by the Sales Tax Department regarding alleged hawala entry providers (including M/s Oriental Enterprises), the Assessing Officer treated the assessee's disputed purchases as bogus and made a disallowance that was sustained at 25% by the CIT(A)-3, Pune. On further appeal, the ITAT Pune by order dated 10.11.2021 restricted the disallowance to 10% of the alleged bogus purchases. The Revenue appealed under section 260A, contending that the assessee had failed to produce delivery challans, weigh slips and octroi receipts and invoking N.K. Proteins Ltd. v. DCIT (SLP No. 769 of 2017).
2. DISCUSSION BY THE COURT
The Division Bench held that the issue was squarely covered by its coordinate-bench decisions in PCIT v. Paramshakti Distributors Pvt. Ltd. (ITXA No. 413 of 2017), PCIT-1 v. SVD Resins & Plastics (P.) Ltd., (2025) 474 ITR 151 (Bom), and CIT v. Ramelex (P.) Ltd., 2025 SCC OnLine Bom 3862. Reproducing extensive extracts from those rulings, the Court emphasised that where the Assessing Officer has not rejected the corresponding sales made out of the disputed purchases and relies merely on general information from the Sales Tax Department without independent case-specific verification, furnishing adverse material, or affording cross-examination, only the profit element embedded in the disputed purchases can be brought to tax. Determining that embedded profit element at 10% was a reasonable factual finding by the Tribunal.
3. JUDICIAL DECISION
Holding that the ITAT rightly restricted the addition to 10% of the alleged bogus purchases and that the issues were essentially findings of fact raising no substantial question of law under section 260A, the High Court dismissed the Revenue's appeal with no order as to costs.
4. OUTCOME
In favour of the assessee (Amcon Construction) on the Revenue's appeal. The ITAT's order restricting the addition to 10% of the disputed purchases (as against 25% sustained by the CIT(A)) was upheld.
5. AKHB REVIEW POINT
AKHB analysis: in Sales Tax / MVAT hawala-information cases, compile complete quantitative stock tallies linking disputed inputs to accepted sales, purchase invoices, ledger accounts and account-payee bank payment proofs, and specifically request copies of third-party statements and cross-examination during assessment. Note that the assessee here did not cross-appeal against the 10% estimation sustained by the ITAT.
Source: AKHB analysis based on paragraphs 7-15 / PDF pp. 3-9
Source and verification
Ten-page official Bombay High Court signed order PDF; paragraphs 1-16 span PDF pages 1-10.
Original PDF: 10 pages · SHA-256: 08065d0cb91d5d74a1f254d817ec883e29fc8e52721dfe56d48efd1fcf79d86a
Supplied source-reviewed note retained; original bytes and identity validation checked in this release. Substantive re-review is not claimed for this record.
Applies the Income-tax Act, 1961 for AY 2011-12. Income-tax Act, 2025 equivalence is not verified.
Full order checked. Comprehensive subsequent judicial treatment has not been verified.
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