The Tax Publishers2020 TaxPub(DT) 3114 (Pune-Trib)

INCOME TAX ACT, 1961

Section 69

In entire transaction of obtaining fake bills from hawala operators regarding purchase of machines and actually installing such machines by purchasing them from grey market, the only thing which could be called for disallowance was depreciation claimed by assessee on excess purchase price of those machines.

Income from undisclosed sources - Addition under section 69 - Purchases of machines from hawala operators - Treatment as bogus purchases--Disallowance of depreciation on hawala purchase of machines

AO got some information that assessee-firm obtained accommodation entries from hawala operators. Those accommodation entries were related to purchase of certain machines, which were capitalized by the assessee in its books of account. Accordingly, the assessee was called upon to furnish purchase bills, evidence of installation and putting the machines to use, delivery challans etc., however, the assessee furnished incomplete information. Further, the AO conducted an independent enquiry by calling information under section 133(6) from the said hawala operators. The enquiry transpired that there was no existence of genuine businesses and further their bank accounts indicated that the same were used for only accommodation entries. Therefore, the AO treated such purchases as bogus and made addition under section 69. In addition to that, the AO also disallowed depreciation on such fixed assets. Held: It was found that the AO personally visited the factory premises of assessee and found three injection molding machines were actually installed. It was further found that the assessee recorded purchase of those machines from the alleged sellers, in respect of which the assessee could not substantiate the receipt of machines except for the bills. Thus, it could be inferred that those machines were purchased from grey market and only the bills with higher value were taken from the hawala operators. Therefore, the only thing which could be called for disallowance was depreciation claimed by the assessee on excess purchase price of those machines. Further, the GP rate in the extant hawala transactions was 15% and the assessee actually purchased machinery at 85% of the declared value, for which the bills were obtained for 100%. Accordingly, the purchase value of the machines would get reduced to 85% instead of 100% and the claim of depreciation on such excess of 15% would be disallowed. Further, the addition made under section 69 was unwarranted and the same was deleted.

REFERRED :

FAVOUR : Partly in favour of assessee.

A.Y. : 2009-10



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