M/s IHR Associates, Ludhiana V. DCIT, Ludhiana

CO 10/CHANDI/2017

• Counselvise Citation: [2017] 123 COUNSELVISE.COM (IT) 3206 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 11 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 20-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Bogus purchase; Rejection of books of accounts; Permanent establishment
• Section: 40A(3); 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO.60/CHD/2009 ASSESSMENT YEAR:2011-12 DY. CIT VS. M/S IHR ASSOCIATES CIRCLE-6, LUDHIANA 3791/C, 1 ST FLOOR, JOY PLAZA COMPLEX, JAGJIT NAGAR PAKHOWAL ROAD, LUDHIANA PAN NO. AACFI4581N CROSS OBJECTION NO. 10/CHD/2017 ASSESSMENT YEAR:2011-12 M/S IHR ASSOCIATES VS. DCIT 3791/C, 1 ST FLOOR CIRCLE-6 JOY PLAZA COMPLEX, JAGJIT NAGAR LUDHIANA PAKHOWAL ROAD, LUDHIANA (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. SUDHIR SEHGAL DEPARTMENT BY : SH. MANJIT SINGH DATE OF HEARING : 08/08/2017 DATE OF PRONOUNCEMENT : 02/11/2017 ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A ND CROSS OBJECTION FILED BY THE REVENUE AGAINST THE COMMON O RDER OF THE LD. CIT(A)-3 DT. 07/10/2016. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: I. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN RESTRICTING THE ADDITION OF RS. 1,97,55,357/- TO RS. 15,00,000/ - WITHOUT GIVING THE REASONS AND BASIS FOR RESTRICTING THE ADDITION. II. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD PRODUCE CONFIRMATION / SUPPLIER ONLY TO THE TUNE O F 61.93% OF THE TOTAL PURCHASES OF RS. 5,27,81,496/- AND IN NOT APP RECIATING THAT ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE ENTIRE PURCHASES CLAIMED TO HAVE BEEN MADE BY IT. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN ITS CROSS OBJECTION: 1. THAT THE WORTHY COMMISSIONER OF INCOME TAX (A) HAS ERRED IN RESTRICTING THE ADDITION TO THE TUNE OF RS. 15 LACS AS PER PARA 3.1.3 OF THE ORDER. 2. THAT THE RESTRICTING OF ADDITION TO THE TUNE OF RS. 15 LACS IS AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. BRIEF FACTS OF THE CASE ARE THAT THE RETURN DECL ARING INCOME OF RS. 17,91,640/- WAS FILED ON 30/09/2011. THE ASSESSEE F IRM IS IN THE BUSINESS OF CONSTRUCTION OF ROAD, BUILDING ETC. DURING THE COUR SE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE FIRM WHO IS A CIVIL CONTRACTOR CARRIED ON CONTRACT OF CONSTRUCTION OF ROADS AND BU ILDING ETC. THE ASSESEE HAD DEBITED PURCHASES OF CONSTRUCTION MATERIAL IN THE S HAPE OF BITUMEN, STONE/CRASHER, SAND, BRICKS, CEMENT, MITTI ETC. TO THE TUNE OF RS. 5,27,81,496/-. THE ASSESSING OFFICER FURTHER NOTED THAT ALMOST ALL THE PAYMENTS WERE MADE IN CASH NOT EXCEEDING THE MONETARY LIMIT LAID DOWN UND ER SECTION 40A(3) OF THE ACT TOTALING RS. 47,31,397/-. FURTHER THE ASSESSING OFFICER HAS ISSUED NOTICE UNDER SECTION 133 TO VARIOUS PARTIES IN ORDER TO VERIFY T HE GENUINENESS OF THE PURCHASES. OWING TO NON PRODUCTION OF THE PARTIES BY THE ASSES SEE THE ASSESSING OFFICER HAS DISALLOWED THE AMOUNT OF RS. 1,97,55,357/- OUT OF T HE TOTAL AMOUNT DEBITED OF RS. 5,27,81,496/-CLAIMED BY THE ASSESSEE ON ACCOUNT OF PURCHASE OF CONSTRUCTION MATERIAL LIKE BITUMEN , SAND , AND BRICKS. 5. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE L D. CIT(A). 6. THE LD. CIT(A) VIDE ORDER DT. 07/10/2016 HAS RES TRICTED THE ADDITION OF RS. 1,97,55,357/- TO RS. 15,00,000/-. WHILE DELETING TH E ADDITION THE LD. CIT(A) HAS HELD AS UNDER: APPARENTLY, THIS IS THE CASE WHEREIN THE AO HAS NOT FOLLOWED SOME BASIC FACTS OF THE CASE. APPARENTLY, THE APPELLANT IS ENGAGED IN T HE BUSINESS OF CIVIL CONSTRUCTION. THE AO MADE ADDITIONS ON ACCOUNT OF U NVERIFIABLE PURCHASES TO THE TUNE OF RS. 1,97,55,357/- FOR PURCHASING CONSTR UCTION MATERIALS NAMELY BITUMEN/STONE/CRASHER/SAND/BRICKS/CEMENT/MITTI ETC. THE MAJOR PART OF THE PURCHASES WERE MADE IN CASH AND SUCH PARTIES COULD NOT BE PRODUCED BEFORE THE AO AS THESE PARTIES WERE PETTY SUPPLIERS WHO DO NOT HAVE A FIXED PLACE OF BUSINESS, THE APPELLANT HAS DEBITED THE PURCHASES O F CONSTRUCTION MATERIAL IN THE SHAPE OF BITUMEN, STONE/CRASHER, SAND, BRICKS, CEME NT, MITTI ETC. TO THE TUNE OF RS.5,27,81,496/-. THE APPELLANT DURING THE COURSE O F ASSESSMENT PROCEEDINGS, WAS ASKED TO FILE THE PARTY WISE DETAILS OF THE PURCHAS ES MADE BY THE ASSESSEE. THE COMPLETE LIST OF 30 PERSONS ALONG WITH THE ADDRESSE S OF PARTIES WERE FILED WITH THE ASSESSING OFFICER AND THIS INFORMATION WAS FILED ON THE BASIS OF WHATEVER INFORMATION THE ASSESSEE HAD ABOUT SUCH PARTIES. TH E APPELLANT FURTHER CONTENDED THAT THE SUPPLIERS OF THESE GOODS HAVE NO PERMANENT PLACES FOR CARRYING ON THE BUSINESS. IN VIEW OF THE CIRCUMSTAN CES AND THE REGULAR PRACTICE AS DESCRIBED BY THE APPELLANT, THE APPELLANT COULD NOT PRODUCE OR LEAD ANY EVIDENCE AS PER THE ASSESSING OFFICER IN RESPECT OF 15 PARTIES AND THE ASSESSING OFFICER WITHOUT CONSIDERING THAT THE PURCHASES TO T HE TUNE OF 61.93% OF RS. 527.81 LACS HAVE PROVED MADE THE ADDITION OF RS. 1,97,55, 357/- IN RESPECT OF THE PARTIES, WHO COULD NOT BE PRODUCED BY IT ONLY ON THE BASIS T HAT NO CONFIRMATIONS HAVE BEEN FILED NOR SUCH PARTIES HAD BEEN PRODUCED DURIN G THE COURSE OF HEARING BEFORE THE ASSESSING OFFICER. 3.7 THE APPELLANT HAS FURTHER STRONGLY CONTENDED TH AT THE APPELLANT IS IN LINE OF THIS BUSINESS FROM PAST MANY YEARS AND IN THE EARLIER YE ARS THE BOOK RESULTS OF THE APPELLANT HAVE BEEN ACCEPTED CONSISTENTLY YEAR AFTE R YEAR ON THE BASIS OF SAME SET OF RECORDS AND BOOKS OF ACCOUNTS AS MAINTAINED IN THIS YEAR. APART FROM THIS THE APPELLANT HAS FURTHER CONTENDED THAT THE APPELL ANT WAS ASKED TO FILE THE CONFIRMATION IS IN RESPECT OF SUCH PURCHASES OF RS. 1,97,55,357/- AT THE FAG END OF 2013 AND AS ON 31 ST MARCH, 2011, NO AMOUNT WAS PAYABLE IN RESPECT OF S UCH PARTIES FROM WHOM, PURCHASES HAVE BEEN MADE AND, AS SUCH, THE APPELLANT HAD NO MEANS TO HAVE THE ADDRESS OF SUCH PARTIES UNDER SUCH CIRCUMSTANCES. 3.8 THE APPELLANT HAS FURTHER STRONGLY CONTENDED THAT I T IS A REGISTERED A CLASS CONTRACTOR AND THERE HAS BEEN NO DISPUTE WITH REGAR D TO WORK DONE BY THE APPELLANT DURING THE ASSESSMENT YEAR. THEREFORE, LO GIC BEHIND ONLY DISALLOWANCE OF PURCHASES PERTAINING TO STONE/CRASHER, SAND, BRI CKS, MITTI AND SUCH ITEMS ARE NECESSARY FOR THE PURPOSES OF EXECUTION OF THE CONT RACT AND WITHOUT WHICH, THE VARIOUS CONTRACTS COULD NOT BE COMPLETED IS NOT JUS TIFIABLE. THE APPELLANT HAS FURTHER SUBMITTED THE QUANTITATIVE TALLY IN RESPECT OF VARIOUS ITEMS AS PURCHASE BY THEM AND WHICH PROVES THAT THE ACTUAL MATERIAL HAS BEEN CONSUMED BY THE APPELLANT FOR THE PURPOSE OF EXECUTION OF TIME BOUN D CONTRACT. THE APPELLANT HAS FURTHER STRONGLY CONTENDED THAT THE ASSESSING O FFICER HAS NOT REJECTED THE BOOKS OF ACCOUNTS EITHER U/S 145(3) OR OTHERWISE WH EREAS IT IS A SETTLED LAW THAT NO ADDITION CAN BE MADE IF THE BOOKS OF ACCOUNTS U/S 1 45(3) ARE NOT REJECTED. NEITHER THE ASSESSING OFFICER HAS POINTED OUT ANY D EFECTS IN THE BOOKS OF ACCOUNTS WHICH CAN BE A GOOD GROUND FOR MAKING THE ADDITION. THE APPELLANT HAS RELIED UPON THE DECISION OF HON'BLE JURISDICTIONAL BENCH O F ITAT, CHANDIGARH WHEREIN THE ISSUE WAS RELATED TO BOGUS PURCHASES AND IT WAS HEL D THAT SINCE THE ASSESSEE MAINTAINS PROPER QUANTITATIVE DETAILS OF THE PURCHA SE/SALES MADE AND THERE WAS NO OUTSTANDING BALANCE OF THE PARTIES IN WHOSE CASE ADDITION ON ACCOUNT OF BOGUS PURCHASE WAS MADE AND THEREFORE, THE ADDITION MADE BY THE AO WAS DELETED BY THE ITAT. 3.9 APART FROM THE ABOVE SUBMISSION, THE APPELLANT HAS REALLY STRONGLY CONTENDED THAT IT HAS DECLARED A NET PROFIT RATE OF 2.07% IN ITS PROFIT AND LOSS ACCOUNT AS AFTER CONSIDERING THE ADDITIONS MADE BY THE ASSESSING OFFICER THE NET PROFIT RATE JUMPS TO 25.15% WHICH IS HIGHLY OF NORM AL RATE OF NET PROFIT AND WHICH IS TOTALLY IMPOSSIBLE RATE OF NET PROFIT IN CONSTRUCTI ON BUSINESS. EVEN IF THE PAST HISTORY OF THE APPELLANT IS CONSIDERED THEN IT IS SEEN THAT THE NET PROFIT RATE AS DECLARED BY THE APPELLANT IS RANGING BETWEEN 2% - 3% WHICH H AS BEEN DULY ACCEPTED BY THE DEPARTMENT YEAR AFTER YEAR. EVEN IN THE SUBSEQU ENT YEARS THE NET PROFIT RATE IS SOMEWHERE BETWEEN 2.64% AND 3.50%. THE APPELLANT HA S RELIED UPON A CHART OF NET PROFIT RATIOS OF EARLIER YEARS AND SUBSEQUENT Y EARS. A.Y GROSS WORK DONE I.E. SALES NET PROFIT (IN RS.) N.P. RATIO BEFORE ASSESSMENT U/S 143(1)/143(3) OF THE ACT N.P. AFTER ADDITIONS MADE BY THE AO N.P. RATIO 2009-10 1,83,69,944 3,92,449 2.14% NIL 2.14% 2010-11 3,95,09,598 6,75,578 1.71% NIL 1.71% 2011-12 8,56,17,738 17,72,675 2.07% 2,15,28,032 25. 14% 2012-13 9,80,97,467 20,37,288 2.08% 25,89,027 2.64% 2013-14 9,48,06,276 27,72,423 2.92% 33,13,042 3.50% 2014-15 8,81,76,823 41,02,032 4.65% NOT ASSESSED 4.65% 2015-16 10,15,63,577 45,34,561 4.46% NOT YET ASSESSED 4.46% 3.10 THE APPELLANT HAS ALSO CONTESTED THAT THE ASSE SSING OFFICER OBSERVED THAT THE APPELLANT HAD PRODUCED ONLY 9 SUPPLIERS OUT OF LIST OF 30 SUPPLIERS FILED BY THE APPELLANT AND ON THE REPEATED REQUEST THE APPELLANT FAILED TO PRODUCE REMAINING SUPPLIERS. BOTH ARE MENTIONED BELOW:- A. THE APPELLANT PRODUCED FOLLOWING SUPPLIERS: SRNO. NAME OF THE SUPPLIER AMOUNT OF PURCHASES 1. ABINASH TRADERS, LUDHIANA RS. 10,07,100/- 2. GURU TEG BAHADUR CO., LUDHIANA RS. 10,45,800/- 3. SHIVAM ENTERRPRISES, LUDHIANA RS. 12,75,300/- 4. VISHAL STONE ENTERPRISES RS. 11,45,350/- 5. SHIV SHANKER STONE RS. 14,97,100/- 6. SUKHDEV CRASHER AND STONE, LUDHIANA RS. 10,12,96 5/- 7. SURJIT TRADERS, LUHDIANA RS. 10,49,600/- 8. SIDHU BRICKWORKS, LUDHIANA RS. 5,76,075/- 9. PUNJAB CEMENT, LUDHIANA RS 2,00,440/- B. THE APPELLANT DID NOT PRODUCE FOLLOWING SUPPLIER S: SR NO. NAME OF THE SUPPLIER AMOUNT OF PURCHASES 1. SHARAN PROPERTIES AND SUPPLIERS, LUHDIANA RS. 25,69,900/- 2. AKAL TRADING COMPANY, LUDHIANA RS 23,70,600/- 3. RINKU TRADING CO., LUDHIANA RS. 27,95,560/- 4. OM CRUSHERS, LUHDIANA RS. 26,45,550/- 5. NEW AKAL TRADING CO., LUDHIANA RS. 28,60,175/- 6. NEW JAI HIND TRADING CO. PATHANKOT RS. 3,95,900/ - 7. THAKURDALJIT&CO., HP RS. 8,25,100/- 8. CHOUDHARY CRUSHER, HP RS. 6,25,750/- 9. JHELAM STONE CRUSHER, HP RS. 7,25,800/- 10. SHARMA AND COMPANY HP RS. 5,05,900/- 11. RADHEY SHAM & CO. HP RS. 5,09,000/- 12 JANTA CRUSHER HP RS. 5,85,600/- 13. J.S.ROAD CARRIERS, HP RS. 6,84,797/- 14. CHOUDHARY TRADERS JALANDHAR, HP RS. 8,25,425/- 15. MOGE WALIAN DI COMPANY, SARNA (PB) RS. 8,30,300 /- TOTAL RS. 1,97,55,537/- ACCORDINGLY, IN VIEW OF THE ABOVE FACTS THE AO HELD THAT THE PURCHASES OF RS.1,97,55,537/- PERTAINING TO PURCHASES OF CONSTRU CTION MATERIAL IN THE SHAPE OF BITUMEN, STONE/CRASHER, SAND, BRICKS, CEMENT, MITTI , COULD NOT BE CONFIRMED BY THE APPELLANT BY NOT PRODUCING THE SUPPLIERS AND TH E SAME WERE TREATED AS INGENUINE AND UNVERIFIABLE PURCHASES AND FURTHER DI SALLOWED THE SAME. 3.11 I HAVE GONE THROUGH THE DETAILED SUBMISSION FILED B Y THE APPELLANT. I HAVE ALSO GONE THROUGH THE ASSESSMENT ORDER AND SUBSEQUE NT REPORTS OF THE ASSESSING OFFICER. IN MY CONSIDERED VIEW, I AM INCLINED TO AG REE WITH THE CONTENTION OF THE APPELLANT AFTER GOING THROUGH THE DETAILED SUBMISSI ON FILED BY THE APPELLANT, IN MY OPINION THE ASSESSING OFFICER WHO HAD GIVEN SHOW CAUSE DURING THE COURSE OF ASSESSMENT PROCEEDINGS OF ASSESSING INCOME AT THE R ATE OF 12%, HAS FAILED TO TAKE STEPS WHICH WOULD STATUTORILY CASTED UPON HIM TO AR RIVE AT THE CONCLUSION TO MAKE HIM ADDING THE HUGE ADDITION OF RS. 1,97,55,537/- O N ACCOUNT OF DISCREPANCIES IN VERIFICATION OF THE PURCHASERS. IN MY VIEW, THE ASS ESSING OFFICER HAS FAILED TO APPLY THE LOGIC BEHIND THE REJECTION OF AN ENTIRE PURCHAS E OF RS. 1,97,55,537/- WHEREAS IT HAS NOT GIVEN ANY LOGIC AS TO FROM WHICH WAS THE AP PELLANT HAS PURCHASED OR UTILISED THE MATERIAL UNDER CONSIDERATION FOR WHICH THE DISALLOWANCE OF RS. 1,97,55,537/-HAVE BEEN MADE. THE ASSESSING OFFICER HAS ALSO NOT SUPPLIED THE LOGIC OF POINTED OUT TOWARDS ANY OTHER DEFECTS IN T HE BOOKS OF ACCOUNTS OF THE APPELLANT WHICH HAS COMPELLED HIM TO MAKE SUCH HUGE ADDITION. THE ASSESSING OFFICER HAS NOT EVEN CARED TO REJECT THE BOOKS OF A CCOUNTS UNDER SECTION 145(3) OF THE ACT BEFORE APPLYING HIS LOGIC OF MAKING SUCH HUGE ADDITION. THE FACT THAT OF ACCOUNTS OF THE APPELLANT HAS BEEN AUDITED BY TH E CHARTERED ACCOUNTANT AND THE ASSESSING OFFICER HAS NOT POINTED OUT ANY M AJOR DEFECTS AND REJECTED THE BOOKS OF ACCOUNTS IN ORDER TO ARRIVE THE TRUE AFFAI RS OF THE APPELLANT. 3.12 APPARENTLY, IT IS OBSERVED THAT THE ASSESSING OFFIC ER HAS COMPLETELY IGNORED THE HISTORY OF THE APPELLANT IN PRECEDING Y EARS AND SUBSEQUENT YEARS. THE NET PROFIT SHOWN BY THE APPELLANT SHOWS THAT THE NE T PROFIT RATE REFLECTED BY THE APPELLANT ALL THESE YEARS IS RANGING BETWEEN 2.64% AND 3.50%. HOWEVER, THE ASSESSING OFFICER HAS FAILED TO WORK OUT ANY OTHER DEFICIENCY IN THE BOOKS OF ACCOUNTS OF THE APPELLANT TO WORK OUT THE NET PROFI T AFTER REJECTION OF BOOKS OF ACCOUNTS. THEREFORE, IN TOTALITY GOING THROUGH THE FACTS OF THE CASE AND THE PAST AND RECENT HISTORY OF THE CASE IN MY CONSIDERED VIE W CONSIDERING THAT IN THE IMMEDIATE SUCCEEDING YEAR THAT IS ASSESSMENT YEAR 2 012-13 WHEREIN THE TURNOVER WAS RS.9,80,97,467/- AND THE ASSESSING OFFICER MADE THE ADDITION OF RS.25,89,027/- WHICH WORKED OUT THE NET PROFIT AT THE RATE OF 2.64 %. WHEREAS, IN THE ASSESSMENT YEAR IN QUESTION THE PROFIT RATE AFTER COMPLETION O F ASSESSMENT COMES TO 25.14% WHICH IS HIGHLY EXORBITANT. 3.13 THEREFORE, AFTER CONSIDERING ALL THE FACTS OF THE CASE AND THE DECISIONS RELIED UPON BY THE APPELLANT IN MY CONSIDERED VIEW THE ADD ITION OF RS.15 LAKH WOULD BE ENOUGH TO TAKE CARE OF THE DEFICIENCIES WORKED OUT BY THE ASSESSING OFFICER. ON THIS ACCOUNT, IN MY VIEW THE ASSESSING OFFICER SHOU LD HAVE REJECTED THE BOOKS OF ACCOUNTS STATING THE DEFECTS IN THE BOOKS OF ACCOUN TS OF THE APPELLANT. THEREFORE, SUBJECT TO THE ADDITION OF RS. 15,00,000 /- THE ADDITION OF RS.1,97,55,537/- IS ORDERED TO BE DELETED. 7. BEFORE US THE LD. SR. DR RELIED ON THE ASSESSMEN T ORDER. THE LD.SR. DR ARGUED THAT THE ASSSESSEE HAS FAILED TO PRODUCE THE PARTIES THUS FAILED TO DISCHARGE THE ONUS OF PROVING THE PURCHASE OF MATER IAL AS GENUINE. IT WAS FURTHER ARGUED THAT SINCE THE BUSINESS IS ON GOING PROCESS THERE SHOULD NOT HAVE BEEN ANY DIFFICULTY FOR THE ASSESSEE TO PRODUCE THE PARTIES PERTAINING TO SAND AND BRICKS AND ALSO KEEPING IN VIEW THE FACT THAT I T IS VERY UNLIKELY THAT THE STONE CRUSHERS SHIFT THEIR PLANT AND OPERATIONS FREQUENTL Y. 8. THE LD. AR HAS SUBMITTED THAT OUT OF THE RS. 5.2 7 CRORES OF PURCHASES THE PURCHASE FROM INDIAN OIL CORPORATION ITSELF IS TO T HE TUNE OF RS. 2.30 CRORES LEAVING THE TOTAL PURCHASES OF RS. 2.97 CRORES FROM THE UNREGISTERED DEALERS OUT OF WHICH 1.97 CRORES HAS BEEN DISALLOWED WHICH COME S TO 66.3% OF THE REMAINING PURCHASES. THE LD. AR FURTHER RELIED ON T HE SUBMISSIONS MADE BEFORE THE CIT(A). 9. WE HAVE HEARD LD. REPRESENTATIVES OF BOTH THE PA RTIES AND PERUSED THE MATERIAL PLACED BEFORE US AND ALSO THE ORDER OF TH E LD. CIT(A). 10. THE ASSESSEE HAS BEEN CONTINUOUSLY DECLARING NE T PROFIT IN THE RANGE OF 1.71% TO 4.65% AND THE DISALLOWANCE MADE BY THE ASS ESSING OFFICER IF ACCEPTED WOULD INCREASE THE NET PROFIT TO THE TUNE OF 25.15% WHICH IS VERY ABNORMAL. THE CONTENTION OF THE AR THAT THE SUPPLIERS OF THESE GO ODS HAVE NO PERMANENT PLACE FOR CARRYING ON THE BUSINESS CAN BE ACCEPTED. THERE WERE NO DEFECTS IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE HAS BEEN POIN TED OUT BY THE ASSESSING OFFICER. IT CANNOT ALSO BE SAID THAT AFTER PURCHASI NG BITUMEN TO THE TUNE OF RS. 2.30 CRORES IN THE WORK CAN BE EXECUTED BY USING TH E BUILDING MATERIAL TO THE TUNE OF RS. 1.07 CRORES ONLY AS EQUIVALENT BUILDING MATERIAL IS ALSO REQUIRED TO UTILIZE THE BITUMEN. MOREOVER THE ASSESSEE HAS DONE MAJOR PART OF THE WORK FOR THE GOVERNMENT DEPARTMENTS AND THE AUTHENTICITY OF THE WORK DONE HAS BEEN CONFIRMED BY THE GOVERNMENT DEPARTMENT. IN THE CASE OF CIT VS. LEADERS VALVES PVT. LTD. 285 ITR 0435 (P&H HIGH COURT)[2006] WHEREIN HONBLE HIGH COURT HELD THAT IF THE PURCHAS E WERE TREATED AS BOGUS IT WOULD BE IMPOSSIBLE TO MANUFACTURE THE GOODS SHOWN TO HAVE BEEN MANUFACTURED BY IT. THIS IS APPLICABLE IN THE CASE OF THE ASSESSEE ALSO AS THE DISALLOWANCE WILL LEAD TO NET PROFIT OF 25% AND ALS O THE FACT THAT THE WORK EXECUTED BY THE ASSESSEE HAS BEEN CERTIFIED BY THE GOVERNMENT AGENCIES. THE QUANTITATIVE DETAILS OF BITUMENT HAS BEEN CLEARLY M ENTIONED ALONG WITH CORRESPONDENT UTILIZATION OF MITTI, SAND AND CRUSHE R STONE. IN THE CASE OF ITO VS. LAM SADIK ITAT, JODHPUR 81 TTJ 769 [2003] WHEREIN I T WAS HELD THAT WHEN PURCHASES ARE MADE FROM UNREGISTERED DEALERS AND AR E SUPPORTED BY BILLS AND VOUCHERS NO ADDITION CAN BE WARRANTED IN THE ABSENC E OF REJECTION OF BOOKS OF ACCOUNTS. 11. KEEPING IN VIEW THE TOTAL FACTS AND CIRCUMSTANC ES THE RATIONALE GIVEN BY THE LD. CIT(A), THE ACTION OF THE LD. CIT(A) DELETI NG THE ADDITION IS HEREBY CONFIRMED. 12. IN THE RESULT APPEAL OF THE REVENUE STANDS DISM ISSED. 13. REGARDING THE CROSS OBJECTION OF THE ASSESSEE, THE LD. AR SUBMITTED THAT THE CONFIRMATION OF 15 LAC RUPEES MADE BY THE LD. C IT(A) ON ACCOUNT OF DISCREPANCIES CANNOT BE ACCEPTED AS NO BASIS OF SUC H ESTIMATION HAS BEEN GIVEN AND SPECIALLY WHEN TRADING RESULTS STANDS ACC EPTED. 14. THE LD. DR REITERATED THE ARGUMENTS TAKEN IN TH E APPEAL OF THE REVENUE. HE OBSERVED THAT THE ORDER UNDER SECTION 143(3) MAD E FOR SUBSEQUENT YEARS AND AFTER TAKING INTO CONSIDERATION THE FACTS AND N ATURE OF THE TRADE OF THE ASSESSEE THE REVENUE HAS DISALLOWED RS. 5,00,000/- TO COVER THE DISCREPANCY. A COPY OF THE ASSESSMENT ORDER HAS BEEN FILED ALONGWI TH THE PAPER BOOK. IN ORDER TO MAINTAIN CONSISTENCY AND SINCE THE FACTS ARE COM MON AND IDENTICAL THE DISALLOWANCE CONFIRMED BY THE LD. CIT(A) OF RS. 15 LACS IS BEING REDUCED TO RS. 5,00,000/- . 15. AS A RESULT THE CROSS OBJECTION OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02/11/2017 SD/- SD/- (DIVA SINGH) (DR. B.R.R. KUMAR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 02/11/2017 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR