M/s. Saduddin A. Bala, Ahmedabad V. The Dy.CIT., Bharuch Circle, Bharuch

CO 161/AHD/2010

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 7394 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 25 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-12-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 17-12-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 05-07-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANIL R SHAH
• Assessee Lawyers: J P JHANGID
• Keywords: Bogus purchase; Permanent establishment
• Section: 40A(3); 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT, J.M. & SHRI ANIL CH ATURVEDI, A.M.) I.T. A. NO.1480/AHD/2010 & CO. NO. 161/AHD/2010 (ASSESSMENT YEAR: 2006-07) THE D.C.I.T ABOVE BANK OF BARODA, STATION RAOD, BHARUCH CIRCLE, BHARUCH V/S M/S. S.A. BALA, MOTA KUMBHARWAD, ANKLESHWAR, DIST. BHARUCH (APPELLANT) (RESPONDENT) M/S. S.A. BALA, MOTA KUMBHARWAD, ANKLESHWAR, DIST. BHARUCH V/S THE D.C.I.T ABOVE BANK OF BARODA, STATION RAOD, BHARUCH CIRCLE, BHARUCH (APPELLANT) (RESPONDENT) PAN: AAHFS 2020B APPELLANT BY : SHRI J.P. JHANGID, SR. D.R . RESPONDENT BY : SHRI ANIL R. SHAH ( )/ ORDER DATE OF HEARING : 17-12-2013 DATE OF PRONOUNCEMENT : 31 -12-2013 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF CIT(A)-VI, BARODA DATED 20.01.2010 FOR A.Y. 2006-07 AND THE AS SESSEE HAS ALSO FILED CROSS OBJECTION. ITA NO 1480/A/2010 & CO. NO. 161/A/2010 . A.Y. 2006- 07 2 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSIN ESS OF CIVIL CONTRACTOR MAINLY WORK OF ONGC RELATED TO ROAD AND PLATFORM WO RK. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 06-07 ON 06.12.2006 D ECLARING TOTAL INCOME OF RS. 8,13,498/-. THE CASE WAS SELECTED FOR SCRUTI NY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) OF THE A CT VIDE ORDER DATED 29.12.2008 AND THE TOTAL INCOME WAS ASSESSED AT RS. 59,43,030. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) VIDE ORDER DATED 20.01.2010 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF CIT(A), THE REV ENUE IS NOW IN APPEAL BEFORE US AND ASSESSEE HAS ALSO FILED C.O. 4. THE GROUND RAISED BY THE REVENUE READS AS UNDER:- 1(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN RESTRICTING THE ADDITION OF RS. 25,29,225/- BEING NON-GENUINE CASH PURCHASES, TO 20% OF THE SAID AMOUNT (EXCLUDING AN AMOUNT OF RS. 4,00,000/- BEING PAYMENT MADE BY C HEQUE), THEREBY GRANTING RELIEF OF RS. 21,03,380/- TO THE ASSESSEE. 1(B) THE CIT(A) FAILED TO APPRECIATE THAT DURING TH E COURSE OF ASSESSMENT PROCEEDINGS NEITHER ANY REPLY WAS RECEIVED FROM THE PARTIES IN RESPONSE TO THE LETTER ISSUE U/S. 133(6) NOR THE ASSESSEE COULD PRODUCE THE PARTIES CONCERNED BEFORE THE A.O. IN RE SPECT OF THE CASH PURCHASES OF RS. 25,29,225/-. SINCE THE ENTIRE PURCHASE OF RS. 25,29,225/- WAS FO UND TO BE NON-GENUINE THE A.O. HAD RIGHTLY DISALLOWED THE ENTIRE EXPENDITURE OF RS. 25,29,225/ -. THE DECISION OF THE CIT(A) RESTRICTING THE SAID DISALLOWANCE TO 20% IS, THEREFORE, NOT ACCEPTABLE I N PRINCIPLE. 5. THE GROUND RAISED BY THE ASSESSEE IN C.O. READS AS UNDER:- 1) THE LEARNED CIT(A) VI BARODA, HAS ERRED IN GRANTING PARTIAL RELIEF IN RESPECT OF ADDITION OF CASH PURCHASE MADE BY YOUR RESPONDENT AND THEREBY RETAIN ING 20% OUT OF TOTAL PURCHASES (AFTER DELETING PAYMENT OF RS. 4,00,000/- BY CHEQUE) I.E. RS. 4,25,844/-. IT IS SUBMITTED BY YOUR RESPONDENT THAT LEARNED CIT (A) IV HAVING ACCEPTED THE FACTS OF THE CASE AND PAST PRACTICE AND HAVING DELETED RS. 21,03,381/- AD DED BY ITO OUGHT TO HAVE DELETED THE ENTIRE ADDITION OF RS. 25,29,235/- MADE BY THE INCOME TAX OFFICER OUT OF TOTAL PURCHASES OF RS. 83,50,970/-. 2) THE LEARNED CIT(A) HAS ALSO ERRED IN RETAINING RS. 1,00,000/- OUT OF LABOUR CHARGES DISALLOWED AT RS. 4,15,966/- BY INCOME TAX OFFICER AT 5% OF TO TAL LABOUR PAYMENT OF RS. 82,99,323/-. IT IS SUBMITTED BY YOUR APPELLANT THAT THE ENTIRE A DDITION MADE BY THE ASSESSING OFFICER IS ON PRESUMPTION AND GUESS WORK ON ESTIMATE AND ADHOC BA SIS WITHOUT ANY JUSTIFICATION OR COGENT EVIDENCE AND THEREFORE THE ENTIRE DISALLOWANCE OF RS. 4,15,9 66/- OUGHT TO HAVE BEEN DELETED. ITA NO 1480/A/2010 & CO. NO. 161/A/2010 . A.Y. 2006- 07 3 6. WE FIRST TAKE UP REVENUES APPEAL (ITA NO. 1480/AHD /2010) 7. BOTH THE GROUNDS RAISED BY THE REVENUE ARE INTERCON NECTED AND THEREFORE BOTH ARE CONSIDERED TOGETHER. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O. N OTICED THAT ASSESSEE HAS SHOWN PURCHASE OF SAND, SOIL , RUBBLE ETC. OF R S. 83,50,970/- IN ORDER TO VERIFY THE GENUINENESS OF PURCHASES, LETTER UNDE R SECTION 133(6) WAS ISSUED TO SIX PARTIES LISTED ON PAGE 2 OF THE ORDER . THE LETTER ISSUED UNDER SECTION 133(6) OF THE ACT WERE RECEIVED BACK UNSERV ED WITH MOST OF THE REMARK BEING THAT THE PARTY IS NOT AVAILABLE AT THE GIVEN ADDRESS. THE ASSESSEE WAS THEREAFTER ASKED TO PROVE THE GENUINEN ESS OF THE TRANSACTION. THE ASSESSEE COULD NOT PRODUCE THE PAR TIES. THE A.O. THEREAFTER PROCEEDED TO VERIFY THE GENUINENESS OF P AYMENTS BY SCRUTINISING THE BANK ACCOUNT OF THE ASSESSEE. ON VERIFICATION OF THE BANK ACCOUNT OF THE ASSESSEE, A.O. NOTICED THAT ASS ESSEE HAD WITHDRAWN THE CASH FROM BANK BUT HAD SHOWN THE PAYMENT AS MAD E BY CHEQUE AGAINST THE PURCHASES MADE TO THE VARIOUS PARTIES. THE A.O. HAS LISTED SUCH CASES ON PAGE 3 TO 5 OF THE ORDER. A.O. THERE FORE CONCLUDED THAT ASSESSEE HAD HIMSELF WITHDRAWN CASH BUT TO GIVE THE COLOUR OF GENUINENESS AND TO SHOW THE PAYMENT AGAINST BOGUS P URCHASES, SHOWED THAT THE PAYMENTS WERE MADE TO THE PARTIES. HE THE REFORE CONSIDERED THE PURCHASE TRANSACTIONS TO BE FAKE. HE THEREAFTER CON SIDERED THE PAYMENTS MADE TO THE PARTIES WHICH COULD NOT BE PROVED BY LE TTER UNDER SECTION 133(6) AGGREGATING TO RS. 25,29,235/- AS NOT GENUIN E PURCHASE AND ADDED IT TO THE INCOME. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). ITA NO 1480/A/2010 & CO. NO. 161/A/2010 . A.Y. 2006- 07 4 9. BEFORE CIT(A) ASSESSEE INTERALIA SUBMITTED THAT AS SESSEE WAS UNDERTAKING THE CONTRACTS AWARDED MAINLY BY ONGC AN D TO FULFILL THE CONTRACT, IT HAD MADE PURCHASES OF SAND, BRICKS AND RUBBLE. THE SUPPLIERS OF THE MATERIALS WERE UNORGANIZED IN NATURE AND DID NOT HAVE ANY PERMANENT ESTABLISHMENT AND THEREFORE AFTER A PERIO D OF 2 TO 3 YEARS THEIR ACCESSIBILITY COULD NOT BE ENSURED. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS HAVING A TURNOVER OF AROUND RS. 329 LA KHS AND WITHOUT THE PURCHASES, IT WOULD NOT HAVE BEEN POSSIBLE TO ATTAI N THE SALES. IT WAS ALSO STATED THAT THE BOOKS OF ACCOUNTS WERE AUDITED AND NO DISCREPANCY WAS NOTED BY THE A.O IN THE BOOKS OF ACCOUNTS. BEFORE C IT(A) IT WAS ALSO SUBMITTED THE CASH WITHDRAWN WAS DIRECTLY PAID TO T HE PARTIES AND IF AT ALL ANY DISALLOWANCE WAS REQUIRED TO BE MADE, THE SAME SHOULD HAVE BEEN MADE U/S. SECTION 40A(3) AND THE ENTIRE PURCHASES S HOULD NOT HAVE BEEN DISALLOWED. CIT(A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING A S UNDER:- 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. A.R . AND FACTS OF THE CASE. I HAVE ALSO SEEN THE ASSESSMENT ORDER AND THE OTHER MATERIAL AVAILABLE O N RECORD. IT IS AN UNDISPUTED FACT THAT THE A.O HAS CONDUCTED EXTENSIVE INQUIRIES ABOUT SOME PURCHASE D ETAILS AND CAME TO THE CONCLUSION THAT THE PARTIES WERE NOT AVAILABLE AT THE GIVEN ADDRESS. AS SEEN FR OM THE RECORDS THE APPELLANT HAS ALSO NOT PRODUCED SUCH PARTIES FOR HIS EXAMINATION. BUT, HOWEVER, THE PAYMENTS THOUGH MADE IN CASH WERE NOT DISPUTED. THERE IS ALSO NO DISPUTE REGARDING PARTY WISE DETAI LS OF PAYMENTS AS NOTED AT PARA NO. 3.2 HEREINABOVE . SINCE THE PAYMENTS TO CONCERNED PARTIES WERE NOT DI SPUTED, AS POINTED OUT BY THE APPELLANT, THE A.O. COULD HAVE ADDED 20% OF SUCH CASH PAYMENTS EXCLUDIN G CHEQUE PAYMENT OF RS. 4,00,000/- MADE TO BHATJI TRADING AND THE A.O. IS DIRECTED ACCORDINGLY AND IN THE PROCESS THIS GROUND OF APPEAL IS PARTLY ALLOWED. 10. AGGRIEVED BY THE ORDER OF CIT(A), THE REVENUE IS NO W IN APPEAL BEFORE US. 11. BEFORE US, THE LD. D.R. POINTED TO THE FINDINGS OF A.O. AND STRONGLY SUPPORTED THE ORDER OF A.O. BY SUBMITTING THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF PURCHASES AND THEREFORE TH E A.O. WAS FULLY ITA NO 1480/A/2010 & CO. NO. 161/A/2010 . A.Y. 2006- 07 5 JUSTIFIED IN MAKING THE ADDITIONS. HE FURTHER SUBM ITTED THAT CIT(A) WAS ALSO NOT JUSTIFIED IN RESTRICTING THE DISALLOWANCE TO 20% OF CASH PURCHASES BECAUSE SUCH DISALLOWANCE CAN ONLY BE MADE WHERE TH E PURCHASES ARE GENUINE AND NOT IN THE CASE WHERE THE PURCHASES ARE BOGUS. HE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTH ER HAND REITERATED THE SUBMISSIONS MADE BEFORE CIT(A). HE FURTHER SUBMITTE D THAT OUT OF THE TOTAL PURCHASES OF RS. 83.50 LAKHS, THE A.O. HAS DI SALLOWED PURCHASE OF RS. 25.29 LAKHS WHICH AMOUNTS TO ALMOST 30% OF THE PURCHASES WHICH WAS VERY HIGH. HE FURTHER SUBMITTED THAT THE ASSES SEES TURNOVER AND THE NATURE OF BUSINESS IS NOT DISPUTED AND THEREFORE IT CANNOT BE SAID THAT THE PURCHASE OF SAND, SOIL AND RUBBLE HAS NOT BEEN MADE DURING THE COURSE OF BUSINESS AND WITHOUT ITS PURCHASES, THE ASSESSEE CO ULD NOT HAVE ACHIEVED THE TURNOVER OF RS. 329 LACS. HE FURTHER SUBMITTED THAT A.O. HAS NOT POINTED ANY OTHER DEFECT IN THE BOOKS OF ACCOUNTS A ND THEREFORE NO ADDITION ON ACCOUNT OF BOGUS PURCHASES CAN BE MADE. HE FURTHER PLACED RELIANCE ON THE DECISION OF CIT VS. VIKRAM PLASTIC AND ORS. (1999) 239 ITR 161 (GUJ). HE THUS SUPPORTED THE ORDER OF CIT(A ). 12. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IT IS AN UNDISPUTED FACT THAT ASSESSEE IS ENGAGED I N THE BUSINESS OF CIVIL CONSTRUCTION IN BUILDING ROAD AND PLATFORM, MAINLY FOR ONGC. IT IS ALSO A FACT THAT THE TURNOVER OF THE ASSESSEE DURING THE YEAR UNDER APPEAL WAS RS. 329 LACS AND THE NATURE OF BUSINESS IS SUCH THA T THE ASSESSEE WOULD REQUIRE SOIL, SAND, RUBBLE ETC. IT IS ALSO A FACT THAT THE BOOKS OF THE ASSESSEE ARE AUDITED AND NO OTHER DEFECT HAS BEEN P OINTED BY THE A.O. EXCEPT THE AFORESAID PURCHASES. CIT(A) WHILE DELETI NG THE ADDITION HAS NOTED THAT THE PAYMENT TO VARIOUS PARTIES WAS NOT I N DISPUTE AND THE ITA NO 1480/A/2010 & CO. NO. 161/A/2010 . A.Y. 2006- 07 6 PAYMENT TO THEM MADE IN CASH WAS ALSO NOT IN DISPUT E. HE CONSIDERING THE FACTS AND THE NATURE OF THE BUSINESS OF THE ASS ESSEE RESTRICTED THE DISALLOWANCE TO 20% OF THE CASH PAYMENTS EXCLUDING CHEQUE PAYMENT OF RS. 4 LAKHS MADE TO BHATJI TRADING. BEFORE US, THE REVENUE COULD NOT CONTROVERT THE FINDINGS OF CIT(A) NOR HAS BROUGHT A NY CONTRARY MATERIAL ON RECORD. IN VIEW OF THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND THUS THIS GROUND OF RE VENUE IS DISMISSED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. 14. BEFORE US, THE LD. A.R. SUBMITTED THAT IT WANTS TO WITHDRAW THE C.O. SINCE THE C.O. IS WITHDRAWN THE SAME IS DISMISSED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE AND C.O. O F THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 -12 -2013. SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT, AHMEDABAD