DCIT CIR 3, THANE V. T A GEORGE KUTTY, THANE

ITA 15/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9045 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 02-01-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJAT MITTAL
• Keywords: Bogus purchase
• Section: 69C; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI JOGINDER SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 15/MUM/2017 ASSESSMENT YEAR: 2010 - 11 DCIT - 3 ROOM NO. 02, 6 TH F LOOR, ASHAR IT PARK, MIDC, WAGLE INDL. ESTATE, THANE(W) - 400604. VS. SHRI T.A. GEORGE KUTTY PROP. OF M/S G.K. CONSTRUCTION B 843, DAKAK ENGG., GHODBUNDER ROAD, THANE - 400607 PAN NO. ADOPG7694M APPELLANT RESPONDENT REVENUE BY : SHRI RAJAT MITTAL, DR ASSESSEE BY: NONE DATE OF HEARING : 21 /08/2017 DATE OF PRONOUNCEMENT : 11/10 /2017 ORDER PER N.K. PRADHAN, A.M. THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2010 - 11 . THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) - 2, THANE AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) R.W.S 14 7 OF THE INCOME TAX ACT 1961, (T HE ACT). ITA NO. 15/MUM/2017 2 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN RELYING ON THE DECISION OF SUPREME COURT IN THE CASE OF KANCHWALA GEMS VS. JCIT 288 ITR 10(SC) AND HON'BLE HIGH COURT'S DECISION IN THE CASE OF VIJAY PROTEIN, SANJAY OIL CAKE INDUS TRIES, ETC. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ERRED IN NOT FOLLOW ING THE ORDER OF ITAT, PUNE IN I TA NO. 1411 - 1415 DATED 20.02.2015 IN THE CASE OF M/S. KOLTE PATIL DEVELOPERS LTD. WHEREIN 100% ADDITION OF BOGUS PU RCHASES WAS CONFIRMED. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN GIVING RELIEF TO THE ASSESSEE TO THE EXTENT OF SUPPRESSED G.P. OUT OF TOTAL BOGUS PURCHASES EVEN THOUGH - I. THE ASSESSEE COULD NOT PRODUC E PRIMARY EVIDENCES LIKE OCTROI RECEIPTS, DELIVERY CHALLAN ETC. EVIDENCE TO PROVE THE GENUINENESS OF THE PURCHASES BEFORE THE AO AND BEFORE CIT(A). II. THE AFFIDAVITS FILED BY THE ENTRY PROVIDERS BEFORE SALES TAX AUTHORITIES CANNOT BE IGNORED HAVING EVIDENTIAR Y VALUE. 4. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER (AO) RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA T HAT THE ASSESSEE WAS A BENEFICIARY OF THE BOGUS PURCHASES MADE FROM THE FOLLOWING PARTIES: SR. NO. NAME VAT NO. AMOUNT (RS.) 1. M/S SHREE SARASWATI ENTERPRISES 27460710899V 8,06,515/ - 2. M/S MEHTA ENTERPRISES/SWETA ENTERPRISES 27750537934V 6,84,614/ - 3. M/S SEVA ENTERPRISES 27280687760V 7,11,302/ - ITA NO. 15/MUM/2017 3 4. M/S KALPTARU TRADING CO. 27330544567V 5,08,372/ - 5. M/S ABHILASHA SALES P. LTD. 27450723466V 5,95,814/ - THE AO ON THE BASIS OF THE ABOVE INFORMATION REOPENED THE ASSESSMENT FOR THE IMPUGNED ASSESSMENT YEAR BY ISSUING NOTICE U/S 148. THE ASSESSEE IS ENGAGED IN THE WORK OUT CIVIL CONSTRUCTION, INFRASTRUCTURE AND LABOUR WORK IN THE NAME AND STYLE M/S G.K. CONS TRUCTION. IN RESPONSE TO A QUERY RAISED BY THE AO, THE ASSESSEE FILED A REPLY WHICH HAS BEEN EXTRACTED AT PARA 5.1 IN THE ASSESSMENT ORDER. THE AO WAS NOT CONVINCED WITH THE SAME AS THE ASSESSEE FAILED TO FILE COPY OF THE TRANSPORT BILLS AND OCTROI BILLS F OR THE PURCHASES MADE FROM THE ABOVE PARTIES. THE AO OBSERVED THAT BARRING THE LEDGER ACCOUNT AND CHEQUE PAYMENTS, NO OTHER DOCUMENTS SUCH AS OCTROI RECEIPTS, TRANSPORTATION DETAILS COULD BE FILED BY THE ASSESSEE BEFORE HIM . ALSO THE ASSESSEE FAILED TO FIL E BEFORE THE AO ITEM - WISE DETAILS REGARDING UTILIZATION OF MATERIAL AND STOCK REGISTER IN RESPECT OF CONSUMPTION/UTILIZATION OF MATERIAL S . IN VIEW OF THE ABOVE, THE AO MADE AN ADDITION OF RS.33,06,617/ - TOWARDS BOGUS PURCHASES U/S 69C OF THE ACT. 4. AGGR IEVED BY THE ORDER OF THE AO, THE ASSESSEE FILED A N APPEAL BEFORE THE LD. CIT(A). WE FIND THAT THE LD. CIT(A) HAS HELD THAT THE ASSESSEE IS DOING CIVIL CONSTRUCTION WORK WITH PRIVATE PARTIES AND NOT WITH GOVERNMENT, THEREFORE, THE RESULTANT N.P. OF 14.52% AFTER DISALLOWANCE OF RS.5,29,058/ - OUT OF HAWALA PURCHASES AS REQUESTED BY THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE IS IN ORDER AND THEREFORE, ITA NO. 15/MUM/2017 4 ACCEPTED. THE LD. CIT(A) THUS SUSTAIN ED THE DISALLOWANCE TO THE EXTENT OF RS.5,29,058/ - OUT OF HAWALA PURCHASES AND DELETED THE BALANCE AMOUNT OF RS.27,77,55 9/ - (RS.33,06,617/ - MINUS RS.5,29,058/ - ). 5. BEFORE US, THE LD. DR SUBMITS THAT THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF PURCHASES FROM THE ABOVE FIVE PARTIES. THEREFORE, IT IS STATED BY HIM THAT THE LD. CIT(A) SHOULD HAVE CONFIRMED THE TOTAL DISALLOWANCE OF RS.33,06,617/ - INSTEAD OF RESTRICTING IT TO RS.5,29,058/ - . THE ASSESSEE DID NOT APPEAR BEFORE THE TRIBUNAL ON THE DATE OF HEARING FIXED BY THE REGISTRY. 6 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. WE FIND THAT THE LD. CIT(A) HAS DONE ANALYSIS OF THE PURCHASES MADE FROM THE HAWALA PARTIES AND PAYMENTS MADE TO THEM AT PAGE 15 OF THE APPELLATE ORDER DATED 26.10.2016 PAS SED BY HIM. AFTER SUCH ANALYSIS HE HAS MADE A DISALLOWANCE OF RS.5,29,058/ - . IN THE CASE OF CIT VS. SIMIT P. SHETH (2013) 38 TAXMANN.COM (GUJ), THE HONBLE GUJARAT HIGH COURT HAS HELD THAT WHERE PURCHASES WERE NOT BOGUS BUT WERE MADE FROM PARTIES OTHER THA N THOSE MENTIONED IN THE BOOKS OF ACCOUNT, NOT ENTIRE PURCHASE PRICE BUT ONLY PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO INCOME OF THE ASSESSEE. THAT BEING THE POSITION, NOT THE ENTIRE PURCHASE PRICE BUT ONLY THE PROFIT ELEMENT EMBEDDED IN S UCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THE HONBLE HIGH COURT HAS REFERRED TO A SIMILAR VIEW TAKEN IN THE CASE OF CIT VS. VIJAY M. MISTRY CONSTRUCTION LTD. [2013] 355 ITR 498 (GUJ) AND CIT VS. BHOLANATH POLY FAB (P) LTD. [2013] 355 ITR 2 90 (GUJ). ITA NO. 15/MUM/2017 5 WE FIND THAT THE DISALLOWANCE OF RS.5,29,058/ - MADE BY THE LD. CIT(A) IS IN ORDER. ACCORDINGLY, WE UPHOLD THE SAME. 7 . IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11/10/2017. SD/ - SD/ - (JOGINDER SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 11/10/2017 RAHUL SHARMA, SR. P.S. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI