M/S. PATKON CONSTRUCTION INDIA PVT. LTD., MUMBAI V. ITO-14(2)(1), MUMBAI

ITA 1591/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 2354 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-11-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 18-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY J SETHI
• Keywords: Tangible material
• Section: 143(1); 201; 22; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER ITA NO. 1591 /MUM. /201 9 ( ASSESSMENT YEAR : 20 11 12 ) PATKON CONSTRUCTION INDIA PVT. LTD. 16, SHIVNUM, D. MAHTANEY PARK R.C. MARG, VASI NAKA, CHAMBUR MUMBAI 400 074 PAN AAACP0526F . APPELLANT V/S INCOME TAX OFFICER WORD 14(2)(1), MUMBAI . RESPONDENT ASSESSEE BY : SHRI ASHWIN CHHAG REVENUE BY : S HRI SANJAY J. SETHI DATE OF HEARING 09 .11.2020 DATE OF ORDER 24.11.2020 O R D E R CAPTIONED APPEAL HAS BEEN FILED BY THE ASSESSEE CHALLENGING THE ORDER DATED 30 TH NOVEMBER 2018, PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 22 , MUMBAI, PERTAINING TO THE ASSESSMENT YEAR 201 1 12 . 2. IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE VALIDITY OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ). WHEREAS , IN GROUNDS NO.2 AND 3, THE ASSESSEE HAS CHALLE NGED THE MERITS OF THE ADDITION/ DISALLOWANCE MA DE ON 2 PATKON CONSTRUCTION INDIA R PVT. LTD. ACCOUNT OF NON GENUINE PURCHASES. SINCE T HESE ISSUES ARE INTER CONNECTED , I PROPOSE TO DEAL WITH THEM TOGETHER. 3. BRIEF FACTS ARE, THE ASSESSEE , A RESIDENT COMPANY , IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. FOR THE ASSESSMENT YEAR UNDER DISPUT E, THE ASSESSEE FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER 2011, DECLARING TOTAL INCOME OF ` 11,97,841. INITIALLY, THE RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM THE EXTERNAL SOURCES THAT CERTAIN PURCHASES MADE BY THE ASSESSEE ARE NON GENUINE AS THEY ARE IN T HE NATURE OF HAWALA TRANSACTION, T HE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER INFORMED THE ASSESSEE THAT PURCHASES WORTH ` 27,92,583, CLAIMED TO HAVE BEEN MADE DURING THE YE AR FROM EIGHT PARTIES ARE NON GENUINE AS THE CONCERNED SELLING DEALERS HAVE BEEN IDENTIFIED AS HAWALA OPERATOR S BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. HE, THEREFORE, CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF SUCH PURCHASES BY FU RNISHING VARIOUS DOCUMENTARY EVIDENCES , SUCH A S, PURCHASE ORDERS, BILLS RAISED , GOODS RECEIVED NOTE, GOODS SURVEY / INSPECTION REPORT, DELIVERY CHALLAN, LORRY RECEIPT, DETAILS OF PAYMENT, DETAILS OF TRANSPORTATION OF GOODS, ETC. AS STATED BY THE ASSESSING OF FICER, IN RESPONSE, THE ASSESSEE FURNISHED LEDGER DETAILS, TAX INVOICE, BANK STATEMENT SHOWING PAYMENT 3 PATKON CONSTRUCTION INDIA R PVT. LTD. MADE TO THE PARTIES. THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE EVIDENCES FURNISHED BY THE ASSESSEE. HE WAS OF THE VIEW THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES CLAIMED TO HAVE BEEN MADE. HOWEVER, HE OBSERVED, SINCE THE PURCHASES WERE RECORDED IN THE BOOKS OF ACCOUNT AND CO RRESPONDING SALES HAVE BEEN MADE, THE ENTIRE PURCHASES CANNOT BE DISALLOWED. ACCORDINGLY, HE DISALLOWED AN AMOUNT OF ` 3,49,073, BEING 12.5% OF THE ALLEGED NON GENUINE PURCHASES AND ADDED BACK TO THE INCOME OF THE ASSESSEE. THOUGH, THE ASSESSEE CHALLENGED THE AFORESAID ADDITION BEFORE LEARNED COMMISSIONER (APPEALS), HOWEVER, THE ADDITION WAS S USTAINED . 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSEE UNDERTAKES CONTRACT WORK OF VARIOUS GOVERNMENT AGENCIES ONLY , SUCH AS , BHEL, BPCL, TATA POWER, ETC. HE SUBMITTED , GOODS WERE DIRECTLY SUPPLIED TO THE SITES OF THE CONTRACTEES. HE SUBM ITTED , THE ASSESSEE HAS DULY RECORDED THE PURCHASES AND SALES EFFECTED BY IT IN THE BOOKS OF ACCOUNT. THE ASSESSEE HAD ALSO SUBMITTED PURCHASE BILLS, LEDGER ACCOUNT COPIES, BANK STATEMENT, ETC. TO ESTABLISH THE GENUINENESS OF PURCHASES. THUS, HE SUBMITTED , WITHOUT REJECTING THE BOOKS OF ACCOUNT, THE ASSESSING OFFICER COULD NOT HAVE DISALLOWED PART OF THE PURCHASES. WITHOUT PREJUDICE, HE SUBMITTED , SINCE THE ASSESSEE HAS OFFERED GROSS PROFIT @ 9.5%, THE ADDITION, IF ANY, BE RESTRICTED TO 3% BEING THE 4 PATKON CONSTRUCTION INDIA R PVT. LTD. DIFFERE NCE BETWEEN 12.5% ESTIMATED BY THE ASSESSING OFFICER AND THE RATE OF GROSS PROFIT DECLARED BY THE ASSESSEE. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY RELYING UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS) SUBMITTE D , SINCE THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF PURCHASES, THE DISALLOWANCE MADE SHOULD BE UPHELD. 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THOUGH , IT MAY BE A FACT THAT THE ASSESSEE WAS UNABLE TO PROVE THAT PURCHA SES INDEED WERE MADE FROM THE DECLARED SOURCES, HOWEVER, IT IS EQUALLY TRUE THAT THE ASSESSING OFFICER HAS ACCEPTED THE FACT THAT ALL THE PURCHASES HAVE BEEN DULY REFLECTED IN THE BOOKS OF ACCOUNT NO SALES OUTSIDE THE BOOKS OF ACCOUNT HAVE BEEN DETECTED BY HIM. THUS, IT IS A FACT ON RECORD THAT THE ASSESSING OFFICER HAS NOT FOUND ANY DISCREPANCY OR INACCURACY IN THE BOOKS OF ACCOUNT MAINTAINED BY THE ASSESSEE. FOR THIS REASON ALONE, THE ASSESSING OFFICER INSTEAD OF DI SALLOWING THE ENTIRE PURCHASES HAS RESTR ICTED IT TO 12.0 5 % OF THE NON GENUINE PURCHASES. THE REASON BEING , WHAT THE ASSESSEE MIGHT HAVE GAINED BY WAY OF INCOME IS SUPPRESSED PROFIT ON THE UNPROVED PURCHASES. THE CLAIM OF THE ASSESSEE THAT IT HAS DECLARED GROSS PROFIT RATE OF 9.5% HAS NOT BEEN DI SPUTED BY THE REVENUE. THAT BEING THE CASE, THE CONTENTION OF THE LEARNED AUTHORISED 5 PATKON CONSTRUCTION INDIA R PVT. LTD. REPRESENTATIVE THAT THE ADDITION, IF ANY, SHOULD BE RESTRICTED TO THE DIFFERENCE BETWEEN T HE PROFIT ESTIMATED @ 12.5% AND THE GROSS PROFIT DECLARED BY THE ASSESSEE IS ACCE PTABLE. ACCORDINGLY, I DIRECT THE ASSESSING OFFICER TO RESTRICT THE ADDITION TO 3% OF THE NON GENUINE PURCHASES. 7. AS REGARDS THE ISSUE OF RE OPENING OF ASSESSMENT UNDER SECTION 147 OF THE ACT, IN MY CONSIDERED OPINION, SINCE SUCH RE OPENING IS ON THE BASIS OF INFORMATION RECEIVED FROM EXTERNAL SOURCES , POST PROCESS ING OF RETURN OF INCOME UNDER SECTION 143(1) OF THE ACT, IT CONSTITUTE S TANGIBLE MATERIAL. THEREFORE , RE OPENING OF ASSESSMENT UNDER SECTION 147 IS VALID. GROUNDS ARE DISPOSED OFF ACCORDINGLY. 8. GR OUND NO.4, HAVING NOT BEEN PRESSED IS DISMISSED. 9. GROUNDS NO.5 AND 6, BEING CONSEQUENTIAL AND PRE MATURE, ARE DISMISSED. 10. IN THE RESULT, APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24.11.2020 SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 24.11.2020 6 PATKON CONSTRUCTION INDIA R PVT. LTD. COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CONCERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI