M/S.S.P.ENGINEERS, MUMBAI V. INCOME TAX OFFICER WARD-2(4), KALYAN

ITA 1648/MUM/2018

• Counselvise Citation: [2018] 112 COUNSELVISE.COM (IT) 5653 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 14-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Bogus purchase
• Section: 201; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/ SHRI B.R. BASKARAN (AM) & SANDEEP GOSAIN (JM) I.T.A. NO. 1648 /MUM/20 1 8 (ASSESSMENT YEAR 20 11 - 12 ) M/S. S.P. ENGINEERS ADV. N.A. KULKARNI, WADAL BUILDING, 1 ST FLOOR, MANPADA ROAD, NEAR DN SB DOMBIVLI (EAST) PIN - 421 201. PA N : ABCFS78821A VS. ITO WARD 2(4) MOHAN PLAZA 2 ND FLOOR KALYAN WEST MAHARASHTRA ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI N.A. KULKARNI DEPARTMENT BY SHRI RAJESHKUMAR YADAV DATE OF HEARING 28 . 1 1 . 201 8 DATE OF PRONOUNCEMENT 28 . 1 1 . 201 8 O R D E R PER B.R. BASKARAN (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 29.1.2018 PASSED BY THE LEARNED CIT(A) - 3, THANE AND IT RELATES TO A.Y. 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION OF ` 4.90 LAKHS RELATING TO BOGUS PURCHASES. 2. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSING OFFICER RECEIVED INFORMATION THAT THE ASSESSEE HAS PURCHASED MATERIAL AMOUNTING TO ` 4,90,464/ - FROM M/S. SAJ ENTERPRISES, WHICH HAS BEEN IDENTIFIED AS HAWALA DEALER BY THE SALES TAX DEPARTMENT OF GOVERNMENT OF MAHARASHTRA AND IT HAS BEEN PROVIDING ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING THE MATERIAL. HENCE, THE ASSESSING OF FICER REOPENED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION. SINCE HE ASSESSEE DID NOT APPEAR BEFORE THE ASSESSING OFFICER, THE ASSESSING OFFICER COMPLETED THE ASSESSMENT OF THE BEST OF HIS JUDGEMENT U/S. 144 OF THE ACT BY DISALLOWING PURCHASES MADE OF ` 4,90,464/ - . M/S. S.P. ENGINEERS 2 3. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE FURNISHED EXPLANATION S BEFORE THE LEARNED CIT(A). THE ASSESSEE SUBMITTED THAT IT HAS NOT MADE PAYMENT AGAINST ABOVE PURCHASES AND HENCE M/S. SAJ ENTERPRISE HAS BEEN SHOWN AS A CREDITOR AS AT THE Y EAR END. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS WRITTEN OFF BALANCE OUTSTANDING IN THE NAME OF M/S. SAJ ENTERPRISES IN THE SUCCEEDING YEAR AND OFFERED THE SAME AS ITS INCOME U/S. 41(1) OF THE ACT. ACCORDINGLY IT WAS SUBMITTED THAT DISALLOWANCE OF P URCHASE WOULD RESULT IN DOUBLE TAXATION OF THE SAME ITEM. IT WAS SUBMITTED THAT PURCHASES WERE GENUINE AND THE MATERIALS WERE CONSUMED IN ITS BUSINESS . THE LEARNED CIT(A) CALLED FOR THE REMAND REPORT FROM THE ASSESSING OFFICER. IN THE REMAND REPORT, THE AO SUBMITTED THAT THE INCOME OFFERED BY THE ASSESSEE U/S. 41(1) OF THE ACT IN SUCCEEDING YEAR WOULD , IN NO WAY PROVE THE GENUINENESS OF THE PURCH ASES. THE LEARNED CIT(A) AGRE ED WITH THE SUBMISSIONS MADE BY THE ASSESSING OFFICER IN THE REMAND REPORT AND ACCOR DINGLY CONFIRMED THE DISALLOWANCE OF PURCHASES. 4. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAS DULY ACCOUNTED FOR PURCHASES IN ITS BOOKS OF ACCOUNT AND HAS USED IT FOR ITS BUSINESS PURPOSES AND HENCE DISALLOWANCE OF PURCHASE WAS NOT JUSTIFIED. HE FURT HER SUBMITTED THAT THE ASSESSEE HAS OFFERED IMPUGNED AMOUNT AS CESSATION OF LIABILITY U/S. 41(1) OF THE ACT IN SUCCEEDING YEAR. 5. ON THE CONTRARY, LEARNED DR SUPPORTED THE ORDER PASSED BY THE LEARNED CIT(A). 6. HAVING REGARD THE RIVAL SUBMISSIONS, W E AGREE WITH THE VIEW OF THE AO THAT THE OFFERING OF AMOUNT U/S. 41(1) OF THE ACT WOULD NOT PROVE THE GENUINENESS OF PURCHASES . HOWEVER, IT IS THE PLEA OF THE ASSESSEE THAT THE MATERIALS HAVE BEEN USED FOR PURPOSE OF ITS BUSINESS OF MANUFACTURE OF CHEMICA L PLANT EQUIPMENT. CONSIDERING THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE DISALLOWANCE OF ENTIRE AMOUNT OF PURCHASES IN THE INSTANT CASE IS NOT JUS TIFIED . A S HELD BY HON'BLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P. SHETH M/S. S.P. ENGINEERS 3 (3 56 ITR 451) , THE PROFI T ELEMENT EMBEDDED IN SUCH PURCHASES CA N BE ASSESSED TO TAX. 7. CONSIDERING THE ACTIVITIES OF THE ASSESSEE, WE ARE OF THE VIEW THAT PROFIT ELEMENT EMBEDDED IN SAID PURCHASE MAY BE TAKEN AT 15%. ACCORDINGLY, WE MODIFY THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO RESTRICT THE DISAL LOWANCE TO 15% OF VALUE OF PURCHASES. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 28 . 1 1 .201 8 . SD/ - SD/ - (SANDEEP GOSAIN ) (B .R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 28 / 1 1 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CI T(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI