NIKO ASSOCIATES, THANE V. ITO 3(1), THANE

ITA 1731/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9403 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 23-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: MOMDER VAIDYA
• Keywords: Bogus purchase

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH D, MUMBAI BEFORE SHRI P.K. BANSAL, VICE PRESIDENT AND SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.1731/M/2016 ASSESSMENT YEAR: 2011-12 M/S. NIKO ASSOCIATES, 6, MOHAN BUILDING, PIPE LINE ROAD, THANE (W)-400 604 PAN: AAFFN7758K VS. ITO-3(1), IT PARK, WAGLE ESTATE, THANE (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI MOMDER VAIDYA, A.R. REVENUE BY : SHRI PURUSHOTTAM KUMAR, D.R. DATE OF HEARING : 06.07.2017 DATE OF PRONOUNCEMENT : 05.10.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 29.01.2016 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2011-12. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S A WORKS CONTRACTOR AND INTERIOR DESIGNER. THE WORKS CONTRA CTS INCLUDE MATERIAL AND LABOUR AND SERVICE CHARGES. DURING TH E YEAR UNDER CONSIDERATION, ASSESSEE HAD EXECUTED WORKS CONTRACT FOR CIVIL PAINTINGS AND ELECTRICAL FITTINGS ETC. DURING THE YEAR THE ASSESSING ITA NO.1731/M/2016 M/S. NIKO ASSOCIATES 2 OFFICER (HEREINAFTER REFERRED TO AS THE AO) FOUND T HAT ASSESSEE HAD MADE PURCHASES FROM FOLLOWING PARTIES: SR. NO. NAME OF THE PARTY AMOUNT OF PURCHASE (RS) 1. SHRUTI SALES CORPORATION 10,10,520 2. KARAN ENTERPRISES 14,27,713 3. DARSHAN SALES CORP. 1,33,875 TOTAL 25,72,108 3. THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE PART IES FOR VERIFICATION. THERE WAS NO COMPLIANCE OF NOTICE UND ER SECTION 133(6). THEREFORE, THE AO HAS MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.25,72,108/-. 4. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) HAS DISMISSED THE CLAIM BY OBSERVING AS UNDER: 4.18. FROM THE ABOVE DETAILS IT IS SEEN THAT THE GP RATE, IN THE YEAR UNDER APPEAL, HAS GONE DOWN SUBSTANTIALLY LOW I.E. 42.93% FROM 51.77% IN AYR 2010-11, I.E. IMMEDIATE PRECEDING YEAR. THIS SHOWS THAT THE APPELLANT IS CAPABLE OF HARVESTING GP @ 51.77%, FROM 4 SAME SET OF BUSINESS. IN COMPLIANCE, THE LD. AR , COULD NOT SUBSTANTIATE THE FALL IN GP WITH SUPPORTING DOCUMENTS. FROM THE ABOVE CHART, IT IS CRYSTAL CLEA R THAT THE APPELLANT HAS SUPPRESSED GROSS PROFIT BY 8.84% (51.7 7% - 42.93%). THE SUPPRESSED GROSS PROFIT IS WORKED OUT AT RS.28,65,731/- (RS. 3 ,24,17, 778/- X 8.84/100), WHICH IS MORE THAN THE BOGUS PURCHASE OF RS.25,72,108/-, THEREFORE, THE DISALLOWANCE OF ENTIRE BOGUS PURCHASES, MADE BY THE A.O., IS HEREBY, SUSTAINED. IN THIS REGARD, THE RELIANCE IS PLACED O N THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S KANCHWALA GEMS VS JCIT. 288 ITR 10 (SC), WHEREIN, ON ACCOUNT OF SIMILAR SET OF CIRCUMSTANCES , THE ESTIMATION OF GP WAS HELD, AS JUSTIFIED. IN THE RESULT, THE APPEAL IS DISMISSED. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. LD. D.R. RELIED UPON THE DECISION OF THE TRIBUNAL, AHME DABAD BENCH IN THE CASES OF SHWETAMBAR STEELS VS. ITO AHMEDABAD AN D GANESH ITA NO.1731/M/2016 M/S. NIKO ASSOCIATES 3 RICE MILLS VS. CIT (294 ITR 316). THE FACTS IN THE PRESENT CASE SHOW THAT ASSESSEE COULD NOT PRODUCE THE PARTIES FR OM WHOM GOODS ARE STATED TO HAVE BEEN PURCHASED. THE SUPPLIERS WE RE FOUND TO BE ENGAGED IN PROVIDING BOGUS BILL WITHOUT ACTUAL DEAL ING OF GOODS. IN THIS REGARD, THE ASSESSEE HAS STATED THAT THEY HAD SUBMITTED QUANTITATIVE DETAILS OF STOCK WITH RESPECT OF THE S ALES WITH PURCHASES FROM THE PARTIES DURING THE ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS SUBMITTED THE DETAIL OF CORRESPONDING SALES IN RESP ECT OF THE PURCHASE FROM THE SAID PARTIES. AS MENTIONED ABOVE THE AO HA S NEVER DISPUTED OR EXAMINED THE ASPECT OF SALES RECEIPTS. SINCE THE SALES MADE BY THE ASSESSEE WAS NOT DOUBTED OR DISPUTED BY THE AO AND HE HAS ACCEPTED THE SALES RECEIPTS OF THE ASSESSEE AS IT IS, THEREF ORE, THE AO CANNOT DENY THAT PURCHASES WERE NOT MADE BY THE ASSESSEE A ND THE MATERIAL WAS NOT USED FOR ITS SALES. WHAT IS UNDER DISPUTE I S THE PURCHASES FROM THE PARTIES FROM WHOM BILLS HAVE BEEN TAKEN AN D CHEQUES HAVE BEEN ISSUED TO THEM. PURCHASES ARE NOT IN DISPUTE B UT THE PARTIES FROM WHOM PURCHASE ARE SHOWN TO HAVE BEEN MADE ARE DISPU TED AND SUSPICIOUS. THE AO HAD MADE THE ADDITION AS SOME O F THE SUPPLIERS WERE DECLARED HAWALA DEALERS BY THE VAT DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. ONCE THE ASSESSEE HAS BROUGHT ON RECO RD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETH ER THERE WAS ANY ITA NO.1731/M/2016 M/S. NIKO ASSOCIATES 4 IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SU CH EXERCISE HAS BEEN DONE OR FINDINGS RECORDED. THERE WAS NO DETAIL ED INVESTIGATION MADE BY THE AO HIMSELF. IT IS ALSO FOUND THAT THE P AYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY RE FLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENC E TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BACK FROM THE SUPPLIERS. MERELY BECAUSE THE SUPPLIERS DID NOT APPEAR BEFORE THE AO OR SOME CONFIRMATION LETTERS WERE NOT FURNISHED, ONE CANNOT CONCLUDE THA T THE PURCHASES WERE NOT MADE BY THE ASSESSEE. THIS VIEW IS SUPPORT ED BY THE DECISION OF NIKUNJ EXIMP ENTERPRISES VS. CIT 216 TA XMAN 171 (BOM). TO THIS EXTENT, WE ARE OF THE VIEW THAT IF T HE ASSESSEE HAS FULFILLED ITS ONUS OF MAKING THE PAYMENT BY CHEQUE AND HAS SUPPLIED THE ADDRESSES OF THE SELLERS THEN IT CANNOT BE PRES UMED THAT SUPPLIER WERE BOGUS SIMPLY BECAUSE THE SELLERS WERE NOT FOUN D AT THE GIVEN ADDRESS. THERE IS A CONSIDERABLE TIME GAP BETWEEN T HE PERIOD OF PURCHASE TRANSACTION AND PERIOD OF SCRUTINY PROCEED INGS. THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THE RE IS SUPPRESSION OF SALES. IT IS BASIC RULE OF ACCOUNTANCY AS WELL A S OF TAXATION LAWS THAT PROFIT FROM BUSINESS CANNOT BE ASCERTAINED WIT HOUT DEDUCTING COST OF PURCHASE FROM SALES. ESTIMATION OF PROFIT R ANGING FROM 12.5% TO 15% HAS BEEN UPHELD BY THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ.). R ESPECTFULLY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COUR T IN THE CASE OF CIT VS. SIMIT P. SHETH 38 TAXMAN 385 (GUJ), WE DIRE CT THE AO TO TAKE GP @ 12.5%. ITA NO.1731/M/2016 M/S. NIKO ASSOCIATES 5 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.10.2017. SD/- SD/- (P.K. BANSAL) (D.T. GARASIA) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATED: 05.10.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.