Asstt. Commissioner ofIncome tax, Cir.8, Nagpur V. Jaishree Shyambaba Constructiion Co., Nagpur

ITA 183/NAG/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3888 (ITAT-NAGPUR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 18-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ABHAY MARATHE
• Keywords: Bogus purchase
• Section: 6

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL NAGPUR , BENCH , ( E - COURT), MUMBAI , BEFORE SHRI R.K.GUPTA , J M & SHRI D.KARUNAKAR RAO , A M ITA NO. 18 3 / N AG / 20 1 2 ( ASSESSMENT YEAR S : 200 6 - 0 7 ) ACIT,CIR - 8, 5 TH FLOOR, AMBEDKAR BHAVAN, SEMINARY HILLS, NAGPUR - 440 006 VS. M/S JAISHREE SHAYMBABA CONSTRUCTION CO., 72, NEW SNEH NAGAR, NAGPUR - 440 015 PAN/GIR NO. : A AAFJ 7007 J ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : MR. ABHAY MARATHE /ASSESSEE BY : MR. MANOJ SHARMA DATE OF HEARING : 8 TH M ARCH ., 201 3 DATE OF PRONOUNCEMENT : 03/04/ 201 3 O R D E R P ER SHRI R.K.GUPTA, JM : TH IS APPEAL HA S BEEN PREFERRED BY THE DEPARTMENT BEFORE THE ITAT NAGPUR BENCH, NAGPUR, AGAIN ST THE ORDER OF LEANED CIT(A) - IV , NAGPUR (MAHAR ASHTRA) RELATING TO THE ASSESSMENT YEARS 2006 - 07 , WHICH HA S BEEN HEARD THROUGH E - COURT, MUMBAI. \ 2 . THE DEPARTMENT IS OBJECTING IN DELETING THE ADDITION OF RS. 25,68,877/ - ON ACCOUNT OF BOGUS PURCHASES AND THEREAFTER ESTIMATING THE PROFIT AT THE RATE OF 8% AS NET PROFIT . 3 . THE AO BY OBSERVING THAT TILL PASSING OF THE ASSESSMENT ORDER, THE ASSESSEE NEITHER ATTENDED BEFORE HIM NOR EXPLAINED THE NON - EXISTENCE OF PARTIES IN THE NAME OF WHICH HE HAD BOOKED THE EXPENSES ITA NO. 1 8 3 /20 1 2 2 ON ACCOUNT OF VARIOUS PURCHASES. THEREFORE, HE MADE AN ADDITION OF RS. 25,68,877/ - ON ACCOUNT OF BOGUS PURCHASES . 4 . DETAILED SUBMISSIONS WERE FILED BEFORE THE CIT(A) . IT WAS SUBMITTED THAT THE ASSESSEE IS A CONTRACTOR ENGAGED IN THE BUSINESS OF CONSTRUCTION OF CANAL. IT WAS SUBMITTED THA T THE ASSE SSEE HAS PURCHASED MURUM, SAND AND GRIT TOTALING TO RS. 25 LAKHS OR ODD, THE AO HAS DISALLOWED 100% OF PURCHASES. IT WAS SUBMITTED THAT WITHOUT THESE MATERIALS CONSTRUCTION OF CANAL CANNOT BE COMPLETED. IT WAS FURTHER SUBMITTED THAT ONLY WORK OF RS. 1,99,28, 273/ - WAS COMPLETED DURING THE YEAR UNDER CONSIDERATION . THIS WAS VERIFIED AND APPROVED BY THE EX - ENGINEERS OF THE VARIOUS DEPARTMENTS, EX - ENGINEERS HAD ISSUED THE CERTIFICATE IN RESPECT TO WORK DONE BY THE ASSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE IS U NDER SCRUTINY CONTINUOUSLY FROM LAST FIVE YEARS AND NO SUCH ADDITION HAS BEEN MADE. THE MATTER WAS REMANDED BACK TO THE AO BY CIT(A) AND REMAND REPORT WAS SENT. IN THE REMAND REPORT, IT WAS STATED THAT THE ASSESSEE HAS PRODUCED ONE SHRI KAILASH VAIDYA, PRO PRIETOR OF M/S MAHAKALI METAL INDUSTRIES, AMARAVATI, WHO CONFIRMED THAT HE HAS ENGAGED IN THE BUSINESS OF SUPPLY CONSTRUCTION MATERIAL OF ASSESSEE. HOWEVER, IT WAS SUBMITTED THAT THE ASSESSEE COULD NOT SUBSTANTIATE THE EXPENSES . AFTER CONSIDERING THE SUBMI SSION AND THE REMAND REPORT, LEARNED CIT(A) NOTED THAT THE ASSESSEE IS A GOVERNMENT CONTRACTOR AND HAS COMPLETED THE WORK OF CONSTRUCTION OF CANAL AND 80% OF PAYMENT HAS BEEN MADE AFTER DUE PROCESS. FROM THIS FACT, IT WAS OBSERVED BY THE CIT(A) THAT THE AS SESSEE HAS UTILIZED ITA NO. 1 8 3 /20 1 2 3 THE WORK OF CONSTRUCTION AND THE WORK HAS BEEN COMPLETED. LEARNED CIT(A) FURTHER NOTED THAT THAT IN EARLIER FOUR YEARS, THE NET PROFIT SHOWN BY THE ASSESSEE WAS 6.55%, 3.16%, 4% AND 5.75% I.E FROM ASSESSMENT YEAR 2001 - 02 TO ASSESSMENT Y EAR 2004 - 05. CIT(A) BY OBSERVING THA T IF THE CONTENTION OF THE AO IS ACCEPTED THEN THE NP RATE WILL COME TO 12.71% , WHICH IS NOT REASONABLE IN THE CASE OF A SMALL CONTRACTOR. THEREFORE, TAKING INTO CONSIDERATION ALL THE VIEW, LEARNED CIT(A) DIRECTED THE AO TO APPLY NP RATE OF 8% AND ACCORDING TO RECOMPUTE THE ICOME. 5. LEARNED DR PLACED RELIANCE ON THE ORDER OF AO 6. ON THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE PLACED RELIANCE ON THE ORDER OF CIT(A). 7. AFTER CONSIDERING THE ORDER OF THE AO AND THE CI T(A), WE FOUND NO UNREASONABLENESS IN THE ORDER OF THE LEARNED CIT(A) . LEARNED CIT(A) HAS ASCERTAINED THE FACTUAL MATRIX OF THE CASE AND FOUND THAT THE ASSESSEE IS A SMALL CONTRACTOR. CONTRACT WAS COMPLETED IN RESPECT TO JOB ASSIGNED BY THE GOVERNMENT . PAY MENTS HAVE BEEN RECEIVED. THEREFORE, THE NP RATE SHOULD HAVE BEEN APPLIED INSTEAD OF DISALLOWING THE EXPENSES ON ACCOUNT OF MATERIAL USED BY THE ASSESSEE. LEARNED CIT(A) AFTER TAKING INTO CONSIDERATION THE PAST HISTORY AND THE CURRENT YEARS FACT, FOUND TH AT THE NP RATE OF 8% SHOULD BE APPLIED WHICH WILL BE THE REASONABLE. IN THIS FINDING OF THE LEARNED CIT(A), WE SEE NO REASON TO INTERFERE AS THEY ARE REASONABLE FINDING. ACCORDINGLY, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) . ITA NO. 1 8 3 /20 1 2 4 8 . RESULTANTLY , APPEAL OF THE DEPARTMENT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 3RD DAY OF APR. 201 3 . 201 3 SD/ - SD/ - ( ) ( D.KARUNAKAR RAO ) ( ) ( R.K.GUPTA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI ; DATED : 03 / 04 / 201 3 . /PKM , PS COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) , MUMBAI / NAGPUR . 4. / CIT 5. / DR, ITAT, MUMBAI / NAGPUR . 6. GUARD FILE. //TRUE COPY// / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI