VINAY UNIQUE CONSTRUCTION P.LTD, MUMBAI V. ACIT 15(3), MUMBAI

ITA 1910/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8157 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AARJOO GARODIA
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Bogus purchase; Opportunity of being heard
• Section: 201(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL J BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. PRADHAN , ACCOUNTANT MEMBER AND ITA N O. 1910/MUM/2016 ( ASSESSMENT YEAR : 2011 12 ) M/S. VIN AY UNIQUE CONSTRUCTION P. LTD., FORMERLY VINAY UNIQUE CONSTRUCTION CO., A 08, OM MAHESHWAR NIKETAN HARSHA PARK, CHANDAVARKAR ROAD BORIVALI (W), MUMBAI 400 092 PAN NO:AAECV7326B . APPELLANT V/S ACIT 15(3) R.NO.122, 1 ST FLOOR MATRU MANDIR MUMBAI 400 007 . RESPONDENT APPELLANT BY : SHR I SUBODH RATNAPARKHI RESPONDENT BY : MS. AARJOO GARODIA DATE OF HEARING 12/12/2017 DATE OF ORDER 12/12/2017 O R D E R PER SAKTIJIT DEY, J.M. THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER DATED 19/01/2016 OF LD. COMMISSIONER OF INCOME TAX (APPEALS) 44 , MUMBAI FOR A.Y.2011 12. 2. GROUND NO. 1(I) HAS NOT BEEN PRESSED, H ENCE, DISMISSED. 2 3. IN GROUND NO.1 (II), ASSESSEE HAS CHALLENGED DISALLOWANCE OF . 49,18,527/ UNDER SECTION.40(A)(IA) OF THE ACT. 4. BRIEFLY THE FACTS ARE , THE ASSESSEE A COMPANY IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER . F OR TH E ASSESSMENT YEAR UNDER DISPUTE A SSESSEE FILED ITS RETURN OF INCOME ON 30/09/2011 DECLARING TOTAL INCOME OF . 1,27,39,434/ . DURING T HE ASSESSMENT P ROCEEDINGS, THE A SSESSING O FFICER NOTICED THAT , THOUGH , THE ASSESSEE HAS PAID INTEREST OF . 49,18,527/ TO N ON B ANKING F INANCIAL C OMPANIES (NBFC) TOWARDS LOANS AVAILED FROM THEM, HOWEVER, THE ASSESSEE HAS NOT DEDUCTED TAX AT SOURCE WHILE MAKING SUCH PAYMEN T. HE THEREFORE , CALLED UPON THE ASSESSEE TO EXPLAIN WHY THE INTEREST PAID SHOULD NOT BE DISALLOWED UNDER SECTION.40(A)(IA) OF THE ACT. 5. IN REPLY, THOUGH , THE ASSESSEE JUSTIFIED ITS ACTION IN NOT DEDUCTING TAX AT SOURCE ON THE INTEREST PAID, HOWEVER, THE ASSESSING OFFICER REJECTING THE EXPLANATION OF THE ASSESSEE , DISALLOWED AN AMOUNT OF . 49,18,527/ UNDER SECTION.40(A )(IA) OF THE ACT. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS ALSO SUSTAINED BY THE FIRST APPELLATE AUTHORITY. 6. THE LD. A UTHORIZE D R EPRESENTATIVE SUBMITTED BEFORE US , THE PAYEES / RECIPIENTS OF INTEREST PAID BY THE ASSESSEE HAVE INCLUDED THE AMOUNT IN COMPUTING THE IR TAXABLE INCOME, THEREFORE, AS PER SECOND PROVISO TO 3 SECTION 40(A)(IA) OF THE ACT, NO DISALLOWANCE CAN BE MADE UNDER THE SAID PROVISION. FURTHER, LEARNED AR SUBMITTED , THE SECOND PROVISO TO SECTION 40(A)(IA) WILL APPLY RETROSPECTIVELY. IN THIS CONTEXT, HE RELIED UPON THE FOLLOWING DECISIONS: I) CIT VS - ANSAL LAND MARK TOWNSHIP (P) LTD., 61 TAXMANN.COM 45(DELHI) (2015) II) DCIT VS - UPS JETAIR EXPRESS (P) LTD., 56 TAXMANN.COM 387 (MUMBAI - TRIB)(2015) (III) REDEUS ADVERTISING (P) LTD., VS. ACIT, 80 TAXMANN.COM 353 (MUM - TRIB)(2017) (IV) ITO VS. DR. JAIDEEP KUMAR SHARMA, 152 ITD 270 (DELHI)(2015) 7. THE LEANED A UTHORIZED R EPRESENTATIVE SUBMITTED , THE ISSUE MAY BE RESTORED BACK TO THE ASSESSING OFFICER TO EXAMINE THIS ASPECT. 8. THE LEARNED D EPARTMENTAL R EPRESENTATIVE SUBMITTED , THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE THAT THE RECIPIENTS HAVE OFFERED THE INTEREST PAID TO THEM AS INCOME IN THE RELEVANT ASSESSMENT YEAR. 9 . WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MATERIALS ON RECORD. IN PRINCIPLE, WE AGREE WITH THE CONTENTION OF LEARNED A UTHORIZED R EPRESENTATIVE THAT THE SECOND PROVISO OF SECTION 40(A)(IA) WILL HAVE R ETROSPECTIVE OPERATION. THE DECISIONS RELIED UPON BY THE LEARNED AUTHORIZED REPRESENTATIVE SUPPORTS THIS VIEW. HOWEVER, A CAREFUL READING OF THE SECOND PROVISO TO SECTION 40(A)(IA) WOULD MAKE IT CLEAR THAT IT WILL APPLY IF THE ASSESSEE IS NOT DEEMED TO BE AN 4 ASSESSEE IN DEFAULT IN TERMS O F FIRST PROVISO OF SECTION 201 (1) OF THE ACT. AS PER THE CONDITIONS OF SECTION 201(1) OF THE ACT, THE ONUS IS O N THE ASSESSEE TO DEMONSTRATE THROUGH DOCUMENTARY EVIDENCE THAT THE RECIPIENTS HAVE OFFERED THE AMOUNT PAID TO THEM , WITHOUT DEDUCTING TAX AT SOURCE , AS INCOME IN THE RETURN OF INCOME FILED FOR THE RELEVANT ASSESSMENT YEAR. 1 1 . SINCE THE AFORESAID CLAIM OF THE ASSESSEE REQUIRES FACTUAL VERIFICAT ION AND THE ASSESSEE HAS TO BRING PROPER EVIDENCE ON RECORD TO PROVE I TS CLAIM, WE RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. IN CASE ASSESSEES CLAIM THAT THE RECIPIENTS HAVE OFFERED THE INTEREST PAID TO THEM AS INCOME IN THE RELEVANT A SSESSM ENT YEAR IS FOUND TO BE CORRECT, N O DISALLOWANCE UNDER SECTION.40(A)(IA) SHOULD BE MADE. WITH THE AFORESAID OBSERVATION S , THE GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 1 2 . IN GROUND NO.2 ASSESSEE HAS CHALLENGED OF ADDITION OF . 10,40,053 ON ACCOUNT OF BOGUS PURCHASES. 1 3 . BRIEFLY THE FACTS ARE , DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON THE BASIS OF INFORMATION AVAILABLE ON RECORD FOUND THAT PURCHASES TO THE TUNE OF . 50,28,05/ MADE FROM EIGHT PARTIES 5 WERE BOGUS IN NATURE AS THOSE PARTIES ARE HAWALA OPERATORS AND ARE PROVIDING ACCOMMODATION BILLS. 14 . FURTHER , TO VERIFY THE AUTHENTICITY OF THE PURCHASE S , THE ASSESSING OFFICER ISSUED NOTICES UNDER SECTION.133(6) TO THE CONCERNED PARTIES WHICH RETURNED UNSERVED BY THE POSTAL AUTHOR ITIES WITH REMARK S LE F T , UNKNOWN ETC. . THE ASSESSING OFFICER ALSO OBSERVED THAT APART FROM FURNISHING PURCHASE INVOICES, THE ASSESSEE COULD NOT PROVE THE PHYSICAL DELIVERY OF GOODS AT ITS PREMISES THROUGH DELIVERY CHALLAN, TRANSPORTATION BILLS ETC., T HEREFORE, HE TREATED THE PURCHASES MADE OF . 50,28,053/ FROM THE CONCERNED PARTIES AS BOGUS, AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 15 . LD. COMMISSIONER (A PPEALS ) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE ENTIRE PURCHASES CAN NOT BE ADDED TO THE INCOME OF THE ASSESSEE AS THE CONSUMPTION OF MATERIAL HAS NOT BEEN DOUBTED BY THE ASSESSING OFFICER. HE ALSO FOUND THAT THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES FIGURE OR THE WORK IN PROGRESS. THEREFORE, LEARNED COMMISSIONER (A PPEALS ) HELD , SINCE , ONLY THE SOURCE OF PURCHASE S IS DOUBTFUL THE PROFIT ELEMENT EMBEDDED IN SUCH PURC HASES CAN BE CONSIDERED FOR ADDITION. ACCORDINGLY, HE QUANTIFIED THE DISALLOWANCE AT 20% OF THE ALLEGED BOGUS PURCHASES. 6 16. THE ONLY SUBMISSION BY THE LEARNED A UTHORIZED R EPRESENTATIVE BEFORE US IS , THE DISALLOWANCE OF 20% IS ON A MUCH HIGHER SIDE A ND SHOULD BE SUITABLY SCALED DOWN . LEARNED D EPARTMENTAL R EPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE COMMISSIONER (A PPEALS ). 17 . WE HAVE HEARD RIVAL CO NTENTIONS AND PERUSED MATERIAL ON RECORD. THE ISSUE BEFORE US IS THE QUANTUM OF DISALLOWANCE TO BE MADE OUT OF BOGUS PURCHASES. AS COULD BE SEEN , LEARNED COMMISSIONER (A PPEALS ) HAS DISALLOWED 20% OUT OF THE ALLEGED BOGUS PURCHASES. HOWEVER, IT IS A FACT TH AT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF BUILDER AND DEVELOPER (CIVIL CONSTRUCTION WORK). THEREFORE , IT CANNOT BE EXPECTED TO EARN PROFIT OF 20%. FURTHER, IN SIMILAR TYPES OF CASES, THE TRIBUNAL IS CONSISTENTLY UPHOLDING DISALLOWANCE AT 12.5% OF THE A LLEGED BOGUS PURCHASE. IN TUNE WITH THE AFORESAID CONSISTENT VIEW OF THE TRIBUNAL, WE RESTRICT THE DISALLOWANCE TO 12.5% OF THE ALLEGED BOGUS PURCHASES. FURT H ER, WE MAY MAKE IT CLEAR THAT OUR AFORESAID DECISION IS PURELY IN THE CONTEXT OF THE FACTS INVOLVE D IN THE PRESENT APPEAL. GROUND RAISED IS PARTLY ALLOWED. 18. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.12.2017 SD/ - SD/ - SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER 7 MUMBAI, DATED: 12.12.2017 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 KARUNA SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI