PBA INFRASTRUCTURE LTD., MUMBAI V. ACIT CENT CIR. 36, MUMBAI

ITA 2121/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0499 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 01-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Keywords: Unexplained expenditure; Rule of consistency; Retraction
• Section: 69C; 143(3); 133(6); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 2121 TO 2125/MUM/2016 (ASSESSMENT YEARS- 20 07-08 TO 2011-12) PBA INFRASTRUCTURE LIMITED 6/11, PRAKASH, V N PURAV MARG, CHEMBUR, MUMBAI-400071. PAN: AAAC7564K VS. ACIT CC- 36 (2)(1), AAYAKAR BHAVAN, M.K. ROAD, CHURCHGATE, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI Y.P. TRIVEDI SR ADVOCATE WITH MS. USHA DALAL, ADVOCATE REVENUE BY : SHRI V. JUSTIN (SR. DR) DATE OF HEARING : 03.08.2017 DATE OF PRONOUNCEMENT : 08.08.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER 1. THIS BUNCH OF FIVE APPEALS BY ASSESSEE UNDER SECTIO N 253 OF THE INCOME-TAX ACT (THE ACT) ARE DIRECTED AGAINST THE ORDER OF LD. COM MISSIONER OF INCOME-TAX (APPEALS)-53, MUMBAI (CIT(A)-53, MUMBAI DATED 21.10 .2015 FOR ASSESSMENT YEARS (AY) 2007-08 TO 2011-12. IN ALL APPEALS, THE ASSESSEE HAS RAISED THE IDENTICAL GROUNDS OF APPEAL. THE FACTS FOR ALL AYS ARE ALMOST SIMILAR EXCEPT THE VARIATION OF FIGURES OF ADDITION. CONSIDERING THE C OMMON GROUNDS OF APPEAL, SIMILAR FACTS IN APPEAL ALL WERE HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER TO AVOID TO THE CONFLICTING DECISION. FOR APPRECIATION OF FACTS, WE ARE REFERRING THE ITAS NO.2121 TO 2125/M/2016 PBA INFRASTRUCTURE LIMITED 2 FACTS FOR AY 2007-08 IN ITA NO. 2121/MUM/2016. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ID. CIT (A) ERRED IN UPHOLDING THE DISALLOWA NCE OF RS 43,84,084/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE PAID BY THE APPE LLANT WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE . 2. THE LEARNED CIT ( A) FURTHER ERRED IN ALLEGING T HAT THE APPELLANT WAS SIPHONING OF PROFIT BY DEBITING BOGUS EXPENSES WITH OUT BRINGING ANY EVIDENCE ON RECORD. 3. WHILE UPHOLDING THE AFORESAID DISALLOWANCE , THE LEARNED CIT (A) FURTHER ERRED IN RELYING ON EVIDENCES COLLECTED DURING SEAR CH PROCEEDINGS, WHICH ARE HAVING LITTLE EVIDENTIARY VALUE AND HENCE, NOT ADMI SSIBLE IN LAW AS PER VARIOUS JUDICIAL PRONOUNCEMENT. 4. THE LEARNED CIT (A) FAILED TO APPRECIATE THE INT RICACIES OF THE APPELLANT'S BUSINESS AND HENCE, ERRED IN UPHOLDING THE ORDER OF THE ASSESSING OFFICER, WHICH WAS BASED ON PRESUMPTIONS, CONJECTURES AND SU RMISES. 5. THE LEARNED CIT (A) FAILED TO APPRECIATE THAT TH E APPELLANT HAD RETRIEVE INCOME OFFERED DURING THE SEARCH ON ACCOUNT OF DISC REPANCIES IN RECORD OF PURCHASE OF RS. 7,03,09,621/- AND HENCE A DISALLOWA NCE WAS UNWARRANTED AND ILLEGAL AND/OR EXCESSIVE. 2. THOUGH, THE ASSESSEE HAS RAISED AS MANY AS SIX GROU NDS OF APPEAL, HOWEVER, AS PER OUR CONSIDERED VIEW THE SOLE AND SUBSTANTIAL GROUND OF APPEAL IS IF THE LD. CIT(A) ERRED IN UPHOLDING THE DISALLOWANCE OF RS. 43,84,08 4/- ON ACCOUNT OF UNEXPLAINED EXPENDITURE. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-C OMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF ROADS, LAYING OF PAVER BLOCKS AN D EXECUTION OF VARIOUS OTHER INFRASTRUCTURE PROJECTS ACROSS THE COUNTRY. THE ASS ESSEE FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 31.10.2007 DECLARING TOTAL INCOM E OF RS. 120,67,47,682/-. THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 3 1.12.2009 AFTER MAKING A CERTAIN ADDITIONS AND DISALLOWANCES ASSESSING THE T OTAL INCOME AT RS.13,55,16,460/- . SUBSEQUENTLY, THE ASSESSMENT WAS OPENED U/S 147 OF THE ACT. THE NOTICE U/S 148 DATED 31.03.2013 WAS SERVED UPON THE ASSESSEE. THE ASSESSMENT WAS RE-OPENED AS A SURVEY ACTION WAS CARRIED ON THE PREMISES OF THE ASSESSEE ON 14.02.2013 AND ITAS NO.2121 TO 2125/M/2016 PBA INFRASTRUCTURE LIMITED 3 DURING THE SURVEY SH. BALKRISHNA WARDHAWAN TO ADMIT CERTAIN PURCHASE AS NON- GENUINE. DURING THE SURVEY STATEMENT BALKRISHNA WAR DHAWAN WAS RECORDED UNDER SECTION 132(4) OF THE ACT, WHEREIN HE HAS OFFERED ( DECLARED) INCOME OF RS. 7.03 CRORE. IN RESPONSE THE NOTICE UNDER SECTION 148, T HE ASSESSEE FILED ITS RETURN OF INCOME ON 09.10.2013 DECLARING TOTAL INCOME OF RS. 13,02,49,682/-. THE AO COMPLETED THE RE-ASSESSMENT PROCEEDING ON 26.03.201 4 U/S 143(3) R.W.S. 147 OF THE ACT. WHILE FRAMING RE-ASSESSMENT ORDER, THE ASSESSI NG OFFICER (AO) MADE THE ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE OF R S. 43,84,084/-. ON APPEAL BEFORE THE LD. CIT(A), THE ORDER OF AO WAS CONFIRME D. FURTHER, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRE SENT APPEAL BEFORE US. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT THE MAJOR ADDITION TO THE INCOME DURING THE RE-ASSESSMENT PROCEEDING IS O N ACCOUNT OF ALLEGED UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. THE AO DISALLOWED THE GENUINE AND EXPLAINED EXPENDITURE OF RS. 43,84,084/-. THE MATER IAL WAS PURCHASED FROM THE DEALERS AFTER AVAILING PROPER BILLS. THE PAYMENTS W ERE MADE THROUGH CHEQUES AND ALL DETAILS REGARDING THE CONSUMPTION OF MATERIAL W ERE SHOWN. THE ASSESSEE- COMPANY IS ENGAGED IN THE BUSINESS OF INFRASTRUCTUR E PROJECT AT VARIOUS SITES, ALL THE MATERIAL PURCHASED FROM ALL THE SO-CALLED HAWALA DE ALERS WERE CONSUMED. THE WORK OF THE ASSESSEE IS CERTIFIED BY INDEPENDENT AG ENCY. DURING THE SURVEY, THE OFFICIAL OF INCOME-TAX DEPARTMENT PRESSURIZED SHRI BALKRISHNA WARDHAWAN TO ADMIT CERTAIN PURCHASE AS NON-GENUINE. THE ASSESSE E FILED AFFIDAVIT DATED ITAS NO.2121 TO 2125/M/2016 PBA INFRASTRUCTURE LIMITED 4 28.02.2013 RETRACTED FROM THE STATEMENT RECORDED DU RING THE SURVEY. THE RETRACTION OF THE ASSESSEE WAS NOT CONSIDERED BY THE LOWER AUT HORITIES. THE AO AS WELL AS LD. CIT(A) DISALLOWED THE PURCHASES WITHOUT APPRECIATIN G THE FACT THAT ASSESSEE HAS CONSUMED THE MATERIAL IN EXECUTION OF PROJECT. THE LD. AR OF THE ASSESSEE SPECIFICALLY RELIED UPON THE SUB-PARA (VI) OF PARA- 5 OF ORDER OF AO. THE LD. AR OF THE ASSESSEE IN SUPPORT OF HIS SUBMISSION FURTHER F ILED A WRITTEN SYNOPSIS AND RELIED UPON CERTAIN DECISIONS OF TRIBUNAL, AS REFERRED IN HIS WRITTEN SUBMISSION. THE WRITTEN SUBMISSIONS OF THE ASSESSEE ARE ALSO TAKEN ON RECORD. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF A UTHORITIES BELOW. IT WAS ARGUED THAT DURING THE SURVEY ACTION U/S 133(A) STATEMENT OF SHRI BALKRISHNA WARDHAWAN WAS RECORDED. IN HIS STATEMENT SHRI BALKRISHNA WARD HAWAN ADMITTED THAT THEY HAVE MADE PURCHASES FROM HAWALA PARTIES CONSISTING OF KAPASI FAMILY AND M/S. SHIVANI HOT ROLLED STEELS PVT. LTD. AND OFFERED THE ADDITIONAL INCOME. DURING THE RE-ASSESSMENT, THE AO ASKED THE ASSESSEE TO FURNISH THE LIST OF PARTIES FROM WHOM THE ASSESSEE MADE PURCHASES. FROM THE LIST SUPPLIED BY ASSESSEE, THE AO NOTED THAT SIX OF THE PARTIES FROM THE ASSESSEE MADE PURCHASES WERE LISTED IN THE LIST OF HAWALA TRADERS IN THE WEBSITE OF SALES TAX DEPARTMENT, STA TE OF MAHARASHTRA. THE ASSESSEE WAS GIVEN SUFFICIENT OPPORTUNITY TO PROVE THE GENUI NENESS OF PURCHASES. THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE TRA NSACTION FROM SIX PARTIES. THE NAMES OF ALL THE PARTIES HAVE BEEN MENTIONED BY AO IN PARA-4 OF HIS ORDER. AS THE ASSESSEE FAILED TO PROVE THE GENUINENESS OF THE PUR CHASES, THE AO WAS JUSTIFIED IN DISALLOWING THE AGGREGATE OF PURCHASES FROM THESE S IX PARTIES. ITAS NO.2121 TO 2125/M/2016 PBA INFRASTRUCTURE LIMITED 5 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF REPRESEN TATIVE OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE A O DURING THE RE-ASSESSMENT PROCEEDINGS ASKED THE ASSESSEE TO FURNISH THE LIST OF PERSON FROM WHOM THE PURCHASES HAS MADE DURING THE RELEVANT PERIOD. THE ASSESSEE FURNISHED THE DETAILED OF THE PARTIES FROM THE PURCHASES WERE MADE. THE AO FROM THE LIST OF SUCH PERSON NOTICED THAT THE NAMES OF SIX PARTIES WERE LISTED I N THE OFFICIAL WEBSITE OF SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THE ASSESSEE MADE THE FOLLOWING PURCHASED FROM THOSE SIX PARTIES. SR.NO. NAME OF THE HAWALA DEALER AMOUNT OF PURCHASES (RS.) 1 M/S. ALLIED INDUSTRIES 98,100 2 M/S AMAR ENTERPRISES 2,09,250 3 M/S. GEETA ENTERPRISES 28,54,865 4 M/S. GALLENT TRADERS PVT. LTD. 1,70,213 5 M/S. ISHITA ENTERPRISES 6,440 6 M/S. ALSTOM TRADING CO. P. LTD. 10,45,216 TOTAL: 43,84,084 THE AO ISSUED NOTICE U/S 133(6) TO ALL THE PARTIES. HOWEVER, NO REPLY WAS RECEIVED; THE ASSESSEE WAS ASKED TO PRODUCE THE PAR TIES FOR VERIFICATION. THE ASSESSEE FAILED TO PRODUCE THE PARTIES FOR VERIFICA TION. ON SHOW-CAUSE NOTICE AS TO WHY THE AGGREGATE OF PURCHASES BE NOT TREATED AS UN EXPLAINED EXPENDITURE, THE ASSESSEE FURNISHED ITS REPLY DATED 10.02.2014. IN T HE REPLY THE ASSESSEE CONTENDED THAT ALL THE PURCHASES WERE MADE THROUGH CHEQUES. I T WAS FURTHER CONTENDED ON BEHALF OF ASSESSEE THAT THE ADMISSION/DISCLOSURE OF ADDITIONAL INCOME MADE DURING THE SURVEY HAS ALREADY BEEN RETRACTED. THE CONTENTI ON OF ASSESSEE WAS NOT ACCEPTED BY AO. THE AO MADE THE DISALLOWANCE OF AGGREGATE OF PURCHASES FROM SIX PARTIES FOR RS. 43,84,084/-. DURING THE FIRST APPELLATE ST AGE, THE LD. CIT(A) ALSO OBSERVED ITAS NO.2121 TO 2125/M/2016 PBA INFRASTRUCTURE LIMITED 6 THAT THE ASSESSEE HAS NOT PRODUCED THE PARTIES FOR VERIFICATION DESPITE THE OPPORTUNITY GIVEN TO THE ASSESSEE. THE NOTICE U/S 1 33(6) OF THE ACT SENT TO ALL THE PARTIES WERE RETURNED BACK. THE ASSESSEE HAS NOT GI VEN ANY CONFIRMATION FROM THE SAID PARTIES EITHER BEFORE THE AO OR DURING FIRST A PPELLATE STAGE. THE AO HAS NO OCCASION TO VERIFY THE BOOKS OF ACCOUNT AND THE BAN K ACCOUNT OF THE SUPPLIER. THE DOCUMENT FURNISHED BY THE ASSESSEE I.E. LEDGER ACCO UNT OF AFORESAID PARTIES IS ITSELF NOT SUFFICIENT TO ESTABLISH THE GENUINENESS OF THE PURCHASES. THE ASSESSEE HAS NOT FURNISHED THE COPY OF RELEVANT INVOICES, PROOF OF T RANSPORTATION, BILL, CONSUMPTION OF GOODS ETC. THE ASSESSEE COULD NOT PRODUCE ANY DE LIVERY CHALLANS OR LORRY RECEIPT IN RESPECT OF GOODS WHICH HAVE BEEN PURCHAS ES FROM THE AFORESAID PARTIES. FOR THE RETRACTION AFFIDAVIT OF BALKRISHNA WADHAWAN , THE LD CIT(A) OBSERVED THAT IT IS UNWORTHY OF CREDIT. ON THE BASIS OF ABOVE O BSERVATION THE LD CIT(A) CONFIRMED THE ACTION OF AO. 6. WE HAVE SEEN THAT THE ORDER IN POINT NO. (VI) OF SU B-PARA (VI) OF PARA-4. THE AO OBSERVED THAT THE PURCHASES OF THE ASSESSEE , PER-SE IS NOT THE ISSUE AND THESE ALLEGED PURCHASES ARE NOT BEING TREATED AS BOGUS. THE SALES TAX DEPARTMENT HAS COME DOWN HARD ON THE PERNICIOUS PRACTICES INDULGED IN BY THESE UNSCRUPULOUS TRADERS FIGURING IN THE LIST OF SUSPICIOUS DEALERS AND IT IS EVIDENT THAT THE ASSESSEE HAS NOT PURCHASED THE GOODS FROM THESE ALLEGED SUPP LIERS. IT IS EQUALLY TRUE THAT THE GOODS HAVE SOMEHOW ENTERED IN THE ASSESSEES REGULA R BUSINESS. THE ASSESSEE HAS BEEN UNABLE TO GIVE ANY CONVINCING OR COGENT EXPLAN ATION AS TO HOW THESE GOODS HAPPENED TO COME IN HIS POSSESSION. THE ASSESSEE HA S, THUS, INCURRED EXPENDITURE ON SUCH PURCHASES WHICH IS NOT EXPLAINED. THE PURCH ASES ARE NOT TREATED AS BOGUS ITAS NO.2121 TO 2125/M/2016 PBA INFRASTRUCTURE LIMITED 7 OR SHAM RATHER THE EXPENDITURE INCURRED ON SUCH PUR CHASES IS TREATED AS UNEXPLAINED. WE HAVE NOTED THAT THE AO HAVE DISALLO WED THE ENTIRE PURCHASES FROM SIX PARTIES. THE BOOKS OF ACCOUNTS OF ASSESSEE WERE NOT REJECTED BY AO. THE AO HAS NOT MADE ANY INDEPENDENT ENQUIRY FOR BRINGIN G CO-GENT EVIDENCE ON RECORD. THE ASSESSING OFFICER HAS NOT MADE ANY INQU IRY ABOUT THE PURCHASES FROM KAPASI FAMILY AND M/S. SHIVANI HOT ROLLED STEELS PV T. LTD, IN RESPECT OF WHICH THE ADDITIONAL INCOME OF ALLEGEDLY OFFERED DURING THE SURVEY. THE AO HAS NOT EXAMINED THE RATIO OF IMPUGNED PURCHASES QUA THE EN TIRE PURCHASES MADE BY ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE A O RELIED UPON THE REPORT OF SALES TAX DEPARTMENT. THE REPORT OF SALES TAX DEPAR TMENT WAS NOT SHARED WITH THE ASSESSEE. WE ARE OF THE VIEW THAT UNDER INCOME- TAX ACT, THE ONLY REAL INCOME CAN BE TAXED BY THE REVENUE, EVEN IF THE TRANSACTIO N IS NOT VERIFIABLE DUE TO ANY REASON, THE ONLY TAXABLE IS THE TAXABLE INCOME COMP ONENT AND NOT AGGREGATE OF THE TRANSACTION. AFTER CONSIDERING THE FACT AND NATURE OF BUSINESS OF ASSESSEE, WE ARE OF THE OPINION THAT IN ORDER TO FULFILL THE GAP OF REV ENUE LEAKAGE, THE DISALLOWANCE OF REASONABLE PERCENTAGE OF IMPUGNED PURCHASES WOULD M EET THE END OF JUSTICE. THE HONBLE BOMBAY HIGH COURT IN CIT VS HARIRAM BHAMBHA NI IN ITA NO. 313 OF 2013 DECIDED ON 04.2.2015 HELD THAT REVENUE IS NOT ENTITLED TO BRING THE ENTIRE SALES CONSIDERATION TO TAX, BUT ONLY THE PROFIT ATTRIBUTA BLE ON THE TOTAL UNRECORDED SALES CONSIDERATION ALONE CAN BE SUBJECT TO INCOME TAX. 7. WE HAVE NOTED THAT NEITHER THE AO NOR THE LD. CIT(A ) EXAMINED THE GROSS PROFIT OR NET PROFIT RATIO OF ASSESSEE FOR PREVIOUS OR SUB SEQUENT YEARS. CONSIDERING THE FACTS AND THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT A REASONABLE ITAS NO.2121 TO 2125/M/2016 PBA INFRASTRUCTURE LIMITED 8 DISALLOWANCE OF IMPUGNED PURCHASES/ UNEXPLAINED EXP ENDITURE @ 12.5% WOULD MEET THE END OF JUSTICE. HENCE, THE AO IS DIRECTED TO RESTRICT THE DISALLOWA NCE ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C OF THE A CT @ 12.5% OF AGGREGATE PURCHASES (RS. 43,84,048/-) OF IMPUGNED PURCHASES. WITH THE DIRECTIONS THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 2122, 2123, 2124 & 2125/MUM/2016 8. IN ALL APPEALS THE FACTS OF ALL ASSESSMENT YEARS AR E ALMOST SIMILAR, EXCEPT IN VARIANCE OF FIGURE IN ADDITIONS/ DISALLOWANCES, THE ASSESSEE HAS RAISED IDENTICAL GROUNDS OF APPEAL. AS WE HAVE PARTLY ALLOWED THE AP PEAL FOR AY 2007-08. CONSIDERING THE PRINCIPLE OF CONSISTENCY, ALL THESE APPEALS ARE ALLOWED WITH SIMILAR DIRECTIONS. 9. IN THE RESULT, ALL THE APPEALS FILED BY ASSESSEE AR E PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH DAY OF AUGUST 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) (VICE-PRESIDENT) JUDICIAL MEMBER MUMBAI; DATED 08/08/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/