ACIT 25(3), MUMBAI V. RAM BUILDERS, MUMBAI

ITA 2174/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0471 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: USHA KADAM
• Keywords: Reopening of assessment; Bogus purchase
• Section: 143(3); 133(6); 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. 2174/MUM/2016 (ASSESSMENT YEAR- 2009-10) ITA NO. 2175/MUM/2016 (ASSESSMENT YEAR- 2011-12) ACIT-25(3), 6 TH FLOOR, C-10, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051. VS. M/S RAM BUILDERS, 5, VIRESHWAR CHHAYA, V.S. KHANDEKAR MARG, VILE PARLE (E), MUMBAI-400057. PAN: AAAFR8193F (APPELLANT) (RESPONDENT) C. O. NO. 168/MUM/2017 IN ITA NO. 2174/M/2016 (A Y - 2009-10) C. O. NO. 169/MUM/2017 IN ITA NO.2175/M/2016 (A Y - 2011-12) M/S RAM BUILDERS, 5, VIRESHWAR CHHAYA, V.S. KHANDEKAR MARG, VILE PARLE (E), MUMBAI-400057. PAN: AAAFR8193F VS. ACIT-25(3), 6 TH FLOOR, C-10, PRATYAKSH KAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI RAM TIWARI (DR) ASSESSEE BY : SMT. USHA KADAM, (AR) DATE OF HEARING : 01.08.2017 DATE OF PRONOUNCEMENT : 01.08.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THESE TWO APPEAL BY REVENUE U/S. 253 OF THE INCOME- TAX ACT (THE ACT) AND CROSS OBJECTIONS BY ASSESSEE, THEREIN ARE DIRECTED AGAINS T THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-37, [THE CIT(A)], MUMBAI DA TED 15.01.2016 FOR THE IT A NO. 2175 TO 2176 M 2016 & C.O. 168 & 169 M 17 - MS RAM BUILDERS 2 ASSESSMENT YEAR (AY) 2009-10 & 2011-12. AS COMMON G ROUNDS OF APPEAL ARE RAISED IN BOTH THE APPEALS AND IN CROSS OBJECTIONS, FACTS FOR BOTH THE AY ARE ALMOST IDENTICAL, THUS, BOTH THE APPEAL AND THE C.O S WERE HEARD TOGETHER AND ARE DECIDED BY COMMON ORDER. FOR APPRECIATION OF FACT, WE ARE REFERRING THE FACTS OF APPEAL FOR AY 2009-10. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILE D RETURN OF INCOME FOR RELEVANT AY DECLARING TOTAL INCOME AT RS. 83,49,470/-. THE ASSE SSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 07.12.2011 ASSESSING THE TOTAL INCOME OF ASSESSEE AT RS.83,64,129/-. SUBSEQUENTLY, THE ASSESSMENT WAS RE -OPENED ON THE BASIS OF INFORMATION RECEIVED FROM DDIT (INVESTIGATION) AND SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THE ASSESSING OFFICER RE CORDED THE REASONS THAT ASSESSEE HAS MADE PURCHASE FROM PARTIES WHICH HAVE BEEN SHOWN AS A HAWALA DEALERS ON THE WEBSITE OF VAT / SALES TAX DEPARTMEN T OF MAHARASHTRA. THE ASSESSEE MADE A PURCHASES FOR RS. 53,20,528/- FROM SUCH DEALERS. NOTICE U/S 148 DATED 22.03.2013 WAS SERVED UPON THE ASSESSEE. THE ASSESSEE CONTESTED THE NOTICE OF RE-OPENING. THE ASSESSEE OBJECTED TO THE REOPENI NG OF THE ASSESSMENT. THE OBJECTION OF THE ASSESSEE WAS NOT ACCEPTED BY AO. T HE ASSESSING OFFICER (AO) COMPLETED THE RE-ASSESSMENT U/S 143(3) R.W.S. 147 O F THE ACT ON 11.12.2013. THE AO WHILE PASSING THE RE-ASSESSMENT ORDER MADE THE A DDITION OF RS. 53,20,528/- ON ACCOUNT OF NON-GENUINE PURCHASES. ON APPEAL BEFORE THE LD. CIT(A) THE ADDITION WAS RESTRICTED TO 12.5% OF IMPUGNED PURCHASES. THUS , BEING AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRES ENT APPEAL BEFORE US. THE REVENUE IS AGGRIEVED FOR SUSTAINING THE DISALLOWANC E @12.5%. ON SERVICE OF THE IT A NO. 2175 TO 2176 M 2016 & C.O. 168 & 169 M 17 - MS RAM BUILDERS 3 NOTICE OF THE APPEAL BY REVENUE, THE ASSESSEE FILED ITS CROSS OBJECTIONS CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT AS WELL AS SUSTAINING THE ADDITIONS @ 12.5%. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LD. AUTHORIZED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AFTER HEARING OF BOTH THE LD REPRESENTA TIVE OF THE PARTIES, ON THE ISSUE OF REOPENING, THE LD AR FOR THE ASSESSEE AGREED TO WIT HDRAW HER CROSS OBJECTIONS IN BOTH THE APPEALS. CONSIDERING THE SUBMISSIONS OF LD AR FOR THE ASSESSEE THE CROSS OBJECTIONS FILED BY ASSESSEE ARE DISMISSED AS WITHD RAWN. 4. ON THE MERIT OF APPEAL OF REVENUE THE LD. DR FOR TH E REVENUE SUPPORTED THE ORDER OF AO. THE LD DR WOULD ARGUE THAT THE ASSESSEE HAS OBTAINED BOGUS ENTRIES FROM THE HAWALA DEALER AND THE ENTIRE PURCHASES SHOULD H AVE BEEN SUSTAINED BY LD. CIT(A). IT WAS ARGUED THAT DESPITE GIVING OPPORTUNI TY, THE ASSESSEE FAILED TO PRODUCE SUFFICIENT EVIDENCE TO SUBSTANTIATE THE CLA IM OF GENUINITY OF PURCHASES. THE LD. DR FOR THE REVENUE FURTHER ARGUED THAT PART IES FROM WHOM THE ASSESSEE MADE THE PURCHASES WERE BLACK LISTED BY SALES TAX D EPARTMENT, GOVERNMENT OF MAHARASHTRA. BEFORE THE SALES TAX AUTHORITIES THOSE HAWALA DEALERS HAD ADMITTED ON OATH THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANY BODY AND THEY HAD ISSUED ONLY BILLS. ON THE OTHER HAND, LD. AR OF THE ASSESSEE SU PPORTED THE ORDER OF LD. CIT(A) AND WOULD ARGUE THAT DURING THE ORIGINAL ASSESSMENT PROCEEDING, THE CONFIRMATION OF THE DEALERS WERE FILED IN RESPONSE TO THE NOTICE U/S 133(6) OF THE ACT. THE AO ERRED IN MAKING THE ADDITION ON ACCOUNT OF BOGUS PU RCHASES. THE CONFIRMATIONS OF THE PARTIES WERE AVAILABLE ON THE RECORD BEFORE THE ASSESSING OFFICER. THE ASSESSEE IT A NO. 2175 TO 2176 M 2016 & C.O. 168 & 169 M 17 - MS RAM BUILDERS 4 IS ENGAGED IN THE BUSINESS OF CIVIL CONTRACT AND HA D EXECUTED CONTRACT WORK OF MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM). THE EXECUTION OF THE CONTRACT WAS DULY CERTIFIED BY THE OFFICIAL OF MCGM AND THE PAYMENT WAS RELEASED ONLY AFTER VERIFICATION OF QUALITY AND THE QUANTITY OF THE MATERIAL. THE AO RELIED UPON THE INFORMATION OF THIRD PARTY WITHOUT GIVING COPY OF THOSE INFORMATION AND THE EVIDENCES WHICH WAS COLLECTED BY SALES TAX DEPA RTMENT OR BY INVESTIGATION WING OF THE REVENUE. THE ASSESSEE HAS FURNISHED ALL THE DOCUMENTS CONSISTING OF STOCK REGISTER SHOWING THE PURCHASE AND CONSUMED MA TERIAL. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE AO RE-OPENED T HE ASSESSMENT PROCEEDING ON THE BASIS OF INFORMATION FROM INVESTIGATION WING OF THE REVENUE AND THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THE PARTIES NAMELY M/S KARTICKEY ENTERPRISES (PAN: ADWPP7510M) & M/S SHREE ENTERPRISES (PAN: AFKPP4456Q) FROM WHOM THE ASSESSEE HAD MADE PURCHAS ES ARE SHOWN IN THE LIST OF HAWALA DEALER. THE ASSESSEE HAD SHOWN PURCHASES OF RS. 22,10,607/- FROM M/S KARTICKEY ENTERPRISES AND RS. 31,09,821/- FROM M/S . SHREE ENTERPRISES. THE ASSESSEE WAS ASKED TO PRODUCE THE PARTIES. THE AO I SSUED THE SHOW-CAUSE NOTICE DATED 29.11.2013 AS TO WHY THE ENTIRE AMOUNT OF RS. 53,20,528/- SHOULD NOT BE DISALLOWED. THE ASSESSEE FILED ITS REPLY AND CONTEN DED THAT THEY HAVE DEALT WITH A REGISTERED DEALERS WHICH ARE REGISTERED WITH SALES TAX DEPARTMENT AND HAVING VAT/TIN NUMBER AND VALID PAN NUMBER ISSUED BY INCOM E-TAX DEPARTMENT. THE ASSESSEE FURTHER CONTENDED THAT THEY HAVE PURCHASES AND UTILIZED THE MATERIAL ON THE RESPECTIVE WORK-SITE. THE LEDGER CONFIRMATION A LONG WITH ACKNOWLEDGEMENT IT A NO. 2175 TO 2176 M 2016 & C.O. 168 & 169 M 17 - MS RAM BUILDERS 5 AND STOCK AND CONSUMPTION REGISTER WERE ALSO FILED. IT WAS FURTHER CONTENDED THAT WITHOUT PURCHASING THE MATERIAL, IT WAS NOT POSSIBL E FOR THE ASSESSEE TO COMPLETE THE WORK OF MCGM. THE CONTENTION OF THE ASSESSEE WA S NOT ACCEPTED BY AO HOLDING THAT THE SUPPLIER ARE BLACK LISTED BY SALES TAX DEPARTMENT AND THAT THEY HAVE ADMITTED ON OATH BEFORE THE SALE TAX AUTHORITI ES THAT NO MATERIAL SUPPLIED BY THEM. THE AO DISALLOWED THE AGGREGATE OF ENTIRE PUR CHASES MADE FROM THESE TWO PARTIES. THE SIMILAR CONTENTION WAS MADE BEFORE THE LD. CIT(A). THE LD. CIT(A) AFTER CONSIDERING THE CONTENTION OF THE ASSESSEE AN D OBSERVED THAT THE TOTAL PURCHASE OF MATERIAL DURING THE YEAR WAS OF RS. 8,0 9,72,575/-, THE DISALLOWANCE IS OF RS. 52,20,528/- WHICH IS 6.5% OF THE TOTAL MATER IAL PURCHASES. THE LD. CIT(A) FURTHER OBSERVED THAT NEITHER THE STATEMENT NOR THE AFFIDAVIT OF BOTH THE HAWALA DEALERS WERE SUPPLIED WERE NOT GIVEN TO THE ASSESSE E. THE AO HAS NOT MADE AN INDEPENDENT ENQUIRY NOR ISSUE ANY NOTICE U/S 133(6) TO THOSE PARTIES. THE AO MADE THE ADDITION ON THE BASIS THAT THE NAME OF BOTH THE PARTIES WERE PUBLISHED BY SALES TAX DEPARTMENT AS SUSPICIOUS DEALERS AND THAT THE A SSESSEE COULD NOT PRODUCE THOSE PARTIES DURING THE ASSESSMENT. AFTER OBSERV ING THE ABOVE NARRATED FACTS, THE LD. CIT(A) ON THE BASIS OF DECISION OF HONBLE GUJA RAT HIGH COURT IN CASE OF CIT VS. SIMIT P. SHETH (356 ITR 451) (GUJ.) HELD THAT E STIMATION OF RATE OF PROFIT RETURN MUST NECESSARILY VARY WITH THE NATURE OF BUSINESS A ND NO UNIFORM YARDSTICK COULD BE ADOPTED IN DETERMINING THE BOGUS PURCHASE AS PRO FIT EMBEDDED IN SUCH TRANSACTION. THE LD. CIT(A) FURTHER HELD THAT THERE IS CONSTANT TIME GAP BETWEEN THE PERIOD OF PURCHASE, TRANSACTION AND THE PERIOD OF SCRUTINY ASSESSMENT. SINCE, THE AO HAS NOT BROUGHT ANY MATERIAL ON RECORD TO SH OW THAT THERE IS SUPPRESSION OF IT A NO. 2175 TO 2176 M 2016 & C.O. 168 & 169 M 17 - MS RAM BUILDERS 6 SALE (BOGUS PURCHASE). THE LD. CIT(A) WHILE CONSIDE RING THE RULE OF ACCOUNTANCY AS WELL AS OF TAXATION LAW THAT PROFIT FROM BUSINES S CANNOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM SALE AND FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN CIT VS. SIMIT P. SHTEH (SUPRA ) ESTIMATED THE PROFIT @ 12.5% OF IMPUGNED PURCHASES. THEREAFTER, THE LD CIT(A) S USTAINED THE ADDITION @ 12.5% OF THE ALLEGED BOGUS PURCHASES. WE ARE ALSO OF THE CONSIDERED VIEW THAT UNDER INCOME-TAX ACT ONLY REAL INCOME CAN BE TAXED BY THE REVENUE. EVEN OTHERWISE, WHERE IN ANY CASE, THE WHOLE TRANSACTION NOT VERIFI ABLE DUE TO VARIOUS REASONS, THE ONLY TAXABLE IS IS THE TAXABLE INCOME COMPONENT AND NOT THE ENTIRE TRANSACTION. THE HONBLE BOMBAY HIGH COURT IN CIT VS. HARIRAM BHAMBH ANI IN ITA NO. 313/2013 DATED 04.02.2015 HELD THAT THE REVENUE IS NOT ENTIT LED TO BRING THE ENTIRE SALE CONSIDERATION TO TAX, BUT ONLY THE PROFIT ATTRIBUTA BLE ON SUCH TOTAL UNRECORDED SALE CONSIDERATION ALONE CAN BE SUBJECT TO TAX. WE HAVE NOTICED THAT AO HAS DISALLOWED THE ENTIRE PURCHASES FROM THE ALLEGED HAWALA DEALER S; HOWEVER, THE LD. CIT (A) RESTRICTED THE DISALLOWANCE @ 12.5%. IN OUR CONSIDE RED VIEW THE ORDER OF LD. CIT (A) DOES NOT WARRANT ANY INTERFERENCE AT OUR END. H ENCE, THE GROUNDS OF APPEAL RAISED BY REVENUE ARE DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 7175/MUM/2016 AY-2011-12 7. THE REVENUE HAS RAISED IDENTICAL GROUNDS OF APPEAL AS RAISED IN ITA NO. 2174/MUM/2016 FOR AY 2009-10. SINCE WE HAVE ALREADY DISMISSED THE APPEAL OF REVENUE BY CONFIRMING THE ORDER OF LD. CIT(A). HENC E, THE APPEAL FOR AY 2011-12 IS ALSO DISMISSED WITH THE SAME OBSERVATIONS. IT A NO. 2175 TO 2176 M 2016 & C.O. 168 & 169 M 17 - MS RAM BUILDERS 7 8. IN THE RESULT, APPEAL OF REVENUE FOR ASSESSMENT YEA R 2009-10 AND 2011-12 ARE DISMISSED. THE CROSS OBJECTIONS NO.168 AND 169 /M/ 2017 FILED BY ASSESSEE ARE DISMISSED AS WITHDRAWN. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST DAY OF AUGUST 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) (VICE-PRESIDENT) JUDICIAL MEMBER MUMBAI; DATED 01/08/2017 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/