DCIT CENT. CIR. - 1(3), MUMBAI V. POONAM SKYLINE CONSTRUCTION, MUMBAI

ITA 2311/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0109 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 28-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V VIDHYADHARDR
• Assessee Lawyers: L S SINGHVI
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./2311/MUM/2016, / ASSESSMENT YEAR: 2011-12 DCIT-CC-1(3) ROOM NO.905, PATISHTHA BHAVAN, 9TH FLOOR, OLD CGO BUILDING ANNEXE MUMBAI-400 020. VS. M/S. POONAM SKYLINE CONSTRUCTION 66/B, 3RD FLOOR, PODAR CHAMBERS, MUMBAI SAMACHAR MARG, FORT, MUMBAI-400 001. PAN:AAHFP 4019 R ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI V. VIDHYADHAR-DR /ASSESSEE BY: SHRI L.S. SINGHVI / DATE OF HEARING: 11/12/2017 / DATE OF PRONOUNCEMENT:01.3.2018 , / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 19/02/2016 OF THE CIT (A)- 9, MUMBAI,THE ASSESSING OFFICER (AO)HAS FILED PRESENT APPEAL.ASSESSEE ENGAGED IN THE BUSINESS OF BUILDING AND DEVELOPMENT OF PROPERTY FILED ITS RETURN OF INCOME ON 28/09/2011,DECLARING TOTAL INCOME AT RS.5.01 CRORES. THE AO COMPLETED THE ASSESSMENT,ON 25/03/2014,U/S. 143(3) OF THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS.5. 89 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DIRECTION GIVE N BY THE FIRST APPELLATE AUTHORITY (FAA) TO THE AO TO REDUCE THE CLOSING WIP PROPORTIONATELY .THE AO HAD RECEIVED INFORMATION FROM THE INVESTIGATION WING THAT THE ASSESSEE HAD ENTERE D INTO BOGUS TRANSACTION WITH 8 PARTIES AND THE AMOUNT INVOLVED WAS RS.87.66 LAKHS.DURING THE A SSESSMENT PROCEEDINGS THE AO DIRECTED THE ASSESSEE TO PRODUCE DETAILS OF PURCHASES MADE F ROM THOSE PARTIES AS ALSO DETAILS OF PURCHASE BILLS, PROOFS OF DELIVERY OF GOODS AND TRA NSPORTS AND LORRY RECEIPTS ETC. HE ALSO REQUIRED IT TO PRODUCE THE PARTIES BEFORE HIM. IN R ESPONSE, THE ASSESSEE FURNISHED PURCHASE BILLS, LEDGER ACCOUNTS COPIES OF BANK STATEMENTS DE TAILS OF PAYMENTS MADE.HOWEVER, IT COULD NOT PRODUCE LORRY RECEIPTS OR TRANSPORTATION DETAIL S.IT ALSO COULD NOT PRODUCE THE PARTIES BEFORE AO FOR EXAMINATION NOR DID HE PROVIDE THE ADDRESSES .THEREFORE, THE AO DISALLOWED THE ENTIRE BOGUS PURCHASE OF RS.87.66 LAKHS AND ADDED IT TO TH E TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE DETAILED SUBMISSIO N.IT ALSO RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HE LD THAT AO HAD HELD THAT PURCHASES FROM 8 PARTIES HAS ACTUALLY BEEN MADE,THAT SAME WERE HELD TO BE BOGUS AS THE ASSESSEE COULD NOT 2311/M/16-POONAM SKYLINE CONSTRUCTION 2 PRODUCE THOSE PARTIES BEFORE HIM FOR EXAMINATION,TH AT THERE WAS NO PROOF OF IDENTITY OF SUPPLIERS, THAT THE AO DID NOT DOUBT THE SALES REVE NUE RECOGNIZED FROM CONSTRUCTION BUSINESS, THAT HE DID NOT DISTURB THE WORKING OF CLOSING STOC K OF FLATS OR WIP OF PROJECTS UNDER CONSTRUCTION . HE REFERRED TO THE ORDER OF ITAT MUM BAI BENCHES WHERE IT WAS HELD THAT IN THE CASES OF BOGUS PURCHASES ENTIRE PURCHASES COULD NOT BE DISALLOWED AND THAT ONLY PROFIT EMBEDDED IN DOUBTFUL TRANSACTIONS HAD TO BE TAXED. HE REFERRED TO THE CASES OF MADHUKANT B. GANDHI ITA/1950/MUM/2009 AY 05-06 DTD 23/2/2010),BH OLANA POLYFAB PVT. LTD. (355 ITR 290), SANJAY OIL CAKE INDUSTRIES (316ITR274), SIMIT P. SHETH (356ITR451) AND HELD THAT THE ASSESSEE WAS NOT IN A POSITION TO BRING THE EXISTE NCE OF THE SUPPLIERS, THAT THERE WERE ENOUGH CIRCUMSTANTIAL EVIDENCES CASTING A DOUBT ON THE NAT URE OF THE TRANSACTION, THAT THE ASSESSEE HAD MADE CASH PURCHASES FROM OTHER PARTIES WHICH WE RE NOT RECORDED IN THE BOOKS, HE TOOK ONLY BILLS FROM 8 PARTIES TO EXPLAIN THE PURCHASES, THAT NATURE OF ITEMS PURCHASED FROM ALLEGED SUPPLIERS PROVED THAT SAME WERE UTILIZED BY IT, THA T THE PURCHASES MADE FROM 8 PARTIES WERE DEBITED TO P&L ACCOUNT THAT THE TOTAL ALLEGED PURCH ASES OF RS.87,66,486/- HAD BEEN CONSUMED BY THE ASSESSEE IN 4 OF HIS PROJECTS. HE TABULATED THE BREAKUP OF PURCHASES FROM 8 PARTIES AND UTILIZATION OF PURCHASES IN 4 PROJECTS AS UNDER: SN. NAME OF PARTY ITEM TOTAL AMOUNT (RS.) POONAM ASTER POONAM AUTUM POONAM ACORN POONAM ASTRAL 1. RAJ TRADERS CEMENT 15,46,707/ - 15,47,707/ - 2. R.K. STEEL & MERCANTILE PVT. LTD. STEEL 9,72,205/ - 3, AMAR TRADING CORPORATION SAND/METAL/EARTH 19,02,285/ - 4. AROMA IMPEX MODULAR KITCHEN 7,58,578/ - 76,84 2/ - 5. LIBERTY TRADING CORPORATION SAND/METAL/EARTH 5,86,840/ - 3,99,416/ - 1,87, 424/ - 6. SUBH ENTERPRISES MARBLE & TILES 18,41,050/ - 64,002/ - 17,77,048/ - 7. NISHA ENTERPRISES CEMENT 10,01,429/ - 10,01,429/ - 8. RUMEET ENTERPRISES DOOR FRAM E 80,550/ - 80,550/ - TOTAL 87,66,486/ - 20,10,125/ - 64,92,095/ - 1,87,424/ - 76,842/ - HE FURTHER OBSERVED THAT THE ASSESSEE HAD SHOWN CL OSING WIP OF THE 4 PROJECTS IN SCHEDULE K OF THE BALANCE SHEET ,THAT THE WIP WAS SHOWN ON P RORATINATE BASIS OF TOTAL AREA CONSTRUCTED AS REDUCED BY THE TOTAL AREAS SOLD,THAT ONCE THE TO TAL PURCHASES HAD BEEN DISALLOWED THE 2311/M/16-POONAM SKYLINE CONSTRUCTION 3 COMPONENT OF PURCHASES LYING IN THE CLOSING STOCK HAD ALSO TO BE REDUCED ON THE CREDIT SIDE OF THE P&L ACCOUNT AND THE BALANCE SHEETS.UPHOLDING THE DISALLOWANCE OF RS.86.67 LAKHS,HE DIRECTED THE AO TO REDUCE THE CLOSING WIP BY THE PR OPORTIONATE ELEMENT OF PURCHASES AS PER THE FORMULA ADOPTED BY THE ASSESSEE IN SCHEDULE- K TO THE BALANCE SHEET. HE OBSERVED THAT THE ASSESSEE WOULD GET A CONSEQUENTIAL BENEFIT OF REDUC TION OF CREDIT SIDE OF THE P&L ACCOUNT. HE CLARIFIED THAT ONLY THE NET AMOUNT, TOTAL PURCHASES (AS REDUCED BY THE PROPORTIONATE REDUCTION OF CLOSING WIP ) HAD TO BE DISALLOWED. 4. BEFORE US,THE DEPARTMENTAL REPRESNETATIVE(DR) SUPPO RTED THE ORDER OF THE AO. THE AUTHORISED REPRESENTATIVE(AR)LEFT THE MATTER TO THE DISCRETION OF THE BENCH. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE AO RECEIVED INFORMATION FROM THE INVESTIGATION WING AB OUT BOGUS PURCHASES MADE BY THE ASSESSEE,THAT HE MADE FURTHER INQUIRIES IN THAT REG ARD AND DISALLOWED THE ENTIRE BOGUS PURCHASE OF RS.87.66 LAKHS ADDING IT TO THE TOTAL I NCOME OF THE ASSESSEE,THAT THE FAA ALLOWED PARTIAL RELIEF TO THE ASSESSEE.HE DIRECTED THE AO T O REDUCE THE CLOSING WIP BY THE PROPORTIONATE ELEMENT OF PURCHASES AS PER THE FORMU LA ADOPTED BY THE ASSESSEE IN SCHEDULE- K TO THE BALANCE SHEET.IN OUR OPINION,THE APPROACH OF THE FAA IS QUITE REASONABLE AND IS BASED ON SOUND PRINCIPLES OF ACCOUNTANCY.THE ASSESS EE WAS ENTITLED TO GET PROPORTIONATE RELIEF FOR THE PURCHASES IN THE WIP.WE ARE OF THE O PINION,THAT HIS ORDER DOES NOT SUFFER FROM ANY LEGAL OR FACTUAL INFIRMITY.SO,CONFIRMING THE SA ME,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT, APPEAL FILED BY THE AO STANDS DISMIS SED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST MARCH, 2018. ! ' # 01 $ , 2018 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; ' # /DATED : 01.3.2018. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ 2311/M/16-POONAM SKYLINE CONSTRUCTION 4 //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.