ACIT - 19(1), MUMBAI V. HARESH M. SHAH, MUMBAI

ITA 2773/MUM/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0544 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN LD
• Assessee Lawyers: RAHUL K HAKANI LD
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 147; 148

Judgement Text

ITA NO.2773/MUM/2016 & CO NO. 180/M/17 HARESH M.SHAH ASSESSMENT YEAR-2009-2010 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI JOGINDER SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.2773/MUM/2016 & CO NO. 180/M/2017 ( / ASSESSMENT YEARS: 2009-10) ASSTT. COMMISSIONER OF INCOME TAX 19(1) 2 ND FLOOR MATRU MANDIR TARDEO ROAD MUMBAI 400 007 / VS. HARESH M.SHAH ROOM NO. 18-19 1 ST FLOOR HARHARWALA BUILDING SVP ROAD MUMBAI - 400 0 04 ! ./ ./PAN/GIR NO. ANQPS-5958-J ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) A SSESSEE BY : RAHUL K.HAKANI, LD. AR RE VENUE BY : T.A.KHAN, LD. DR / DATE OF HEARING : 01/08/2017 / DATE OF PRONOUNCEMENT : 02 /08/2017 ITA NO.2773/MUM/2016 & CO NO. 180/M/17 HARESH M.SHAH ASSESSMENT YEAR-2009-2010 2 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2009- 10 ASSAILS THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-30 [CIT(A)], MUMBAI DATED 22/01/2016. THE ASSESSEE HAS FILED CROSS OBJECTION AGAINST THE SAME. THE ONLY ISSUE INVOLVED IN THE APPEAL IS QUANTUM ADDITION AGAINST CERTAIN BOGUS PURCHASES. 2. BRIEFLY STATED, THE ASSESSEE BEING RESIDENT INDIVIDUAL ENGAGED AS CIVIL CONTRACTOR UNDER PROPRIETORSHIP CONCERN NAMELY RIDHI ENTERPRISES, WAS SUBJECTED TO AN ASSESSMENT U/S 143(3) READ WITH SECTION 147 ON 19/03/2014 WHERE THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.1,54,81,760/- AFTER SOLE ADDITION OF RS.1,27,76, 068/- QUA CERTAIN BOGUS PURCHASES AS AGAINST RETURNED INCOME OF RS.27,05,689/- FILED BY THE ASSESSEE ON 10/09/2009. THE ASSESSEE REFLECTED TURNOVER OF RS.5.63 CRORES AND DECLARED NET PROFIT OF RS.28,87, 128/- IN HIS PROFIT & LOSS ACCOUNT. 2.1 THE ASSESSEE WAS SUBJECTED TO REASSESSMENT PROC EEDINGS PURSUANT TO RECEIPT OF CERTAIN INFORMATION THAT THE ASSESSEE STOOD BENEFICIARY OF CERTAIN ACCOMMODATION BILLS IN THE F ORM OF PURCHASES BILLS AND CONSEQUENTLY, SADDLED WITH NOTICE U/S 148 ON 18 /02/2013. 2.2 IT WAS NOTICED THAT THE ASSESSEE MADE ALLEGED BOGUS PURCHASES AGGREGATING TO RS.127.76 LACS FROM 12 PARTIES. THE NOTICES ISSUED U/S 133(6) TO CONFIRM THE TRANSACTIONS WERE RETURNED UN -SERVED AS THE PARTIES WERE NOT FOUND AT THE GIVEN ADDRESSES AND T HE SAME WAS ITA NO.2773/MUM/2016 & CO NO. 180/M/17 HARESH M.SHAH ASSESSMENT YEAR-2009-2010 3 CONFRONTED TO THE ASSESSEE. THE ASSESSEE CONTESTED THAT SAME ON THE PREMISES THAT THE SAID MATERIAL WAS USED IN THE CON TRACT / PROJECT WORK UNDERTAKEN BY THE ASSESSEE AND THE WORK DONE BY ASS ESSEE WAS DULY CERTIFIED BY THE GOVERNMENT AGENCY. HOWEVER, NOT CO NVINCED, LD. AO TREATED THE SAME AS BOGUS PURCHASES AND ADDED TO THE INCOME OF THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 22/01/2 016 AND RAISED SIMILAR CONTENTIONS. THE LD. CIT(A) AFTER CONSIDERI NG ASSESSEES CONTENTIONS AND PLACING RELIANCE ON SEVERAL JUDICIA L PRONOUNCEMENT IN THIS REGARD, CAME TO A CONCLUSION THAT SINCE CONTRA CTUAL RECEIPTS ARE NOT DOUBTED, FULL ADDITION WAS NOT JUSTIFIED AND THEREF ORE, RESTRICTED THE SAME TO 12.5% OF BOGUS PURCHASES. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US AND THE ASSESSEE HAS FILED CROSS OBJECTIO N AGAINST THE SAME. 4. THE LD. DEPARTMENTAL REPRESENTATIVE, WHILE SUPPO RTING THE STAND TAKEN BY LD. AO, CONTENDED THAT THE ASSESSEE COULD NOT PROVE ACTUAL DELIVERY / CONSUMPTION OF MATERIAL AND MERE PAYMENT THROUGH BANKING CHANNELS WAS NOT SUFFICIENT TO ESTABLISH THE GENUIN ENESS OF THE PURCHASES. MOREOVER, NONE OF THE SUPPLIER WAS FOUND AT THE GIVEN ADDRESS AND THE ONUS TO SUBSTANTIATE THE PURCHASES SQUARELY LIE ON THE ASSESSEE WHICH HE HAS FAILED TO DISCHARGE AND THERE FORE, FULL DISALLOWANCE THEREOF WAS JUSTIFIED. 4.1 PER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] DREW OUR ATTENTION T O THE FACT THAT THE ASSESSEE WAS A CONTACTOR WHICH RE QUIRED CONSUMPTION OF MATERIAL AND THEREFORE, DISALLOWANCE OF WHOLE OF THE PURCHASES WAS NOT JUSTIFIED PARTICULARLY WHEN THE CONTRACT WORK W AS SUBJECT TO ITA NO.2773/MUM/2016 & CO NO. 180/M/17 HARESH M.SHAH ASSESSMENT YEAR-2009-2010 4 CERTIFICATION BY GOVERNMENT AGENCY AT VARIOUS STAGE S. THE LD. AR ALSO DREW OUR ATTENTION TO THE FACT THAT NET PROFIT [NP] RATE REFLECTED BY THE ASSESSEE WAS 5.13% WHICH WAS QUITE MORE THAN NP RAT E OF 5% AS ACCEPTED BY THE INCOME TAX SETTLEMENT COMMISSION [ITSC] IN ASSESSEES OWN CASE FOR AY 2010-11 & 2012-13. RELIA NCE HAS BEEN PLACED ON THE DECISION OF THIS TRIBUNAL IN ACIT VS. PINAKI D.PANANI [ITA NO. 119/MUM/2015 ORDER DATED 19/12/2016] FOR THE CONTENTION THAT THE NP RATE, IN THE ALTERNATIVE, BE ESTIMATED AT 5.76%. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. SO FAR AS NP RATE OF 5% ADOPTED BY ITSC IS CONCERNED, THE SAME DO NOT APPLY SINCE, IN THE PRES ENT CASE, WE ARE DEALING WITH THE ISSUE OF BOGUS PURCHASES AND NOT ESTIMATION OF NORMAL INCOME EARNED BY THE ASSESSEE AND THEREFORE, THE SA ME COULD NOT BE ACCEPTED. 6. SIMILARLY, THERE COULD BE NO UNIFORM NP RATE WHI CH COULD BE APPLIED UNIVERSALLY IN ALL CASES SINCE EACH CASE, QUA BOGUS PURCHASE, STANDS ON DIFFERENCE FOOTING WITH DIFFERENT SET OF FACTS AND CIRCUMSTANCES. 7. ADVERTING TO THE ISSUE IN HAND, WE ARE CONVINCED WITH THE ARGUMENTS OF THE REVENUE THAT THE ASSESSEE HAS FAIL ED TO DISCHARGE THE PRIMARY ONUS OF PROVING THE PURCHASES AS IT COULD N OT PRODUCE EVIDENCES TO SHOW ACTUAL DELIVERY OF MATERIAL AND ALSO COULD NOT PRODUCE CONFIRMATORY LETTERS FROM THE ALLEGED BOGUS SUPPLIE RS AND THUS FAILED TO SUBSTANTIATE THE PURCHASES. HOWEVER, AT THE SAME TI ME, THE ASSESSEE IS A CIVIL CONTRACTOR AND COULD NOT UNDERTAKE THE WORK WITHOUT ACTUAL CONSUMPTION OF MATERIAL PARTICULARLY IN VIEW OF THE FACT THAT CONTRACT WORK WAS SUBJECT TO CERTIFICATION BY GOVERNMENT AGENCY A T VARIOUS STAGES. ITA NO.2773/MUM/2016 & CO NO. 180/M/17 HARESH M.SHAH ASSESSMENT YEAR-2009-2010 5 THEREFORE, IN SUCH A SITUATION, THE ADDITION, WHICH COULD BE MADE, WAS TO ACCOUNT FOR PROFIT ELEMENT EMBEDDED IN THESE PURCHA SE TRANSACTIONS TO FACTORIZE PROFIT EARNED BY ASSESSEE AGAINST PURCHAS E OF MATERIAL IN THE GREY MARKET AND UNDUE BENEFIT OF VAT AGAINST BOGUS PURCHASES, WHICH LD. CIT(A) HAS RIGHTLY DONE. HOWEVER, WE FIND THE E STIMATION OF 12.5% TO BE ON THE HIGHER SIDE SINCE THE ASSESSEE HAS ALREAD Y DECLARED NP RATE OF 5.13%. THEREFORE, WE PROVIDE FURTHER RELIEF TO T HE ASSESSEE BY RESTRICTING THE SAME TO 6% OF BOGUS PURCHASES OF RS.1,27,76,068/- WHICH COMES TO RS.7,64,564/-. 8. RESULTANTLY, THE REVENUES APPEAL STANDS DISMISS ED WHEREAS CROSS OBJECTIONS FILED BY ASSESSEE STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 02 ND AUGUST, 2017. SD/- SD/- (JOGINDER SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 02 .08.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $%!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. $'- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI