RAMESH KUMAR & CO., MUMBAI V. ACIT 21(1), MUMBAI

ITA 2959/MUM/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84261 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Keywords: Bogus purchase
• Section: 44AD; 69C; 6

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BE NCH, MUMBAI , !' #$% , !& ! ' BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./I .T.A. NO.2959/MUM/2014 ( ( ( ( ( / ASSESSMENT YEAR : 2010-11 RAMESH KUMAR & CO., OFFICE NO. 50, IIND FLOOR,SWASTIK PLAZA VL MEHTA ROAD, VILE PARLE (W), MUMBAI-400 049 / VS. THE ACIT 21(1), C-10, INCOME TAX OFFICE, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 ) !& ./ * ./ PAN/GIR NO. : AAAFR 1612D ( )+ / APPELLANT ) .. ( ,-)+ / RESPONDENT ) )+ . ! / APPELLANT BY: SHRI K.R. LAKSHMINARAYANAN ,-)+ / . ! / RESPONDENT BY: SHRI JEETENDRA KUMAR / 0& / DATE OF HEARING :24.11.2014 12( / 0& / DATE OF PRONOUNCEMENT :28.11.2014 !3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE LD. CIT(A)-32, MUMBAI DT.3.3.2014 PERTAINING TO A.Y .2010-11. 2. THE ASSESSEE HAS RAISED 8 SUBSTANTIVE GROUNDS OF APPEAL. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE ASSESSEE IS T HAT THE LD. CIT(A) ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ADDITION OF RS. ITA NO. 2959/M/2014 2 4,98,80,892/- MADE BY THE AO U/S. 69C OF THE ACT BY TREATING THE PURCHASES AS NOT GENUINE. 3. THE ASSESSEE IS A PARTNERSHIP FIRM CARRYING OUT THE BUSINESS OF CIVIL CONTRACTS, CIVIL INFRASTRUCTURE, SUCH AS DRAINAGE A ND ROAD REPAIRS & MAINTENANCE MAINLY WITH MUNICIPAL CORPORATION OF GR EATER MUMBAI. THE RETURN FOR THE YEAR WAS FILED ON 28.9.2010 DECL ARING TOTAL INCOME OF RS. 2,99,79,680/-. THE RETURN WAS SELECTED FOR SCR UTINY ASSESSMENT AND STATUTORY NOTICES WERE ACCORDINGLY ISSUED AND SERVE D ON THE ASSESSEE. 3.1. DURING THE COURSE OF THE ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS SHOWN CONTRA CT RECEIPTS AT RS. 32.05 CRORES AGAINST WHICH TOTAL PURCHASES AND DIRE CT EXPENSES WERE SHOWN AT RS. 27.5 CRORES. THE DETAILS OF PURCHASES WERE FILED WITH FULL ADDRESS OF THE PARTIES AND THE AMOUNT OF PURCHASE M ADE FROM THEM DURING THE YEAR UNDER CONSIDERATION. WHILE GOING THROUGH THE LIST OF PURCHASES, THE AO OBSERVED THAT MANY OF THE PARTIES WERE BLACK LISTED BY SALES TAX DEPARTMENT OF MAHARASHTRA GOVT. AND THE MAHARASHTRA SALES TAX DEPARTMENT HAD CANCELLED THEIR TIN NUMBER S. 3.2. ON RECEIVING THE LIST OF BENEFICIARIES TO THES E HAWALA PARTIES, THE ASSESSEE WAS ASKED TO PRODUCE THESE PARTIES WITH RE LEVANT DOCUMENTARY PROOF TO PROVE THE GENUINENESS OF THE TRANSACTION. THE ASSESSEE FAILED TO PRODUCE THE PARTIES BUT FILED THE COPIES OF BILLS. IT WAS FURTHER EXPLAINED THAT PAYMENTS TO THESE PARTIES WERE MADE THROUGH AC COUNT PAYEE CHEQUES. IT WAS FURTHER CLAIMED THAT THE TRANSACTIONS ARE GE NUINE AND THE ASSESSEE HAS PURCHASED MATERIAL FROM THESE PARTIES. THE PAR TIES SHORTLISTED BY THE AO ARE AS UNDER: ITA NO. 2959/M/2014 3 SR. NO. NAME OF PARTY TIN AMOUNT IN RS. 1. SHUBHLAXMI SALES CORP. 27490615192V 3678176 2. RIDDHI SIDDHI ENTERPRISES 27750610781V 3970355 3. DEEP ENTERPRISES 27750595164V 3126703 4. TORAL ENTERPRISES 27600666493V 2501019 5. CNS TRADE LINKS PVT. LTD 27750532987V 274685 6. SIDDHI ENTERPRISES 27860154093V 4001487 7. SHANTINATH CORPORATION 27520680408V 3809804 8. TULSIANI RADING PVT. LTD. 27440688212V 10610755 9. ROHIT ENTERPRISES 27020680974V 4645143 10. SAMARTH ENTERPRISES 27560694451V 2027551 11. NIDDHISH IMPEX PVT. LTD. 27600648257V 11235194 TOTAL 49880892/- 3.3. THE ASSESSEE WAS ASKED TO SHOWCAUSE WHY THE TR ANSACTIONS WITH THESE PARTIES SHOULD NOT BE CONSIDERED AS NON GENUI NE AND THE WHOLE AMOUNT CLAIMED AS PURCHASE FROM THESE PARTIES SHOU LD NOT BE DISALLOWED. ON RECEIVING NO PLAUSIBLE REPLY TO THE SHOWCAUSE N OTICE, THE AO PROCEEDED BY TREATING THE PURCHASES OF RS. 4,98,80, 892/- AS BOGUS PURCHASES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A). IT WAS STRONGLY CONTENDED BY THE ASSESSEE THAT THE EXECUTION OF THE WORK IS EXECUTED BY THE ASSESSEE UNDER THE DIRE CTIONS OF THE SUB- ENGINEERS OF MUNICIPAL CORPORATION OF GREATER MUMBA I. THE PROGRESS AND QUANTITY OF WORK IS VERIFIED BY THE AUTHORITIES . THE RUNNING ACCOUNT BILL PREPARED AND SUBMITTED BY THE CONTRACTOR (ASSE SSEE) IS CHECKED AND ITA NO. 2959/M/2014 4 VERIFIED BY THE SUB-ENGINEER AND FURTHER HAVE CHECK S IN THE DEPARTMENT AND IN THE PROCESS OF WORKING, COMPLETION OF WORK, MEASUREMENT, QUANTITY ETC. AND THAT THERE WAS NEVER ANY COMPLAIN T AND NO DISPUTE OR LITIGATION HAS ARISEN IN RESPECT OF ANY OF THE PURC HASES MADE BY THE ASSESSEE. IT WAS FURTHER EXPLAINED THAT THE PURCHA SES WERE REFLECTED IN THE BOOKS OF ACCOUNT AND THE UTILIZATION OF GOODS IS SU PPORTED BY THE RECORDS OF THE CERTIFICATION OF MUNICIPAL CORPORATION OF GR EATER MUMBAI. IT WAS FURTHER SUBMITTED THAT IF THE ASSESSEE HAD NOT PURC HASED THE GOODS, THE ASSESSEE WOULD NOT HAVE BEEN ABLE TO COMPLETE THE W ORK ASSIGNED AND IN TURN WOULD NOT HAVE RECEIVED THE PAYMENT FROM THE G OVERNMENT AGENCIES I.E. MUNICIPAL CORPORATION OF GREATER MUMBAI. ON F INANCIALS, THE ASSESSEE STATED THAT THE GROSS PROFIT RATE OFFERED BY THE ASSESSEE IS APPROXIMATELY 14.2.% WHICH IS VERY MUCH LEGITIMATE AND REASONABLE. 4.1. AFTER GIVING A THOUGHTFUL CONSIDERATION TO THE FACTS AND SUBMISSIONS OF THE ASSESSEE, THE LD. CIT(A) WAS NOT CONVINCED AS ACCORDING TO HIM, THE ASSESSEE HAD FAILED TO SUBSTA NTIATE THE CLAIM OF PURCHASES OF GOODS AT SITE WITHOUT SUBMITTING THE DELIVERY CHALLANS. THE RATIO ANALYSIS OF THE FINANCIALS GIVEN BY THE ASSES SEE WERE ALSO REJECTED BY THE LD. CIT(A). THE LD. CIT(A) DISMISSED THE APPEA L AND CONFIRMED THE ADDITION MADE BY THE AO BY OBSERVING THAT THE ASSES SEE HAS FAILED TO CO- RELATE THE MATERIAL PURCHASED WITH THEIR USE IN THE PROJECTS. 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. 6. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT IS THE SAY OF THE LD. COUNSEL THAT ALL THE PURCHASE INVOICES WERE SUBMITTED BEFOR E THE AO AND THE AO HAS NOT POINTED OUT ANY DEFECT IN THE PURCHASE INVO ICE. THE LD. COUNSEL FURTHER STATED THAT THE PURCHASES WERE DULY PAID BY ACCOUNT PAYEE CHEQUE ITA NO. 2959/M/2014 5 AND THE PAYMENT IS REFLECTED IN THEIR RESPECTIVE CO PIES OF LEDGER ACCOUNT. THE PAYMENTS ARE ALSO REFLECTED IN THE BANK STATEME NTS OF THE ASSESSEE THEREFORE IT CANNOT BE SAID THAT PURCHASES ARE BOGU S. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE AUTHORITIES BELOW. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT BEFORE U S. WE FIND THAT THE AO HAS MADE THE ADDITION AS SOME OF THE SUPPLIERS O F THE ASSESSEE WERE DECLARED HAWALA DEALER BY THE SALES TAX DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASS ESSMENT ON SUSPICION . ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY ACCOUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND A LSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS ANY IMMED IATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEEN DONE . THE LD. CIT(A) HAS ALSO CONFIRMED THE ADDITION MADE BY THE AO BY GOING ON THE SUSPICION AND THE BELIEF THAT THE SUPPLIERS OF THE ASSESSEE A RE HAWALA TRADERS. WE ALSO FIND THAT NO EFFORT HAS BEEN MADE TO VERIFY TH E WORK DONE BY THE ASSESSEE FROM THE MUNICIPAL CORPORATION OF GREATER MUMBAI. WE AGREE WITH THE SUBMISSIONS OF THE LD. COUNSEL THAT IF THE RE WERE NO PURCHASES, THE ASSESSEE WOULD NOT HAVE BEEN IN A POSITION TO C OMPLETE THE CIVIL WORK. 8.1. ON CIVIL CONTRACT RECEIPTS OF RS. 32.05 CRORES , THE ASSESSEE HAS SHOWN GROSS PROFIT AT 14.2% AND NET PROFIT AT 9.72% . 8.2. EVEN IF FOR THE SAKE OF ARGUMENT, THE BOOKS OF ACCOUNTS ARE REJECTED, THE PROFIT HAS TO BE COMPUTED ON THE SALE S MADE BY THE ASSESSEE ITA NO. 2959/M/2014 6 U/S. 44AD OF THE ACT, THE PRESUMPTIVE PROFIT IN CAS E OF CIVIL CONTRACTORS IS 8% AND IN CASE OF A PARTNERSHIP FIRM, A FURTHER DEDUCTION IS ALLOWED IN RESPECT OF SALARY AND INTEREST PAID TO THE PARTNERS . THE RATIO ANALYSIS OF THE PROFITABILITY IS ALSO IN FAVOUR OF THE ASSESSEE. I N OUR CONSIDERED OPINION, THE PURCHASES ARE SUPPORTED BY PROPER INVOICES DULY REFLECTED IN THE BOOKS OF ACCOUNT. THE PAYMENTS HAVE BEEN MADE BY A CCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEME NT OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS RECEIVED CASH BOOK FROM THE SUPPLIERS. THE ADDITIONS HAVE BEEN MADE M ERELY ON THE REPORT OF THE SALES TAX DEPARTMENT BUT AT THE SAME TIME IT CA NNOT BE SAID THAT PURCHASES ARE BOGUS. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO TO DELETE THE ADDITION OF RS. 4,98,80,892/-. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH NOVEMBER, 2014 SD/- SD/- (VIJAY PAL RAO ) (N.K. BILLAIYA) /JUDICIAL MEMBER !& / ACCOUNTANT MEMBER MUMBAI; 4 DATED : 28 TH NOVEMBER, 2014 . . ./ RJ , SR. PS ITA NO. 2959/M/2014 7 !3 !3 !3 !3 / // / ,0 ,0 ,0 ,0 5!(0 5!(0 5!(0 5!(0 / COPY OF THE ORDER FORWARDED TO : 1. )+ / THE APPELLANT 2. ,-)+ / THE RESPONDENT. 3. 6 ( ) / THE CIT(A)- 4. 6 / CIT 5. 78 ,0 , , / DR, ITAT, MUMBAI 6. 8 9 / GUARD FILE. !3 !3 !3 !3 / BY ORDER, -0 ,0 //TRUE COPY// : :: : / ; ; ; ; (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI