Assistant Commissioner of Income-tax, V. Shri Shivaji Chandarrao Deshmukh, Latur

ITA 314/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7120 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-12-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Bogus purchase; Reassessment proceedings

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NOS.313 & 314/PUN/2016 / ASSESSMENT YEARS : 2009-10 & 2010-11 ASST. COMMISSIONER OF INCOME TAX, SWATI CHAMBERS, AUSA ROAD, LATUR 413 512 . /APPELLANT VS. SHRI SHIVAJI CHANDARRAO DESHMUKH, R/O. GARSOLI, TAL. RENAPUR, DIST. LATUR PAN AGVPD2803R . / RESPONDENT ASSESSEE BY : NONE REVENUE BY : DR. VIVEK AGGARWAL, CIT / DATE OF HEARING : 22.11.2017 / DATE OF PRONOUNCEMENT: 08.12.2017 / ORDER PER D. KARUNAKARA RAO, AM : THERE ARE 2 APPEALS FILED BY THE REVENUE UNDER CONS IDERATION INVOLVING ASSESSMENT YEARS 2009-10 AND 2010-11. THE Y ARE FILED AGAINST SEPARATE ORDERS OF CIT(A), AURANGABAD COMMO NLY DATED 23-12-2015. 2. DESPITE SERVICE OF NOTICE ON THE ASSESSEE, NONE APPEARED ON BEHALF OF THE ASSESSEE. NO ADJOURNMENT PETITION WA S ALSO FILED. DESPITE THE SAME, WE PROCEED TO DECIDE THE APPEALS WITH THE ASSISTANCE OF LD. DR FOR THE REVENUE. 3. SINCE IDENTICAL GROUNDS HAVE BEEN RAISED BY THE REVENUE FOR BOTH THE ASSESSMENT YEARS, WE PROCEED TO REFER TO F ACTS AND ISSUES ITA NOS.313 & 314/PUN/2016 SHRI SHIVAJI C. DESHMUKH 2 IN A.Y. 2009-10. REVENUE RAISED COUPLE OF GROUNDS FOR THE A.Y. 2009-10 AND THE SAME ARE EXTRACTED AS UNDER : 1. ADDITION ON ACCOUNT OF BOGUS PURCHASE : THE LD.CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW BY RESTRICTING THE ADDITION AT RS.38,180/- AS AGAINST MADE BY THE AO A T RS.3,05,437/- ON ACCOUNT OF BOGUS PURCHASE. THE LD . CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ADDITION WAS MADE AS THE ASSESSEE FAILED TO PRODUCE STOCK REGISTER AND LORRY RECEIPTS IN THE ABSENCE OF WHICH GENUINENESS OF PURCHASES COULD NOT BE PROVED. HENCE THE AO HAS RIGHTLY ADDED THE AMOUNT TO THE TO TAL INCOME OF THE ASSESSEE. 2. DISALLOWANCE OF NON-GENUINE EXPENSES : THE LD.CIT(A) HAS ERRED IN FACTS AS WELL AS IN LAW BY DELETING THE ADHOC ADDITIONS OF RS.2,75,220/- ON ACCOUNT OF SAND AND MURUM PURCHASE AND RS.91,21,776/- ON ACCOUNT OF LABOUR PA YMENT. THE LD.CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT TH E ADDITION WAS VERY WELL VALID AS THE ASSESSEE DESPITE OF BEING GI VEN AMPLE OPPORTUNITIES HAD FAILED TO PROVE THE GENUINENESS A ND AUTHENTICITY OF THE BILLS. 4. BRIEFLY STATED RELEVANT FACTS OF THE CASE INCLUD E THAT ASSESSEE IS A CONTRACTOR AND ENGAGED IN CONSTRUCTION OF ROAD S, BRIDGES AND OTHER WORKS IN THE NAME AND STYLE OF ASHIRWAD CONST RUCTION. ASSESSEE FILED THE RETURN OF INCOME (FOR THE A.Y. 2 009-10) ON 29-09-2009 DECLARING TOTAL INCOME OF RS.95,55,640/- . IN THE REASSESSMENT PROCEEDINGS, THE REASSESSED INCOME IS DETERMINED AT RS.87,03,840/-. AO MADE VARIOUS ADDITIONS AS PER T HE DISCUSSION GIVEN IN PARAGRAPHS 5.2 AND 6 TO 10 OF THE ASSESSME NT ORDER. PARA NO. 5.2 OF THE ASSESSMENT ORDER DEALS WITH THE ADDI TION ON ACCOUNT OF ENTIRE BOGUS PURCHASES AMOUNTING TO RS.3,05,437/ -. AO WHILE MAKING ADDITION OF RS.3,05,437/- CONCLUDED THAT THE PURCHASES BILLS ARE OBTAINED WITHOUT ACTUALLY RECEIVING THE G OODS WITH A MALAFIED INTENTION OF SHOWING BOGUS PURCHASES. FURT HER, THE PARA NO.9 AND 10 OF THE ASSESSMENT ORDER DEALS WITH ADHO C DISALLOWANCES APPLYING THE FLAT RATES OF 10% AND 30 % ON ACCOUNT ITA NOS.313 & 314/PUN/2016 SHRI SHIVAJI C. DESHMUKH 3 OF CLAIMS IN MURUM/SAND ON ONE SIDE AND LABOUR CHAR GES CLAIMED ON THE OTHER RESPECTIVELY. 5. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSES SEE MADE VARIOUS SUBMISSIONS. ON CONSIDERING THE SAME, THE C IT(A) EITHER CONFIRMED THE ADDITIONS ON FEW ACCOUNTS AND RESTRIC TED THE ADDITIONS ON THE OTHERS. 6. AGGRIEVED WITH THE RELIEF GRANTED BY THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US FOR BOTH THE ASSESSMENT YEARS. 7. BASED ON THE RECORDS AVAILABLE WITH THEM, ASSESS EE HAS NOT FILED APPEALS FOR BOTH THE YEARS AS INFORMED TO US BY THE LD. DR FOR THE REVENUE. THE TRIBUNAL ALSO VERIFIED INDEPENDENT LY IF THERE EXISTS ANY CROSS APPEALS BY THE ASSESSEE AGAINST TH E ADDITIONS CONFIRMED BY THE CIT(A) AND FOUND NEGATIVE. 8. REGARDING GROUND NO. 1 RAISED BY THE REVENUE, LD. DR FOR THE REVENUE SUBMITTED THAT THE AO MADE ADDITION OF RS.3,05,43 7/- ON ACCOUNT OF BOGUS PURCHASES. IN THE FIRST APPELLATE PROCE EDINGS, THE CIT(A) RESTRICTED THE ADDITION TO 12.5% OF THE SAID BOGUS P URCHASES. THE D ISCU S SION GIVEN IN PARA NO.13 OF THE CIT(A)'S ORDER IS RELEVANT IN THIS REGARD. 9. AFTER HEARING THE LD. DR FOR THE REVENUE AND ON PERU SING THE FINDING OF CIT(A) ON THIS ISSUE, WE FIND THE CIT(A) RELIED HEAVILY ON THE JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF CI T VS. SIMIT P. SHETH REPORTED IN 356 ITR 451 AND RESTRICTED THE ADDIT ION TO RS.38,180/ - (I.E. 12.5% OF RS.3,05,437 / -). THUS, THE CIT(A) GRANTED RELIEF OF RS.2,67,257/-. CONSIDERING THE PECULIAR FACTS OF THIS C ASE, WE ITA NOS.313 & 314/PUN/2016 SHRI SHIVAJI C. DESHMUKH 4 FIND T HE SAID ORDER OF THE CIT(A) IS FAIR AND REASONABLE AND IT DO ES NOT CALL FOR ANY INTERFERENCE ON THIS ISSUE. ACCORDINGLY, GROUND NO.1 RAISED BY THE REVENUE FOR BOTH THE ASSESSMENT YEARS IS DISMISSED. 10. REGARDING GROUND NO.2 RELATING TO DISALLOWANCE ON ADHOC BA SIS ON ACCOUNT OF MURUM PURCHASES AND ON ACCOUNT OF LABOUR PAYMENTS, WE FIND THE ASSESSEE CLAIMED RS.11,44,890/ - ON ACCOUNT OF MURUM PURCHASES AND RS.16,07,300/- ON ACCOUNT OF STONE PURCHA SES. FOR WANT OF PROPER BILLS, THE AO MADE ADDITION TO 10% OF THE PURCHASES AND THE ADDITION ON THIS ACCOUNT WORKS OUT TO RS.4,42,11 8/-. CIT(A) DELETED THE SAME. SIMILARLY, THE AO NOTED THE PAYMENTS OF RS.3.07 CRORES WAS CLAIMED ON ACCOUNT OF LABOUR PAYMENTS. CONSIDERING T HE QUALITY OF THE VOUCHERS/BILLS MAINTAINED BY THE ASSESSEE ON THIS ACC OUNT, AO DISALLOWED 30% OF THE CLAIM THAT WORKS OUT TO RS.92,21,776/- . THIS ADDITION WAS ALSO DELETED BY THE CIT(A). THE DISCUSSION GIVEN BY THE CIT(A) IN PARA NO.22 IS RELEVANT. 11. AFTER HEARING THE LD. DR FOR THE REVENUE AND ON PER USAL OF THE FINDINGS OF THE CIT(A) ON THIS ISSUE, WE FIND THE CIT(A) DID N OT UPHOLD MAKING SUCH ADHOC DISALLOWANCES WITHOUT ANY SOUND BASIS O R REASON IS NOT PERMITTED IN LAW. FURTHER, THE CIT(A) HELD THAT THE NET PROFIT OF THE ASSESSEE WITH 7.12% IS FAIR AND REASONABLE IN THIS LINE OF BUSINESS ACTIVITY. HE ALSO RELIED ON THE JUDGMENT OF RAJASTHAN HIGH COURT IN THE CASE OF LAXMI ENGINEERING INDUSTRIES REPORTED IN 298 ITR 203 FOR THE PROPOSITION THAT THE SUSPICION MUST NOT BE THE REAS ON FOR MAKING DISALLOWANCES WHEN THERE IS NO ADVERSE EVIDENCE AGAINST T HE ASSESSEE. HE ACCORDINGLY DELETED THE ADDITIONS. HOWEVER, HE HAS NO T EXAMINED THE FACTS RELATING TO THE DEFICIENCIES NOTED BY THE AO WITH REFERENCE TO ITA NOS.313 & 314/PUN/2016 SHRI SHIVAJI C. DESHMUKH 5 THE CORRECTNESS OF MAINTAINING THE VOUCHERS/BILLS IN SUPPOR T OF THE CLAIMS OF EXPENSES. IN OUR VIEW, DELETION OF THE ENTIRE ADDIT ION IS NOT PROPER WITHOUT MEETING THE LOOPHOLES RAISED BY THE AO IN THE ASSESSMENT. THEREFORE, ON HEARING THE LD. DR FOR THE RE VENUE AND CONSIDERING THE DEFICIENCIES NOTED BY THE AO DURING THE R EASSESSMENT PROCEEDINGS, WE ARE OF THE VIEW THAT INSTEAD OF PERCENTAG E-BASED DISALLOWANCES, MAKING A ROUND SUM OF RS.5 LAKHS EACH IN A.Y. 2 009- 10 AND 2010-11 SHOULD MEET BOTH ENDS OF JUSTICE. ACCOR DINGLY, GROUND NO.2 RAISED BY THE REVENUE IN BOTH THE ASSESSME NT YEARS ARE PARTLY ALLOWED. 12. IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 08 TH DAY OF DECEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 08 TH DECEMBER, 2017. / COPY OF THE ORDER FORWARDED TO : BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE THE APPELLANT THE RESPONDENT THE CIT(A) , AURANGABAD CIT , AURANGABAD % , , B BENCH PUNE; / GUARD FILE.