ITO 4(1)(4), MUMBAI V. ENRICH RD INFRAPROJECTS P,. LTD, MUMBAI

ITA 3190/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0701 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 02-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M V RAJGURU LD
• Assessee Lawyers: BHUPENDRA SHAH LD
• Keywords: Bogus purchase; Gross profit estimation; Rejection of books of accounts
• Section: 44AD; 142(1); 133(6); 144

Judgement Text

ITA.NO.3190/MUM/2017 ENRICH RD INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL L BENCH, MUMBAI . . , , BEFORE SHRI D.T. GARASIA, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.3190/MUM/2017 ( / ASSESSMENT YEAR: 2010-11) INCOME TAX OFFICER 4(1)(4) 6 TH FLOOR, R.NO.637-A AAYKAR BHAVAN, M.K.ROAD MUMBAI- 400 020 / VS. ENRICH RD INFRAPROJECTS PRIVATE LTD (FORMERLY KNOWN AS RD.ELECTRICALS PRIVATE LTD) 30,GOPAL BHAVAN 2 ND FLOOR, 199,PRINCESS STREET MUMBAI- 400 002 ! ./ ./PAN/GIR NO. AADCR-7020-F ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) ASSESSEE BY : BHUPENDRA SHAH, LD.AR REVENUE BY : M.V. RAJGURU, LD. DR / DATE OF HEARING : 28/11/2017 / DATE OF PRONOUNCEMENT : 17/01/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY REVENUE FOR ASSESSMENT Y EAR [AY] 2010- 11 ASSAILS THE ORDER OF THE LD. COMMISSIONER OF INC OME-TAX (APPEALS)-9 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-9/CIR.4/TR.3/2013-14 DATED 31/01/2017 BY RAISING THE FOLLOWING EFFECTIVE GROUN DS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS MADE BY THE AO. ON ACCOUNT OF REJECTION OF BOOKS OF ACCOUNTS OF THE ASSESSE U/S. 145(3) OF THE I.T.ACT, 1961 AND ESTIMATING THE NET PROFIT @ 8% OF THE GROSS RECEIPTS OF RS.9,13,80,502/- I.E. RS.73,10,440/ ITA.NO.3190/MUM/2017 ENRICH RD INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 2 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSE HAD FAILED TO PROVE THE PURCHASES MADE WITH DIFFERENT PARTIES AS GENUINE BY NOT PROVI DING ANY DOCUMENTARY EVIDENCES, WHEREIN THE DEPARTMENT ALSO ISSUED NOTICES U/S 133( 6) WHICH WERE RETURNED UNSERVED. FURTHER THE ASSESSE ALSO HAD MADE PURCHAS ES FROM THOSE COMPANIES/PARTIES WHICH WERE NOT APPROVED BY THE RA ILWAY AUTHORITIES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT SHRI REDEKA R WAS ASSESSEES WITNESS AND HENCE THE QUESTION OF CROSS EXAMINING HIM CAN ARISE ONLY IF THE ASSESSE DECLARES HIM AS HOSTILE WITNESS. THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED U/S 143(3 ) READ WITH SECTION 144 OF THE INCOME TAX ACT,1961 BY LD. INCOME TAX OFFICER 7(2)(4) [AO], MUMBAI ON 30/03/2013. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE ENGAGED AS CONTRACTOR WAS ASSESSED FOR IMPUGNED AY AT RS.82.44 LACS AFTER CERTAIN ADDITIONS / DISAL LOWANCES AS AGAINST RETURNED INCOME OF RS.22.75 LACS FILED BY THE ASSES SEE ON 15/10/2010. THE ASSESSEE WAS ENGAGED IN EXECUTION OF WORKS CONT RACT, MAINLY FOR INDIAN RAILWAY APART FROM TRADING IN CERTAIN ITEMS. 2.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED TH AT THE ASSESSEE MADE CERTAIN PURCHASES FROM FOLLOWING DEALERS WHICH WERE LISTED BY SALES TAX DEPARTMENT, MAHARASHTRA AS DEALERS ENGAGED IN PROVIDING ACCOMMODATION BILLS WITHOUT DOING ANY BUSINESS:- S.NO. NAME AMOUNT (RS.) 1 SHIVAM TRADING CO. 74,913/- 2 RUPANI & CO. 15,64,888/- THE ASSESSEE, VIDE NOTICE U/S 142(1) WAS ASKED TO F ILE DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE PURCHASES. NOTICE U/S 133(6) WAS ISSUED TO BOTH THE PARTIES TO CONFIRM THE TRANSACTIONS REM AINED UN-RESPONDED. THE ASSESSEE, WHILE DEFENDING THE PURCHASES MADE BY HIM, COULD NOT ITA.NO.3190/MUM/2017 ENRICH RD INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 3 PRODUCE ANY DOCUMENTS RELATING TO PURCHASES ON THE PREMISES THAT THE SAME WERE IN POSSESSION OF ONE OF THE EX-DIRECTOR N AMELY DHASRATH REDEKAR. THE PERUSAL OF THE BANK STATEMENT OF RUPANI & CO. REVEALED THAT THERE WERE IMMEDIATE CASH WITHDRAWALS FROM THE BANK ACCOUNT AFTER RECEIPT OF PAYMENT FROM THE ASSESSEE THROUGH BANKIN G CHANNELS. THE CHEQUE FOR RS.74,913/- STATED TO BE PAID BY THE ASS ESSEE TO SHIVAM & CO. WAS NOT REFLECTED IN HIS BANK ACCOUNT. 2.3 THE ASSESSEE REFLECTED ANOTHER PURCHASE OF RS.2 1,05,688/- FROM ANOTHER ENTITY NAMELY UTTAM ENGINEERING BUT THE SAID ENTITY, IN RESPONSE TO NOTICE ISSUED U/S 133(6) DENIED HAVING UNDERTAKE N ANY TRANSACTION WITH THE ASSESSEE COMPANY. 2.4 ALL THE ABOVE FACTS LED THE LD. AO TO DISBELIEV E THE AGGREGATE PURCHASE TRANSACTION OF RS.37,45,489/- MADE BY THE ASSESSEE FROM THE AFORESAID THREE SUPPLIERS AND THEREFORE, THE SAME W ERE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE. 2.5 THE LD. AO ALSO NOTED THAT THE ASSESSEE REFLECT ED VERY LOW GROSS PROFIT OF RS.1,22,411/- IN TRADING DIVISION AGAINST TURNOV ER OF RS.834.79 LACS. TO CONFIRM THESE TRADING TRANSACTIONS, NOTICE S U/S 133(6) WERE ISSUED TO CERTAIN SUPPLIERS, CUSTOMERS AND LABOR CO NTRACTORS AS LISTED BY LD. AO AT PAGE NUMBER 16 OF THE QUANTUM ASSESSMENT ORDER. HOWEVER, MOST OF THEM YIELDED NO RESPONSE AND THE ASSESSEE A LSO COULD NOT PRODUCE SUPPORTING DOCUMENTARY EVIDENCES LIKE INVOI CES / DELIVERY CHALLANS / TRANSPORTATION BILLS ETC. TO SUSTAIN THE SAME. FINALLY, LD. AO NOTED THAT THE ASSESSEE REFLECTED HUGE NET LOSS OF RS. 15.15 LACS FROM TRADING OPERATIONS AND IN THE ABSENCE OF DOCUMENTAR Y EVIDENCES, THE SAME COULD NOT BE ALLOWED TO THE ASSESSEE. THE INCO ME COMPUTED, IN ITA.NO.3190/MUM/2017 ENRICH RD INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 4 THE ABOVE MANNER, WORKED OUT TO RS.75.36 LACS AFTER DISALLOWING BOGUS PURCHASE FOR RS.37.45 LAC AND TRADING DIVISION LOSS OF RS.15.15 LACS. 2.6 THE LD. AO, IN THE ALTERNATIVE, OBSERVED THAT T HE ASSESSEE REFLECTED VERY LOW NET PROFIT OF LESS THAN 2% AGAINST RAILWAY CONTRACT RECEIPTS AS AGAINST 8% AS ENVISAGED BY SECTION 44AD AND SINCE, THE ASSESSEE COULD NOT PRODUCE THE BOOKS OF ACCOUNTS, LD. AO REJ ECTED THE BOOKS U/S 145(3) AND ESTIMATED NET PROFIT OF 8% AGAINST RAILW AY CONTRACT RECEIPTS WHICH CAME TO RS.73.10 LACS. AFTER ADDING INCOME FR OM TRADING DIVISION FOR RS.1.22 LACS AND OTHER INCOMES, TOTAL INCOME WA S FINALLY COMPUTED AT RS.82.44 LACS. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 31/01/2017 WHE RE A REMAND REPORT DATED 07/09/2016 WAS CALLED FROM LD. AO AGAINST VA RIOUS SUBMISSIONS / EVIDENCES SUBMITTED BY THE ASSESSEE. THE ASSESSEE SUPPORTED HIS CASE WITH SALES REGISTER, ON ACCOUNT CONTRACT CERTIFICATES FROM THE RAILWAYS, PURCHASE REGISTER ETC. IN THE REMAND PROCEEDINGS AND CONTESTED THE REJECTION OF BOOKS OF ACCOUNT. 4. BEFORE LD. CIT(A), THE ATTENTION WAS DRAWN TO TH E FACT THAT RELEVANT REGISTERS WERE PRODUCED DURING REMAND PROCEEDINGS AND THE ACCOUNTS WERE SUBJECTED TO TAX AUDIT U/S 44AB AND THEREFORE, REJECTION OF BOOKS U/S 145(3) WAS NOT JUSTIFIED. THE LD.CIT(A), UPON F ACTUAL MATRIX, CONCURRED WITH THE STAND OF THE ASSESSEE THAT REJEC TION OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME @8% WAS NOT JUSTI FIED. 5. THE ALTERNATIVE ADDITIONS ON ACCOUNT OF BOGUS PURCHASES AND TRADING LOSS , AS PROPOSED BY LD. AO, WAS ALSO DELETED BY LD.CIT (A) AFTER ITA.NO.3190/MUM/2017 ENRICH RD INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 5 PLACING RELIANCE ON CERTAIN JUDICIAL PRONOUNCEMENTS . AGGRIEVED THE REVENUE IS IN FURTHER APPEAL BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE [DR] VEHEME NTLY CONTESTED THE RELIEF GRANTED BY LD. CIT(A) BY DRAWING OUR ATT ENTION TO THE FACT THAT THE ASSESSEE MISERABLY FAILED TO PROVE THE PURCHASE TRANSACTIONS AND THEREFORE, THE ADDITIONS AS MADE BY LD. AO WERE JUS TIFIED. PER CONTRA, LD. COUNSEL FOR ASSESSEE [AR] CONTENDED THAT THE STAND OF LD. CIT(A) WAS QUITE FAIR AND REASONABLE. 7. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS REJECTION OF BOOKS OF ACCOUNTS AND ESTIMATION OF INCOME @8% IS CONCERNED, WE FIND THE STAND OF LD. CIT(A) QUITE LOGICAL ONE SINCE THE ACCOUNTS OF THE ASSESSE E WERE DULY AUDITED U/S 44AB OF THE INCOME TAX ACT AND AUDIT REPORT IN FORM 3CA WAS AVAILABLE ON RECORD. FURTHER, THE ASSESSEE PRODUCED RELEVANT REGISTERS & STATEMENTS ETC. DURING REMAND PROCEEDINGS. THEREFORE, THE REJECTION OF BOOKS WAS NOT JUSTIFIED. MOREOVER, THERE WAS NO BAS IS TO ADOPT NET PROFIT RATE OF 8% BY LD. AO. EXTENDING THE SAME LOGIC TO I NCOME BEING REFLECTED BY THE ASSESSEE FROM TRADING DIVISION, TH E DISALLOWANCE OF LOSS OF RS.15.15 LACS AS COMPUTED BY LD. AO WAS ALSO NOT JUSTIFIED WITHOUT THERE BEING ANY MATERIAL ON RECORD TO CONTROVERT TH E FINANCIAL RESULTS REFLECTED BY THE ASSESSEE. RESULTANTLY, GROUND NO.1 OF REVENUES APPEAL STANDS DISMISSED. 8. SO FAR AS THE ADDITION AGAINST ALLEGED BOGUS PURCHASES IS CONCERNED, WE FIND STRENGTH IN THE ARGUMENT OF THE REVENUE THAT THE ASSESSEE MISERABLY FAILED TO SUBSTANTIATE THE PURCH ASES AND MERE PAYMENT THROUGH BANKING CHANNELS WAS NOT SUFFICIENT TO PROVE THE ITA.NO.3190/MUM/2017 ENRICH RD INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 6 GENUINENESS OF THE PURCHASES PARTICULARLY WHEN NOTI CES ISSUED U/S 133(6) ELICITED NO RESPONSE AND THE ASSESSEE COULD NOT PRODUCE ANY OF THE SUPPLIER TO CONFIRM THE TRANSACTION. THE ONUS C ASTED UPON ASSESSEE, IN THIS REGARD, IN OUR OPINION, HAS REMAINED UNSUBS TANTIATED. FROM THE ORDER OF FIRST APPELLATE AUTHORITY, WE NOTE THAT TH E SUPPLIER NAMELY UTTAM ENGINEERING DENIED HAVING MADE ANY TRANSACTION WITH THE ASSESS EE COMPANY SINCE THE NAME OF THE ASSESSEE WAS CHANGED CONSEQUENT TO MERGER WITH ANOTHER ENTITY. HOWEVER, THE ASSESSEE, IN THE REMAND PROCEEDINGS, FILED PURCHASE BILLS, ACCOUNT BALANCE CONFIRMATION, BANK STATEMENT ETC. FROM THE SAID SUPPLIER TO SUBSTANTIATE THE SAME. H ENCE, UPON FACTUAL MATRIX, THE ARGUMENT ADVANCED BY LD. A R, IN THIS REGARD, IS PLAUSIBLE ONE AND ADDITION TO THAT EXTENT DESERVES TO BE DELETED. HOWEVER, ON THE BALANCE ALLEGED BOGUS PURCHASES OF RS.16,39,801/- MADE BY ASSESSEE FROM REMAINING TWO PARTIES, WE EST IMATE ADDITION @12.5% WHICH COMES TO RS.2,04,975/-. RESULTANTLY, G ROUND NO. 2 STANDS PARTLY ALLOWED. GROUND NO. 3 IS SUPPORTING G ROUND WHEREAS GROUND NO. 4 IS GENERAL IN NATURE AND HENCE, DO NOT REQUIRE FURTHER ELABORATIONS. 9. FINALLY, THE REVENUES APPEAL STANDS PARTLY ALLO WED IN TERMS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY,2018 SD/- SD/- (D.T. GARASIA) (MANOJ KUMAR AGGARW AL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 17.01.2018 SR.PS:- THIRUMALESH ITA.NO.3190/MUM/2017 ENRICH RD INFRAPROJECTS PRIVATE LIMITED ASSESSMENT YEAR-2010-11 7 / 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