TRIVENI HOMES, MUMBAI V. ACIT CC 2, THANE

ITA 3780/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0446 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2010-2011
• Appeal Filed On: 24-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Bogus purchase; Additional evidence
• Section: 40A(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI , JM ITA NO. 3780 / MUM/20 17 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. TRIVENI HOMES 001, GROUND FLOOR BALAJI BUSINESS PARK PLOT NO. 3&5, SURVEY NO.785 MA ROL, ANDHERI (E) MUMBAI VS. ACIT CC - 2 THANE - 400604 PAN/GIR NO. AAFFT1576R APPELLANT ) .. RESPONDENT ) ITA NO. 4355/ MUM/20 17 ( ASSESSMENT YEAR : 2010 - 11 ) DCIT 25(1) MUMBAI VS. M/S. TRIVENI HOMES 001, GROUND FLOOR PLOT NUMBER - 3 & 5 MITTAL INDUSTRIAL ESTATE M.V.ROAD, ANDHERI (E) MUMBAI PAN/GIR NO. AAFFT1576R APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI RUSHABH MEHTA REVENUE BY SHRI M.C.OMI NINGSHEN DATE OF HEARING 12/02 /201 8 DATE OF PRONOUNCEME NT 13 / 02 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE CROSS APPEALS FILED BY ASSESSEE AND REVENUE AGAINST THE ORDER OF CIT(A) - 1,AURANGABAD DATED 01/03/2017 FOR A.Y.2010 - 11 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. ITA NO. 3780/MUM/2017 & 4355/2017 M/S. TRIVENI HOMES 2 2. THE FOLLOWING GROUNDS H AVE BEEN TAKEN BY THE ASSESSEE: - 1. THE LD. CIT(A) ERRED IN FACTS AND LAW IN DISALLOWING AND REDUCING A SUM OF RS. 52,02,655/ - FROM THE CLOSING WIP IN RESPECT OF CERTAIN PURCHASES ALLEGED AS BOGUS BY THE ID. ASSESSING OFFICER WITHOUT APPRECIATING THE EVIDE NCES PLACED ON RECORD. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)AND ASSESSING OFFICER ERRED IN FACTS AND LAW IN NOT APPRECIATING THAT THE APPELLANT HAD DULY DISCHARGED ITS ONUS OF ESTABLISHING THE GENUINENESS OF PURCHASES AND UTILISATION THEREOF IN THE BUSINESS OF THE APPELLANT AND ACCORDINGLY NO DISALLOWANCE WAS WARRANTED. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND ASSESSING OFFICER ERRED IN FACTS AND LAW IN RELYING UPON THE STATEMENT OF CERTAIN PERSONS WITHOUT APPRECIATING THE DEF ECTS POINTED OUT THEREIN AND WITHOUT AFFORDING THE APPELLANT ANY OPPORTUNITY OF CROSS - EXAMINATION OF THESE PARTIES. 4. THE APPELLANT PRAYS THAT - (A) WIP AS SHOWN IN RETURN OF INCOME BE RESTORED AND DISALLOWANCE OF RS. 52,02,6557 - BE DELETED; (B) ANY OTHER RELIEF, AS MAY BE DEEMED FIT. 5. ALL THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO EACH OTHER. 3. THE GROUNDS TAKEN BY REVENUE ARE AS UNDER: - 1. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN R ESTRICTING THE ADDITION OF RS.5,72,36,016/ - ON ACCOUNT OF BOGUS PURCHASES T O RS.52,02,655/ - .' - 2. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT THE ADDITION WAS MADE ON THE BASIS OF INFOR MATION RECEIVED FROM SALES TAX DEPARTMENT, MAHARASHTRA WITH REGARD TO BOGUS PURCHASES MADE BY THE ASSESSEE FROM DEALERS WITHOUT ACTUAL SUPPLY OF GOODS.' 3. 'ON THE FACTS AND IN THE CIRCUMSTAN CES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CON SIDERING THAT THE HAWALA DEALERS HAVE ADMITTED ON OATH BEFORE THE SALES TAX AUTHORITIES THAT THEY HAVE NOT SOLD ANY MATERIAL TO ANYBODY.' 4. 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT CONSIDERING THAT THE ASSESSEE COULD NOT PROVE THE GENUINENESS AND CREDITWORTHINESS OF THE PURCHASE TRANSACTIONS DURING THE COURSE OF ASSESSMENT PROCEEDINGS.' 5. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS FAILED TO CONFORM TO THE RATIO LAI D DOWN BY THE HON'BLE APEX COURT IN THE CASE OF N.K. PROTEINS LTD. VS. DCIT IN SLP (CIVIL) NO.769/2017 DATED 16.01.2017.' ITA NO. 3780/MUM/2017 & 4355/2017 M/S. TRIVENI HOMES 3 6. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THAT PURCHASES WERE MADE FRO M SOME OTHER PARTIES WHICH WERE NOT RECORDED IN THE BOOKS OF ACCOUNTS AND ONLY ACCOMMODATION BILLS WERE OBTAINED FROM HAWALA PARTIES AND THERE BY ATTRACTING PROVISIONS OF SECTION 10A(3}.' 7. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD . CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT APPLICABILITY OF PROVISIONS OF 40A(3) ATTRACTS 100% BOGUS PURCHASES TO BE HELD AS PROFIT.' 8. 'THE APPELLANT PRAYS THAT THE ORDER OF THE C1T(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE ASSESSI NG OFFICER BE RESTORED.' 9. 'THE APPELLANT CRAVES LEAVE TO AMEND OR TO ALTER ANY GROUND OR ADD A NEW GROUND, WHICH MAY BE NECESSARY'. 4. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 5. FACTS IN BRIEF ARE THAT ASSESSEE IS ENGAGED IN THE BUSINE SS OF BUILDER AND DEVELOPER. FOR SUCH BUILDING PROJECT ASSESSEE WAS FOLLOWING PROJECT COMPLETION METHOD. DURING THE COURSE OF SCRUTINY ASSESSMENT, AS PER INFORMATION FROM SALES TAX DEPARTMENT, THE AO OBSERVED THAT ASSESSEE HAS MADE PURCHASES FROM HAWALA PA RTIES AMOUNTING TO RS.5,72,36,016/ - . BY OBSERVING THAT ASSESSEE HAS NOT SUBMITTED PROOF OF TRANSPORTATION OF MATERIAL REC EIVED FROM THE PARTIES AND THE NOTICE S ISSUED U/S.133(6) WERE RETURNED UNSERVED, AO ADDED ENTIRE AMOUNT IN ASSESSEES INCOME. 6. BEFOR E THE CIT(A) ASSESSEE HAS SUBMITTED FOLLOWING ADDITIONAL EVIDENCE. COPY OF ARCHITECT'S CERTIFICATE CERTIFYING THE CONSUMPTION OF MATERIAL . QUANTITATIVE DETAILS OF MATERIAL PURCHASED 7. THE ADDITIONAL EVIDENCES WERE FORWARDED BY CIT(A) TO AO ON 13.08.201 4 AND REPORT WAS CALLED FOR BEFORE 29.08.2014. REMINDERS DATED ITA NO. 3780/MUM/2017 & 4355/2017 M/S. TRIVENI HOMES 4 13.01.2015 AND 14.12.2015 WERE ALSO SENT BY THE ID. CIT(A). HOWEVER, NO REMAND REPORT WAS RECEIVED TILL THE DATE OF ORDER OF THE ID. CIT(A) . 8. IN THE IMPUGNED ORDER, CIT(A) OBSERVED THAT IF EN TIRE PURCHASES ARE DISALLOWED, IT WOULD IMPLY THAT 35% OF THE WIP IS BOGUS, WHICH DOES NOT SEEM TO BE LOGICAL. THE AVERAGE COST OF CONSTRUCTION DECLARED AT RS.2812.07/ - PER SQ.FT. OF THE ASSESSEE APPROXIMATES THE AVERAGE RATE OF IT SISTER CONCERN - TRIVENI PROPERTIES ACCEPTED AT RS.2907/ - PER SQ.FT., WHERE THERE IS NO ALLEGATION OF BOGUS PURCHASES. ALSO, THE PROJECT OF BOTH THESE CONCERNS ARE IN THE SAME VICINITY I.E. KAMOTHE, NAVI MUMBAI. ACCORDINGLY, THE ID. CIT(A) HAS DISALLOWED 6.5% ON PURCHASES WHERE TH E VAT RATE IS 4% AND 15% OF PURCHASES WHERE THE VAT RATE IS 12.5% BASED ON THE RATIONALE LAID DOWN BY THE ITAT IN THE CASE OF SIMIT P SHETH (SUPRA) AND APPROVED BY THE HON'BLE GUJARAT HIGH COURT. THE SAID DISALLOWANCE IS WORKED OUT AT RS.52,02,655/ - . (REFE R PAGE 39 OF CIT(A) ORDER).' 9. SINCE THE ASSESSEE HAD NOT CLAIMED ANY PURCHASES AS DEDUCTION FOR THE YEAR UNDER CONSIDERATION BUT ACCOUNTED FOR IN WORK IN PROGRESS CARRIED FORWARD TO SUBSEQUENT YEARS, THE ID. CIT(A) REDUCED THE WORK IN PROGRESS BY AN AM OUNT OF RS.52,02,655/ - . ACCORDINGLY, THE ID. CIT(A) HAS DELETED THE DISALLOWANCE FOR THE YEAR UNDER CONSIDERATION AND ENHANCED THE INCOME OF THE ASSESSEE FOR A.Y. 2012 - 13 TO THE TUNE OF RS.52,02,655/ - WHEN THE PROJECT WAS COMPLETED AND THE EXPENDITURE WAS CLAIMED. ITA NO. 3780/MUM/2017 & 4355/2017 M/S. TRIVENI HOMES 5 10. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE AND REVENUE ARE IN FURTHER APPEAL BEFORE US. 11. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT FOLLOWING EVIDENCES WERE FILED DURING THE ASSESSMENT AND APPELLATE PROCEEDINGS: I. COPY OF LEDGER OF THE DEALER FOR THE PERIOD 01.04.2009 TO 31.03.2010 II. COPIES OF TAX INVOICES WHICH BEAR THE TIN OF THE DEALER III. COPIES OF DELIVERY CHALLAN IV. COPIES OF CONF IRMATION RECEIVED FROM THE DEALERS V. COPIES OF BANK STATEMENT HIGHLIGHTING THE PAYMENT IN CHEQUE TO THE DEALERS VI. COPY OF ARCHITECT'S CERTIFICATE CERTIFYING CONSUMPTION OF MATERIALS VII. COPY OF QUANTITATIVE DETAILS OF MATERIALS PURCHASED 12. HOW EVER, NO ADVERSE FINDING IS BROUGHT ON RECORD IN RELATION TO THESE EVIDENCES. FURTHER, THE ARCHITECT'S CERTIFICATE ALONG WITH QUANTITATIVE DETAILS ESTABLISHED THE CONSUMPTION OF MATERIALS FOR THE PURPOSE OF CONSTRUCTION OF THE BUILDING. 13. IT WAS ARGUMEN T OF LEARNED AR THAT THE NON - SERVICE OF NOTICE U/S. 133(6) COULD NOT BE VIEWED ADVERSELY AGAINST THE ASSESSEE IN VIEW OF THE DECISION IN THE CASE OF CIT V. ORRISA CORPORATION P. LTD. (1986) 159 ITR 78 (SC) AND CIT V. NIKUNJ EXIMP ENTERPRISES (P.) LTD. [201 5] 372 ITR 619 (BOM.). THE ASSESSING OFFICER HAD NOT PROVIDED THE OPPORTUNITY OF CROSS EXAMINING - SLID. CHANDRAKANT DHEIAI, ON WHOSE STATEMENT RELIANCE WAS PLACED. FURTHER, THE SAID PARTY WAS A MVAT DEFAULTER AND ACCORDINGLY TO AVOID THE CONSEQUENCES OF D EFAULT MAY HAVE GIVEN SUCH A STATEMENT. RELIANCE IN THIS REGARD IS PLACED ON THE DECISION IN THE CASE OF ITA NO. 3780/MUM/2017 & 4355/2017 M/S. TRIVENI HOMES 6 CIT V. M/S. ASHISH INTERNATIONAL (ITA NO. 4299 OF 2009) (BOM.) AND H.R. MEHTA V. ACIT [2016] 387 ITR 561 (BOM.) 14. IT WAS ALSO ARGUED BY LEARNED AR T HAT SECTION 48(5) OF MVAT ACT SHIFTS THE BURDEN OF PAYING MVAT TO THE PURCHASER OF GOODS ON THE SELLER GIVING SUCH A DEPOSITI ON OF ISSUING BOGUS BILLS. THE AR ACCORDINGLY SUBMITTED THAT THE STATEMENT OF VAT DEFAULTERS WHO ARE SAVING THEIR SKIN AND HAVING V ESTED INTEREST CANNOT BE RELIED UPON. IN RESPECT OF CONSTRUCTION BUSINESS IT WAS ARGUED THAT WITH REGARD TO DELIVERY OF GOODS, THE TRANSPORT DOCUMENTS WERE NOT AVAILABLE WITH THE ASSESSEE, AS THE TRANSPORTATION WAS USUALLY UNDERTAKEN BY THE SUPPLIER AND T HE GOODS WERE DIRECTLY DELIVERED AT THE SITE OF CONSTRUCTION. 15. FROM THE RECORD WE FOUND THAT THE AVERAGE COST PER SQ.FT. OF ASSESSEE RS. 2,812.87/ - PER SQ.FT. IS EQUIVALENT TO ITS ASSOCIATE CONCERN M/S. TRIVENI PROPERTIES WITH PROJECT IN THE SAME VICIN ITY HAVING AVERAGE COST AS RS. 2,907/ - PER SQ. FT. SINCE, NO ALLEGATION ON PURCHASES OF SAID ASSOCIATE CONCERN WAS MADE BY THE DEPARTMENT, THE AVERAGE COST PER SQ. FT. OF THE ASSESSEE IS TO BE ACCEPTED. THEREFORE, THERE IS NO QUESTION OF ANY INFLATION OF CO ST OR DEFLATION OF PROFIT. THE ASSESSEE HAD BEEN FOLLOWING PROJECT COMPLETION METHOD SINCE ITS INCEPTION. THOUGH THE ASSESSING OFFICER HAD ADOPTED PERCENTAGE COMPLETION ( METHOD FOR A.Y. 2008 - 09 TO AY 2011 - 12, THE ID. CIT(A) HAD DELETED THE ADDITION IN THI S RESPECT FOR A.Y. 2008 - 09 TO A.Y. 2010 - 11. THE REVENUE'S APPEAL FOR A.Y. 2008 - 09 AND A.Y. 2009 - 10 WAS DISMISSED BEING BELOW THE PRESCRIBED TAX ITA NO. 3780/MUM/2017 & 4355/2017 M/S. TRIVENI HOMES 7 LIMIT. THE REVENUE IS NOT IN APPEAL AGAINST THE SAID DELETION FOR CURRENT A.Y. I.E. 2010 - 1 1. THUS, PROJECT COMPLETION METHOD FOLLOWED BY THE ASSESSEE HAS BEEN ACCEPTED BY THE REVENUE. IT WAS SUBMITTED BY THE ASSESSEE THAT SINCE NO EXPENDITURE/DEDUCTION WAS CLAIMED BY THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, NO DISALLOWANCE SHOULD BE MADE FOR THE YEAR UNDER CONSIDERATION BASED ON THE DECISION OF THE HONBLE MUMBAI ITAT IN THE CASE OF M/S. MARUTI IMPEX V. JCIT (ITA 3823/MUM/2014) & SAVALA ASSOCIATES V. ITO 35 SOT 148 (MUM) 16. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CA SE, WE UPHOLD ADDITION TO THE EXTENT OF 2% OF SUCH BOGUS PURCHASES DURING THE A.Y.2012 - 13. WE DIRECT ACCORDINGLY. 17. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED WHEREAS APPEAL OF ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THI S 13 / 02 /2018 S D/ - ( RAM LAL NEGI ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 13 / 02 /201 8 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//