TRIVENI SPACES, MUMBAI V. ITO WD 2 PANVEL, MUMBAI

ITA 3784/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9668 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 24-05-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Bogus purchase
• Section: 143(3); 133(6); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH H, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTNAT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3784/MUM/2017 (ASSESSMENT YEAR- 2011-12) M/S TRIVENI SPACES 001, GROUND FLOOR, BALAJI BUSINESS PARK, FLAT NO.3&5, SURVEY NO. 785, MAROL, ANDHERI(E), MUMBAI. PAN: AAFFT2023D VS. ITO, WARD-2 , TRIFED TOWER, 2 ND FLOOR, SECTOR-17, KHANDA COLONY, NEW PANVEL, DISTRICT-RAIGAD. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RUSHABH MEHTA (AR) REVENUE BY : SHRI T. A. KHAN (D R) DATE OF HEARING : 21.09.2017 DATE OF PRONOUNCEMENT : 21.09.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL UNDER SECTION 253 OF THE INCOME-TAX ACT (THE ACT) BY ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF I NCOME TAX (APPEALS) -1 [LD. CIT(A)], AURANGABAD DATED 01.03.2017 FOR THE A SSESSMENT YEAR (AY) 2011-12. THE ASSESSEE HAS RAISED THE FOLLOWING GROU NDS OF APPEAL. 1. THE LD. CIT(A) ERRED IN FACTS AND LAW IN DISALLO WING AND REDUCING A SUM OF RS. 39,518/- FROM THE CLOSING WIP IN RESPECT OF CER TAIN PURCHASES ALLEGED AS BOGUS BY THE ID. ASSESSING OFFICER WITHOUT APPRECIA TING THE EVIDENCES 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 PURCHAS ES AND UTILISATION THEREOF IN THE BUSINESS OF THE APPELLANT AND ACCORDINGLY NO DI SALLOWANCE WAS WARRANTED. ITA NO.3784/M/2017- M/S TRIVENI SPACES 2 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND ASSESSING OFFICER ERRED IN FACTS AND LAW IN RELYING UPON THE STATEMEN T OF CERTAIN PERSONS WITHOUT PROVIDING THE SAME AND WITHOUT AFFORDING THE APPELL ANT ANY OPPORTUNITY OF CROSS- EXAMINATION OF THESE PARTIES. 4. THE APPELLANT PRAYS THAT - (A) WIP AS SHOWN IN RETURN OF INCOME BE RESTORED AN D DISALLOWANCE OF RS. 39,518/- BE DELETED; (B) ANY OTHER RELIEF, AS MAY BE DEEMED FIT. 5. ALL THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOU T PREJUDICE TO EACH OTHER. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF COM MERCIAL AND RESIDENTIAL SITES. THE ASSESSEE FILED HIS RETURN OF INCOME FOR RELEVANT AY ON 15.09.2011 DECLARING TOTAL INCOME OF RS. 1,22,600/-. THE ASSES SMENT WAS COMPLETED ON 20.03.2014 UNDER SECTION 143(3) OF THE ACT. DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFFICER OBSERVED THAT ASS ESSEE HAS MADE PURCHASES FROM VARIOUS PARTIES INCLUDING FROM M/S M AHAVIR STEEL CORPORATION OF RS. 39,518/-. THE ASSESSING OFFICER NOTED THAT M/S MAHAVIR STEEL CORPORATION WAS DECLARED AS HAWALA DEALER BY SALES TAX DEPARTMENT, WHO WERE PROVIDING ACCOMMODATION BILL WITHOUT DELIV ERY OF GOODS. THE ASSESSEE WAS ASKED TO EXPLAINED AND SUBSTANTIATE T HE PURCHASES. THE ASSESSEE WAS ALSO ASKED TO PLACE ON RECORD THE PURC HASE INVOICES AND THE RECEIPT OF DELIVERY OF MATERIALS. THE ASSESSEE FURN ISHED THE COPY OF INVOICES, HOWEVER, NO DOCUMENTARY PROOF LIKE RELATED WITH DIS PATCH, FREIGHT RECEIPTS AND DELIVERY CHALLAN WAS FILED. FROM THE EVIDENCES FURNISHED BY ASSESSEE, THE ASSESSING OFFICER WAS NOT SATISFIED. THE ASSESS ING OFFICER WAS OF THE VIEW THAT THE PURCHASE OF THE ASSESSEE WAS NOT GENU INE AND ADDED THE COST OF ITA NO.3784/M/2017- M/S TRIVENI SPACES 3 PURCHASE OF RS. 39,518/- TO THE INCOME OF THE ASSES SEE. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION WAS CONFIRMED. THUS, FURTH ER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT A PPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE ARGUED THAT THE ASSESSING OFFICER MADE THE 100% OF ADDITION TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF BOGUS PURCHASES. THE ASSESSE E HAS SUBSTANTIATED HIS CLAIM BEFORE THE ASSESSING OFFICER. THE LD. CIT(A) ALSO CONFIRMED THE ADDITION OF 100%. THE LD AR PRAYED THAT HE HAS NO O BJECTION IF THE REASONABLE PERCENTAGE OF THE ALLEGED BOGUS PURCHASE IS SUTAINED. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED TH E ORDER OF AUTHORITIES BELOW. THE LD. DR FOR THE REVENUE ARGUED THAT DURIN G THE ASSESSMENT PROCEEDING, THE ASSESSEE COULD NOT SUBSTANTIATE AND PROVE THE GENUINENESS OF PURCHASES. NO EVIDENCE REGARDING THE DELIVERY OF MA TERIAL WAS FILED. THE ASSESSEE WAS GIVEN ADEQUATE AND SUFFICIENT OPPORTUN ITY BY THE LOWER AUTHORITIES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE SEEN THAT DURING THE ASSESSMENT PROCEEDING, THE ASSESSING OFF ICER NOTED THAT THE ASSESSEE HAD MADE THE PURCHASES FROM M/S MAHAVIR ST EEL CORPORATION WHICH WAS DECLARED AS HAWALA DEALERS BY THE SALES TAX DEP ARTMENT, GOVERNMENT ITA NO.3784/M/2017- M/S TRIVENI SPACES 4 OF MAHARASHTRA. THE ASSESSING OFFICER HAS NOT MADE ANY INDEPENDENT ENQUIRY, NO NOTICE U/S 133(6) OR SUMMONS U/S 131OF THE ACT, WAS SENT TO THE SAID BOGUS PARTIES. THE ASSESSING OFFICER HAS NOT B ROUGHT ANY MATERIAL ON RECORD EXCEPT RELYING UPON THE INFORMATION OF SALES TAX DEPARTMENT. HOWEVER, THE LD. CIT(A) WHILE CONSIDERING THIS GROU ND OF APPEAL PASSED THE FOLLOWING ORDER: THE APPELLANT IS ENGAGED IN THE BUSINESS OF BUILDE R & DEVELOPER AND DURING THE YEAR UNDER REFERENCE, IT HAS NOT SHOWN ANY TURNOVER /SALE OF WIP. THE TOTAL COST OF FINISHED STOCK OR WIP WAS SHOWN AT RS.17,51,54,7 20/- AT THE END OF THE YEAR. THEREFORE IF ENTIRE PURCHASES OF RS.39,518/- ARE DI SALLOWED THEN IT WOULD IMPLY THAT ABOUT 0.22% OF WIP WAS BOGUS WHICH DOES NOT AP PEAR TO BE ILLOGICAL. IT WOULD ALSO NOT LEAD TO ABNORMAL PROFITS IN THE YEAR OF SALE. IN VIEW OF ABOVE FACTS, THIS IS A CASE WHERE THE ENTIRE CASH HAS BEE N SIPHONED OFF BY DEBITING THE BOGUS PURCHASES. THEREFORE, FOLLOWING THE PRINCIPLE LAID DOWN IN THE DECISION OF HON'BLE ALLAHABAD HIGH COURT IN THE CASE OF SRI GAN ESH RICE MILLS (294 ITR 316), THE PURCHASES ARE HELD TO BE NON-GENUINE. THE REFORE THE WORK-IN-PROGRESS SHOWN IN THE CURRENT YEAR IS REDUCED BY AN AMOUNT O F RS.39,518/- ON ACCOUNT OF INFLATION OF PURCHASES, IT IS FURTHER NOTICED THAT THE APPELLANT FIRM HAD CLAIMED DEDUCTION ON ACCOUNT OF WORK-IN-PROGRESS IN AY 2012 -13 AND APPEAL FOR THE SAME WAS ALSO PENDING WITH THE UNDERSIGNED. SINCE T HE EFFECT OF ADJUSTMENT IN WIP HAS TO BE MADE IN THAT YEAR, THEREFORE THE UNDE RSIGNED HAS ISSUED NOTICE FOR ENHANCEMENT OF INCOME IN AY 2012-13 TO THE APPELLAN T FIRM ON SUCH ADJUSTMENT IN WIP. IN VIEW OF ABOVE FACTS, THE AO IS DIRECTED TO DELETE THE ADDITION OF RS.39,518/- MADE BY HIM IN THE CURRENT YEAR. THESE GROUNDS OF APPEAL ARE ACCORDINGLY ALLOWED. 5. FROM THE ABOVE OBSERVATIONS WE HAVE NOTE THAT THE LD. CIT(A) HAS INDIRECTLY APPROVED THE ENTIRE THE DISALLOWANCE. I N OUR VIEW, THE LD. CIT(A) HAS NOT GIVEN ANY RELIEF TO THE ASSESSEE BY REDUCIN G AN EQUAL AMOUNT ON ITA NO.3784/M/2017- M/S TRIVENI SPACES 5 ACCOUNT OF PURCHASES. IN OUR VIEW, NO RELIEF IS GRA NTED TO THE ASSESSEE. IN OUR VIEW, UNDER THE PROVISIONS OF INCOME-TAX ACT , THE REVENUE IS ENTITLED ONLY TAXABLE INCOME COMPONENT AND NOT TO T AX THE ENTIRE TRANSACTION. IN OUR OPINION, IF THE TRANSACTION IS NOT VERIFIABL E DUE TO ANY REASON OR CIRCUMSTANCES OF REASONABLE PERCENTAGE OF DISALLOWA NCE MAY FULFILL THE GAP OF REVENUE LEAKAGE AFTER CONSIDERING THE FACTS OF T HE PRESENT CASE AND THE CONTENTION OF BOTH THE PARTIES, WE ARE OF THE OPINI ON THAT IN ORDER TO FULFILL THE GAP OF REVENUE LEAKAGE, THE DISALLOWANCE OF 12. 5% OF THE BOGUS PURCHASES (RS. 39,518/-) WOULD MEET THE ENDS OF JUS TICE. HENCE, THE ASSESSING OFFICER IS DIRECTED TO RESTRICT THE DISAL LOWANCE ON ACCOUNT OF BOGUS PURCHASES/IMPUGNED PURCHASES @ 12.5% OF RS. 3 9,518/-. 6. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF SEPTEMBER 2017. SD/- SD/- (SHAMIM YAHYA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 21/09/2017 S.K.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/