ACIT 33(3), MUMBAI V. SETH CONSTRUCTION CO., MUMBAI

ITA 4280/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7914 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-03-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 10-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VISHWAS MUNDE
• Assessee Lawyers: HITESH M SHAH
• Keywords: Business income
• Section: 69C; 133(6)

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , , BEFORE S/SH.RAJENDRA,ACCOUNTANT MEMBER AND AMARJIT SINGH,JUDICIAL MEMBER ./I.T.A./4280/MUM/2015, / ASSESSMENT YEAR: 2009-10 ACIT-33(3) ROOM NO.409, 4 TH FLOOR, BLDG.NO.C-13, PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E),MUMBAI-400 051. VS. M/S. SETH CONSTRUCTION CO. 507/508, SANJAR ENCLAVE, OPP. MILAN CINEMA, S.V. ROAD, KANDIVALI (W) MUMBAI-400 067. PAN:AAPFS 0792 Q ( /APPELLANT ) ( / RESPONDENT) / REVENUE BY: SHRI VISHWAS MUNDE-CIT-DR /ASSESSEE BY: SHRI HITESH M. SHAH / DATE OF HEARING: 22/03/2017 / DATE OF PRONOUNCEMENT: 24.03.2017 PER RAJENDRA, AM - CHALLENGING THE ORDER OF THE CIT (A)-45,MUMBAI, DAT ED 28/04/2015,THE ASSESSING OFFICER (AO) HAS FILED THE PRESENT APPEAL. ASSESSEE-FIRM,A CONTRACTOR OF CIVIL WORKS, FILED ITS RETURN OF INCOME ON 24/09/2009,DECLARING TOTAL INCOME AT RS.9 7.68 LAKHS. THE AO COMPLETED THE ASSESSMENT U/S.143(3) R.W.S. 147 OF THE ACT, ON 29/ 03/2015,DETERMINING ITS INCOME AT RS. 2.42 CRORES. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT RESTRICTING/UPH OLDING THE ADDITION AT THE RATE OF 8% OF PURCHASE I.E. 8% OF RS.1.44 CRORE WHICH WORKED OUT TO RS.11.55 LAKHS AS AGAINST RS.1, 44, 40, 398/-.DURING THE ASSESSMENT PROCEEDINGS, THE AO FOU ND THAT AS PER THE INFORMATION OF THE SALES TAX DEPARTMENT (STD) GOVERNMENT OF MAHARASHTR A, THE ASSESSEE HAD MADE PURCHASES FROM FIVE ENTITIES WHO WERE INDULGING IN ISSUANCE O F GOODS WITHOUT DELIVERY. HE OBSERVED THAT THE ASSESSEE HAD PURCHASED GOODS FROM DEVDHAR STEEL(RS.78.54 LAKHS),VRUKSHA ENTER - PRISES(RS.5.52 LAKHS), CHAITANYA ENTERPRISES(RS.16. 74 LAKHS),UNIQUE ENTERPRISES (RS. 21.5 LAKHS)AND ORIENTAL TRADING CORPORATION (RS. 22.04 L AKHS), THAT THE STD HAD TAKEN STATEMENTS/ DEPOSITIONS AND AFFIDAVITS OF HUNDREDS OF PERSONS W HO WERE BEHIND RUNNING THE RACKET OF ISSUING BILLS FOR A COMMISSION. THE AO ISSUED NOTIC E UNDER SECTION 133(6) TO ALL THE ABOVE REFERRED FIVE PARTIES. HOWEVER, THE NOTICES WERE RE TURNED WITH REMARK LEFT/NOT KNOWN FROM THE POSTAL AUTHORITIES. THE ASSESSEE FAILED TO PRODUCE THE SUPPLIERS BEFORE THE AO. HE DEPUTED THE INSPECTOR TO SERVE NOTICES UNDER SECTION 133 (6) OF THE ACT, WHO CONFIRMED THAT NO SUCH PARTIES WERE IN EXISTENCE AT THE ADDRESSES MENTIONE D OR THAT NO BUSINESS ACTIVITIES WERE CARRIED OUT FROM THE ADDRESSES.THE AO DIRECTED THE ASSESSEE TO FILE EXPLANATION IN THAT REGARD. AFTER CONSIDERING THE SAME, HE HELD THAT PAYMENT BY ACCOUNT PAYEE CHEQUES WAS NOT 4280/M/15(09-10) M/S. SETH CONSTRUCTION 2 SUFFICIENT TO SUBSTANTIATE THE CLAIM MADE ABOUT PUR CHASES, THAT THE ASSESSEE HAD NOT PRODUCED DELIVERY CHALLAN/LORRY RECEIPTS, MODE OF TRANSPORT OF GOODS AND STOCK REGISTER, THAT IT HAD NOT REBUTTED THE EVIDENCES, DEPOSITIONS AND STATEMENTS OF ALL OPERATORS. ACCORDINGLY HE MADE AN ADDITION OF RS.1.44 CRORES TO THE TOTAL INCOME THE ASSESSEE, INVOKING THE PROVISIONS OF SECTION 69C OF THE ACT. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA). BEFORE HER, IT MADE ELABO RATE SUBMISSIONS AND RELIED UPON CERTAIN CASE LAWS.AFTER CONSIDERING THE SUBMISSION OF THE A SSESSEE AND THE ASSESSMENT ORDER, THE FAA HELD THAT THE ASSESSEE WAS ENGAGED IN THE BUSIN ESS OF CIVIL CONTRACTORS FOR MUNICIPAL CORPORATION AND GOVERNMENT AGENCY, THAT THE AO HAD ISSUED NOTICES UNDER SECTION 133 (6) OF THE ACT AND HAD MADE FIELD ENQUIRIES, THAT HE HA D NOT FOUND ANY CONCRETE EVIDENCE TO DOUBT THE GENUINENESS OF THE PAYMENTS MADE BY THE ASSESSE E THROUGH THE BANKING CHANNELS, THAT HE HAD NOT BEEN ABLE TO QUESTION THE AVAILABILITY OF T HE INVENTORY THAT HAD BEEN SUBSEQUENTLY USED, THAT THE ASSESSEE HAD FILED HIS BOOKS, LEDGER ACCOUNTS AND THE BANK STATEMENTS, THAT THE STD HAD PROVED THAT THE SUPPLIERS WERE ENGAGED IN F ALSE BILLING FOR A FEE/COMMISSION, THAT THE ONUS OF PROVING THE GENUINENESS OF THE TRANSACT ION WAS ON THE ASSESSEE, THAT FILING COPIES OF LEDGER ACCOUNT AND BANK ACCOUNTS WOULD NOT ESTAB LISH THAT PARTIES ACTUALLY EXISTED, THAT THE BOOKS OF ACCOUNTS WERE NOT DISPUTED, THAT THE SALES WERE NOT QUESTIONED BY THE AO, THAT THERE WAS NO EVIDENCE TO SHOW THAT MONEY WAS RECEIVED BY THE ASSESSEE, THAT THE AO HAD NOT DOUBTED THE QUANTITY OF PURCHASE PER SE, THAT IS OB JECTION WAS ABOUT THE GENUINENESS OF THE SUPPLIERS. THE FAA FURTHER OBSERVED THAT THE CAUSE OF JUSTICE WOULD BE SERVED BY LOOKING AT THE GROSS PROFIT MARGINS BEING DECLARED BY THE ASSE SSEE. REFERRING TO THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SHETH (TA X APPEAL NUMBER 5531 OF 2012, DATED 16/01/2013), SHE OBSERVED THAT WHEN TOTAL SALES WER E ACCEPTED BY THE AO THE ENTIRE PURCHASES COULD NOT BE ADDED. ACCORDINGLY, THE FAA ADDED 8% O F THE TOTAL PURCHASES MADE BY THE ASSESSEE DURING THE YEAR AND RESTRICTED THE ADDITIO N TO RS.11,55, 232/-. 4. DURING THE COURSE OF HEARING BEFORE US, THE DEPARTM ENTAL REPRESENTATIVE (DR) RELIED UPON THE ORDER OF THE AO.THE AUTHORISED REPRESENTATIVE ( AR) SUPPORTED THE ORDER OF THE FAA. 5. WE FIND THAT THE AO HAD MADE THE ADDITION ON THE BA SIS OF THE INFORMATION RECEIVED FROM THE STD,THAT HE HAD INVOKED THE PROVISIONS OF SECTI ON 69C OF THE ACT, THAT HE HAD MADE ADDITION OF ENTIRE PURCHASES MADE FROM FIVE ENTITIE S ON THE BASIS OF THE REPORT OF THE STD, THAT HE HAD ISSUED NOTICES UNDER SECTION 133(6) OF THE A CT, THAT HE HAD DEPUTED AN INSPECTOR TO 4280/M/15(09-10) M/S. SETH CONSTRUCTION 3 MAKE ON THE SPOT ENQUIRIES, THAT THE INSPECTOR REPO RTED THAT PARTIES DID NOT OPERATE FROM THE ADDRESSES GIVEN IN THE BILLS,THAT THE FAA HAD RESTR ICTED THE ADDITION TO 8% OF THE PURCHASES FOLLOWING THE JUDGMENT OF HONBLE MADRAS HIGH COURT .IT IS A FACT THAT AO HAD NOT REJECTED THE BOOKS OF THE ASSESSEE NOR DOUBTED THE RECEIPTS .THE ASSESSEE IS EXECUTING CONTRACT FOR BOMBAY MUNICIPAL CORPORATION AND GOVERNMENT AGENCY. THEREFORE,AS FAR AS RECEIPT PART IS CONCERNED NO DOUBT COULD BE RAISED.WITHOUT MATERIAL THE ASSESSEE COULD NOT HAVE EXECUTED ANY WORK.THEREFORE,PURCHASES HAD TO BE RECOGNIZED.I T IS POSSIBLE THAT GOODS HAD BEEN PURCHASED FROM OTHER PARTIES AND NOT FROM THE ABOVE MENTIONED FIVE PARTIES. THE STD HAD MADE ENQUIRIES AND HAD FOUND THAT SUPPLIERS WERE IS SUING BOGUS BILLS.IN THESE CIRCUMSTANCES NEITHER PROVISIONS OF 69C CAN BE INVOKED NOR 100% P URCHASES COULD BE ADDED TO THE INCOME OF THE ASSESSEE.THE FAA HAS ESTIMATED THE GP@8% .I N OUR OPINION, CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE I.E. NON EXISTE NCE OF PARTIES AT THE GIVEN ADDRESS AND RECEIPT FROM THE GOVT. AGENCIES, WE ARE OF THE OPIN ION THAT THE FAA HAD DECIDED THE ISSUE IN A LOGICAL AND FAIR MANNER.THEREFORE, WE DO NOT WANT TO INTERFERE WITH HER ORDER. CONFIRMING THE SAME, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE AO. AS A RESULT APPEAL FILED BY AO STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH MARCH , 2017. 24 , 2017 SD/- SD/- ( / AMARJIT SINGH ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 24.03.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.