ADESHWER ENTERPRISES, MUMBAI V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-1, THANE, MUMBAI

ITA 4335/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0327 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 12-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P MEENA
• Keywords: Bogus purchase
• Section: 143(3); 153A; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'A' BENCH, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NOS.4335 TO 4338/MUM/2017 (ASSESSMENT YEARS: 2008-09 TO 2011-12) M/S. ADESHWER ENTERPRISE 66-67, MAHAVIR CENTRE SECTOR-17, VASHI NAVI MUMBAI 400703 VS. DCIT, CENTRAL CIRCLE - 01 ASHAR I.T. PARK THANE 400604 PAN AAMFA9678C APPELLANT RESPONDENT APPELLANT BY: SHRI MANI JAIN RESPONDENT BY: SHRI R.P. MEENA DATE OF HEARING: 11.01.2018 DATE OF PRONOUNCEMENT: 12.02.2018 O R D E R PER RAJESH KUMAR, AM THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AGAIN ST THE ORDERS OF THE CIT(A)-11, PUNE DATED 27.03.2017 FOR ASSESSEE Y EARS 2008-09 TO 2011- 12. SINCE THE ASSESSEE HAS RAISED COMMON ISSUE IN A LL THESE APPEALS, THEREFORE THE SAME ARE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. THE ONLY ISSUE RAISED IN ALL THESE APPEAL IS AGAIN ST THE CONFIRMATION OF DISALLOWANCE OF APPROXIMATELY 15% OF BOGUS PURCH ASES AS AGAINST 100% DISALLOWED BY THE AO. 3. THE BRIEF FACTS OF THE CASE FOR A.Y. 2008-09 ARE T HAT A SEARCH ACTION WAS CARRIED OUT ON 18.10.2010 ON CHHAJER GROUP AND ITS ASSOCIATE CONCERNS WHICH ARE ENGAGED IN THE BUSINESS OF DEVEL OPMENT OF COMMERCIAL AND RESIDENTIAL PROJECTS. THE CASE OF THE ASSESSEE WAS ALSO COVERED UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 (HEREINAFTE R THE ACT). THE ASSESSEE HAD FILED THE ORIGINAL RETURN OF INCOME ON 27.06.2008 DECLARING AN INCOME OF ` 53,07,105/-. NOTICE UNDER SECTION 153A OF THE ACT W AS ITA NOS. 4335 TO 4338/MUM/2017 M/S. ADESHWER ENTERPRIS 2 ISSUED ON 12.08.2011 AND IT WAS COMPLIED WITH BY FI LING RETURN OF INCOME ON 26.09.2011 DECLARING THE SAME INCOME AS IN THE O RIGINAL RETURN. IN PARA 8.1 OF THE ASSESSMENT ORDER THE AO OBSERVED THAT TH E SALES TAX DEPARTMENT HAD BUSTED A RACKET OF BOGUS DEALERS WHO WERE ENGAGED IN PROVIDING ACCOMMODATION BILLS/INVOICES TO VARIOUS T RADERS/BENEFICIARIES THE DETAILS WHEREOF WERE UPLOADED ON THE OFFICIAL WEBSITE. HE ALSO MENTIONED THAT INFORMATION WAS RECEIVED FROM DGIT ( INV) WING, MUMBAI & PUNE REGARDING THESE DEALERS. WHEN THE ASSESSEE FIL ED COPIES OF EXTRACTS OF PURCHASES IT WAS NOTICED BY THE AO THAT THE ASSESSE E TOO HAD MADE PURCHASES FROM SEVERAL OF THESE BOGUS DEALERS AS LI STED BY THE SALES TAX DEPARTMENT DURING THE YEAR UNDER CONSIDERATION AND ACCORDINGLY THE ASSESSEE WAS ISSUED SHOW CAUSE NOTICE ON 19 TH MARCH, 2013 AS TO WHY THE SAME SHOULD NOT BE DISALLOWED WHICH WAS REPLIED BY THE ASSESSEE VIDE LETTER DATED 20.03.2012. THE ASSESSEE SUBMITTED THA T IT HAS MADE PURCHASES FROM THREE PARTIES AGGREGATING TO ` 31,03,479/- AND SUBMITTED THE DETAILS OF PURCHASES, BILLS, VOUCHERS, VEHICLE NUMBERS AND DELIVERY CHALLANS, ETC BESIDE THE DETAILS OF PAYMENTS. THE ASSESSEE SUBMITTED THAT THESE PURCHASES WERE MADE FOR THE CONSTRUCTION OF V ARIOUS PROJECTS AND THE MATERIALS WERE DULY CONSUMED AND THE SALES WERE ALSO REFLECTED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IT WAS ALSO STATE D THAT MERE NON PAYMENT OF VAT/SALES TAX BY THE VENDOR DO NOT MEAN THAT THE ASSESSEE HAS NOT INCURRED ANY COST ON THE CONSTRUCTION AS TH E ASSESSEE HAS ISSUED ACCOUNT PAYEE CHEQUES TO VARIOUS VENDORS WHO SUPPLI ED MATERIAL TO THE ASSESSEE WHICH WERE ALSO CLEARED. THE REPLY OF THE ASSESSEE DID NOT FIND FAVOUR WITH THE AO AND HE FINALLY TREATED THE ENTIR E PURCHASE AS BOGUS AND NON-GENUINE AND ADDED THE SAME TO THE INCOME THE AS SESSEE BY FRAMING ASSESSMENT UNDER SECTION 143(3) R.W.S. 153A OF THE ACT ASSESSING THE INCOME AT ` 84,10,580/- VIDE ORDER DATED 22.03.2013. AGGRIEVED THE ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). 4. IN THE APPELLATE PROCEEDINGS THE LEARNED CIT(A) PAR TLY ALLOWED THE PLEAS OF THE ASSESSEE BY OBSERVING AND HOLDING AS U NDER: - 48. ASST YEAR 2008-09: THE APPELLANT HAS SHOWN AVE RAGE PROFIT OF ONLY 5% FROM THE PROJECT MAHAVIR RATAN. THE AO HAS ALSO ESTIMATED ITA NOS. 4335 TO 4338/MUM/2017 M/S. ADESHWER ENTERPRIS 3 PROFIT @5% OF THE WIP IN THE NEXT TWO YEARS. BUT I THINK THAT IS ON A VERY LOW SIDE. CONSIDERING VARIOUS CASES DISCUSSED ABOVE AND THE PROFIT ESTIMATION CONFIRMED IN THOSE CASES, I THINK IT REASONABLE TO DISALLOW 15% OF THE IMPUGNED PURCHASES. THUS OUT OF THE DISALLOWANCE OF ` 31,03,479/- ADDITION IS CONFIRMED TO THE EXTENT OF ` 4,65,000/-. AGGRIEVED ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED A.R. VEHEMENTLY SUBMITTED BEFORE US THA T THE ORDER OF THE CIT(A) SUSTAINING THE ADDITION TO THE EXTENT OF 15% OF THE BOGUS PURCHASE IS CONTRARY TO THE FACTS OF THE CASE. THE LEARNED A. R. SUBMITTED THAT THE ASSESSEE HAS IN FACT PURCHASED GOODS FROM THE MARKE T AND MADE THE PAYMENTS BY ACCOUNT PAYEE CHEQUES AND PRODUCED BEFO RE THE AO THE PROOFS OF PURCHASES OF MATERIAL SUCH AS DELIVERY CHALLANS, ETC. AND THE CORRESPONDING SALES WERE ALSO SHOWN IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. THE LEARNED A.R. SUBMITTED THAT THE ASSESSEE IS FOL LOWING PROJECT COMPLETION METHOD WHEREIN PROFITS ARE OFFERED TO TAX ONLY AFTE R COMPLETION OF THE PROJECT WHEREAS THE AO HAD ADDED 100% OF THE BOGUS PURCHASE TO THE INCOME OF THE ASSESSEE DISREGARDING THE SAID SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. THE LEARNED A.R. FURTHER SUBMITTED THAT DESPITE PRO DUCING ALL THE EVIDENCES, THE AO HAS NOT DONE ANY VERIFICATION AND MERELY ADD ED THE ENTIRE PURCHASE FROM THREE PARTIES AGGREGATING TO ` 31,03,479/- TO THE INCOME OF THE ASSESSEE. THE LEARNED A.R. ALSO SUBMITTED THAT THE CASE OF TH E ASSESSEE WAS COVERED UNDER SEARCH ACTION AND THE YEAR UNDER CONSIDERATIO N HAS BEEN ATTAINED FINALITY ON THE DATE OF SEARCH AND THE ADDITION WAS NOT BASED ON EVIDENCES/MATERIAL SEIZED DURING THE SEARCH ACTION. THEREFORE THE ASSESSMENT ORDER PASSED BY THE AO IS CONTRARY TO LAW. 6. THE LEARNED D.R., ON THE OTHER HAND, HEAVILY RELIED ON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESS EE WAS CLEARLY FOUND A BENEFICIARY OF BOGUS PURCHASE BILLS AND, THEREFORE, THE ACTION OF THE CIT(A) CONFIRMING 15% OF THE SAID PURCHASE IS REASONABLE A ND CORRECT AND BE CONFIRMED. 7. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATE RIAL ON RECORD. WE FIND THAT THE ASSESSEE IS UNDISPUTEDLY FOUND TO BE BENEFICIARY OF BOGUS PURCHASE BILLS WHICH DURING THE YEAR WERE TO THE TU NE OF ` 31,03,479/- FROM ITA NOS. 4335 TO 4338/MUM/2017 M/S. ADESHWER ENTERPRIS 4 THREE PARTIES AS PUBLISHED BY THE SALES TAX DEPART MENT OF MAHARASHTRA ON ITS OFFICIAL WEBSITE. MOREOVER THE AO RECEIVED I NFORMATION FROM DGIT (INV) WING, MUMBAI AND PUNE OF THE FACT THAT THE AS SESSEE IS BENEFICIARY OF BOGUS PURCHASE BILLS AND IS ONLY RECEIVING ACCOMMOD ATION ENTRIES WITHOUT RECEIVING MATERIAL PHYSICALLY. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS HAS FILED NECESSARY DETAILS BEFORE THE AO AND IS ONLY AFTER EXAMINATION OF THE SAID BILLS THE AO FOU ND THAT THE ASSESSEE IS BENEFICIARY OF BOGUS TRANSACTIONS. THE LEARNED CIT( A) SUSTAINED THE ADDITION PARTIALLY AT 15% OF THE TOTAL PURCHASES BY OBSERVING THAT THE ASSESSEE HAS ESTIMATED THE PROFIT ON WIP @5% WHICH IS LOW AND THUS JUSTIFIED SUSTAINING OF DISALLOWANCE AT 15%. HOWEVE R, IN SIMILAR TYPE OF CASES THE COORDINATE BENCHES HAVE TAKEN A VIEW THAT THE PERCENTAGE ADDITION SHOULD BE MADE RANGING FROM 2 TO 12.5% DEP ENDING UPON THE FACTS AND CIRCUMSTANCES OF THE CASE IN ORDER TO BRI NG TO TAX THE SAVINGS WHICH THE ASSESSEE HAS MADE BY THE REASON OF PURCHA SE OF GOODS FROM GREY MARKET WHEN THE SALES/CONSUMPTION IS UNDISPUTED. IN THE PRESENT CASE THE SALES WERE NOT DISPUTED AND THE METHOD OF ACCOU NTING FOLLOWED BY THE ASSESSEE IS PROJECT COMPLETION, THEREFORE, WE ARE I NCLINED TO ESTIMATE THE PROFIT ON THE ABOVE PURCHASES AT 3%. ACCORDINGLY AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED WITHOUT DECIDING THE ISSUE TECHNICAL LY AND LEGALLY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED. 9. IN ALL THE OTHER ASSESSMENT YEARS, I.E. 2009-10 TO 2011-12 THE ASSESSEE HAS RAISED IDENTICAL ISSUES AS RAISED A.Y. 2008-09 EXCEPT VARIATION IN AMOUNTS. THEREFORE OUR OBSERVATIONS AND DECISION GIVEN IN THE ABOVE MENTIONED APPEAL IS MUTATIS MUTANDIS APPLICABLE TO ALL THESE APPEALS. 10. IN THE RESULT, ALL THE APPEALS FILED BY THE ASSESSE E ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH FEBRUARY, 2018. SD/ - SD / - (D.T. GARASIA) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 12 TH FEBRUARY, 2018 ITA NOS. 4335 TO 4338/MUM/2017 M/S. ADESHWER ENTERPRIS 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), PUNE-11 4. THE CIT - CENTRAL, PUNE 5. THE DR, A BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.