PRABHAV CONSTRUCTION CO., MUMBAI V. ITO 26(2)(4), MUMBAI

ITA 4405/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9025 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 24-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Keywords: Bogus purchase
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 4405/MUM/2016 : (A.Y : 2010 - 11) PRABHAV CONSTRUCTION CO. C/O. ASHISH N. DADIA (PARTNER) 204, PARLE ABHISHEK CHSL, V.P. ROAD, VILE PARLE (W), MUMBAI 400 056 ( APPELLANT ) PAN : AAKFP8403C VS. ITO - 26(2)(4), MUMBAI (RESPONDENT) ASSESSEE BY : SHRI DEVENDRA JAIN REVENUE BY : MS. BEENA SANTOSH DATE OF HEARING : 28/12/2016 DATE OF PRONOUNCEMENT : 13 /01/2017 O R D E R THE CAPTIONED APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF CIT(A) - 32 , MUMBAI DATED 23.07.2014 , PERTAINING TO THE ASSESSMENT YEAR 2010 - 11 , WHICH IN TURN HAS ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER, MUMBAI DATED 22.03.2013 UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. IN THIS APPEAL, ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) - 32,MUMBAI HAS ERRED IN CONFIRMING THE ADDITION OF RS. 2 PRABHAV CONSTRUCTION CO. ITA NO. 4405/MUM/2016 14,08,966/- BEING PAYMENT TOWARDS LABOUR CHARGES TO M/S. AMBIKA TRADE IMPEX. 2) ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE AND IN LAW, THE LEARNED CIT(A) - 32, MUMBAI HAS ERRED IN CONFIRMING THE TOTAL ADDITION OF RS. 24,20,180/ - BEING ALLEGED BOGUS PURCHASES FROM M/S. SHIVRAJ TRADERS OF RS.11,82,040/ - AND M/S. ADINATH TRADING CO OF RS 12,38,140/ - . 3) WITHOUT PREJUDI CE TO GROUND NO. 1 AND 2, THE ADDITIONS MADE BY THE ASSESSING OFFICER ARE WHOLLY UNJUSTIFIABLE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, AS IT IS RESULTING INTO EXORBITANT NET PROFIT RATE OF 52.71 % AS AGAINST THE STATUTORILY ACCEPTED RATE OF 8% OF GROSS RECEIPTS U/S 44AD. 3. AT THE OUTSET, IT WAS NOTICED THAT THE APPEAL OF ASSESSEE WAS FILED BELATEDLY. THE LEARNED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THERE WERE CERTAIN DISPUTES AMONGST THE PARTNERS OF THE ASSESSEE - FIRM AND, THEREFORE, REQU ISITE STEPS COULD NOT BE TAKEN AFTER THE RECEIPT OF ORDER OF CIT(A) TO FILE APPEAL BEFORE THE TRIBUNAL. IN THIS CONNECTION, AN AFFIDAVIT BY ONE OF THE PARTNERS, MR. PRASHANT K. LATHIA DATED 18.11.2016 IS PLACED ON RECORD PRAYING CONDONATION FOR DELAY IN F ILING OF APPEAL FOR THE REASONS AVERRED THEREIN. THE RELEVANT PORTION OF THE AFFIDAVIT READS AS UNDER : - 3. OUR FIRM WAS FORMED FOR CARRYING ON THE BUSINESS OF CIVIL CONSTRUCTION, BY 2 PARTNERS VIZ. MR. PRASHANT LATHIA & MR. ASHISH DADIA, WHEREBY WE HAD TAKEN ONE CONTRACT OF KEYSTONE REALTORS PVT. LTD. 4. BOTH THE PARTNERS HAD SEGREGATED THEIR WORK ON THE BASIS OF, BACK OFFICE WORK HANDLED BY MR PRASHANT LATHIA AND THE SITE CIVIL CONSTRUCTION WORK HANDLED BY MR ASHISH DADIA. FURTHER AS PER THE UNDERSTAN DING BETWEEN FIRM & COMPANY, THE FIRM WAS TO RAISE BILL ON THE COMPANY FOR CIVIL CONSTRUCTION WORK FROM TIME TO TIME AND BOTH 3 PRABHAV CONSTRUCTION CO. ITA NO. 4405/MUM/2016 THE PARTNERS WHERE TO BUY FLAT FROM THE SAID COMPANY. THE AMOUNT RECEIVED BY THE FIRM FROM THE COMPANY FROM TIME TO TIME WAS WITHD RAWN BY THE PARTNERS AND PAID BACK TO THE COMPANY TOWARDS PURCHASE OF FLAT IN THEIR INDIVIDUAL NAMES. 5. UNFORTUNATELY, DISPUTE AROSE BETWEEN BOTH THE PARTNERS ABOUT WITHDRAWAL OF AMOUNT AND PAYMENT TO THE COMPANY TOWARDS PURCHASE OF FLAT, THE OWNERSHIP OF THE SAID FLATS, HANDLING OF RECORDS & ACCOUNTS AND PAYMENTS TO VENDORS. FOR ALL THESE REASONS, A SITUATION OF DEAD LOCK AROSE AND NO FURTHER PROJECT WAS UNDERTAKEN BY FIRM. THIS DEAD LOCK AROSE WHICH REMAINED FOR CONSIDERABLE PERIOD OF TIME AND THE PAR TNERS WERE ON THE VERGE OF SUING EACH OTHER IN LEGAL BATTLE. 6. FOR THIS REASON THERE WAS NO EFFECTIVE COMMUNICATION WITH THE CHARTERED ACCOUNTANT AND THE APPEAL COULD NOT BE FILED WITHIN THE STATUTORY TIME PERIOD RESULTING INTO THE DELAY OF 637 DAYS. 7. HOWEVER, WE HAVE ARRIVED AT MUTUAL SETTLEMENT NOW AND DECIDED TO RESOLVE TAX DISPUTE WITH DEPARTMENT. HENCE, THIS AFFIDAVIT IS BEING MADE IN SUPPORT OF OUR APPLICATION TO THE HON'BLE INCOME TAX APPELLATE TRIBUNAL, MUMBAI TO KINDLY CONDONE THE DELAY IN F ILING OF APPEAL. 4. ON THE BASIS OF THE AFFIDAVIT, IT IS CANVASSED BY THE LEARNED REPRESENTATIVE THAT THE DELAY WAS UNINTENTIONAL AND FOR BONA FIDE REASONS AND, THEREFORE, SAME BE CONDONED AND APPEAL ADMITTED FOR ADJUDICATION ON MERITS. THE LD. DR APPEA RING FOR THE REVENUE HAS NOT DOUBTED THE BONA FIDES OF REASONS CANVASSED BY ASSESSEE FOR DELAY, BUT HAS MERELY OPPOSED THE APPLICATION. 5. IN MY CONSIDERED OPINION, IN THE ABSENCE OF ANY MATERIAL TO DOUBT THE BONA FIDE OF THE REASONS CANVASSED, THE DELAY OUGHT TO BE CONDONED. I HOLD SO. THE AFORESAID ASPECT WAS ANNOUNCED AT THE TIME 4 PRABHAV CONSTRUCTION CO. ITA NO. 4405/MUM/2016 OF HEARING AND ACCORDINGLY, THE RIVAL PARTIES WERE HEARD WITH RESPECT TO THE MERITS OF THE DISPUTE. 6. ALL THE GROUNDS RAISED BY THE ASSESSEE ARISE OUT OF AN ACTION OF ASSESSING OFFICER WHEREBY IT WAS NOTICED , ON THE BASIS OF INFORMATION RECEIVED FROM SALES TAX DEPARTMENT OF MAHARASHTRA , THAT ASSESSEE HAS OBTAINED CERTAIN ACCOMMODATION BILLS FROM PARTIES, WHO WERE FOUND TO BE HAWALA BILLERS BY THE SALES TAX DEPARTMENT. THE DETAILS IN THIS REGARD ARE AS UNDER : - A. M/S. SHIVRAJ TRADERS RS.11,82,040 B. M/S. ADINATH TRADING CO. RS.12,38,140 C. M/S. AMBIKA TRADE IMPEX RS.14,08,966 TOTAL RS.38,29,146 IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER EXAM INED THE PARTNERS OF ASSESSEE - FIRM AND IN RESPONSE TO QUESTION NO. 6, IT WAS DEPOSED THAT SO FAR AS PURCHASES FROM M/S. SHIVRAJ TRADERS AND M/S. ADINATH TRADING CO. OF RS.11,82,040/ - AND RS.12,38,140/ - RESPECTIVELY ARE CONCERNED, IT WAS ADMITTED THAT ASSES SEE HAD OBTAINED ACCOMMODATION BILLS FROM THE ABOVE ENTITIES. HOWEVER, WITH REGARD TO THE PAYMENTS MADE TO M/S. AMBIKA TRADE IMPEX, IT WAS POINTED OUT THAT THE PAYMENTS WERE AGAINST LABOUR JOB AND NOT AGAINST ANY PURCHASE OF GOODS AND, THEREFORE, IT CANNO T BE TREATED IN THE SAME MANNER. THE ASSESSING OFFICER NOTED THAT NOTICE U/S 133(6) OF THE ACT WITH RESPECT TO THE TRANSACTION WITH M/S. AMBIKA TRADE IMPEX HAD COME BACK UNCLAIMED AND EVEN ASSESSEE COULD NOT PRODUCE THE CONCERNED PARTY. THEREFORE, HE TRE ATED THE TRANSACTIONS WITH ALL THE 5 PRABHAV CONSTRUCTION CO. ITA NO. 4405/MUM/2016 ABOVE THREE PARTIES AS NON - GENUINE AND BOGUS. ACCORDINGLY, A SUM OF RS.38,29,146/ - WAS ADDED TO THE RETURNED INCOME AS BOGUS PURCHASES. THE SAID STAND OF ASSESSING OFFICER HAS BEEN AFFIRMED BY CIT(A) AGAINST WHICH ASSES SEE IS IN FURTHER APPEAL BEFORE THE TRIBUNAL. 7. BEFORE ME, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE EXPLAINED THAT ASSESSEE WAS IN THE BUSINESS OF CIVIL CONTRACTING AND THAT SO FAR AS PAYMENTS TO M/S. AMBIKA TRADE IMPEX IS CONCERNED, IT WAS MADE IN TERMS OF A SUB - CONTRACT FOR LABOUR CHARGES AND THAT ASSESSEE HAD NOT PURCHASED ANY MATERIAL SO AS TO BE TREATED IN THE SAME MANNER AS THE OTHER TWO CONCERNS. IT HAS BEEN POINTED OUT THAT THE REQUISITE TAX HAS ALSO BEEN DEDUCTED AT SOURCE ON PAYMENT S MADE TO M/S. AMBIKA TRADE IMPEX IN TERMS OF TDS CERTIFICATE PLACED AT PAGES 30 TO 33 OF PAPER BOOK. IN SUM AND SUBSTANCE, THE PLEA OF ASSESSEE IS THAT PAYMENTS TO M/S. AMBIKA TRADE IMPEX COULD NOT BE TREATED AS NON - GENUINE. WITH REGARD TO OTHER TWO CONCERNS, NAMELY M/S. SHIVRAJ TRADERS AND M/S. ADINATH TRADING CO. , THE LEARNED REPRESENTATIVE FAIRLY CONCEDED THAT THE NATURE OF TRANSACTIONS HAVE BEEN ADMITTED BY THE ASSESSEE TO BE IN THE NATURE OF OBTAINING OF ACCOMMODATION BILLS. THE LEARNED REPRESENTATIVE POI NTED OUT THAT THE ENTIRE PURCHASES COULD NOT BE TREATED AS INCOME AND ONLY THE PROFIT ELEMENT ON SUCH TRANSACTIONS BE TREATED AS INCOME ASSESSABLE FOLLOWING THE RATIO OF JUDGMENT OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SATHYANARAYAN P. RATHI, 351 ITR 150 . 8. ON THE OTHER HAND, THE LD. DR HAS REITERATED THE STAND OF LOWER AUTHORITIES AND CONTENDED THAT THE ADDITIONS WERE MADE NOT ONLY ON THE BASIS OF INFORMATION OBTAINED FROM SALES TAX DEPARTMENT, BUT ALSO 6 PRABHAV CONSTRUCTION CO. ITA NO. 4405/MUM/2016 AS A RESULT OF INVESTIGATIONS CARRIED OUT BY I SSUANCE OF NOTICE U/S 133(6) OF THE ACT. 9. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. INSOFAR AS PURCHASES FROM M/S. SHIVRAJ TRADERS AND M/S. ADINATH TRADING CO. OF RS.11,82,040/ - AND RS.12,38,140/ - RESPECTIVELY ARE CONCERNED, THE ASSESSEE HAS ITSELF ADMITTED THAT SAME ARE IN THE NATURE OF ACCOMMODATION BILLS. IN RESPECT OF M/S. AMBIKA TRADE IMPEX, ALTHOUGH ASSESSEE CANVASSED THAT NO MATERIAL HAS BEEN PURCHASED BUT ONLY LABOUR CHARGES HAVE BEEN PAID, EVEN ON THIS ASPECT I FIND THAT ASSESSEE HAS NOT BEEN ABLE TO PROVE THAT THE PAYMENTS ARE GENUINE BECAUSE ASSESSEE ITSELF VOLUNTEERED TO PRODUCE SUCH PART Y, BUT FAILED TO DO SO AT THE TIME OF ASSESSMENT PROCEEDINGS. IN MY CONSIDERED OPINION, AND HAVING REGARD TO THE FACTS OF THE CASE, THE TRANSACTI ONS WITH THE THREE CONCERNS ARE LIABLE TO BE TAKEN AS NON - GENUINE ; SO HOWEVER, I FIND ENOUGH MERIT IN THE ALTERNATE PLEA OF ASSESSEE THAT WHAT IS REQUIRED TO BE TAXED IS ONLY THE PROFIT ELEMENT WITH REGARD TO THE IMPUGNED TRANSACTIONS FOLLOWING THE JUDGMEN T OF HON'BLE GUJARAT HIGH COURT IN THE CASE OF SATHYANARAYAN P. RATHI (SUPRA) . THIS IS BECAUSE THE ASSESSEE HAD INDEED MADE THE RESPECTIVE PURCHASES AND OBTAINED SERVICES FOR LABOUR, ETC. FROM THE OPEN MARKET BY MAKING PAYMENTS AND INSTEAD PROCURED ACCOMM ODATION BILLS FROM THE SAID PARTIES. IN THIS VIEW O F THE MATTER, CONSIDERING THE FACTS OF THE CASE, IT WOULD BE IN THE FITNESS OF THINGS THAT 12% OF THE GROSS AMOUNT OF THE TRANSACTIONS FROM THE SAID THREE CONCERNS BE ASSESSED AS INCOME AND THE BALANCE OF ADDITION BE DELETED. I HOLD SO. THUS, ASSESSEE PARTLY SUCCEEDS. 7 PRABHAV CONSTRUCTION CO. ITA NO. 4405/MUM/2016 10. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 T H JANUARY, 2017. S D / - ( G.S. PANNU ) ACCOUNTANT MEMBER MUMBAI, DATE : 1 3 T H JANUARY , 201 7 * SSL * COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, SMC BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI