ARUN SHIMPI, THANE V. ITO WD 3(1), KALYAN

ITA 492/MUM/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2201 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2010-2011
• Appeal Filed On: 02-02-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A RAMACHANDRAN
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries
• Section: 143(3); 14A; 133(6); 148; 139

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO. 492 /MUM/2016 ( / ASSESSMENT YEAR : 2010-11) ARUN SHIMPI, 5 TH FLOOR, TULSI DHARA, GOKUL NAGAR, KALYAN (WEST), THANE 421301. / V. THE ITO WARD 3(1), KALYAN. ./ PAN : ACKPS5666A ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY SHRI ANIL THAKRAR REVENUE BY : SHRI A. RAMACHANDRAN / DATE OF HEARING : 4-10-2016 / DATE OF PRONOUNCEMENT : 09-11-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE, BEING ITA NO. 492/MUM/2016, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 30 TH DECEMBER, 2015 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 3, NA SIK(CAMP OFFICE THANE) (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSME NT YEAR 2010-11, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARI SING FROM THE ASSESSMENT ORDER DATED 22 ND JANUARY, 2015 PASSED BY THE LEARNED ASSESSING OFFI CER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT,1961 (HEREINAFTER CALLED THE ACT). ITA 492/MUM/2016 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE IN THE MEMO OF APPEAL FILED WITH THE INCOME-TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- 1. THE LD. CIT (APPEAL) ERRED IN CONFIRMING ADDITI ON OF RS. 3,96,333/- AS PROFIT ON PURCHASES OF RS. 31,70,670/ -. 2. THE APPELLANT REQUESTS TO DELETE THE ADDITION CONF IRMED BY THE LD. CIT(A). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A GOVERNMENT ELECTRICAL CONTRACTOR WORKING UNDER THE NAME AND ST YLE OF SHANTI ELECTRICALS AND SERVICES. IN THIS CASE, CERTAIN INFORMATION WAS RECEIVED BY THE AO FROM THE DGIT (LNV.), PUNE VIDE LETTER NO.PN/DGIT/SALES TAX HAWALA/2012- 13/2179 DATED 6 TH FEBRUARY, 2013 TO THE EFFECT THAT THE SALES TAX DEPARTMENT, MUMBAI HAS UNEARTHED A RACKET INVOLVING MORE THAN 1935 HAWALA DEALERS INVOLVED IN ISSUING BOGUS INVOICES T O ALLOW A TRADER TO CLAIM TAX CREDITS AND THERE ARE MORE THAN 37,000 BENEFICI ARIES WHO CLAIMED SUCH BOGUS PURCHASES AS WELL AS BOGUS TAX CREDITS. IT WA S ALSO REVEALED FROM THE STATEMENTS RECORDED BY THE SALES TAX DEPARTMENT U/S .14 OF THE MAHARASHTRA VALUE ADDED TAX, 2002 OF THE HAWALA DEALERS AND THE AFFIDAVITS FILED BY THEM, THAT THE HAWALA DEALERS, IN FACT, DID NOT DO ANY GE NUINE BUSINESS AND THEY HAVE ONLY ISSUED THE BOGUS SALE BILLS TO VARIOUS PA RTIES WITHOUT SUPPLYING ANY GOODS. THERE WERE NO CORRESPONDING PURCHASES TO SUC H BOGUS SALE BILLS. THE BOGUS SALE BILLS WERE SUPPLIED ON COMMISSION BASIS. THE PAYMENTS RECEIVED IN THE FORM OF CHEQUES HAVE BEEN CREDITED IN THE BANK ACCOUNT AND THEREAFTER CASH WAS WITHDRAWN AND RETURNED TO THE BENEFICIARY AFTER DEDUCTING THEIR COMMISSION. IT WAS OBSERVED BY THE AO THAT THE INVE STIGATION CARRIED OUT BY THE SALES TAX DEPARTMENT REVEALED THAT THE HAWALA O PERATOR POSING AS THE SELLER EXISTS ONLY ON PAPER, ISSUES FAKE BILL TO A CONCERN AND GETS A CUT IN ITA 492/MUM/2016 3 RETURN. THE BENEFICIARY , IN RETURN GETS THE INPUT TAX CREDIT ON THE MATERIAL , HE HAD NEVER PURCHASED IN REALITY THE MATERIAL REPR ESENTED BY BOGUS BILLS ISSUED BY HAWALA DEALERS .AS PER THE LIST RECEIVED FROM THE DGIT (LNV.), PUNE, THE ASSESSEE IS FOUND TO BE ONE OF SUCH BENEFICIARY . THUS, THE CASE OF THE ASSESSEE WAS REOPENED BY THE A.O. BY ISSUANCE OF NO TICE U/S 148 OF THE ACT ON THE BELIEF THAT THE PURCHASES TO THE TUNE OF RS . 31,70,670/- ARE ACCOMMODATION ENTRIES AND ARE NOT GENUINE. THEREFOR E AS PER THE AO, THESE PURCHASES OF RS. 31,70,670/- HAVE ESCAPED THE ASSES SMENT AS ENVISAGED U/S 147 OF THE ACT FOR THE IMPUGNED ASSESSMENT YEAR. T HE ASSESSEE IN RESPONSE TO NOTICE U/S 148 OF THE ACT SUBMITTED THAT THE ORI GINAL RETURN OF INCOME FILED U/S. 139 OF THE ACT BE TREATED AS RETURN OF INCOME FILED IN RESPONSE TO THE NOTICE U/S. 148 OF THE ACT . THE AO OBSERVED THAT AS PER INFORMATION RECEIVED FROM DGIT(INV.), MUMBAI, THESE HAWALA DEALERS HAVE FILED AFFIDAVIT WITH SALES TAX DEPARTMENT ALSO MADE DEPOSITION U/S 14A OF MVAT ACT, 2002 WHEREBY THEY DEPOSED OF BEING HAWALA DEALERS ENGAGED IN ACC OMMODATION ENTRIES AND WERE NOT ENGAGED IN GENUINE BUSINESS. DURING THE C OURSE OF ASSESSMENT PROCEEDINGS, ASSESSEE PRODUCED BANK BOOK, CASH BOOK , LEDGER, SALES REGISTER, PURCHASE REGISTER AND FINANCIAL STATEMENTS. THE ASS ESSEE WAS ASKED TO FURNISH NAMES AND ADDRESSES OF PARTIES FROM WHOM PU RCHASES WERE MADE AND TO WHOM SALES WERE MADE. ALSO, IT WAS SPECIFICA LLY ASKED TO FURNISH ACCOUNT EXTRACTS OF PURCHASES MADE ALONG WITH CONFI RMATION, PURCHASE BILL, RELEVANT DELIVERY CHALLAN, LORRY RECEIPTS, STOCK RE GISTER AND ESCORT RECEIPTS SO AS TO VERIFY THE PURCHASES. THE ASSESSEE SUBMITTED LEDGER EXTRACT FOR PURCHASES AND ALSO COPIES OF PURCHASE BILLS. THE A. O. OBSERVED FROM THE DETAILS AVAILABLE THAT THE PURCHASES MADE FROM THE FOLLOWING PARTIES WERE SUSPICIOUS:- TIN OF HAWALA DEALER NAME OF HAWALA DEALER PAN OF HAWALA DEALER ASSESSMENT YEAR AMOUNT IN RUPEES 270503389521V SIDHIVINAYAK STEELS AGVPS7889Q 2009-10 2113302 ITA 492/MUM/2016 4 27120627472V HARISH METAL & TUBES AHYPJ8223D 2009-10 1057368 TOTAL 31,70,670 NOTICES U/S 133(6) OF THE ACT WERE ISSUED TO THE AB OVE VENDORS TO VERIFY THE FACTS FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE MA DE CERTAIN PURCHASES AND VARIOUS DETAILS WERE CALLED FROM THEM. HOWEVER , THE NOTICES ISSUED U/S 133(6) OF THE ACT IN RESPECT OF ABOVE PARTIES WERE UNSERVED WITH THE REASONS NOT KNOWN AND LEFT. IN VIEW OF THIS, THE ASSESS EE WAS ASKED BY THE AO TO PRODUCE THESE HAWALA OPERATORS BEFORE THE AO BUT T HE ASSESSEE FAILED TO PRODUCE THESE VENDORS BEFORE THE AO AND EXPRESSED I TS INABILITY TO PRODUCE THESE VENDORS. THE A.O. AFTER CONSIDERING SUBMISSI ONS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE COULD NOT PRODUCE THE RE LATED DOCUMENTARY EVIDENCES FOR VERIFICATION SUCH AS OCTROI RECEIPTS, LORRY RECEIPTS , STOCK REGISTER AND ESCORT RECEIPTS FOR THE PURCHASES MADE FROM TH ESE PARTIES , AND ALSO FAILED TO PRODUCE THE VENDORS AND AS SUCH THE PURCH ASES MADE FROM THE SO CALLED VENDORS CANNOT BE CONSIDERED AS GENUINE. TH E AO OBSERVED THAT BOOKS OF ACCOUNT ARE NOT COMPLETE AND CORRECT. THE A.O. ACCORDINGLY REJECTED THE BOOKS OF ACCOUNT U/S 145(3) OF THE ACT AND TREATED THE ALLEGED PURCHASES OF RS. 31,70,670/- AS UNPROVED PURCHASES AND ADDED THE INVESTMENT MADE THEREIN TO THE INCOME OF THE ASSESSEE U/S 69-C OF T HE ACT , VIDE ASSESSMENT ORDER DATED 22 ND JANUARY, 2015 PASSED BY THE AO U/S 143(3) R.W.S. 1 47 OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 22-01-20 15 PASSED BY THE A.O. U/S 143(3) R.W.S. 147 OF THE ACT, THE ASSESSEE FILED FIRST APPEAL BEFORE THE LD. CIT(A). 5. BEFORE THE LD. CIT(A) , THE ASSESSEE SUBMITTED C OPIES OF INVOICES IN RESPECT OF ALL THESE PURCHASES AND LEDGER ACCOUNTS OF ALL THE PARTIES WERE ALSO SUBMITTED , AND IT WAS SUBMITTED THAT THE PAYMENTS FOR THESE PURCHASES ITA 492/MUM/2016 5 WERE MADE THROUGH CHEQUES. THE ASSESSEE SUBMITTED C OMPARATIVE CHART OF GROSS PROFIT AND NET PROFIT FOR THE YEAR UNDER CONS IDERATION AND FOR THE TWO PRECEDING YEARS, WITH AND WITHOUT HAWALA DEALER PUR CHASES AS UNDER: A.Y. SALES G.P(RS.) G.P.(%) N.P.(RS.) N.P.(%) 2008-09 1,04,40,263/- 23,52,190/- 22.53% 8,35,230/- 7.99% 2009-10 34,58,466/- 7,82,268/- 22.61% 3,60,670/- 10.43% 2010-11 90,70,063/- 19,12,587/- 21.09% 8,35,850/- 9.22% PARTICULARS 2009-10 NET PROFIT AS PER BOOKS OF A/C 8,35,850 ADDITION MADE BY AO 31,70,670 NET PROFIT AFTER ADDITION 40,06,520 REVISED NP % 44% IT WAS SUBMITTED BY THE ASSESSEE THAT IF THE ENTIRE BOGUS PURCHASES ARE ADDED, THE NET PROFIT RATIO WOULD BE 44% , WHICH IS ABNORMAL IN CASE OF CONTRACTOR. THE ASSESSEE ALSO RELIED ON FOLLOWING JUDICIAL DEC ISIONS : A) NIKUNJ EXIM ENTERPRISES ITA NO. 5604 OF 2010- WHERE IN HONBLE BOMBAY HIGH COURT HELD THAT MERELY BECAUSE SUPPLIER S HAVE NOT APPEARED BEFORE THE AO OR CIT(A), ONE CANNOT CONCLU DE THAT THE PURCHASES WERE NOT MADE BY THE ASSESSEE. B) ITO V. PARESH ARVIND GANDHI ITA NO 5706/MUM/2013 THE TRIBUNAL HELD THAT THE AO DID NOT CONDUCT ANY INDEP ENDENT ENQUIRY TO ESTABLISH THAT THE PURCHASES WERE NOT GENUINE. T HE ABSENCE OF ITA 492/MUM/2016 6 DELIVERY CHALLANS WAS NOT SUFFICIENT TO PROVE NON-G ENUINENESS OF THE TRANSACTION. C) RAMESH KUMAR AND CO ITA NO. 2959/MUM/2014- THE AD DITIONS HAVE BEEN MADE ON THE BASIS OF REPORT OF THE SALES TAX DEPARTMENT. THE TRIBUNAL HELD THAT IF THERE WERE NO PURCHASES T HE TAX-PAYER WOULD NOT HAVE BEEN IN POSITION TO COMPLETE THE CIV IL WORKS. WITHOUT PREJUDICE TO THE ABOVE SUBMISSIONS, THE ASS ESSEE VIDE LETTER DATED 30-12-2015 REQUESTED THAT THE ADDITION OF 12.5% OF ALLEGED HAWALA PURCHASES BE MADE TO THE INCOME OF THE ASSESSEE IN ORDER TO B UY PEACE OF MIND. THE LD. CIT(A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE HELD THAT THE ASSESSEE HAD SHOWN PURCHASES AMOUNTING TO RS. 31,70 ,670/- FROM VARIOUS PARTIES WHICH WERE FROM HAWALA OPERATORS AS APPEARI NG IN THE LIST PREPARED BY SALES TAX DEPARTMENT AND WHICH WERE NOT GENUINE PUR CHASES. THESE DEALERS ONLY GAVE THE PURCHASE BILLS AND THERE WERE NO ACTU AL SALE AND PURCHASE TRANSACTIONS AND NO TRANSFER OF GOODS. THE ASSESSEE COULD NOT PRODUCE TRANSPORTATION AND OCTROI PAYMENT RECEIPTS TO SHOWN THAT THE ASSESSEE HAD MADE ACTUAL PURCHASES FROM THE SAID HAWALA DEALERS. THE ASSESSEE COULD NOT PRODUCE EITHER THE PARTIES OR CONFIRMATION/LEDGER E XTRACT OF THE ASSESSEE IN THE BOOKS OF ACCOUNTS OF THE SAID HAWALA DEALERS. THE LEARNED CIT(A) OBSERVED THAT THE ASSESSEE RECEIVED THE BILLS AND M ADE PAYMENTS THROUGH ACCOUNT PAYEE CHEQUES , BUT THE ASSESSEE ALONG WITH THOUSANDS OF OTHER TAX- PAYER IN COLLUSION WITH THE SELLING DEALERS SUBVERT ED AND MANIPULATED THE SYSTEM, WHEREIN THE SELLING DEALERS WERE ONLY GIVIN G THE BILLS AND THE AMOUNT PAID BY THE PURCHASING DEALER IN THE FORM OF CHEQUE S WERE RETURNED TO THE PURCHASING DEALERS IN THE FORM OF CASH WITHOUT ACTU AL TRANSACTION OF GOODS. THE ASSESSEE SHOWED THAT THE MATERIAL PURCHASED HAS BEEN USED IN EXECUTION OF GOVERNMENT CONTRACTS AND RUNNING BILLS WERE PROD UCED TO SHOW THAT THE ITA 492/MUM/2016 7 MATERIAL NAMELY MS PLATES AND SHEETS HAVE BEEN USED IN THE MANUFACTURING OF GOODS AND EXECUTION OF CONTRACTS OF VARIOUS GOVE RNMENT DEPARTMENTS. THE LD. CIT(A) HELD THAT IF THE SALES WERE THERE PURCHA SES HAVE TO BE THERE AS HELD BY THE MUMBAI TRIBUNAL IN THE CASE OF RAMESH KUMAR & CO. V. ITAT, MUMBAI (ITA NO. 2959/MUM/2014), HENCE, THE INFERENCE THAT CAN BE DRAWN IS THAT THE ASSESSEE HAD MADE PURCHASES IN THE OPEN MARKET BUT HAD OBTAINED BILLS FROM THE HAWALA OPERATORS , BUT HOWEVER THERE IS NO ONE TO ONE CORRELATION WITH THE MATERIAL PURCHASED FROM THE SAID HAWALA DEALERS TO HAVE BEEN COMPLETELY USED IN THE EXECUTION OF WORK CONTRACTS. THUS, THE ASSESSEE ACTUALLY MADE THE PURCHASES FROM THIRD PARTIES AND THE INVOICES BEING INFLATED. THE LEARNED CIT(A) HELD THAT THE ASSESSEE IS IN THE BUSINESS OF ELECTRIC CONTRACTS AND THE TOTAL CONTRACT RECEIPTS DURING THE YEAR WAS RS. 90, 70,063/- ON WHICH GROSS PROFIT AND NET PROFIT HAS BEEN SHOWN AT RS. 8,35,85 0/- WHICH WORKS OUT TO 9.22%. FOLLOWING THE DECISION OF THE HON'BLE GUJARA T HIGH COURT IN THE CASE OF CIT VS. SIMITH P. SHETH, THE LEARNED CIT(A) HELD TH AT IT WOULD BE APPROPRIATE IF 12.5% OF THE AMOUNT OF UNPROVED PURCHASES OF RS. 31 ,70,670/- AMOUNTING TO RS. 3,96,333/- IS DISALLOWED IN THE HANDS OF THE AS SESSEE. THIS ADDITION WILL BE OVER AND ABOVE THE PROFITS OF RS. 7,82,140/- SHO WN BY THE ASSESSEE IN HIS RETURN OF INCOME. THUS, THE NET PROFIT WOULD BE RS. 11,78,473, APPROXIMATELY 12.9% OF CONTACT RECEIPTS. IN THE PREVIOUS YEAR, TH E NET PROFIT WAS 10.43% AND IN VIEW OF THIS, THE PROFIT MARGIN OF 12.9% WAS NOT UNREASONABLE AFTER MAKING THE ADDITION AND WAS ALSO IN LINE WITH THE FINDING OF TRIBUNAL IN THE CASE OF RAMESH KUMA (SUPRA) REGARDING THE REASONABILITY OF PROFIT IN THE CASE OF CONTRACTOR. THE LD. CIT(A) ACCORDINGLY RESTRICTED T HE ADDITION TO RS. 3,96,333/- , VIDE APPELLATE ORDERS DATED 30-12-2015 PASSED BY LEARNED CIT(A). 6. AGGRIEVED BY THE APPELLATE ORDER DATED 30-12-201 5 PASSED BY THE LD. CIT(A), THE ASSESSEE FILED SECOND APPEAL BEFORE TH E TRIBUNAL. ITA 492/MUM/2016 8 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT ADDITIONS HAVE BEEN MADE U/S 69-C OF THE ACT ON ACCOUNT OF ALLEGED BOGU S PURCHASES OF RS. 31,70,670/- BY THE AO WITH RESPECT TO PURCHASES FRO M TWO PARTIES. THE LD. CIT(A) CONFIRMED THE ADDITIONS @12.5% OF THE AMOUNT OF UNPROVED PURCHASES OF RS. 31,70,670/- , AMOUNTING TO RS. 3,96,333/-. I T WAS SUBMITTED THAT IN THE PREVIOUS YEAR, THE NET PROFIT RATIO WAS 10.43% WHICH WAS ACCEPTED BY REVENUE. THE LD. COUNSEL SUBMITTED THAT THE ASSESS EE COULD NOT PRODUCE THE VENDORS BEFORE THE AUTHORITIES BELOW, HOWEVER, ALL THE DETAILS WERE FURNISHED BEFORE THE A.O. 8. THE LD. D.R., HOWEVER, RELIED UPON THE ORDERS OF AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE JUDICIAL DECISION S CITED BY THE PARTIES. WE HAVE OBSERVED THAT THE ASSESSEE IS A GOVERNMENT ELE CTRICAL CONTRACTOR WORKING UNDER THE NAME AND STYLE OF SHANTI ELECTRICALS AND SERVICES . WE HAVE OBSERVED THAT CERTAIN INFORMATION WAS RECEIVED BY THE AO FROM THE DGIT (LNV.), PUNE VIDE LETTER NO.PN/DGIT/SALES TAX HAWAL A/2012-13/2179 DATED 6 TH FEBRUARY, 2013 TO THE EFFECT THAT THE SALES TAX DE PARTMENT, MUMBAI HAS UNEARTHED A RACKET INVOLVING MORE THAN 1935 HAWALA DEALERS INVOLVED IN ISSUING BOGUS INVOICES TO ALLOW A TRADER TO CLAIM T AX CREDITS AND THERE ARE MORE THAN 37,000 BENEFICIARIES WHO CLAIMED SUCH BOG US PURCHASES AS WELL AS BOGUS TAX CREDITS. IT WAS ALSO REVEALED FROM THE ST ATEMENTS RECORDED BY THE SALES TAX DEPARTMENT U/S.14 OF THE MAHARASHTRA VALU E ADDED TAX, 2002 OF THE HAWALA DEALERS AND THE AFFIDAVITS FILED BY THEM , THAT THE HAWALA DEALERS, IN FACT, DID NOT DO ANY GENUINE BUSINESS AND THEY H AVE ONLY ISSUED BOGUS SALE BILLS TO VARIOUS PARTIES WITHOUT SUPPLYING ANY GOODS. THERE WERE NO CORRESPONDING PURCHASES TO SUCH BOGUS SALE BILLS. T HE BOGUS SALE BILLS WERE SUPPLIED ON COMMISSION BASIS. THE PAYMENTS RECEIVED IN THE FORM OF CHEQUES HAVE BEEN CREDITED IN THE BANK ACCOUNT AND THEREAFT ER CASH WAS WITHDRAWN ITA 492/MUM/2016 9 AND RETURNED TO THE BENEFICIARY AFTER DEDUCTING THE IR COMMISSION. IT WAS OBSERVED BY THE AO THAT THE INVESTIGATION CARRIED O UT BY THE SALES TAX DEPARTMENT REVEALED THAT THE HAWALA OPERATOR POSING AS THE SELLER EXISTS ONLY ON PAPER, ISSUES FAKE BILL TO A CONCERN AND GETS A CUT IN RETURN. THE BENEFICIARY , IN RETURN GETS THE INPUT TAX CREDIT O N THE MATERIAL , HE HAD NEVER PURCHASED IN REALITY THE MATERIAL REPRESENTED BY BO GUS BILLS ISSUED BY HAWALA DEALERS . THE SAID HAWALA DEALERS HAVE GIVEN AFFIDA VIT AND STATEMENTS BEFORE THE SALES TAX AUTHORITIES THAT THEY WERE ENGAGED IN PROVIDING ACCOMMODATION ENTRIES WHEREBY BOGUS BILLS WERE ISSUED AGAINST WHI CH NO GOODS WERE SUPPLIED BY THEM. AS PER THE LIST RECEIVED FROM THE DGIT (IN V.), PUNE, THE ASSESSEE IS FOUND TO BE ONE OF SUCH BENEFICIARY. THE ASSESSEE S UBMITTED COPIES OF PURCHASE BILLS AND ALSO STATED THAT PAYMENT HAVE BE EN MADE THROUGH CHEQUES. THE ASSESSEE COULD NOT PRODUCE THE PARTIES FROM WHOM THE MATERIAL WAS PROCURED BEFORE THE AUTHORITIES BELOW WHILE NOT ICES U/S 133(6) OF THE ACT ISSUED BY AUTHORITIES BELOW EITHER REMAINED UN-SERV ED OR NOT COMPLIED WITH. THE AO REJECTED THE BOOKS OF ACCOUNTS AND MADE ADDI TIONS TO THE TUNE OF UNPROVED PURCHASES AGGREGATED TO RS. 31,70,670/- TO THE INCOME OF THE ASSESSEE U/S 69-C OF THE ACT . THE LEARNED CIT(A) RESTRICTED THE DISALLOWANCE TO 12.5% OF THE NET PROFIT RATIO . THE ASSESSEE SHO WED BEFORE THE LEARNED CIT(A) THAT THE MATERIAL PURCHASED HAS BEEN USED IN EXECUTION OF GOVERNMENT CONTRACTS AND RUNNING BILLS WERE PRODUCED TO SHOW T HAT THE MATERIAL NAMELY MS PLATES AND SHEETS HAVE BEEN USED IN THE MANUFACT URING OF GOODS AND EXECUTION OF CONTRACTS OF VARIOUS GOVERNMENT DEPART MENTS. THE LD. CIT(A) AFTER CONSIDERING THE REPLIES OF THE ASSESSEE HELD THAT IF THE SALES WERE THERE PURCHASES HAVE TO BE THERE AS HELD BY THE MUMBAI TR IBUNAL IN THE CASE OF RAMESH KUMAR & CO. V. ITAT, MUMBAI (ITA NO. 2959/MU M/2014), HENCE, THE INFERENCE THAT CAN BE DRAWN IS THAT THE ASSESSE E HAD MADE PURCHASES IN THE OPEN MARKET BUT HAD OBTAINED BILLS FROM THE HAW ALA OPERATORS , BUT HOWEVER THERE IS NO ONE TO ONE CORRELATION WITH THE MATERIAL PURCHASED FROM THE SAID HAWALA DEALERS TO HAVE BEEN COMPLETELY USE D IN THE EXECUTION OF WORK ITA 492/MUM/2016 10 CONTRACTS. THUS, THE ASSESSEE ACTUALLY MADE THE PUR CHASES FROM THIRD PARTIES AND THE INVOICES BEING INFLATED WAS THE CONCLUSION OF THE LEARNED CIT(A) AND ACCORDINGLY ADDITION WAS SUSTAINED BY THE LEARNED C IT(A). IT HAS NOT BEEN BROUGHT ON RECORD THAT THE REVENUE HAS FILED ANY AP PEAL WITH THE TRIBUNAL AGAINST THE DECISION OF LEARNED CIT(A). THE REVENU E HAS ACCEPTED THE PROFIT RATE OF 10.43% EARNED BY THE ASSESSEE IN THE PRECED ING YEAR, WHILE IN THE INSTANT YEAR THE NET PROFIT RATE WAS 9.22%. THE TUR NOVER IN THE INSTANT YEAR IS RS. 90,70,063/- . HENCE IN OUR CONSIDERED VIEW , IN TEREST OF JUSTICE WILL BE BEST SERVED KEEPING IN VIEW FACTUAL MATRIX OF THE C ASE IF THE ADDITIONS TO THE EXTENT ARE MADE TO THE INCOME OF THE ASSESSEE TO MA KE THE PROFIT COMPARABLE WITH THAT OF THE PRECEDING YEAR OF 10.43%. WE ORDE R ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 492/MUM/2016 FOR THE ASSESSMENT YEAR 2010-11 IS PAR TLY ALLOWED AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH NOVEMBER, 2016. # $% &' 09-11-2011 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS ITA 492/MUM/2016 11 !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI E BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI