SKYWAY CONSTRUCTON CO., MUMBAI V. ACIT 19(3), MUMBAI

ITA 5211/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 4292 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 09-08-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Bogus purchase; Additional evidence; Accommodation entries; Stock register not maintained
• Section: 143(3); 142(1); 133(6); 143(1); 274

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI BEFORE SHRI MAHAVIR SINGH, JM & SHRI M.BALAGANESH, AM ITA NO. 5211 / MUM/20 1 7 ( ASSESSMENT YEAR : 2009 - 10 ) M/S. SKYWAY CONSTRUCTION CO., 10/11, 1 ST FLOOR, 25, HARHAWALA, MUMBAI 400 004 VS. AS ST. COMMISSIONER OF INCOME TAX - 19(3), ROOM NO.206, 2 ND FLOOR MATRUMANDIR, TARDEO ROAD MUMBAI PAN/GIR NO. AAAFS1200N ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI CHAUDHARY ARUNKUMAR SINGH DATE OF HEARING 07 / 03 /201 9 DATE OF P RONOUNCEMENT 13 / 03 /201 9 / O R D E R PER M. BALAGANESH (A.M) : AFORESAID APPEAL BY THE ASSESSEE IS AGAINST ORDER DATED 14 TH JUNE 2017, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 30, MUMBAI, FOR THE ASSESSMENT YEAR 2009 10 IN THE MATT ER OF ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961. ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 2 2. THE DISPUTE IN THE PRESENT APPEAL IS CONFINED TO THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN RESTRICTING THE ADDITION TO 15% ON THE ALLEGED BOGUS PURCHASES. 3. BRIEF FACTS ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN EXECUTION OF CONTRACTS FOR MUNICIPAL CORPORATION OF GREATER MUMBAI (MCGM). FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE WAS ORIGINALLY ASSESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT ) ACCEPTING THE RETURNED INCOME OF RS . 47,93,427/ - . SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED FROM DGIT (INV.), MUMBAI, THAT PURCHASES SHOWN BY THE ASSESSEE TO THE TUNE OF RS. 2,19,25,244/ - , FROM 22 P ARTIES ARE NOT GENUINE, THE ASSESSING OFFICER RE OPENED THE ASSESSMENT UNDER SECTION 147 OF THE ACT. DURING THE RE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER ON THE BASIS OF MATERIAL ON RECORD NOTICED THAT THE 22 PARTIES FROM WHOM THE ASSESSEE HAD SHOWN PURCHASES HAVE BEEN IDENTIFIED BY THE SALES TAX / VAT DEPARTMENT OF GOVERNMENT OF MAHARASHTRA AS HAWALA DEALERS AND PROVIDING ACCOMMODATION ENTRIES ONLY. THEREFORE, HE CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF SUCH PURCHASES BY FURNISHING THE D ETAILS OF PURCHASE ALONG WITH NAME, ADDRESS, TIN NO. AND AMOUNT DEBITED IN THE PROFIT AND LOSS ACCOUNT. FURTHER, ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 3 TO VERIFY THE GENUINENESS OF THE TRANSACTIONS, ASSESSING OFFICER ISSUED NOTICES UNDER SECTION 133(6) OF THE ACT TO THE CONCERNED PARTIES. HOWEV ER, AS OBSERVED BY THE ASSESSING OFFICER, ALL SUCH NOTICES WERE RETURNED BACK UN SERVED BY THE POSTAL DEPARTMENT. THE INSPECTOR OF INCOME TAX VIDE HIS REPORT DATE 11.02.2015 HAD STATED THAT NO SUCH CONCERNS WERE EXISTING AT THE GIVEN ADDRESSES. LATER THE A SSESSEE WAS ASKED TO SUBMIT THE ORIGINAL BILLS, DELIVERY CHALLANS AND TRANSPORT RECEIPTS, ALL DOCUMENT RELATED WORK DONE FOR MCGM, PAYMENT CERTIFICATE ISSUED BY MCGM. THE ASSESSING OFFICER OBSERVED THAT IN THE INSTANT CASE , THE MATERIALS CLAIMED TO HAVE PURCHASED FROM THE SUSPICIOUS PARTIES, HAD BEEN SOLD BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. FROM THE SUBMISSION FILED BY THE ASSESSEE, IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD CLAIMED TO HAVE SOLD SOME OF THE MATERIAL PURCHASED FROM THE SUSPICIOUS PARTIES. BUT AS CERTAIN DISCREPANCIES WERE FOUND IN THE SUBMISSION, THE ASSESSING OFFICER ISSUED NOTICE U/S 142(1) OF THE ACT DATED 05.01.2015 TO FURNISH THE FOLLOWING INFORMATION : - A ) BOOKS OF ACCOUNTS IN SOFT COPY FORMAT B ) STOC K REGISTER C ) KINDLY MATCH THE SALES VIS - - VIS THE SUSPICIOUS HAWALA PURCHASES IN THE SPECIFIC FORMAT CALLED FOR ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 4 D ) KINDLY SUBMIT ALL DOCUMENTARY EVIDENCES AVAILABLE FOR SUCH PURCHASES AS WELL AS SALE E ) IN CASE OF A MANUFACTURER/CONTRACTOR BUILDER, KINDLY SUBMIT THE PROOF OF DELIVERY OF MATERIAL AT THE FACTORY ADDRESS / SITE ADDRESS F ) KINDLY SUBMIT COPY OF AUDIT REPORT IN THE PRESCRIBED FORM AS PER PROVISIONS OF SECTION 61 OF MVAT ACT, 2002 IN YOUR CASE FOR FY 2007 - 08 G ) KINDLY SUBMIT COPY OF SHOW CAUSE IN FORM 302 ISS UED BY MVAT AUTHORITIES AS PER PROVISIONS OF SECTION23(5) OF MVAT ACT, 2002 IN YOUR CASE FOR FY 2007 - 08 H ) KINDLY SUBMIT COPY OF INTIMATION IN FORM 604 ISSUED BY MVAT AUTHORITIES , AS PER PROVISIONS OF SECTION 63(7) OF MVAT ACT, 2002 IN YOUR CASE FOR FY 2007 - 08 4. THE ASSESSEE SUBMITTED ITS REPLY DATED 19.01.2015 IN RESPONSE TO THE AFOREMENTIONED NOTICE U/S 142(1) OF THE ACT. THE REPLY OF THE ASSESSEE WAS CONSIDERED AND THE ASSESSING OFFICER OBSERVED THAT THE REPLY OF THE ASSESSEE WAS NOT FOUND SATISFACTORY FOR THE REASONS GIVEN BELOW: - A ) STOCK REGISTER NOT MAINTAINED B ) NO DELIVERY CHALLANS C ) NO NEXUS BETWEEN PURCHASES / SALES D ) NO MATCHING OF SALES VIS - - VIS PURCHASES 4.1. THE ASSESSING OFFICER GAVE FINAL OPPORTUNITY TO THE ASSESSEE TO PRODUCE THE ORIGINAL BILLS, D ELIVERY CHALLANS AND TRANSPORT RECEIPTS FOR AY 2009 - 10 IN RESPECT OF THE 22 PARTIES ; TOGETHER WITH COPY OF ALL TENDER DOCUMENTS OF MCGM WORKS FOR WHICH THE RECEIPTS WERE CREDITED AND EXPENSES WERE DEBITED DURING THE YEAR. IN ADDITION, THE PAYMENT CERTIFIC ATE BY MCGM FOR THE ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 5 WORKS AWARDED TO THE ASSESSEE WAS ALSO CALLED FOR. THE ASSESSING OFFICER ALSO ASKED THE ASSESSEE TO RECONCILE THE MATERIAL CONSUMPTION DURING THE YEAR FOR EACH SITE/WORK ALONG WITH MATERIAL ACTUALLY USED FOR MCGM WORK AS REFLECTED FROM TENDER DOCUMENT AND PAYMENT CERTIFICATE FOR THAT SITE WORK. HOWEVER THERE WAS NO RESPONSE FROM THE ASSESSEE. ACCORDINGLY THE ASSESSING OFFICER HELD THAT THE ASSESSEE WAS NOT ABLE TO ESTABLISH THE GENUINENESS OF THE PURCHASES. ACCORDINGLY, THE ASSESSING OFFICER DISALLOWED THE ENTIRE PURCHASES MADE FROM 22 PARTIES TO THE TUNE OF RS . 2,19,5,244/ - IN THE RE - ASSESSMENT BY REJECTING THE BOOKS OF ACCOUNTS OF THE ASSESSEE U/S 145(3) OF THE ACT. BEING AGGRIEVED OF SUCH ADDITION, THE ASSESSEE PREFERRED APPEAL BEFOR E THE FIRST APPELLATE AUTHORITY. 5. THE ASSESSEE SUBMITTED THAT ALL THE PAYMENTS WERE EFFECTED BY ACCOUNT PAYEE CHEQUES TO THE CONCERNED SUPPLIERS. NO MATERIAL EVIDENCE WAS PROVIDED BY THE LEARNED ASSESSING OFFICER FOR REJECTING THE ASSESSEES EXPLANATIO NS, NO INQUIRIES MADE WITH THE BANKS IN ORDER TO ASCERTAIN THE GENUINENESS OF TRANSACTIONS. THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE SAME GOT CLEARED IN SELLERS ACCOUNTS WHICH IS EVIDENT FROM THE CERTIFICATE ISSUED BY THE BANKER. NO SALES CO ULD HAVE BEEN EFFECTED IF THERE WERE NO PURCHASES. THE ASSESSEE HAD RECEIVED ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 6 PAYMENTS FROM MCGM WHICH IS PROOF OF THE UTILISATION OF MATERIAL IN THE PROJECTS. NO PROOF WAS BROUGHT ON RECORD BY THE ASSESSING OFFICER THAT MONEY WAS RETURNED TO THE ASSESSEE. THE ASSESSEE FURTHER STATED THAT CONSUMPTION OF MATERIAL IS ESTABLISHED BYT HE QUANTITY OF CONSTRUCTION DONE DURING THE YEAR WHICH IS EVIDENCED BY THE MEASUREMENT RECORDS OF THE PRINCIPAL I.E MCGM FOR WHOM THE ASSESSEE HAS DONE THE CONSTRUCTION AS A CONTRA CTOR. 6. ALL THESE SUBMISSIONS WERE FORWARDED BY THE LEARNED COMMISSIONER (APPEALS) TO THE ASSESSING OFFICER ALONG WITH THE DETAILS REGARDING THE PURCHASE OF MATERIAL AND CONSUMPTION THEREOF IN CONSTRUCTION. IN VIEW OF THE ADDITIONAL EVIDENCES FURNISHED , THE ASSESSING OFFICER WAS ASKED TO VERIFY THE SUBMISSIONS AND THE DETAILS AND THE EVIDENCES AND CONDUCT ALL NECESSARY INQUIRIES AND FIND OUT WHETHER THE ASSESSEE HAS CONSUMED THE MATERIAL PURCHASED WHICH IS DISPUTED ON THE BASIS OF THE INFORMATION RECEIV ED FROM THE SALES TAX DEPARTMENT. THE ASSESSING OFFICER WAS ALSO ASKED TO CONDUCT ENQUIRY IN RELATION TO GENUINENESS OF PAYEMNTS AS CLAIMED FOR DISPUTED PURCHASES MADE AND WHETHER THE PAYEES ACCOUNTS HAVE BEEN CREDITED. THE REPORT FROM THE ASSESSING OFFICE R DATED 7.4.2017 WAS RECEIVED ON 11.4.2017 THROUGH JCIT. THE ASSESSEE FURNISHED A ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 7 CONFIRMATION MADE ON THE LETTER WRITTEN BY IT TO THE BRANCH MANAGER, VIJAYA BANK WITH REGARD TO THE PAYMENTS MADE THROUGH THE BANK, IN RESPONSE TO THE REQUEST OF THE ASSESSEE . THE ASSESSEE IN ITS REJOINDER SUBMITTED THAT THE ASSESSING OFFICER HAD REITERATED THE ARGUMENTS PUT FORTH IN THE ASSESSMENT TO SUBSTANTIATE THE ADDITION. THE ASSESSEE SUBMITTED THAT THE MAIN REASON ADDUCED BY THE ASSESSING OFFICER WAS THAT THE SUPPLY O F GOODS HAD NOT BEEN PROVED BY THE ASSESSEE. IN THIS REGARD, THE ASSESSEE ARGUED THAT THE CONSUMPTION OF MATERIALS DETAILS GIVEN TO THE ASSESSING OFFICER WAS NOT DISPUTED BY THE ASSESSING OFFICER WHICH EFFECTIVELY PROVES THE SUPPLY OF GOODS TO THE ASSESSEE BY THE SUPPLIER. 7. THE LEARNED COMMISSIONER (APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, HAVING FOUND THAT THE ASSESSING OFFICER WAS SILENT WITH REGARD TO THE EXECUTION OF THE WORKS AND G ETTING THE BILLS CLEARED FROM MCGM ON SUCH CONTRACT WHICH IS NOT POSSIBLE WITHOUT ANY PURCHASES BEING MADE. AS CONTRACT RECEIPTS OF MCGM HAVE NOT BEEN DOUBTED, THE NATURAL COROLLARY WOULD MEAN THAT THE ASSESSEE MUST HAVE PURCHASED THE GOODS FROM SOME UNKN OWN ENTITIES. THE BANK ACCOUNT COPY FURNISHED SHOWS THAT ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 8 THE AMOUNTS WERE PAID THROUGH THE BANK TO THOSE PARTIES. IN THE REMAND REPORT SUBMITTED, THE ASSESSING OFFICER CONFIRMED THE AMOUNTS ARE PAID FROM THE BANK ACCOUNT OF THE ASSESSEE. THE LEARNED COMMIS SIONER (APPEALS) ALSO HELD THAT THERE IS NO PROOF THAT THE AMOUNTS HAVE COME BACK TO THE ASSESSEE IN CASH. THEREFORE, THE LEARNED COMMISSIONER (APPEALS) ULTIMATELY RESTRICTED THE ADDITION TO 15% OF THE ALLEGED BOGUS PURCHASES. THE LEARNED COMMISSIONER (APP EALS) ALSO PLACED RELIANCE ON THE DECISIONS OF HONBLE GUJARAT HIGH COURT IN THE CASE OF BHOLANATH POLY FAB PVT LTD REPORTED IN 355 ITR 290 (GUJ) ; SANJAY OIL CAKE IND. REPORTED IN 316 ITR 274 (GUJ) AND CIT VS SIMIT SHETH REPORTED IN (2013) 38 TAXMANN.COM 385 (GUJ HC) IN SUPPORT OF HIS CONCLUSION OF ADDING ONLY THE PROFIT EMBEDDED IN THE DISPUTED PURCHASES. 8. WHEN THE APPEAL WAS CALLED FOR HEARING NO ONE WAS PRESENT FOR THE ASSESSEE. EVEN, THERE IS NO APPLICATION FILED BY THE ASSESSEE SEEKING ADJOURNMEN T. HOWEVER, CONSIDERING THE NATURE OF DISPUTE, WE PROCEED TO DISPOSE OF THE APPEAL EX PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ON THE BASIS OF MATERIAL ON RECORD. ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 9 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE FAILED TO PROVE THE PURCHASES FROM THE CONCERNED PARTIES BY PRODUCING COGENT DOCUMENTARY EVIDENCES LIKE STOCK REGISTER, DELIVERY CHALLAN, ETC. THEREFORE, THE LEARNED COMMISSIONER (APPEALS) WAS FAIR ENOUGH IN ESTIMATING THE PROFIT AT 15% ON THE DISPUTED PURCHASES. 10. HAVING CONSIDERED THE SUBMISSIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE AND PERUSED MATERIAL ON RECORD, WE FIND THAT IN COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD PRODUCED CERTAIN DOCUMENTARY EVIDENCES LIKE PUR CHASE BILLS, CONSUMPTION OF MATERIALS DETAILS FOR EXECUTION OF CONTRACT WORKS WHICH HAD BEEN ACCEPTED BY MCGM, BANK STATEMENT SHOWING PAYMENT TO SELLERS, ETC. THUS, IT IS NOT A FACT THAT THE ASSESSEE HAS NOT PRODUCED ANY DOCUMENTARY EVIDENCE TO PROVE THE PURCHASES. AS IT APPEARS, THE ASSESSING OFFICER HAS TREATED THE PURCHASES AS BOGUS BEING INFLUENCED BY THE FACT THAT THE CONCERNED DEALERS HAVE BEEN IDENTIFIED AS HAWALA OPERATORS BY THE SALES TAX/VAT DEPARTMENT. ANOTHER REASON FOR DISALLOWING THE PURCHASE S APPEARS TO BE NON PRODUCTION OF THE CONCERNED PARTIES AND DELIVERY CHALLAN BY THE ASSESSEE. HOWEVER, IT IS A FACT ON RECORD THAT ASSESSING OFFICER HAS NOT DISPUTED THE ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 10 CONTRACT RECEIPTS FROM MCGM SHOWN BY THE ASSESSEE. THUS, THE AFORESAID FACTS MAY CERTA INLY LEAD ONE TO CONCLUDE, THOUGH, THE ASSESSEE WAS UNABLE TO FULLY ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE DECLARED SOURCE, HOWEVER, IT IS QUITE POSSIBLE THAT HE MIGHT HAVE PURCHASED SUCH GOODS FROM GREY MARKET BY AVOIDING PAYMENT OF SALES TAX / VAT. THEREFORE, IN THESE CIRCUMSTANCES, ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE TREATED AS INCOME OF THE ASSESSEE. CONSIDERED IN THE AFORESAID PERSPECTIVE, THE DECISION OF THE LEARNED COMMISSIONER (APPEALS) IN RESTRICTING THE ADDITION TO 12.5%, IN OUR VIEW, IS REASONABLE. THEREFORE, WE DEEM IT FIT AND APPROPRIATE TO MODIFY THE ORDER OF THE LEARNED COMMISSIONER (APPEALS) TO THIS EXTENT. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 / 03 /201 9 SD/ - ( MAHAVIR SINGH ) SD/ - ( M.BALAGANESH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED 13 / 03 /201 9 KARUNA SR. PS ITA NO. 5211/MUM/2017 M/S. SKYWAY CONSTRUCTION CO., 11 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APP ELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//