ASST CIT CIR 3, KALYAN V. SHANKHESHWAR REAL ESTATE CO, KALYAN

ITA 5350/MUM/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0179 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-03-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V JUSTIN
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Bogus purchase; Rejection of books of accounts
• Section: 40A(3); 143(3); 133(6); 69

Judgement Text

ITA.NO.5350 & 5351/MUM/2015 (A.Y: 2011 - 12) M/S. SHANKHESHWAR REAL ESTATE CO M/S. SHANKHESHWAR KREATORS 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E , MUMBAI BEFORE SHRI G.S. PANNU, HON'BLE ACCOUNTANT MEMBER & SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER ITA.NO. 5350 /MUM/201 5 (A.Y: 2011 - 12) ASST. COMMISSIONER OF INCOME TAX CIRCLE - 3, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W), MUMBAI 421 301 V. M/S. SHANKHESHWAR REAL ESTATE CO., 208, OM SUPREME BUILDING, NEAR D - MART, VALLIPEER ROAD, KALYAN (W) , MUMBAI - 421 301 PAN NO: A BCFS 6382 A (APPELLANT) (RESPONDENT) ITA.NO. 5351 /MUM/201 5 (A.Y: 2011 - 12) ASST. COMMISSIONER OF INCOME TAX CIRCLE - 3, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN (W), MUMBAI 421 301 V. M/S. SHANKHESHWAR KREATORS 208, OM SUPREME BUILDING, NEAR D - MART, VALLIPEER ROAD, KALYAN (W) , MUMBAI - 421 301 PAN NO: A AXFS 9371 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUBODH RATNAPARKHI REVENUE BY : SHRI V. JUSTIN DATE OF HEARING : 06 .12. 2017 DATE OF PRONOUNCEMENT : 05 .03 .2018 ITA.NO.5350 & 5351/MUM/2015 (A.Y: 2011 - 12) M/S. SHANKHESHWAR REAL ESTATE CO M/S. SHANKHESHWAR KREATORS 2 O R D E R PER C. N. PRASAD (JM) 1. TH ESE TWO APPEAL S ARE FILED BY THE REVENUE AGAI N ST THE DIFFERENT ORDER S OF THE LD.CIT(A) - 1 , THANE DATED 31 .08. 201 5 FOR THE ASSESSMENT YEAR 2011 - 12. REVENUE HAS RAISED COMMON GROUNDS OF APPEAL EXCEPT FOR THE FIGURES. 2. THE GROUNDS OF APPEAL BY THE REVENUE IN THE CASE OF M/S. SHANKHESHWAR REAL ESTATE CO. ARE AS UNDER: - 1.1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN NOT CONFIRMING ADDITION AT 100% OF BOGUS PURCHASES OF RS.5,43,06,544/ - BY RELYING ON THE DE CISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH (356 ITR 451) DESPITE THE FACTS OF BOTH THE CASES BEING DIFFERENT. 1.2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT(A) ERRED IN DELETING THE ADDI TION DESPITE THE FACT THAT IN CASE OF SIMIT P SHETH THE ASSESSEE WAS DEALING IN STEEL WHERE QUANTITATIVE TALLY OF STOCK WAS POSSIBLE WHERE IS IN THE PRESENT CASE NO QUANTITATIVE TALLY OF MATERIALS PURCHASED IS POSSIBLE 1.3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE HONBLE CIT(A) ERRED IN DELETING THE ABOVE ADDITION DESPITE CONFIRMING THAT THE PURCHASES SHOWN BY THE ASSESSEE FROM THE SAID PARTIES REMAINED UNVERIFIABLE [PARA 23 ON PAGE 14 OF THE ORDER OF CIT(A)]. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT(A) ERRED IN GIVING RELIEF OF RS.21,07,700/ - IN RESPECT OF DISALLOWANCE UNDER SECTION 40A(IA) DESPITE CONFIRMING THAT THE SAID EXPENSES WERE ONLY A PROV ISION AND NOT PAID TILL THE TIME OF FILING OF RETURN OF INCOME [PARA 32 ON PAGE 21 OF THE ORDER OF THE CIT(A)], WHEREAS TDS IS DEDUCTIBLE AT THE TIME OF CREDIT OF PAYMENT EVEN IF NOT ACTUALLY PAID. 3. THE ORDER OF THE CIT(A) MAY BE VACATED AND THAT OF THE ASS ESSING OFFICER MAY BE RESTORED. ITA.NO.5350 & 5351/MUM/2015 (A.Y: 2011 - 12) M/S. SHANKHESHWAR REAL ESTATE CO M/S. SHANKHESHWAR KREATORS 3 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. 3. BRIEFLY STATED THE FACTS ARE THAT, IN BOTH THESE CASES ASSESSMENTS WERE COMPLETED U/S. 143(3) ON 03.03.2014 BY MAKING ADDITIONS U/S. 69 C OF THE ACT TOWARDS BOGUS PURCHASES AND ALSO DISALLOWANCE U/S.40A(IA) F OR NON - DEDUCTION OF TDS ON THE PROVISIONS MADE BY THE ASSESSEE FOR EXPENSES AND ALSO CERTAIN PAYMENTS MADE TOWARDS LABOUR CHARGES. THE ASSESSING OFFICER REJECTED THE BOOKS OF ACCOUNTS AND TREATED THE ENTIRE PURCHASES AS BOGUS PURCHASES APART FROM ESTIMATING THE GROSS PROFIT ON BOGUS PURCHASES. THE ASSESSING OFFICER TREATED THE PURCHASES MADE BY THE ASSESSEE FROM VARIOUS PARTIES AS BOGUS BASED ON THE INFORMATION PUBLISHED IN THE OFFICI AL WEBSITE OF MAHARASHTRA SALES TAX DEPARTMENT. ASSESSING OFFICER OBSERVED THAT THE NOTICES SENT U/S. 133(6) TO VARIOUS PARTIES H A VE RETURNED UNSERVED AND THEREFORE HE DISBELIEVED THE EVIDENCES FURNISHED BY THE ASSESSEE IN THE FORM OF LEDGER ACCOUNTS , BANK STATEMENTS, COPIES OF INVOICES TO ESTABLISH THAT T HE PURCHASES WERE GENUINE. HE REJECTED BOOKS OF ACCOUNTS AND DISALLOWED THE ENTIRE PURCHASES AND ALSO ESTIMATED THE PROF IT ON SUCH PURCHASES SEPARATELY. FURTHER DISALLOWANCES U/S.40A(IA) , 40A(3) AND 4 0A(3A) WERE ALSO MADE. THE ASSESSEE CONTESTED THESE ADDITIONS/DISALLOWANCES BEFOR E TH E LD.CIT(A) AND THE LD.CIT(A) FOLLOWING T HE VARIOUS JUDICIAL PRONOUNCEMENTS RESTRICTED THE DISALLOWANCE OF BOGUS PURCHASES TO 12.5% ITA.NO.5350 & 5351/MUM/2015 (A.Y: 2011 - 12) M/S. SHANKHESHWAR REAL ESTATE CO M/S. SHANKHESHWAR KREATORS 4 ESPECIALLY IN VIEW OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P SHETH [356 ITR 451] IN VIEW OF THE FACT THAT THE SALES MADE BY THE ASSESSEE FROM THESE PURCHASES HAVE BEEN ACCEPTED BY THE REVENUE AND THEREFORE THE ENTIRE PURCHASES CANNOT BE TREATED AS BOGUS BU T ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES CAN BE ADDED TO THE INCOME OF THE ASSESSEE. THUS , HE DIRECTED THE ASSESSING OFFICER TO RESTRICT T HE ADDITION TO 12.5% OF THE ALLEGED BOGUS PURCHASES. HE ALSO DELETED THE ADDITIONS MADE U/S. 40A(3) AND 40A(3A) OF THE ACT. 4. IN SO FAR AS THE DISALLOWANCE U/S. 40(A)(I) IS CONCERNED, ASSESSEE CONTENDED BEFORE THE LD.CIT(A) THAT THE ASSESSEE HAD IN FACT DEDUCT ED TDS IN THE SUBSEQUENT ASSESSMENT YEAR AND T HEREFORE THERE SHOULD NOT BE ANY DISALLOWANCE U/S. 40(A)(I) OF THE ACT. IT WAS ALSO CONTENDED THAT SINCE ASSESSING OFFICER HAD REJECTED THE BOOKS OF ACCOUNTS THERE SHOULD NOT BE ANY FURTHER DISALLOWANCE U/S. 40(A)(I) ON THE BASIS OF THE VERY SAME BOOKS OF ACCOUNTS WHICH STOOD REJECTED. 5. LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN SO FAR AS THE BOGUS PURCHASES IS CONCERNED THIS TRIBUNAL HAS BEEN HOLDI NG THAT WHEN ONCE THE REVENUE ACCEPTED THE SALES MADE BY THE ASSESSEE THE ENTIRE PURCHASES CANNOT BE TREATED AS ITA.NO.5350 & 5351/MUM/2015 (A.Y: 2011 - 12) M/S. SHANKHESHWAR REAL ESTATE CO M/S. SHANKHESHWAR KREATORS 5 BOGUS AND ONLY THE PROFIT ELEMENT EMBEDDED IN SUCH PURCHASES HAS TO BE DISALLOWED. IN THE CASES ON HAND LD.CIT(A) RESTRICTED THE DISALLOWANCE TO 12.5% OF THE PURCHASES FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT V. SIMIT P SHETH (SUPRA). IN THE CIRCUMSTANCES WE DO NOT FIND ANY VALID REASON TO INTERFERE IN THE DECISION OF THE LD.CIT(A). THIS GROUND OF THE REVENUE IS REJECTED. 7. COMING TO THE DISALLOWANCE MADE U/S. 40(A)(I) OF THE ACT, LD.CIT(A) HAVING EXAMINED THE DETAILS FURNISHED BY THE ASSESSEE AND SINCE THE ASSESSEE HAD ALREADY DEDUCTED THE TDS ON THE PROVISION MADE FOR EXPENSES AND ALSO PAYMENTS MADE TOWARDS L ABOUR CHARGES TO VARIOUS PERSONS IN THE SUBSEQUENT ASSESSMENT YEAR , THE LD.CIT(A) HELD THAT ONLY THE AMOUNT WHICH WERE STILL OUTSTANDING WITHOUT TAKEN ON TAX IN THE SUBSEQUENT YEAR BE DISALLOWED. 8. BEFORE US, IT IS THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE BOOKS OF ACCOUNTS WERE REJECTED BY THE ASSESSING OFFICER THERE SHOULD NOT BE ANY FURTHER DISALLOWANCE U/S. 40(A)(I) OF THE ACT ON THE BASIS OF THE VERY SAME BOOKS OF ACCOUNTS WHICH STOOD REJECTED. LD. COUNSEL FOR THE ASSESSEE , TO SUPPORT HIS CONTENTION RELIED ON THE FOLLOWING DECISIONS: - (I) INDWELL CONSTRUCTION V. CIT [232 ITR 776 (AP)] (II) TEJA CONSTRUCTION V. ACIT [39 SOT 13 (HY D) ] (III) ITO V. SAHADEV PRADHAN [33 TAXMANN.COM 563] ITA.NO.5350 & 5351/MUM/2015 (A.Y: 2011 - 12) M/S. SHANKHESHWAR REAL ESTATE CO M/S. SHANKHESHWAR KREATORS 6 (IV) CIT V. BANWARILAL BANSHIDHAR [229 ITR 229 ] (V) CIT V. SMT. SANTOSH JAIN [159 TAXMANN.COM 392] (VI) ITO V. NARDEV KUMAR GUPTA [32 TAXMANN.COM 388] 9. WE ACCEPT THE ABOVE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE IN VIEW OF THE ABOVE JUDICIAL PRONOUNCEMENTS, WHEREIN IT HAS BEEN HELD THAT THERE SHALL NOT BE ANY SEPARA TE ADDITION WHEN ONCE THE BOOKS OF ACCOUNTS ARE REJECTED AND INCOME IS ESTIMATED. FURTHER, WE DO NOT SEE ANY GOOD REASON TO REVERSE THE FINDING OF THE LD.CIT(A). THUS, THE GROUND RAISED BY THE REVENUE IS REJECTED. 10. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE 05 T H MARCH , 2018 . SD/ - SD/ - ( G.S. PANNU ) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 05 / 03 / 2018 GIRIDHAR , SPS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY// BY ORDER, (ASSTT. REGISTRAR) ITAT, MUM BAI