INNOVATORS FACADE SYSTEMS P.LTD, THANE V. ACIT CIR 2, THANE

ITA 5450/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2541 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 25-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 27-11-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PAVAN KUMAR BEER LA
• Keywords: Bogus purchase; Unexplained investment; Income from undisclosed sources; Opportunity of cross examination; Retraction; Revised return; Reason to believe; Revenue expenditure; Reassessment proceedings
• Section: 143(3); 133A; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I, BENC H MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH, J M ./ ITA NO.5450, 5451 & 5452/MUM/2015 ( / ASSESSMENT YEAR :2009-2010 TO 2011-2012) M/S. INNOVATORS FAADE SYSTEMS PVT. LTD., B- 65, 204, SECTOR-I, SHANTI NAGAR, MIRA ROAD (E), THANE 401107 VS. ACIT (CIR-2), THANE. ./ ./PAN/GIR NO. : AAAC17326Q ( /ASSESSEE ) .. ( / RESPONDENT ) /ASSESSEE BY : SHRI NARESH JAIN, A.R. /REVENUE BY : SHRI PAVAN KUMAR BEERLA, DR / DATE OF HEARING : 25/05/2016 /DATE OF PRONOUNCEMENT 20/07/2016 / O R D E R PER R.C.SHARMA (A.M) : THESE ARE THE APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF CIT(A)-1, DATED 18.09.2015, FOR THE ASSESSMENT YEAR S 2009-10 TO 2011- 12, IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. 2. COMMON GRIEVANCE OF THE ASSESSEE IN ALL THE THRE E YEARS UNDER CONSIDERATION PERTAINS TO THE ADDITIONS MADE ON ACC OUNT OF ALLEGED BOGUS PURCHASES. GROUNDS TAKEN BY THE ASSESSEE IN THE ASS ESSMENT YEAR 2009- 2010 READ AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ACTION OF AS SESSING OFFICER IN REOPENING THE ASSESSMENT UNDER SECTION 147/148 OF I NCOME TAX ACT, 1961 FOR THE A.Y.2009-10. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITIONS MA DE BY THE AO OF RS.3,40,64,343/- ON ACCOUNT OF PURCHASES TO THE TOT AL INCOME FOR THE ASST. YEAR2009-10. ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LEARNED CIT(A) ERRED IN IGNORING THE FACT THAT THE STATEMENTS MADE BY THE DIRECTORS OF THE ASSESSEE COMPANY WERE DULY RETRACTED AND SHOULD NOT BE THE BASIS FOR FRAMING ASSESSMENT. 4. THE LD. CIT(A) ERRED IN IGNORING THE PLEA OF THE ASSESSEE THAT WITHOUT PREJUDICE TO ABOVE, ONLY A CERTAIN PER CENTAGE OF THE PURCHASES AS PROFIT MARGIN, AT BEST CAN BE ADDED TO THE INCOME OF THE ASSESSEE AND NOT THE ENTIRE PURCHASES. SINCE COMMON GROUNDS ARE INVOLVED IN ALL THE THREE YEARS AND THE CIT(A) HAS DISPOSED OF ALL THE THREE YEARS BY CONSO LIDATED ORDER DATED 18.09.2015, WE THEREFORE HEARD ALL THREE FILES TOGE THER AND NOW DISPOSING OF THE SAME BY THIS CONSOLIDATED ORDER. 3. FACTS IN BRIEF ARE THAT THE ASSESSEE COMPANY IS CONTRACTOR FOR CIVIL AND INTERIOR WORK WHICH INCLUDES EXTERNAL AND INTER NAL GLAZING OF GLASS WORK AND PROVIDING & FIXING ALUMINUM WINDOWS. ORIGI NAL RETURN OF INCOME FOR A.Y.2009-2010 WAS FILED ON 22.09.2009 DECLARING TOTAL INCOME AT RS.1,33,40,240/-. THE CASE OF THE ASSESSEE GETS SEL ECTED FOR SCRUTINY AND VIDE ORDER U/S.143(3) DATED 23.12.2011, THE ASSESSM ENT GETS COMPLETED. LATER SURVEY U/S. 133A OF THE ACT WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE ON 22.11.2012. AS PER THE INFORMATI ON MADE AVAILABLE TO ASSESSEE BY THE SURVEY TEAM, THE DEPARTMENT OF SALE S TAX MAHARASHTRA HAS PLACED NAMES OF CERTAIN PARTIES AS BOGUS HAWALA OPERATORS ON THEIR WEBSITE MAHAVAT.GOV.IN. THE SURVEY TEAM ALLEGED THA T SOME OF THE PURCHASES MADE BY THE COMPANY WERE FROM HAWALA OPER ATORS WHICH WERE IN THE PRACTICE OF GIVING ACCOMMODATION BILLS. STATEMENT OF DIRECTOR OF THE COMPANY WAS RECORDED DURING THE COURSE OF SU RVEY, WHEREIN SURRENDER OF RS.10.69 CRORE HAD BEEN TAKEN FOR THRE E YEARS I.E. AY 2009- ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 3 10, 2010-11 & 2011-12 UNDER PRESSURE WHICH WAS LATE R RETRACTED IN DETAIL. OUT OF TOTAL AMOUNT SURRENDERED AN AMOUNT OF RS.3,4 0,64,343/- WAS RELATED TO AY 2009-10. 4. AFTER SURVEY, ASSESSEES CASE WAS REOPENED. IN R ESPONSE TO NOTICE U/S.148, ASSESSEE HAD FILED THE RETURN OF INCOME ON 14.02.2013, INCORPORATING RS. 3.40 CRORE AS INCOME. BUT THE ASS ESSEE HAD NOT PAID THE TAXES ON IT AS THE RETURN WAS FILED UNDER PROTE ST. THE ASSESSEE ALSO FILED A LETTER TO THE AO DATED 28.02.2013 TO IGNORE THE RETURN FILED ON 14.02.2013 AND ASKED TO TREAT THE RETURN FILED U/S 139(1) IN COMPLIANCE OF NOTICE U/S. 148. FURTHER VIDE LETTER DATED 2308.201 3 THE ASEESSEE HAD FILED A DETAILED REPLY, REBUTTING THE ALLEGATION OF THE AO AND ALSO SUBMITTED THE RETRACTION STATEMENT. 5. HOWEVER AO DID NOT CONVINCE WITH THE ASSESSEES REPLY AND FRAMED ASSESSMENT U/S.143(3) AND ASSESSED INCOME AT RS.4.7 4 CRORE. 6. BEFORE THE LEARNED CIT(A) ASSESSEE HAS CHALLENGE D REOPENING AS WELL AS MERIT OF THE ADDITION. BY THE IMPUGNED ORDE R CIT(A) REJECTED ASSESSEES CONTENTION OF REOPENING AND ALSO CONFIRM ED THE ADDITION MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES. 7. BEFORE US ASSESSEE CHALLENGED, VALIDITY OF REOPE NING AS WELL AS MERIT OF ADDITION. 8. AFTER GOING THROUGH THE ORDER OF THE LOWER AUTHO RITIES AS WELL AS REASONS RECORDED FOR REOPENING, WE FIND THAT THE AO HAD SPECIFIC INFORMATION THAT THE ASSESSEE HAD OBTAINED ACCOMMOD ATION BILLS FROM ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 4 HAWALA DEALERS TO THE EXTENT OF RS.10,69,87,060/- F OR THREE AYS I.E. AY 2009-10, 2010-11 AND 2011-12. A SURVEY WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE. THE AO ON THE BASIS OF THE STATEME NT OF THE DIRECTOR OF THE ASSESSEE COMPANY WHEREIN HE HAD DECLARED ADDITI ONAL INCOME FOR THE YEAR UNDER CONSIDERATION REOPENED THE ASSESSMENT. T HUS, THE AO WAS HAVING SUFFICIENT REASON TO BELIEVE THAT THERE WAS ESCAPEMENT OF INCOME. ACCORDINGLY WE DO NOT FIND ANY INFIRMITY IN THE ORD ER OF AO FOR REOPENING THE ASSESSMENT. 9. WITH REGARD TO MERIT OF THE ADDITION IT WAS CONT ENDED BY LEARNED AR THAT ALL THE PURCHASES MADE ARE GENUINE AND PAYMENT HAS BEEN MADE BY ACCOUNT PAYEE CHEQUES ONLY. THE ASSESSEE HAD SUBMIT TED COPY OF INVOICES ALONG WITH SUPPORTING VOUCHERS IN THE ASSE SSMENT PROCEEDINGS. ALSO, THERE IS NO DISPUTE REGARDING THE FACT THAT A LL THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHEQUES AND THE SAME HAS BEEN MADE AS PER THE TERMS OF THE PAYMENT I.E. 60 DAYS 120 DAYS [A PX]. ACCOUNT CONFIRMATION OF THE PARTIES FROM WHOM THE TRANSACTI ON WERE MADE WERE ALSO FIELD BEFORE THE AO. IT WAS FURTHER CONTENDED THAT NO INCRIMINATING MATERIAL WAS SHARED WITH THE ASSESSEE TO PROVE THE ALLEGED BOGUS PURCHASES. HOWEVER NO OPPORTUNITY TO CROSS-EXAMINE WAS PROVIDED TO THE ASSESSEE WITH REGARD TO THE STATEMENT GIVEN BY THOS E ALLEGED HAWALA OPERATORS. AS PER THE LEARNED AR ADDITION WAS MADE MERELY BY RELYING ON THE STATEMENT GIVEN BY THIRD PARTY. RELIANCE WAS PL ACED ON THE DECISION OF HONBLE ITAT JODHPUR BENCH IN THE CASE OF ITO VS PE RMANAND, 107 TTJ ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 5 395 WHEREIN IT WAS HELD THAT IN ABSENCE OF ANY OTHE R EVIDENCE, NO ADDITION CAN BE MADE SOLELY RELYING ON THE STATEMENT OF THIR D PARTIES. THE HEAD NOTES ARE REPRODUCED HEREIN BELOW: 'INCOME FROM UNDISCLOSED SOURCES-ADDITION UNDER SEC TION 69- ALLEGED BOGUS PURCHASES-AO RECEIVED INFORMATION FRO M THE SALES- TAX DEPARTMENT THAT THE PURCHASES MODE BY THE ASSES SEE FROM TWO PARTIES WERE BOGUS-SOLELY RELYING ON THE SAME, AO M ADE ADDITION UNDER S. 69-NOT JUSTIFIED-NO ADDITION CAN BE MADE I N THE HANDS OF THE ASSESSEE MERELY ON THE BASIS OF OBSERVATIONS MA DE BY A THIRD PARTY- WHILE MAKING THE ASSESSMENT, IT IS THE SATIS FACTION OF THE AO WHICH IS OF PRIME IMPORTANCE-IT CANNOT BE SUBSTITUT ED BY THE SATISFACTION OF SOMEONE ELSE-ASSESSEE HAS DISCHARGE D THE PRIMARY ONUS CAST ON HIM BY SHOWING THE PURCHASES IN THE BO OKS OF ACCOUNTS, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUES A ND PRODUCING THE VOUCHERS OF SALE OF GOODS-AO DID NOT MAKE REQUISITE INVESTIGATIONS AGAINST THE SAID SELLERS-MOREOVER, N O OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CONFRONT THE SELLERS-ADDIT ION RIGHTLY DELETED. 10. IT WAS FURTHER CONTENDED THAT SO FAR AS THE SIT E 'MAHAVAT.GOV.IN' CONTAINING LIST OF PARTIES IS CONCERNED, THE SITE O NLY CONTAINS A LIST OF SUSPICIOUS PARTIES AND NOT CONFIRMED HAWALA PARTIES . FURTHER, DURING F.Y. 2008-09, 2009-10 & 2010-11, WHEN THESE PURCHASES WE RE MADE, THE SITE WAS NOT CONTAINING THE NAMES OF THE PARTIES FROM WH OM THE ASSESSEE HAD MADE THE PURCHASES. THE NAMES WERE PUT SUBSEQUENTLY ON THE SITE. THEREFORE ASSESSEE HAD NO CLUE HOW THE PARTIES WHO WERE ISSUING INVOICES AGAINST THE PURCHASES COULD BE HAWALA PART IES. IT IS ALSO POSSIBLE THAT ASSESSEE HAD PURCHASED THE GOODS FROM MARKET F ROM PERSONS AND THEY HAD GIVEN THE INVOICES TO THE ASSESSEE OF SOME OTHER FIRM. ASSESSEE COULD ONLY SEE WHETHER THESE PARTIES ARE REGISTERED UNDER VAT OR NOT AND AT THAT TIME THESE PARTIES WERE DULY REGISTERED UND ER MAHARASHTRA VAT. ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 6 THEREFORE ASSESSEE HAD NO REASON TO SUSPECT THAT TH E INVOICES WHICH IT WAS GETTING ALONG WITH THE GOODS ARE FROM HAWALA OP ERATORS. 11. AS PER LEARNED AR AT NO STAGE, DURING THE COURS E OF SURVEYOR OR DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS POINTED OUT TO ASSESSEE BY THE DEPARTMENT THAT: I. FROM WHICH DATE THESE PARTIES ARE BLACKLISTED. II. WHAT KIND OF INFORMATION MAHARASHTRA SALES TAX DEPARTMENT HAS PROVIDED TO INCOME TAX DEPARTMENT. III. WHAT TYPE OF STATEMENT THESE PARTIES HAVE GIVE N BEFORE SALES TAX DEPARTMENT. IV. WHAT KIND OF DOCUMENTARY PROOF THESE PARTIES HA VE GIVEN ABOUT THE ASSESSEE COMPANY. AS PER LD. AR THOUGH ASSESSEE HAS CONFESSED IN STAT EMENT RECORDED U/S 131 IN THE PROCEEDING U/S 133A, THE SAME HAS BEEN R ETRACTED BY ASSESSEE AS THE ASSESSEE WAS FORCED TO SIGN THE SAM E. IT WAS FURTHER CONTENDED BY LD. AR THAT STATEMENT MADE BY ASSESSEE DURING SURVEY OPERATIONS HAS NO EVIDENTIARY VALUE. FOR THIS RELIA NCE WAS PLACED IN THE CASE OF MAHESH OHRI V. ACIT (DELHI) . 154 TTJ 33 DE I 'E' (UO) ITR TRIBUNAL VOLUME 23 PART 4 PAGE 522 AND UNITEX PRODU CTS LTD. VS. ITO (2008) 22 SOT 429 (MUMBAI) . HE ALSO CONTENDED THAT ASSESSEE CAN RETRACT THE ADMISSION MADE DURING THE SURVEY WITH E VIDENCE IN VIEW OF THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF ACIT VS. SAFE ENTERPRISES 128 ITD 459 (MUMBAI). HE FURTHER CONTENDED THAT NO OTHE R COLLABORATING EVIDENCE WAS FOUND DURING SURVEY FOR ADDITION EXCEP T ONLY STATEMENT OF ASSESSEE. AMOUNT SURRENDERED IN SURVEY UNDER PRESSU RE, NO MATERIAL OR EVIDENCE FOUND IN SUPPORT OF AMOUNT SURRENDERED UND ER THESE ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 7 CIRCUMSTANCES, ADDITION IS LIABLE TO BE DELETED. FO R THIS PURPOSE RELIANCE WAS PLACED ON THE FOLLOWING DECISIONS :- SATISH BUILDERS V/S ACIT ITA NO. 4095 12005 BENCH ' C' DATED 13/212009 (DEL) REPORTED IN TAX REVIEW MARCH 2009 P AGE 65 23 DTR 171 (DEL); DCIT V/S PREMSONS 'B' BENCH MUMBAI BCA APRIL 2009 P AGE 25 130 TTJ 159 (MUM) DCIT V/S PAHAR GANJ GRIH NIRMAN SAHAKARI SAMITI LTD . 99 TTJ 549 (JAIP) AJIT CHINTAMAN KARVE V/S ITO 311 ITR (AT) 66 (PUNE) 12. LEARNED AR INVITED OUR ATTENTION TO THE DETAILS OF PURCHASES FURNISHED DURING APPELLATE PROCEEDINGS WHICH WERE S ENT BY THE CIT(A) TO THE AO FOR HIS COMMENTS. OUR ATTENTION WAS ALSO INV ITED TO THE REMAND REPORT SENT BY AO DATED 19 TH JANUARY, 2015, WHEREIN AO HAS STATED THAT DURING REMAND PROCEEDINGS, IN ORDER TO VERIFY WHETH ER THE ASSESSEE HAS PURCHASED MATERIAL FROM HAWALA DEALERS AT A HIGHER RATE, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS IN RESPECT OF SOME ITEMS PURCHASED FROM PARTIES OTHER THAN THE HAWALA DEALERS DURING THE SA ME PERIOD. ON THE VERIFICATION, AO FOUND THAT IN RESPECT OF SOME ITEM S THE RATE OF ITEMS SUPPLIED BY ENTRY PROVIDED WAS HIGHER AS WELL AS LO WER ALSO BUT THE ULTIMATE EFFECT OF THE PURCHASE OF ALL SUCH HAWALA DEALERS HAS RESULTED INTO HIGHER PROFIT MARGIN SHOWN BY THE ASSESSEE. IN THE REMAND REPORT, AO HAS ALSO OBSERVED THAT THE ASSESSEE HAS PRODUCED PURCHA SE ORDERS, INVOICES, DELIVERY, CHALLANS IN RESPECT OF PURCHASES OF MATER IALS BOTH FROM THE HAWALA DEALERS AS WELL AS OTHER PARTIES. ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 8 13. IN VIEW OF THE ABOVE REMAND REPORT, IT WAS CONT ENDED THAT ENTIRE PURCHASE SHOULD NOT BE ADDED AND ONLY A PERCENT OF PURCHASES WHEREIN PRICE ARE HIGHER THAN NORMAL PURCHASES CAN BE ADDED . IN VIEW OF ALL THESE DETAILS IT WAS SUBMITTED THAT AO WAS NOT JUSTIFIED IN MAKING ADDITION FOR THE ALLEGED PURCHASES. RELIANCE WAS PLACED BY LD. AR ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS :- I) ITO VS. PERMANAND [107 TTJ 395 (JODH); II) DCIT VS. SHRI RAJEEV G. KALATHIL, [ITA 6727/M/2 012(MUM); (III) ITO VS. D.N. SHAH & CO. [2 TTJ 1217 (AHD)]; IV) CIT VS. M.K. BROTHERS [(1987) 163 ITR 249 (GUJ) ] V) M/S IMPERIAL IMP & EXP VS ITO(ITA 5427/MUM/2015) VI) DEEPAK POPAT LAL GHADA VS. ITO(ITA 6203/MUM/201 3) VII) DCIT VS. SHRI JITENDRA S. MOTANI [ITA 6178/M/2 007 (MUM)] VIII) CIT VS. SANJAY OIL CAKE INDUSTRIES V. CIT [31 6 ITR 274 (GUJ)] 14. ON THE OTHER HAND, IT WAS CONTENDED BY LEARNED DR THAT THE AO HAD RECEIVED INFORMATION THAT THE PURCHASES AMOUNTING T O RS.10,69,87,060/- FOR THE THREE A YS I.E. 2009-10, 2010-11 AND 2011-1 2 HAD BEEN SHOWN BY THE ASSESSEE FROM THE PARTIES WHO WERE APPEARING IN THE LIST OF HAWALA DEALERS AS MENTIONED ON THE OFFICIAL WEBSITE OF THE SALES-TAX DEPARTMENT OF MAHARASHTRA GOVERNMENT. THEREAFTER A SURVEY U/S. 133A OF THE IT. ACT WAS CARRIED OUT AT THE BUSINESS PREMISES OF THE ASS ESSEE ON 22.11.2012. DURING THE COURSE OF SURVEY STATEMENT OF SHRI RADHE SHYAM SHIVCHAND SHARMA, DIRECTOR OF THE ASSESSEE COMPANY WAS RECORD ED IN WHICH HE WAS CONFRONTED WITH THIS INFORMATION. 15. AS PER LEARNED DR, THE ASSESSEE COMPANY HAD FILED ITS REVISED RETURNS FOR ALL THE THREE YEARS AFTER A PERIOD OF A BOUT THREE MONTHS FROM THE DATE OF SURVEY, INCORPORATING THE ADDITIONAL IN COME SURRENDERED DURING ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 9 THE COURSE OF SURVEY. THEREFORE, IT CANNOT BE SAID THAT THE STATEMENT OF THE DIRECTOR RECORDED DURING THE COURSE OF SURVEY WAS T AKEN UNDER ANY KIND OF PRESSURE. THE ASSESSMENT PROCEEDINGS FOR A.Y. 2010- 11 WERE GOING ON AND THE AO THROUGH SHOW CAUSE NOTICE DATED 22.01.20 13 HAD ASKED THE ASSESSEE TO EXPLAIN WHY THE ADDITION IN RESPECT OF BOGUS PURCHASES SHOULD NOT BE MADE TO ITS INCOME. FURTHER AS PER LE ARNED DR IT IS ONLY AFTER A PERIOD OF NINE MONTHS FROM THE DATE OF SURV EY THAT THE ASSESSEE FILED OBJECTION TO RE-OPENING OF THE ASSESSMENT FOR A.Y. 2009-10 & 2011- 12 AND MADE RETRACTION OF THE STATEMENT MADE DURING THE COURSE OF SURVEY. IT IS AT THIS STAGE WHEN THE ASSESSEE SUBMI TTED THAT THE RETRACTION OF THE STATEMENT ALSO APPLIED TO THE ASSESSMENT YEA R 2010-11, THE ASSESSMENT FOR WHICH HAD ALREADY BEEN FINALIZED ON THE BASIS OF THE REVISED RETURN IN WHICH THE ADDITIONAL INCOME HAD B EEN INCORPORATED. ACCORDING TO LEARNED AR THE ASSESSEE HAS NOT BEEN A BLE TO ESTABLISH THE GENUINENESS OF THE PURCHASES SHOWN FROM VARIOUS PAR TIES AMOUNTING TO RS.10,69,87,060/-, WHO WERE LISTED AS HAWALA OPERAT ORS ON THE WEBSITE OF THE SALES TAX DEPARTMENT. LEARNED DR FURTHER RELIED UPON THE FINDING OF LOWER AUTHORITIES AND CONTENDED THAT ADDITIONS SO M ADE BY THE AO SHOULD BE CONFIRMED. 16. WE HAVE HEARD THE RIVAL SUBMISSION AND CAREFULL Y GONE THROUGH THE ORDER OF THE TAX AUTHORITIES BELOW AND ALSO DELIBER ATED ON JUDICIAL PRONOUNCEMENT REFERRED BY LOWER AUTHORITIES IN THEI R RESPECTIVE ORDERS AS WELL AS CITED BY LEARNED AR AND DR DURING THE COURS E OF HEARING BEFORE ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 10 US. FROM THE RECORD, WE FOUND THAT ASSESSEE COMPANY WAS INCORPORATED ON 08.06.1999 AS PRIVATE LIMITED COMPANY AS A SMALL SCALE INDUSTRY AND IS ENGAGED IN CONSTRUCTION OF COMMERCIAL AND INDUSTRIA L SERVICES. ASSESSEE COMPANY IS THE LEADING FACADE WORK CONTRACTORS IN I NDIA AND PROVIDES COMPLETE ENVELOPING SOLUTIONS TO CONSTRUCTION INDUS TRY IN INDIA. IN PAST, IT HAS COMPLETED PROJECTS FOR REPUTED COMPANIES SUCH A S M/S GANON DUNKERLEY & CO LTD, M/S GVK PROPERTIES, M/S K. RAHE JA CONSTRUCTIONS, M/S L&T, M/S. SHAPOORI PALLANJI AND M/S SIMPLEX INF RASTRUCTURE. DURING THE YEAR UNDER REFERENCE, SOME OF THE IMPORTANT AND PRESTIGIOUS PROJECTS IN HAND WERE VIZ M/S ADITYA BIRLA, M/S BG SHIRKE CO NST. TECH., M/S EMIRATES TECHNOLOGIES, M/S GRAUER & WELL (INDIA) LT D., M/S GUJARAT ADANI PORT LTD., M/S KALPATARU PROPERTIES (THANE), M/S L&T, M/S OBEROI CONSTRUCTION, M/S SYMBIOSIS, M/S. TATA INSTITUTE OF SCIENCE ETC. THE ASSESSEE COMPANY'S JOB IS MAINLY PERFORMED AT SITE. HOWEVER, MAJOR PORTION OF FABRICATION WORK IS DONE AT ITS PLANTS. ONCE A PROJECT IS TAKEN UP, IT TAKES MINIMUM THREE AND MAXIMUM FIVE YEARS TO CO MPLETE. THE PURCHASES ARE CENTRALIZED. MOST OF THE MATERIAL IS RECEIVED AT FACTORY AND FROM THERE IT IS DISPATCHED TO VARIOUS LOCATIONS. H OWEVER, TO REDUCE THE COST OF TRANSPORTATION, SOME MATERIAL WHICH DOES NO T REQUIRE ANY KIND OF FINISHING/ FABRICATION/ POLISHING IS DIRECTLY PURCH ASED AND SUPPLIED AT SITES. THOUGH THE MAJOR ELEMENT OF COST IS MATERIAL AND LA BOUR BUT EQUALLY THERE ARE OVERHEADS, DESIGN AND DRAWING COST AS WELL AS C OST OF SENIOR AND TECHNICAL PEOPLE OF THE ASSESSEE. ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 11 17. ON THE INFORMATION FROM SALES TAX DEPARTMENT TH AT THERE ARE SOME BOGUS SUPPLIERS ISSUING BILLS WITHOUT PHYSICAL DELI VERY OF GOODS, A SURVEY WAS CONDUCTED AT THE PREMISES OF THE ASSESSEE WHERE IN STATEMENT OF DIRECTOR WAS RECORDED AND ASSESSEE HAS ALSO OFFERED INCOME ON ACCOUNT OF SAID ALLEGED BOGUS PURCHASES. SURVEY WAS ON THE BASIS OF INFORMATION FROM THE SALES TAX DEPARTMENT. JUST ON THE INFORMAT ION FROM SALES TAX DEPARTMENT AND ON THE STATEMENT OF ANY PARTY AND WI THOUT ACTUALLY VERIFICATION AND PUTTING ON RECORD AND WITHOUT GIVI NG AN OPPORTUNITY OF CROSS EXAMINATION, THE PURCHASES FROM SUCH SUSPECTE D PARTIES SHOULD NOT BE DISALLOWED. FOR THIS PURPOSE RELIANCE CAN BE PLA CED ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: INCOME TAX OFFICER VS. PERMANAND 107 TTJ 395 [JO DHPUR ITAT) INCOME FROM UNDISCLOSED SOURCES-ADDITION UNDER S. 6 9-ALLEGED BOGUS PURCHASES-AO RECEIVED INFORMATION FROM THE SA LES-TAX DEPARTMENT THAT THE PURCHASES MADE BY THE ASSESSEE FROM TWO PARTIES WERE BOGUS-SOLELY RELYING ON THE SAME, AA M ADE ADDITION UNDER S. 69-NOT JUSTIFIED-NO ADDITION CAN BE MADE I N THE HANDS OF THE ASSESSEE MERELY ON THE BASIS OF OBSERVATIONS MA DE BY A THIRD PARTY-WHILE MAKING THE ASSESSMENT, IT IS THE SATISF ACTION OF THE AA WHICH IS OF PRIME IMPORTANCE-IT CANNOT BE SUBSTITUT ED BY THE SATISFACTION OF SOMEONE ELSE-ASSESSEE HAS DISCHARGE D THE PRIMARY ONUS CAST ON HIM BY SHOWING THE PURCHASES IN THE BO OKS OF ACCOUNTS, PAYMENT BY WAY OF ACCOUNT PAYEE CHEQUES A ND PRODUCING THE VOUCHERS OF SALE OF GOODS-AO DID NOT MAKE REQUISITE INVESTIGATIONS AGAINST THE SAID SELLERS-MOREOVER, N O OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO CONFRONT THE SELLERS-ADDIT ION RIGHTLY DELETED. DCLT VS. SHRI RAJEEV G. KALATHIL [ITA 6727/MUM/2012 ) [MUM ITAT] THE AO HAD MADE THE ADDITION AS ONE OF THE SUPPLIER S WAS DECLARED A HAWALA DEALER BY THE VAT DEPARTMENT. THE TRIBUNAL OBSERVED THAT THIS WAS A GOOD STARTING POINT FOR MA KING FURTHER INVESTIGATION AND TO TAKE IT TO ITS LOGICAL END. BU T, THE AO LEFT THE JOB AT INITIAL POINT ITSELF. IT WAS FURTHER HELD THAT SUSPICION OF HIGHEST DEGREE CANNOT TAKE PLACE OF EVIDENCE AND THE ASSES SING ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 12 OFFICER COULD HAVE CALLED FOR THE DETAILS OF THE B ANK ACCOUNTS OF THE SUPPLIERS TO FIND OUT WHETHER THERE WAS ANYIM MEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. TRANSPORTATION OF GOOD TO THE SITE IS ONE OF THE DECIDING FACTORS TO BE CONSIDER ED FOR RESOLVING THE ISSUE AND THE CIT (A) HAD GIVEN A FINDING OF FACT THAT PART OF THE GOODS RECEIVED BY THE ASSESSEE WAS FORMING PART O F CLOSING STOCK. FURTHERMORE, SINCE THE PROOF OF MOV EMENT OF GOODS IS NOT IN DOUBT AND THERE IS NOTHING IN THE ORDER OF THE AO ABOUT CASH TRAIL, DISALLOWANCE COULD NOT BE MADE. CLT VS. M.K. BROTHERS 163 ITR 249 (GUJARAT HC) INCOME-ADDITION-BOGUS PURCHASES-ASSESSEE MAKING PU RCHASES FROM CERTAIN PARTIES, WHO WERE HELD TO BE BOGUS BY SALES-TAX AUTHORITIES-ASSESSEE WAS GIVEN CREDIT FACILITIES FO R A SHORT DURATION AND THE PAYMENTS WERE GIVEN BY CHEQUES- TR IBUNAL OBSERVED THAT THERE WERE CERTAIN DOUBTFUL FEATURES, BUT THE EVIDENCE WAS NOT ADEQUATE TO CONCLUDE THAT THE PUR CHASES MADE BY THE ASSESSEE FROM THE PARTIES WERE BOGUS- C ONCLUSION ARRIVED AT BY THE TRIBUNAL IS NOT AGAINST THE WEIGH T OF EVIDENCE- ADDITION OF THE AMOUNT OF PURCHASES AS INCOME FRO M UNDISCLOSED SOURCES RIGHTLY DELETED. THE INCOME TAX OFFICER VS. D.N. SHAH & CO. 2 TTJ 12 17 [AHMADABAD ITAT] INCOME FROM UNDISCLOSED SOURCES-ADDITION UNDER SS. 69 AND 69A ASSESSEE , A DEALER IN CHEMICALS PURCHASING GOODS WORTH RS.1.71 LAKHS FROM ONE M-PAYMENT FOR PURCHASE BY C ROSSED CHEQUE- PROPER ENTRY OF GOODS PURCHASED IN THE STOC K- BOOK- EVIDENCE OF M BEFORE SALES-TAX AUTHORITIES TO THE EFFECT THAT AFTER 1970 THEY ENTERED ONLY HAWALA TRANSACTIONS- O PPORTUNITY FOR CROSS EXAMINATION OF M NOT MADE AVAILABLE TO A SSESSEE EITHER BY SALES-TAX OR BY INCOME-TAX AUTHORITIES-AD DITIONS UNDER S. 69 AND 69A NOT JUSTIFIED. JAGDAMBA TRADING COMPANY VS. ITO 107 TTJ 398 [JOD HPUR ITAT] INCOME FROM UNDISCLOSED SOURCES-ADDITION-ALLEGED BO GUS PURCHASES-THERE IS NO PROOF ON RECORD THAT THE AMO UNT OF RS.2,20,000 PAID BY ASSESSEE BY CHEQUE WAS DEPOSITE D IN THE ACCOUNT OF THE ASSESSEE-ASSTT. MANAGER OF THE BANK HAS CATEGORICALLY CONFIRMED THAT THE RECIPIENT OF CASH WAS ONE R AND NOT RP, PROPRIETOR OF THE ASSESSEE CONCERN-EXCEPT T HE CONTRA ENTRY ON THE BACKSIDE OF THE SAID CHEQUE MENTIONING THAT AMOUNT WAS DEPOSITED IN ASSESSEE ACCOUNT, THERE IS NO EVIDENCE TO CONNECT THE ASSESSEE WITH THE WITHDRAWAL OF SAID MONEY-AS REGA RDS THE AVERMENT OF THE SELLER IN HIS AFFIDAVIT SUBMITTED I N SALES-TAX PROCEEDINGS THAT HE HAS NOT MADE ANY SALES DURING T HE RELEVANT YEAR, SAME CANNOT BE RELIED UPON, PARTICULARLY WHEN NO OPPORTUNITY ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 13 OF CROSS-EXAMINATION WAS GIVEN TO THE ASSESSEE-SAI D AFFIDAVIT HAVING BEEN FILED DURING THE SALES-TAX PROCEEDINGS OF THE SELLER, IT HARDLY HAS ANY EVIDENTIARY VALUE AGAINST THE ASSESS EE IN THE INCOME-TAX PROCEEDINGS THEREFORE, THE PURCHASES IN QUESTION CANNOT BE HELD TO BE BOGUS-IMPUGNED ADDITION DELET ED. 18. AS PER VERDICT OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. S. KAHDER KHAN & SONS, 300 ITR 157, SECTION 133A DOES NOT EMPOWER ANY IT AUTHORITY TO EXAMINE ANY PERSON ON OATH, HENCE, MERE STATEMENT RECORDED DURING SURVEY HAS NO EVIDENTIARY VALUE AND ANY SUCH ADDITION CANNOT BE MADE, WITHOUT BRINGING ON RECORD CORROBOR ATIVE MATERIALS. THE HONBLE SUPREME COURT FURTHER OBSERVED THAT THIS VI EW IS CLEARLY SUPPORTED BY CBDT CIRCULAR DATED 10 TH MARCH, 2003. ACCORDINGLY IT WAS HELD THAT NO ADDITION CAN BE MADE MERELY ON THE BAS IS OF STATEMENT RECORDED DURING SURVEY U/S.133A. FUTHERMORE, ANY ST ATEMENT WITHOUT ANY CORROBORATIVE EVIDENCE CANNOT BE USED FOR MAKING AN ADDITION ESPECIALLY WHEN SUCH STATEMENTS ARE MADE DURING THE SURVEY PRO CEEDINGS. FOR THIS PURPOSE, RELIANCE CAN BE MADE ON THE FOLLOWING JUDI CIAL PRONOUNCEMENT. I. S ARJAN SINGH VS. CWT 175 ITR 91 [DELHI] IN THIS CASE THE ASSESSEE IS HAVING ONE PROPERTY AT AURANGZEB ROAD, NEW DELHI. THE ASSESSEE HAD INDICATED SOME VA LUE IN THE WEALTH TAX RETURN. THE WTO REFERRED THE MATTER TO A VALUER AND ACCEPTED THE VALUE DETERMINED BY THE VALUATION OFFI CER. THE ASSESSEE APPEALED TO THE AAC THAT THE VALUATION OFF ICER HAD, INTER ALIA, NOT DEDUCTED 50 PERCENT OF THE UNEARNED INCRE ASE TO BE PAID TO THE LAND AND DEVELOPMENT OFFICER ON TRANSFER, IN AR RIVING AT THE VALUATION. THE AAC REJECTED THE CONTENTION BUT THE TRIBUNAL HELD THAT AFTER 1951, THIS PAYMENT BECAME OBLIGATORY AND THE SAID AMOUNT HAS TO BE ALLOWED AS A DEDUCTION IN ARRIVING AT THE VALUATION OF THE PROPERTY IN THE LIGHT OF THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN CWT VS. SIKAND (P. N.) (1977) 107 ITR 922. CONSEQUENTLY, THE TRIBUNAL DIRECTED THE WTO 'TO REC OMPUTE THE VALUE OF THE PROPERTY IN DIFFERENT YEARS IN THE LIG HT OF THE ABOVE DIRECTIONS' BUT INDICATED THAT THE RECOMPUTED VALUE WILL NOT BE LESS THAN THAT RETURNED BY THE ASSESSEE IN THOSE YEARS. ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 14 AGAINST THIS, THE ASSESSEE HAD PREFERRED AN APPEAL IN HC RAISING THE QUESTION THAT LITHE TRIBUNAL ERRED IN LAW IN H OLDING THAT THE VALUATION OF THE PROPERTY COMPUTED IN ACCORDANCE W ITH THE DIRECTION OF THE TRIBUNAL BE NOT LESS THAN THAT R ETURNED BY THE ASSESSEE ITSELF. HON'BLE HIGH COURT HAD HELD THAT A VALUATION LOWER THAN THAT RETURNED MAY BE THE CORRECT VALUE. AN ADMISSION IS AN IMPORTANT PIECE OF EVIDENCE, BUT IT IS NOT CONCLU SIVE AND IT IS OPEN TO THE ASSESSEE TO SHOW THAT IT IS INCORRECT. II. COMMISSIONER OF INCOME TAX VS. DHINGRA METAL W ORKS 328 ITR 384 [DELHI] ON 14TH SEPT., 2004, A SURVEY UNDER S. 133A OF THE ACT WAS CONDUCTED ON THE ASSESSEE'S BUSINESS PREMISES. DUR ING THE COURSE OF SURVEY, THE TAX OFFICIALS NOTICED SOME DI SCREPANCIES IN STOCK AND CASH IN HAND. DURING THE SAID SURVEY, ASS ESSEE SURRENDERED AN AMOUNT OF RS. 99,50,000/- AND OFFER ED THE SAME FOR THE PURPOSES OF TAXATION. THE ADDITIONAL INCOME OFF ERED INCLUDED A SUM OF RS. 45,00,000 ON ACCOUNT OF EXCESS STOCK FOU ND DURING THE COURSE OF SURVEY AND OFFERED BY ONE OF THE PARTNERS OF THE ASSESSEE AS ADDITIONAL INCOME. SUBSEQUENTLY, THE ASSESSEE VI DE ITS LETTER DT. 29TH NOV., 2004, CONTENDED THAT THE STATEMENT ABOUT STOCK WAS INCORRECT AND THAT THE IMPUGNED DISCREPANCY HAD BEE N RECONCILED AS IT WAS ONLY A MISTAKE. CONSEQUENTLY, THE RESPOND ENT-ASSESSEE WITHDREW THE OFFER OF ADDITIONAL INCOME FOR TAXATIO N ON ACCOUNT OF EXCESS STOCK. ON 31ST DEC., 2007, THE AO PASSED THE ASSESSMENT OR DER WHEREIN HE DID NOT ACCEPT THE PLEA OF THE ASSESSEE THAT EXC ESS STOCK DURING THE COURSE OF SURVEY HAD BEEN RECONCILED. THE AO RE LIED UPON THE STATEMENT OF ONE OF THE PARTNERS OF THE ASSESSEE GI VEN DURING THE COURSE OF SURVEY UNDER S. 133A OF THE ACT AND CONCL UDED THAT THE EXPLANATION/RETRACTION BY THE ASSESSEE WAS AN AFTER THOUGHT AND HAD NO ELEMENT OF TRUTH. CIT (A) AS WELL AS ITAT HAD DE LETED THE ADDITION. DEPARTMENT HAD PREFERRED AN APPEAL IN HC. HC HELD THAT WHERE THE ASSESSEE HAS BEEN ABLE TO EXPLAIN THE DIS CREPANCY IN STOCK FOUND DURING THE SURVEY, ADDITION COULD NOT H AVE BEEN MADE BY THE AO SOLELY ON THE BASIS OF THE STATEMENT MADE BY THE ASSESSEE DURING THE COURSE OF SURVEY. III. PAUL MATHEWS & SONS VS. COMMISSIONER OF INCOME TAX 263 ITR 101REVISION-ERRONEOUS AND PREJUDICIAL ORDER-ASSESSM ENT VIS-A-VIS DISCLOSURE DURING SURVEY-SEC. 133A DOES NOT EMPOWER ANY ITO TO EXAMINE ANY PERSON ON OATH-THUS, THE STATEMENT ELIC ITED DURING THE SURVEY OPERATION HAS NO EVIDENTIARY VALUE-ITO DID N OT ACCEPT THE INCOME DECLARED BY THE ASSESSEE AFTER THE SURVEY IN A MECHANICAL WAY, BUT APPLIED HIS MIND TO VARIOUS ASPECTS OF THE MATTER BEFORE COMPLETING THE ASSESSMENT-ADVANCES ADMITTEDLY RECEI VED BY THE ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 15 ASSESSEE FROM TWO PARTIES HAVE BEEN EXPLAINED PARTL Y AND THE UNEXPLAINED AMOUNT IS TELESCOPED IN THE INCOME ALRE ADY DISCLOSED. HENCE, NO SEPARATE ADDITION WAS MADE-ALLEGED ADMISS ION IN THE STATEMENT OF THE MANAGING PARTNER WAS ONLY A QUALIF IED ONE AND THE ASSESSEE HAD CLEARLY EXPLAINED THE SAME TO THE AO B Y COGENT MATERIALS-ORDER PASSED BY THE AO CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTERESTS OF REVENUE - CLT NO T JUSTIFIED IN INVOKING POWERS UNDER S. 263. IV. ASSISTANT COMMISSIONER OF INCOME TAX VS. SMT. U SHA RANI TALLA 6 ITR (TRIB) 37. ASSESSMENT - UNDISCLOSED INCOME ADDITION - SUSTA INABILITY- SURVEY OPERATIONS IN THE BUSINESS PREMISES OF PARTN ERSHIP FIRM CARRYING BUSINESS IN JEWELLERY-DISCREPANCY FOUND IN THE STOCK AND CASH FOUND- ASSESSEE BEING THE WIFE OF THE PARTNER SUMMONED AND HER STATEMENT RECORDED-BASED ON THE STATEMENT MADE BY HER AMOUNTS SURRENDERED DURING SURVEY ADDED TO INCOME O F ASSESSEE NOTWITHSTANDING THE SUBSEQUENTLY RETRACTION OF THE STATEMENT STATING THAT IT WAS MADE IN A DISTURBED MIND-ON APPEAL CIT( A) HOLDING THAT THERE BEING NO EVIDENCE REGARDING UNDISCLOSED INCOM E, ADDITION MADE ONLY ON THE BASIS OF STATEMENT GIVEN IN A STAT E OF CONFUSION AND LATER RETRACTED, COULD NOT BE SUSTAINED EITHER IN PART OR AS A WHOLE-ON FURTHER APPEAL HELD THAT A STATEMENT IS RE CORDED UNDER S. 133A IS NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY F OR THE REASON THAT THE OFFICER IS NOT AUTHORIZED TO ADMINISTER OA TH AND TO TAKE, ANY SWORN STATEMENT WHICH ALONE LENDS EVIDENTIARY VALUE AS CONTEMPLATED UNDER THE LAW-BASIS FOR ADDITION WAS T HE STATEMENT OF THE ASSESSEE WITHOUT ANY CORROBORATIVE MATERIAL OR EVIDENCE ON RECORD NO MATERIAL BROUGHT ON RECORD BY THE AO TO S UBSTANTIATE THAT ANY EXPENDITURE ON RENOVATION WAS INCURRED BY THE A SSESSEE NOR THE AO MADE ANY REFERENCE TO THE DVO TO FIND OUT TH E CORRECT STATE OF AFFAIRS-NO ADDITION WARRANTED IN THE HANDS OF TH E ASSESSEE MERELY BECAUSE SHE SIGNED THE STATEMENT ACCEPTING T HE SAME. V. CLT VS. P BALASUBRAMANIAN 354 ITR 116 [MADRAS] SURVEY-STATEMENT RECORDED U/S 133A-NO CORROBORATION -ADDITION- DELETION THEREOF-SURVEY WAS CONDUCTED AT ASSESSEE'S PREMISES- 900 GMS OF GOLD WAS FOUND DURING SURVEY-ASSESSEE'S STATEMENT THAT IT HAD 2100 GMS OF GOLD WHICH WAS GIVEN TO THR EE PERSONS WAS RECORDED-AO MADE ADDITION OF 3000 GMS OF GOLD-CIT(A ) FURTHER MADE ADDITION OF UNACCOUNTED CASH FOUND IN SURVEY A ND INTEREST EARNED ON UNACCOUNTED INVESTMENTS BASED ON ASSESSEE 'S STATEMENT-TRIBUNAL DELETED ADDITIONS MADE BY CLT(A) - HELD, ASSESSEE, IN HIS EXPLANATION, HAD STATED THAT REMAI NING 2100 GMS HAD BEEN GIVEN TO 3 ASARIS- OFFICERS HAD NOT VERIFI ED WHETHER GOLD WAS AVAILABLE WITH SAID ASARIS NOR CHOSE TO EXAMINE THEM- STATEMENT RECORDED DURING SURVEY OPERATION U/S 133A MAY BE A RELEVANT MATERIAL, BUT IN ABSENCE OF FURTHER MATERI ALS TO SUBSTANTIATE SAME, SUCH STATEMENT RECORDED U/S 133A CAN HARDLY B E BASIS FOR ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 16 ASSESSMENT-DURING SURVEY, 900GMS GOLD WAS FOUND IN ASSESSEE'S PREMISES AND STATEMENT OF ASSESSEE WAS SUPPORTED ON LY TO THAT EXTENT-STATEMENT OF ASSESSEE IN RESPECT OF REMAININ G GOLD WAS NOT SUBSTANTIATED-IN SO FAR AS UNACCOUNTED CASH, ASSESS EE TRIED TO EXPLAIN BY STATING THAT HE HAD SOLD A LAND AND CONS IDERATION WAS DEPOSITED IN BANK AND WAS WITHDRAWN AND DURING COUR SE OF SURVEY, DEPARTMENT CAME ACROSS SAID CASH-SURVEY WAS ON 29.1 0.2002 AND WITHDRAWAL OF MONEY FROM BANK WAS A FEW DAYS BEFORE SEARCH-EVEN THOUGH SAID AMOUNT WAS NOT DISCLOSED IN HIS BOOKS, ASSESSEE TRIED TO EXPLAIN SAME- SO FAR AS ADDITION OF INTEREST EAR NED ON UNACCOUNTED INVESTMENT IN MONEY LENDING BUSINESS WA S CONCERNED, ENHANCEMENT WAS BASED ONLY ON STATEMENT RECORDED FROM ASSESSEE-NO OTHER MATERIAL OR INFORMATION WAS AVAILABLE THAT ASSESSEE INVESTED IN MONEY LENDING BUSINESS AND EAR NED INTEREST- THUS, ADDITION WAS BASED ON ONLY ROUGH ESTIMATE-CIT {A) MADE ENHANCEMENT TO INCOME DETERMINED BY ASSESSING OFFIC ER BASED ON UNSWORN STATEMENT OBTAINED U/S. 133A, IN ABSENCE OF OTHER MATERIALS-THUS, TRIBUNAL HAD RIGHTLY SET ASIDE ORDE R OF CIT (A). VI. ITO VS. VIJAY KUMAR KESAR 327 ITR 497 [CHHATTI SGARH] INCOME FROM UNDISCLOSED SOURCES-ADDITION UNDER S. 6 9-ADDITION ON THE BASIS OF STATEMENT RECORDED DURING SURVEY-ASSES SEE SURRENDERED THE CASH AND VALUE OF EXCESS STOCK FOUN D DURING SURVEY FOR TAXATION BUT DID NOT OFFER ANY SUCH AMOU NT IN HIS RETURN- HE PRODUCED HIS UPDATED BOOKS OF ACCOUNT AND OTHER PRIMARY RECORDS DURING THE ASSESSMENT PROCEEDINGS TO EXPLAI N THE CASH AND STOCK FOUND AT THE TIME OF SURVEY BUT THE AO REJECT ED THE SAME SOLELY ON THE GROUND THAT THE ASSESSEE HAD MADE CON FESSIONAL STATEMENT DURING THE SURVEY PROCEEDINGS AND SURREND ERED INCOME FROM UNDISCLOSED SOURCES IN THE FORM OF CASH AND EX CESS STOCK AND SUCH PRIMARY EVIDENCE WAS PRODUCED AFTER CONSIDERAB LE PERIOD-ON APPEAL, CIT(A) ACCEPTED THE EXPLANATION OFFERED BY THE ASSESSEE AND THE BOOKS OF ACCOUNT PRODUCED BY HIM AS THE ENT RIES IN THE BOOKS WERE SUPPORTED BY PRIMARY EVIDENCE-CIT(A) ALS O ACCEPTED THE EXPLANATION THAT THE STATEMENTS WERE MADE BY TH E ASSESSEE WITHOUT UNDERSTANDING THE IMPORT OF THE SAME AS HE WAS UNDER STRESS DUE TO THE DEATH OF HIS DAUGHTER-ORDER PASSE D BY CIT(A) HAS BEEN CONFIRMED BY THE TRIBUNAL- FINDINGS RECORDED B Y BOTH THE AUTHORITIES CANNOT BE TERMED PERVERSE OR CONTRARY T O RECORD- CONFESSION MADE BY THE ASSESSEE DURING SURVEY PROCE EDINGS IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO ESTABL ISH THAT THE SAME WAS NOT TRUE AND CORRECT BY FILING COGENT EVIDENCE- ADDITIONS RIGHTLY DELETED. VII. CLT VS. MRS DORIS S LUIZ 96 ITR 646 [KERALA] THE STAND TAKEN BY THE ASSESSEE WAS THAT THE MONEY IN QUESTION IS IN THE NATURE OF TRUST MONEY, NOT IMPRESSED WITH TH E CHARACTER OF REVENUE RECEIPT. ON A CAREFUL ANALYSIS OF THE POSIT ION, ONE IS SATISFIED THAT THE MONEY WAS BEING HELD BY THE ASSE SSEE IN CONFIDENCE FOR THE BENEFIT OF THE STUDENTS GOING FO R OVERSEAS ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 17 TRAINING AND EMPLOYMENT AND, AS SUCH, IT IS NOT A T AXABLE ITEM IN HER HANDS. THE MONEY RECEIVED HAS NO PROFIT-MAKING QUAL ITY ABOUT IT, AND IT CONTINUES TO BE THE MONEY OF THE STUDENTS FO R WHICH THE ASSESSEE IS ACCOUNTABLE TO THE STUDENTS. THE ASSESS EE ALL ALONG HAS BEEN IN THE BONA FIDE BELIEF THAT THE SURPLUS A MOUNT IN HER HANDS UNDER THE ABOVE ACCOUNT WAS IN THE NATURE OF A TRUST FUND REFUNDABLE OR RETURNABLE TO THE PARTY. RELIANCE WAS PLACED VERY MUCH BY THE LAC ON THE ADMISSION OF THE ASSESSEE TH AT RS. 22,000 WAS NOT REFUNDED TO THE STUDENTS. IT IS STATED THAT SHE AGREED TO THE SAID AMOUNT OF RS. 22,000 BEING TREATED AS INCOME. IT IS WORTHWHILE TO REMEMBER IN THIS CONNECTION THAT DURING ALL THE RELEVANT YEARS THE ASSESSEE HAD TAKEN THE CONSISTENT STAND THAT THE DE POSITS WERE RETURNABLE TO THE PERSONS CONCERNED AFTER MEETING T HE EXPENSES, AND THE SURPLUS, THEREFORE, SHOULD NOT BE ASSESSED AS INCOME. DURING THE YEAR IN QUESTION SHE HAPPENED TO MAKE TH E ADMISSION UNDER A MISCONCEPTION OF THE ATTENDANT FACTS AND CI RCUMSTANCES. IN SPITE OF THE ADMISSION IT IS INCUMBENT ON THE DEPAR TMENT OF ESTABLISH BY RELEVANT PROOF THAT THE AMOUNT IN QUES TION WAS INCOME IN THE HANDS OF THE ASSESSEE. THE ADMISSION WAS WRO NG AND IT WAS FOR THE DEPARTMENT TO PROVE POSITIVELY ON OTHER MAT ERIAL THAT THERE WAS CONCEALMENT OF INCOME. BEING A QUASI-CRIMINAL P ROCEEDING, THE BURDEN IS ENTIRELY ON THE DEPARTMENT. APART FROM TH E SO-CALLED ADMISSION, THERE IS NO MATERIAL TO HOLD THAT THE IN COME WAS CONCEALED. FURTHER HON'BLE SE IN CASE OF PULLANGODE RUBBER PRO DUCE CO LTD VS. STATE OF KERALA & ANR 91 ITR 18 HAD HELD THAT AN AD MISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PERSON WHO MADE THE A DMISSION TO SHOW THAT IT IS INCORRECT. IN THIS CASE THE ASSESSEE HAD INCURRED AN AMOUNT OF RS. 79,680/- FOR THE CULTIVATION, UPKEEP OR MAINTENANCE OF IMMAT URE PLANTS. THE SAME HAS BEEN CAPITALIZED IN THE BOOKS OF ACCOUNTS. HOWEVER, AT THE TIME OF AGRICULTURAL INCOME TAX ASSESSMENT, THE SAME HAS BEEN TREATED AS REVENUE EXPENDITURE AND DEDUCTED IN THE COMPUTATION. THE SAME WAS DENIED TO THE ASSESSEE. THE MATTER ULT IMATELY TRAVELLED TO SE. SE HELD THAT 'IT IS NO DOUBT TRUE THAT ENTRIES IN THE ACCOUNT BOOKS OF THE ASSESSEE AMOUNT TO AN ADMISSIO N THAT THE AMOUNT IN QUESTION WAS LAID OUT OR EXPENDED FOR THE CULTIVATION, UPKEEP OR MAINTENANCE OF IMMATURE PLANTS FROM WHICH NO AGRICULTURAL INCOME WAS DERIVED DURING THE PREVIOUS YEAR. AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDEN CE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE. IT IS OPEN TO THE PE RSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT. ' 19. HOWEVER, EVEN IF ANY ADDITION IS MADE WHAT CAN BE ADDED IS SOME PERCENTAGE OF GROSS PROFIT OR NET PROFIT AS ALL THE PURCHASES ARE ACCOUNTED ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 18 AND CONSUMED IN BUSINESS. FOR THIS PURPOSE, FOLLOWI NG THE JUDICIAL PRONOUNCEMENT SUPPORTS THE VIEW THAT A REASONABLE G ROSS PROFIT RATE OR NET PROFIT RATE CAN BE ADDED AS UNDISCLOSED INCOME OF THE ASSESSEE. FOR THIS PURPOSE, RELIANCE CAN BE PLACE SHRI MADHUKANT B. GANDHI VS. ITO [ITA 1950/MUM/20 09] (MUM ITAT) THE A.O. TREATED PARTIES AS BOGUS AND MADE TOTAL DI SALLOWANCES. ITAT RESTRICTED THE DISALLOWANCE TO 5% ONLY IN RESP ECT OF THE DISPUTED PURCHASE. DCLT VS. SHRI JITENDRA S. MOTANI [ITA 3024 TO 302 8, 6178/MUM/2007] (MUM ITAT) THE AO MADE DISALLOWANCE OF ENTIRE PURCHASES. ONLY FEW PARTIES FILED CONFIRMATIONS. CIT (A) APPLIED 3% TO GP TO AL L THE PURCHASES. THE PAYMENTS WERE MADE BY A/C PAYEE CHEQUE. THE ITA T HELD THAT ADDITION RESTRICTED TO 3% ON TAINTED PURCHASES ONLY (I.E. WHERE NO CONFIRMATION WAS OBTAINED OR DOUBTFUL IN NATURE). CLT VS. SANJAY OIL CAKE INDUSTRIES V. CIT (2009) 316 ITR 274 (GUJ.)(HC) PURCHASE OF OIL CAKE. AO HAD INFORMATION THAT THESE PARTIES ARE HAWALA ENTRY GIVERS- ENTIRE PURCHASES WERE ADDED. T RIBUNAL RESTRICTED TO 25% OF PURCHASES AS PROFIT OF ASSESSE E. BOTH THE ASSESSEE AND REVENUE FILED AN APPEAL BEFORE THE COU RT. HIGH COURT AFFIRMED THE VIEW OF TRIBUNAL. CIT VS. BHOLANATH POLY FAB (P.) LTD. 355 ITR 290 (G UJARAT HC) ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING IN F INISHED FABRICS. ASSESSING OFFICER DISALLOWED THE PURCHASES ON ACCOU NT THAT PARTIES FROM WHOM PURCHASES WERE MADE ARE NOT FOUND AT THE ADDRESSES GIVEN. CIT(A) CONFIRMED THE ASSESSMENT ORDER. TRIBU NAL HELD THAT PURCHASES WERE MADE FROM BOGUS PARTIES, BUT THE PUR CHASES THEMSELVES WERE NOT BOGUS AS ENTIRE QUANTITY OF OPE NING STOCK, PURCHASES AND THE QUANTITY MANUFACTURED DURING THE YEAR UNDER CONSIDERATION WERE SOLD BY THE ASSESSEE. THEREFORE, TRIBUNAL HELD THAT ADDITIONS SHOULD NOT BE THE ENTIRE AMOUNT, BUT THE PROFIT MARGIN EMBEDDED ON SUCH PURCHASES WOULD BE SUBJECTED TO TA X. ON APPEAL BY REVENUE TO HIGH COURT, TRIBUNAL'S ORDER W AS UPHELD. 20. FROM THE RECORD WE FOUND THAT DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED THAT THE STATEMENT WAS GIVEN ON TH E WRONG UNDERSTANDING OF FACTS AND ACCORDINGLY RETRACTED FR OM THE EARLIER ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 19 STATEMENT GIVEN DURING THE COURSE OF SURVEY ACTION ON THE GROUND THAT THE SAID STATEMENT WAS GIVEN UNDER FORCE. THE ASSESSEE VIDE LETTER DATED 30- 7-2014 HAS ALSO SUBMITTED THAT THE STATEMENT WAS GI VEN FOR ALL THE THREE YEARS, THE RETRACTION SO MADE WAS APPLICABLE TO ALL THE THREE YEARS. IN SUPPORT OF THIS CONTENTION, THE ASSESSEE STATED THA T THE PURCHASES FROM ALL THE SO CALLED HAWALA DEALERS ARE GENUINE IN THE LIG HT OF THE FACT THAT PROPER BILLS HAVE BEEN ISSUED BY ALL SUCH PARTIES AND THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES AGAINST SUCH PURCHASES. IT HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS UNDERTAKEN THE PROJECT OF REP UTED COMPANIES SUCH AS M/S GANON DUNKERLEY & CO. LTD., M/S GVK PROPERTI ES. M/S K. RAHEJA CONSTRUCTION, M/S. L & T, M/S. SHAPOORJI PALLANJI A ND M/S. SIMPLEX INFRASTRUCTURE AND SUCH PROJECTS CANNOT BE COMPLETE D WITHOUT THE PURCHASE OF MATERIALS IN SUPPORT OF ITS CONTENTION THE ASSESSEE HAS SUBMITTED DETAILS OF MATERIALS CONSUMED AGAINST SAL ES WHICH REFLECTS THAT THE RATIO OF SALES TO MATERIALS CONSUMED IS MAINTAI NED ALMOST UNIFORMLY OVER THE YEAR AS PER THE DETAILS ENCLOSED BY THE AS SESSEE. IT WAS FURTHER SUBMITTED THAT SINCE THOSE HAWALA PARTIES HAD NOT P AID VAT COLLECTED FROM US TO THE SALES TAX DEPARTMENT, IT DOES NOT ME AN THAT THE PURCHASES ARE NOT GENUINE AND THEREFORE THOSE PARTIES ARE DEF AULTERS ONLY IN TERMS OF NON-PAYMENT OF VAT TO THE SALE TAX DEPARTMENT, MAHA RASBTRA. FURTHER, THE ASSESSEE SUBMITTED THAT ALL SUCH PURCHASES ARE GENUINE AND NOT FOR THE PURPOSE OF REDUCING PROFIT MARGIN AS EVIDENT FR OM THE FACT TABLED BELOW THAT THE NET PROFIT OF THE ASSESSEE COMPANY H AS REMAINED ALMOST ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 20 THE SAME AS COMPARED TO EARLIER YEARS AS WELL AS SU BSEQUENT YEARS. FROM THE RECORD WE ALSO FOUND THAT DURING THE COURSE OF REMAND PROCEEDINGS, IN ORDER TO VERIFY WHETHER THE ASSESSEE HAS PURCHASED MATERIALS FROM HAWALA DEALERS AT HIGHER RATE, THE ASSESSEE WAS ASK ED TO FURNISH THE DETAILS IN RESPECT OF SAME ITEMS PURCHASED FROM THE PARTIES OTHER THAN THE HAWALA DEALERS DURING THE SAME PERIOD. IT IS SEEN T HAT IN RESPECT OF SOME OF THE ITEMS, THE RATE OF THE ITEMS SUPPLIED BY THE ENTRY PROVIDERS WAS HIGHER AS WELL AS LOWER ALSO BUT THE ULTIMATE EFFEC T OF THE PURCHASES FROM ALL SUCH HAWALA DEALERS HAS RESULTED INTO HIGHER PR OFIT MARGIN SHOWN BY THE ASSESSEE. WE ALSO FOUND THAT DURING THE REMAND PROCEEDINGS, THE ASSESSEE COULD PRODUCE PURCHASE ORDERS, INVOICES, D ELIVERY CHALLANS IN RESPECT OF THE PURCHASES OF MATERIALS BOTH FROM HAW ALA DEALERS AS WELL AS OTHER PARTIES. 21. NOW, COMING TO THE MERITS OF THE ADDITION, WE F OUND THAT PARTIES FROM WHOM PURCHASES WERE MADE, WERE FOUND TO BE REG ISTERED WITH SALES TAX DEPARTMENT. MERELY BECAUSE THEY HAD NOT PAID TH E TAX ON THEIR SALES, CANNOT BE HELD AGAINST THE ASSESSEE SO AS TO CONCLU DE THAT ASSESSEE HAS NOT PURCHASED THE GOODS. WE ALSO FOUND THAT THE INC OME TAX SURVEY TEAM HAS NOT SHARED WITH THE ASSESSEE, ANY EVIDENCE OR S TATEMENTS BY THESE PARTIES PROVING THEM TO BE HAWALA OPERATORS. THE SU RVEY TEAM NEITHER SHARED WITH THE ASSESSEE AS TO ON WHAT BASIS MAHARA SHTRA VAT DEPARTMENT IS DECLARING THESE PARTIES AS HAWALA OPE RATORS/SUSPICIOUS PARTIES. WHETHER THESE PARTIES HAVE GIVEN ANY AFFID AVIT OR ANY OTHER ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 21 EVIDENCES WERE GATHERED BY VAT DEPARTMENT TO COME T O SUCH CONCLUSION IS NOT MADE KNOWN TO THE ASSESSEE NOR HAVE BEEN SHA RED WITH THE ASSESSEE. WE ALSO FOUND THAT IN THE STATEMENT BEFOR E SURVEY TEAM ASSESSEE HAD NEVER ACCEPTED THAT IT HAD TAKEN ANY A CCOMMODATION BILL FROM ANY HAWALA OPERATOR. WHEN A QUERY WITH RESPECT TO BOGUS PURCHASES WAS RAISED THE DIRECTOR HAS STATED AS BELOW: ABOVE EXPENSES HAVE BEEN DONE AS PER THE BUSINESS COMPULSIONS AND THE FUNDS GENERATED RAVE BEEN ENTIRELY USED FOR THE BUSINESS PURPOSES ONLY. 22. NO INCRIMINATING EVIDENCE WAS GATHERED BY THE S URVEY TEAM TO PROVE THAT THE ASSESSEE HAS INDULGED ITSELF INTO PR OCUREMENT OF ACCOMMODATION BILL FROM ALLEGED HAWALA OPERATORS. F URTHER NO EVIDENCE WAS GATHERED BY THE SURVEY TEAM THAT CASH WAS ACTUA LLY RECEIVED BACK FROM THESE PARTIES AFTER PAYMENT IS MADE TO THEM IN CHEQUES. THUS, CHARGE OF INFLATING PURCHASES BY PURCHASING ACCOMMO DATION BILLS FROM THESE PARTIES IS NOT PROVED BY ANY INCRIMINATING MA TERIAL GATHERED DURING THE SURVEY OPERATION. 23. ON SIMILAR FACTS AND CIRCUMSTANCES, AHMEDABAD I TAT IN THE CASE OF ITO VS D N SHAH & CO, 2 TTJ 1217 HAD ALSO DECIDE D THE CASE IN FAVOUR OF THE ASSESSEE. IN- THAT CASE ALSO, THE ASS ESSEE HAD RECORDED THE RECEIPT OF MATERIAL AND ALSO MADE THE PAYMENT BY AC COUNT PAYEE CHEQUES. IT WAS HELD THAT STATEMENT RECORDED BEHIND THE BACK OF ASSESSEE BY SALES TAX AUTHORITIES CANNOT BE USED AG AINST THE ASSESSEE. THE HEAD NOTES OF THE DECISION IS REPRODUCED HEREIN BELOW : ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 22 'INCOME FROM UNDISCLOSED SOURCES - ADDITION UNDER S S. 69 AND 69A - ASSESSEE, A DEALER IN CHEMICALS PURCHASING GOODS WO RTH RS. 1.71 LAKHS FROM ONE M - PAYMENT FOR PURCHASE BY CROSSED CHEQUE- PROPER ENTRY OF GOODS PURCHASED IN THE STOCK- BOOK - EVIDENCE OF M BEFORE SALES-TAX AUTHORITIES TO THE EFFECT THAT AFT ER 1970 THEY ENTERED ONLY HAWALA TRANSACTIONS - OPPORTUNITY FOR CROSS EX AMINATION OF M NOT MADE AVAILABLE TO ASSESSEE EITHER BY SALES-TAX OR BY INCOME- TAX AUTHORITIES - ADDITIONS UNDER S. 69 AND 69A NOT JUSTIFIED' 24. WE HAD ALSO CAREFULLY GONE THROUGH THE STATEMEN T SO RECORDED DURING THE SURVEY AND FOUND THAT THERE IS A CONTRAD ICTION IN THE STATEMENT, INSOFAR AS ON THE ONE SIDE THE DIRECTOR HAS STATED THAT EXPENSES WERE INCURRED FOR BUSINESS PURPOSES AND AT THE SAME TIME AGREED TO OFFER A SUM OF RS.10.69 CRORES AS UNACCOUNTED INCOME. WE HA D ALSO CAREFULLY GONE THROUGH THE REMAND REPORT DATED 19-1-2015, WHI CH READS AS UNDER :- TO, THE HONBLE COMMISSIONER OF INCOME TAX (A)-I, THANE. SIR, SUB: REMAND REPORT IN THE CASE OF M/S. INNOVATORS F ACADE SYSTEM PVT. LTD. FOR A.Y. 2010-11-REG. REF: LETTER NO.THN/CIT(A)-I/REMAND REP./2014-15/300 DATED 02/0112015. KINDLY REFER TO SUBJECT ABOVE. 2. THE ASSESSMENT IN THIS CASES WAS COMPLETED U/S. 143(3) OF THE I. T. ACT, 1961 ON 04/03/2013 AND THE INCOME WAS ASSES SED AT RS.8,06,06,450/- AGAINST RETURNED INCOME AT RS.1,7 2,47,772/-. IN THIS CASE AN ADDITION OF RS. 6,28,80,474/- WAS MADE ON ACCOUNT OF BOGUS PURCHASES SURRENDERED BY THE ASSESSEE DURING SURVEY U/S. 133A CARRIED OUT AT THE BUSINESS PREMISES OF THE AS SESSEE ON 22/11/2012. DURING THE COURSE OF ASSESSMENT PROCEED INGS, THIS ADDITION WAS MADE ON THE BASIS OF THE FINDING THAT DURING YEAR, THE ASSESSEE HAS CLAIMED EXPENSES ON PURCHASE OF MATERI ALS WHICH WERE NOT SUBSTANTIATED EITHER AT THE TIME OF SURVEY OR SUBSEQUENTLY DURING ASSESSMENT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD ISSUED A SHOW CAUSE NOTICE ON 22/01/2013 TO SHOW CAUSE AS TO WHY ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 23 RS.6,28,80.474/- SHOULD NOT BE DISALLOWED IN VIEW O F THE STATEMENT RECORDED DURING SURVEY ACTION. THE ASSESSEE VIDE HI S LETTER DATED NIL FILED IN RESPONSE TO THE SAID SHOW CAUSE NOTICE HAS STATED AT PARA NO.2 OF THE SELF SUBMISSION WHICH IS REPRODUCED AS UNDER: 'WE HAVE ALREADY SUBMITTED OUR SURRENDER IN OUR STA TEMENT ON THE DATE OF SURVEY PROCEEDINGS'. ACCORDINGLY, THE AO DISALLOWED RS.6,28,80,474/- ON ACCOUNT OF BOGUS PURCHASES AND ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESSEE. 3. SINCE THE ASSESSEE HAD MADE PURCHASES FROM THE H AWALA DEALERS/ENTRY PROVIDERS DURING F.Y. 2008-09 & F. Y. 20 I 0-11 AND THE SAME WAS SURRENDERED DURING SURVEY ACTION, NOTI CES U/S, 148 WERE ISSUED FOR THESE TWO ASSESSMENT YEARS ALSO. DU RING REASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED THAT THE STATEMENT WAS GIVEN ON THE WRONG UNDERSTANDING OF FACTS AND A CCORDINGLY RETRACTED FROM THE EARLIER STATEMENT GIVEN DURING T HE COURSE OF SURVEY ACTION ON THE GROUND THAT THE SAID STATEMENT WAS GIVEN UNDER FORCE. THE ASSESSEE VIDE LETTER DATED 30/07/2014 HA S SUBMITTED THAT THE STATEMENT WAS GIVEN FOR ALL THE THREE YEARS, TH E RETRACTION MADE ALSO MADE APPLICABLE TO ALL THE THREE YEARS. IN SUP PORT OF THIS CONTENTION, THE ASSESSEE STATED THAT THE PURCHASES FROM ALL THE SO CALLED HAWALA DEALERS ARE GENUINE IN THE LIGHT OF T HE FACT THAT PROPER BILLS HAVE BEEN ISSUED BY ALL SUCH PARTIES AND THE ASSESSEE HAD MADE PAYMENTS BY CHEQUES AGAINST SUCH PURCHASES. IT HAS FURTHER SUBMITTED THAT THE ASSESSEE HAS UNDERTAKEN THE PROJ ECT FOR REPUTED COMPANIES SUCH AS M/S. GANON DUNKERLEY & CO LTD., M /S GVK PROPERTIES, M/S K. RAHEJA CONSTRUCTION, M/S. L & T, M/S. SHAPOORJI PALLANJI AND M/S. SIMPLEX INFRASTRUCTURE AND SUCH P ROJECTS CANNOT BE COMPLETED WITHOUT THE PURCHASE OF MATERIALS IN SUPP ORT OF ITS CONTENTION THE ASSESSEE HAS SUBMITTED DETAILS OF MA TERIALS CONSUMED AGAINST SALES WHICH REFLECTS THAT THE RATI O OF SALES TO MATERIALS CONSUMED IS MAINTAINED ALMOST UNIFORMLY O VER THE YEAR AS PER THE DETAILS ENCLOSED BY THE ASSESSEE. IT HAS FURTHER SUBMITTED THAT SINCE THOSE HAWALA PA RTIES HAD NOT PAID VAT COLLECTED FROM US TO THE SALES TAX DEPARTMENT, IT DOES NOT MEAN THAT THE PURCHASES ARE NOT GENUINE AND THEREFO RE THOSE PARTIES ARE DEFAULTERS ONLY IN TERMS OF NON-PAYMENT OF VAT TO THE SALE TAX DEPARTMENT, MAHARASBTRA. FURTHER, THE ASSE SSEE SUBMITTED THAT ALL SUCH PURCHASES ARE GENUINE AND N OT FOR THE PURPOSE OF REDUCING PROFIT MARGIN AS EVIDENT FROM T HE FACT TABLED BELOW THAT THE NET PROFIT OF THE ASSESSEE COMPANY H AS REMAINED ALMOST THE SAME AS COMPARED TO EARLIER YEARS AS WEL L AS SUBSEQUENT YEARS. 4. DURING THE COURSE OF REMAND PROCEEDINGS, IN ORDE R TO VERIFY WHETHER THE ASSESSEE HAS PURCHASED MATERIALS FROM H AWALA DEALERS ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 24 AT HIGHER RATE, THE ASSESSEE WAS ASKED TO FURNISH T HE DETAILS IN RESPECT OF SAME ITEMS PURCHASED FROM THE PARTIES OT HER THAN THE HAWALA DEALERS DURING THE SAME PERIOD. IT IS SEEN T HAT IN RESPECT OF SOME OF THE ITEMS, THE RATE OF THE ITEMS SUPPLIED B Y THE ENTRY PROVIDERS WAS HIGHER AS WELL AS LOWER ALSO BUT THE ULTIMATE EFFECT OF THE PURCHASES FROM ALL SUCH HAWALA DEALERS HAS RESU LTED INTO HIGHER PROFIT MARGIN SHOWN BY THE ASSESSEE. DURING THE REMAND PROCEEDINGS, THE ASSESSEE COULD P RODUCE PURCHASE ORDERS, INVOICES, DELIVERY CHALLANS IN RES PECT OF THE PURCHASES OF MATERIALS BOTH FROM HAWALA DEALERS AS WELL AS OTHER PARTIES BUT DID NOT PRODUCE LORRY RECEIPTS, STOCK REGISTER, MATERIAL INWARD AND OUTWARD REGISTER, IN SUPPORT OF DELIVERY OF GOODS. 6. IN VIEW OF THE FACT THAT THE DIRECTOR OF THE ASS ESSEE COMPANY HAD ADMITTED TO HAVE MADE PURCHASES FROM THE PARTIES DE CLARED HAWALA DEALERS BY THE SALES TAX DEPARTMENT, MAHARASHTRA AN D ACCORDINGLY SURRENDERED RS.6,28,80474/- AT THE TIME OF SURVEY, IT IS SUBMITTED THAT THE ASSESSEE'S RETRACTION FROM THE SURRENDER M ADE IN THE STATEMENT GIVEN AT THE TIME OF THE SURVEY PROCEEDIN GS IS WITHOUT ANY BASE AND EVIDENCES AS THE ASSESSEE ALSO FAILED TO P RODUCE LORRY RECEIPTS, STOCK REGISTER, INWARD AND OUTWARD REGIST ER. CONSUMPTION REGISTER, TO SUBSTANTIATE ITS CLAIM TO HAVE RECEIVE D THE GOODS SUPPLIED BY SUCH PARTIES. THEREFORE, THE APPEAL OF THE ASSESSEE DESERVES TO BE DISMISSED. HOWEVER, THE CASE MAY BE DECIDED ON MERITS. YOURS FAITHFULLY, (ASHOK P. JAKHANWAL) ASST. COMMISSIONER OF INCOME TAX, CIRCLC-2, THANE. COPY FOR INFORMATION TO; THE ADDL. COMMISSIONER OF INCOME TAX, RANGE-2, THANE. 25. IT IS CLEAR FROM THE REMAND REPORT THAT THE AO HAS DULY MENTIONED THE FACT THAT DURING ASSESSMENT PROCEEDINGS, THE AS SESSEE HAS CLAIMED THAT THOUGH THE STATEMENT WAS GIVEN ON WRONG UNDERS TANDING OF FACTS AND ACCORDINGLY RETRACTED FROM EARLIER STATEMENT GIVEN DURING THE COURSE OF SURVEY ACTION ON THE GROUND THAT THE SAID STATEMENT WAS GIVEN UNDER FORCE. FURTHERMORE, DURING THE REMAND PROCEEDINGS, IN ORDER TO VERIFY WHETHER THE ASSESSEE HAS PURCHASED MATERIALS FROM H AWALA DEALERS AT ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 25 HIGHER RATE, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS IN RESPECT OF SAME ITEMS PURCHASED FROM THE PARTIES OTHER THAN TH E HAWALA DEALERS DURING THE SAME PERIOD. THE ASSESSEE FURNISHED THE BILLS ASKED BY THE AO TO VERIFY THE CORRECTNESS AND AFTER VERIFICATION TH E AO OBSERVED IN THE REMAND REPORT THAT IN RESPECT OF SOME OF THE ITEMS, THE RATE OF THE ITEMS SUPPLIED BY THE ENTRY PROVIDERS WAS HIGHER AS WELL AS LOWER ALSO BUT THE ULTIMATE EFFECT OF THE PURCHASES FROM ALL SUCH HAWA LA DEALERS HAS RESULTED INTO HIGHER PROFIT MARGIN SHOWN BY THE ASSESSEE. IN THE REMAND REPORT THE AO ALSO OBSERVED THAT DURING THE REMAND PROCEEDINGS , THE ASSESSEE HAD PRODUCED PURCHASE ORDERS, INVOICES, DELIVERY CHALLA NS IN RESPECT OF THE PURCHASES OF MATERIALS BOTH FROM HAWALA DEALERS AS WELL AS OTHER PARTIES. IT MEANS THAT THE MATERIALS WERE ACTUALLY PURCHASED , IT MAY BE POSSIBLE THAT ACTUAL PURCHASES WERE MADE FROM ONE PARTY WHER EAS BILLS HAVE BEEN ISSUED BY OTHER PARTY. UNDER THESE CIRCUMSTANCES, E NTIRE PURCHASES SO MADE CANNOT BE ADDED, ONLY A PERCENTAGE OF SUCH PUR CHASES MAY BE ADDED KEEPING IN VIEW THE RATE OF GP & NP SHOWN BY ASSESSEE VIS--VIS OTHER ASSESSEE ENGAGED IN SIMILAR WORK AND THE FACT S AND CIRCUMSTANCES OF THE CASE. 26. NOW, COMING TO THE DISALLOWANCE OF ALLEGED BOGU S PURCHASES, WE FOUND THAT THESE SUPPLIERS WERE FOUND TO BE NON-GEN UINE BY THE SALES TAX DEPARTMENT, EVEN THOUGH IT WAS THE CONTENTION OF LD . AR THAT SUPPLIERS WERE REGISTERED WITH VAT WHERE STRINGENT PROCESS IS FOLLOWED FOR ISSUING VAT REGISTRATION LIKE PHOTO, VERIFICATION OF ADDRES S (RESIDENTIAL AND OFFICE), ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 26 RATION CARD AND PROOF OF RESIDENCE. HOWEVER, AT THE VERY SAME TIME, WE CANNOT IGNORE THE ACTUAL PURCHASES MADE BY THE ASSE SSEE, WHICH WAS UTILISED FOR ITS CONSTRUCTION PURPOSE AND SALES. DU RING REMAND PROCEEDINGS THE ASSESSEE HAS FILED DETAILS OF MATER IALS CONSUMED AGAINST SALES WHICH REFLECTED THAT THE RATIO OF UNIFORMLY O VER THE YEARS. THIS IS A FINDING RECORDED BY AO DURING REMAND PROCEEDINGS WH ICH HAS NOT BEEN CONTROVERTED BY LD. DR BY BRINGING ANY POSITIVE MAT ERIALS ON RECORD. IN THE REMAND PROCEEDINGS THE AO AFTER EXAMINING ALL SUCH PURCHASES OBSERVED THAT NET PROFIT OF THE ASSESSEE HAS REMAINED ALMOST THE SAME AS COMPARED TO THE EARLIER YEARS AS WELL AS SUBSEQUENT YEARS. MEANING THEREBY THERE IS NO INFLATION OF PURCHASES TO REDUC E THE NET PROFIT DURING THE YEARS UNDER CONSIDERATION. EVEN TO VERIFY THE F ACT OF ASSESSEE HAVING PURCHASED MATERIAL FROM HAWALA DEALERS AT A HIGHER PRICE, THE AO ASKED THE ASSESSEE TO FURNISH DETAILS IN RESPECT OF SOME OF THE ITEMS SO PURCHASED BY HAWALA DEALERS AND THE SIMILAR ITEM PU RCHASED FROM OTHER DEALERS, WHEREIN AFTER VERIFICATION, THE AO RECORDE D A FINDING TO THE EFFECT THAT THE RATE OF ITEMS SUPPLIED BY HAWALA DEALERS W AS HIGHER AS WELL AS LOWER ALSO BUT THE ULTIMATE EFFECT OF THE PURCHASES FROM ALL SUCH HAWALAS DEALERS HAS RESULTED IN THE HIGHER PROFIT MARGIN SH OWN BY THE ASSESSEE. IT MEANS THERE IS NO ADVERSE EFFECT OF THE PURCHASE SO MADE EVEN FROM THE HAWALA DEALERS, INSOFAR AS PURCHASE SO MADE HAVE AC TUALLY BEEN CONSUMED AND SIMILAR PROFIT HAS BEEN SHOWN BY THE A SSESSEE IN RESPECT OF THESE PURCHASES WHEN UTILIZED IN CONSTRUCTION AN D/OR SOLD. ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 27 27. WE HAD ALSO CAREFULLY GONE THROUGH THE PARTICUL ARS OF THE ALLEGED BOGUS BILLS, NATURE OF GOODS SUPPLIED, PRODUCTS SUP PLIED AND PAYMENTS DETAILS. WE HAD ALSO VERIFIED THE CONFIRMATION OF A CCOUNTS FOR PURCHASE OF GOODS, BANK STATEMENT SHOWING PAYMENTS MADE FOR ALL EGED PURCHASE BILLS. THE PURCHASE SO MADE WERE CONSUMED BY THE AS SESSEE IN THE BUSINESS OF ITS CIVIL AND INTERIOR WORK WHICH INCLU DES EXTERNAL AND INTERNAL GLAZING OF GLASS WORK AND PROVIDING & FIXING ALUMIN UM WINDOWS. WE HAD ALSO VERIFIED THE COMPARATIVE GP AND NP RATE SHOWN BY THE ASSESSEE WHICH APPEARS TO BE REASONABLE AS COMPARED TO THE O THER BUSINESS HOUSE ENGAGED IN THE SIMILAR LINE OF CIVIL AND INTERIOR W ORK. THE NET PROFIT RATE SHOWN BY THE ASSESSEE RANGED BETWEEN 3.04% TO 3.61% . 28. FROM THE RECORD WE FOUND THAT ASSESSEE HAD SHOW N GP RATE OF 16.39% AND 23.49% IN THE ASSESSMENT YEAR 2009-10 AN D 2010-11, WHICH IS MUCH BETTER THAN THE GROSS PROFIT RATE SHOWN IN THE ASSESSMENT YEAR 2008-09 AT 11.41%. MOREOVER THE GP RATE SHOWN BY TH E ASSESSEE IS COMPARABLE TO THE GP RATE SHOWN BY OTHER ASSESSEE E NGAGED IN SIMILAR TRADE. HOWEVER, TO SAFEGUARD THE INTEREST OF REVENU E AND TO COVER THE LEAKAGE OF REVENUE, IF ANYONE, AND ALSO TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE BEFORE US, WE DIRECT THE AO TO RESTRICT THE ADDITION TO THE EXTENT OF 2% OF ALLEGED BOGUS PURCHASES SO MADE. WE DIRECT ACCORDINGLY. 29. FACTS AND CIRCUMSTANCES IN THE YEAR 2010-11 & 2 011-2012 ARE PARI MATERIA , FOLLOWING THE REASONING GIVEN HEREINABOVE, WE RES TRICT THE ITA NOS.5450 TO 5452/MUM/2015 ASSESSMENT YEAR 2009-10 TO 2011-12 28 ADDITIONS IN THESE YEARS ALSO TO THE EXTENT OF 2% O F ALLEGED BOGUS PURCHASES SO MADE. WE DIRECT ACCORDINGLY. 30. IN THE RESULT, APPEALS OF ASSESSEE ARE ALLOWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20/07/ 2016. SD/ - (AMARJIT SINGH) SD/ - (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; &' DATED 20/07/2016 KESHARWANI SR.PS./PKM,PS. / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, MUMBAI 1. / THE ASSESSEE 2. / THE RESPONDENT. 3. ( ( ) / THE CIT(A), MUMBAI. 4. ( / CIT 5. )* + , , , , / DR, ITAT, MUMBAI 6. + - / GUARD FILE. ) //TRUE COPY//