GAJANAN BUILDERS, MUMBAI V. ITO 31(1)(5), MUMBAI

ITA 6156/MUM/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1154 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 29-10-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V VINOD KUMAR
• Assessee Lawyers: RAVI DASIJA
• Keywords: Bogus purchase; Peak credit; Tax effect
• Section: 133(6); 143(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G MUMBAI BEFORE SHRI RAJESH KUMAR, HON. ACCOUNTANT MEMBER & SHRI AMARJIT SINGH, HON. JUDICIAL MEMBER ITA NO. 6156/MUM/2018 (ASST. YEAR : 2011-12) M/S. GAJANAN BUILDERS, OFFICE NO. 20, PATEL INDUSTRIAL ESTATE, OPP. VEENA DALWAI INDUSTRIAL ESTATE, NAVPADA ROAD, JOGESHWARI (W), MUMBAI. VS. ITO - 31(1)(5) , ROOM NO. 307, C-13, 3 RD FLOOR, BCK, BANDRA (E) MUMBAI. PAN NO. AAGFG 1193 G (APPELLANT) (RESPONDENT) ITA NO. 5790/MUM/2018 (ASST. YEAR : 2011-12) ITO - 31(1)(5), ROOM NO. 307, C-13, 3 RD FLOOR, BCK, BANDRA (E) MUMBAI. VS. M/S. GAJANAN BUILDERS, OFFICE NO. 20, PATEL INDUSTRIAL ESTATE, OPP. VEENA DALWAI INDUSTRIAL ESTATE, NAVPADA ROAD, JOGESHWARI (W), MUMBAI. PAN NO. AAGFG 1193 G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI KIRAN MEHTA, FCA & SHRI RAVI DASIJA, FCA DEPARTMENT BY : SHRI V. VINOD KUMAR, SR.DR DATE OF HEARING : 04/12/2019. DATE OF PRONOUNCEMENT : 17/12/2019. 2 ITA NO.6156 & 5790/MUM/2018 (GAJANAN BUILDERS) ITA NO. 402/MUM/2015 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER THESE CROSS APPEALS BY THE ASSESSEE AND THE REVENUE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS)-42, MUMBAI, DATED 09/06/2018 FOR THE A.Y. 2011-12. ITA NO. 6156/MUM/2018 2. THE ISSUE CHALLENGED BY THE ASSESSEE IN THIS APPE AL IS AGAINST THE CONFIRMATION OF ADDITION TO THE TUNE OF RS. 10,72,944/- IS BASED ON THE PEAK THEORY AS AGAINST RS. 30,01,93 0/- DISALLOWANCE OF BOGUS PURCHASES MADE BY THE AO. TH E ADDITION CONFIRMED UNDER THIS GROUND BY CIT(A) COMES TO 35. 75% OF THE TOTAL PURCHASES. 3 . FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 24/07/2011 DECLARING TOTAL INCOME OF R S.20,01,165/- WHICH WAS PROCESSED U/S. 143(1) OF THE ACT. THEREA FTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY UNDER CAS S AND STATUTORY NOTICES WERE DULY ISSUED AND SERVED ON TH E ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS MADE TOTAL PURCHASES OF RS. 2.21 C RORES AND 3 ITA NO.6156 & 5790/MUM/2018 (GAJANAN BUILDERS) ITA NO. 402/MUM/2015 ACCORDINGLY ASKED THE ASSESSEE TO FILE THE DETAILS OF PURCHASES WHICH WERE SUBMITTED ON 26/12/2013. IN ORDER TO VE RIFY THESE PURCHASES, THE AO ISSUED NOTICES U/S. 133(6) OF THE ACT TO SOME PARTIES, HOWEVER, THE NOTICES ISSUED TO FOUR PARTIE S WERE RETURNED UNSERVED FROM WHOM THE PURCHASES TO THE EXTENT OF RS.30,01,930/- WERE MADE BY THE ASSESSEE DURING THE YEAR. THE AO ALSO OBSERVED THAT NAMES OF THESE PARTIES APPEAR ED IN THE LIST OF HAWALA DEALERS AS BROUGHT BY THE SALES-TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. THE AO CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THESE TRANSACTIONS BY FILI NG NECESSARY EVIDENCES. THE ASSESSEE VIDE LETTER DATED 25/02/20 14 FILED COPIES OF LEDGER ACCOUNTS, COPIES OF PURCHASE INVOICES AND DETAILS OF PAYMENTS AND SUBMITTED THAT NOTICES ISSUED U/S. 133 (6) COULD NOT BE SERVED ON THESE PARTIES AS THEY HAVE SHIFTED FRO M THEIR ORIGINAL PLACE OF BUSINESS. THE AO FINALLY TREATED THE PURC HASES AS BOGUS AND DISALLOWED THE ENTIRE AMOUNT AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. 4. IN THE APPELLATE PROCEEDINGS, THE LD.CIT(A) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE BY SUSTAINING THE ADDITION T O THE EXTENT OF RS. 10,72,944/- CALCULATED ON THE BASIS OF PEAK THE ORY WHICH COMES APPROXIMATELY TO 35.75% OF THE TOTAL PURCHASES. 4 ITA NO.6156 & 5790/MUM/2018 (GAJANAN BUILDERS) ITA NO. 402/MUM/2015 5. AGGRIEVED BY THE ORDER OF THE LD.CIT(A), THE ASSES SEE IS IN APPEAL BEFORE THIS TRIBUNAL. 6 . AFTER HEARING THE RIVAL CONTENTIONS OF BOTH THE P ARTIES AND PERUSING THE MATERIAL ON RECORD, WE OBSERVE THAT IN THIS CASE, UNDISPUTEDLY THE ASSESSEE IS BENEFICIARY OF HAWALA TRANSACTIONS OF PURCHASES. THE LD.CIT(A) HAS ACCEPTED THE FACT THA T THE ASSESSEE HAS MADE PURCHASES FROM GREY MARKET AND THUS SUSTAI NED THE PART DISALLOWANCE BASED ON THE PEAK THEORY WHICH WO RKED OUT TO 35.75% OF THE TOTAL PURCHASES. THE LD.AR PRAYED F OR THE BENCH THAT IN VIEW OF THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PCIT VS M/S MOHOMMAD HAJI ADAM & CO. IT A NO. 1004 OF 2016 AND OTHERS VIDE ORDER DATED 11.2.2019, THE PERCENTAGE SHOULD BE APPLIED TO ASSESS THE BOGUS PU RCHASES AFTER DEDUCTING THE GROSS PROFIT RATE OF THE ASSESSEE. 7 . HOWEVER, ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE IN THE EARLIER YEAR IN ITA NO.3570/MUM/2015 FOR THE A.Y. 2 010-11 WHEREIN, THE TRIBUNAL CONFIRMED THE ADDITION ON PEA K BASIS AS WORKED OUT BY THE LD.CIT(A). THE ASSESSEE HAS MADE THE PURCHASED GOODS FROM THE GREY MARKET BY OBTAINING T HE BOGUS BILLS FROM HAWALA PARTIES . UNDER THESE FACTS AND CIRCUMSTANCES, 5 ITA NO.6156 & 5790/MUM/2018 (GAJANAN BUILDERS) ITA NO. 402/MUM/2015 WE FIND FORCE IN THE ARGUMENT OF THE LD. DR THAT AF TER THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF PCI T VS M/S MOHOMMAD HAJI ADAM & CO. ITA NO. 1004 OF 2016 AND O THERS (SUPRA), THE PERCENTAGE SHOULD BE APPLIED ON THE BO GUS PURCHASES AFTER DEDUCTING THE PROFIT DECLARED BY THE ASSESSE E IN ORDER TO BRING BOGUS PURCHASES TO TAX. ACCORDINGLY, WE DIRE CT THE AO TO DECIDE THE ISSUE IN TERMS OF BOMBAY HIGH COURT DECI SION IN THE CASE OF PCIT VS M/S MOHOMMAD HAJI ADAM & CO. ITA NO . 1004 OF 2016 AND OTHERS (SUPRA). THUS, THIS GROUND OF APPE AL RAISED BY THE ASSESSEE IS PARTLY ALLOWED. 8 . GROUND NO.3 RAISED BY THE ASSESSEE IS AGAINST THE ORDER OF THE LD.CIT(A) IN NOT ACCEPTING THE PLEA OF THE ASSE SSEE THAT ADDITION MADE ON ACCOUNT OF PURCHASES WHICH GO TO R EDUCE THE WORK-IN-PROGRESS AND NO SEPARATE ADDITION CAN BE MA DE, AS THE ASSESSEE IS FOLLOWING PROJECT COMPLETION METHOD. 9. AFTER HEARING THE RIVAL CONTENTIONS OF THE PARTIES AND PERUSING THE MATERIAL ON RECORD, WE DO NOT FIND MER IT IN THE CONTENTIONS OF THE ASSESSEE THAT BOGUS PURCHASES SH OULD GO REDUCE THE WORK-IN-PROGRESS ON THE GROUND THAT THES E ARE BOGUS PURCHASES WHICH ARE TO BE BROUGHT TO TAX AND THEREF ORE THERE IS NO QUESTION OF ADJUSTING THE PROFIT IN THE ALLEGED BOG US PURCHASES 6 ITA NO.6156 & 5790/MUM/2018 (GAJANAN BUILDERS) ITA NO. 402/MUM/2015 AGAINST WIP OF THE ASSESSEE. ACCORDINGLY, THIS GRO UND OF APPEAL IS DISMISSED. ITA NO.5790/MUM/2018 10 . AT THE OUTSET, LD.AR SUBMITTED THAT THE TAX EFFE CT INVOLVED IN THIS APPEAL IS BELOW RS. 50.00 LAKHS AND AS PER THE LATEST CBDT CIRCULAR NO. 17/2019, DATED 08/08/2019, THIS APPEAL IS NOT MAINTAINABLE AND PRAYED FOR DISMISSAL. 11 . LD.DR FAIRLY ACCEPTED THE CONTENTIONS OF THE LD.A R. 12. IN VIEW OF THE STATEMENT GIVEN BY THE LD.AR, WE FI ND THAT TAX EFFECT INVOLVED IN THIS APPEAL IS BELOW RS. 50.00 L AKHS AND AS PER CBDT CIRCULAR NO. 17/2019, DATED 08/08/2019, THIS A PPEAL IS NOT MAINTAINABLE AND HENCE, DISMISSED. 13. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY AL LOWED AND THAT OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH DECEMBER, 2019 SD/- SD/- ( AMARJIT SINGH ) ( RAJESH KUMAR ) JUDICIAL MEMBER ACC OUNTANT MEMBER DATED : 17 TH DECEMBER, 2019. VR/- COPY TO: 7 ITA NO.6156 & 5790/MUM/2018 (GAJANAN BUILDERS) ITA NO. 402/MUM/2015 1. THE ASSESSEE M/S. GAJANAN BUILDERS, OFFICE NO. 20 , PATEL INDUSTRIAL ESTATE, OPP. VEENA DALWAI INDUSTRI AL ESTATE, NAVPADA ROAD, JOGESHWARI (W), MUMBAI. 2. THE REVENUE ITO-31(1)(5), ROOM NO. 307, C-13, 3 RD FLOOR, BCK, BANDRA (E) MUMBAI. 3. THE PR.CIT-31, MUMBAI. 4. THE CIT(A)-42, MUMBAI. 5. THE D.R., MUMBAI. 6. GUARD FILE. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR I.T.A.T., MUMBAI