HICON CONSTRUCTION , Mumbai V. DCIT, CENTRAL CIRCLE-5(1), Mumbai

ITA 638/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1434 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2021
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 06-02-2019
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GURBINDER SINGH
• Keywords: Bogus purchase; Document seized; Accommodation entries; Documents seized
• Section: 131

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI SHRI SHAMIM YAHYA (AM) & SHRI VIKAS AWASTHY (JM) I.T.A. NO. 638/MUM/2019 (ASSESSMENT YEAR 2008-09) I.T.A. NO. 639/MUM/2019 (ASSESSMENT YEAR 2010-11 ) HICON CONSTRUCTIONS B-201, LEO APARTMENTS 24 TH ROAD, KHAR WEST MUMBAI-400 052. PAN : AAEFH32281J VS. DCIT, CC-5(1) AIR INDIA BUILDING 19 TH FLOOR NARIMAN POINT MUMBAI-400 021. (APPELLANT) (RESPONDENT) ASSESSEE BY MS. NEHA PARANJPE DEPARTMENT BY SHRI GURBINDER SINGH DATE OF HEARING 1 7 . 1 2 . 20 2 0 DATE OF PRONOUNCEMENT 10.02.2021 O R D E R PER SHAMIM YAHYA (AM) :- THESE APPEALS BY THE ASSESSEE WHEREIN THE ASSESSEE IS AGGRIEVED THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING 25% DISALLOW ANCE ON ACCOUNT OF BOGUS PURCHASES BY HIS COMMON ORDER DATED 28.11.2018 AS U NDER :- A.Y. 2008-09 RS. 72,11,374/- A.Y. 2010-11 RS. 48,51,140/- 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENG AGED IN THE BUSINESS OF CONSTRUCTION. INFORMATION WAS RECEIVED FROM THE SAL ES TAX DEPARTMENT THAT ASSESSEE HAS MADE BOGUS PURCHASES. THE ASSESSMENT W AS ACCORDINGLY REOPENED. THE ASSESSING OFFICER IN THIS CASE HAS MA DE 100% ADDITION ON ACCOUNT OF BOGUS PURCHASES AS UNDER :- A.Y. 2008-09 RS. 2,88,45,497/- A.Y. 2010-11 RS. 19,40,455/- M/S. ARIHANT UNIVERSAL REALTY PVT. LTD. & OTHERS 2 3. UPON ASSESSEES APPEAL ID CIT A REDUCED THE SAME TO 25% OF BOGUS PURCHASE FOLLOWING HON'BLE GUJARAT HIGH COURT DECIS ION IN N.K. PROTEINS LTD. (250 ITR 22). LEARNED CIT(A) HAS HELD AS UNDER :- A PERUSAL OF THE INVESTIGATION REPORT OF THE DDIT(INV) 1(4) MUMBAI SHOWS THAT AN FINANCIAL INVESTIGATION UNIT- SUSPICIOUS TRANSACTI ON REPORT (FIU-STR) WAS RECEIVED IN RESPECT OF ONE SHRI KRISHNA KUMAR GUPTA. THE INVESTIGATION SHOWED THAT SHRI GUPTA WAS OPERATING AND MANAGING VARIOUS ENTI TIES THROUGH WHICH ACCOMMODATION ENTRIES WERE BEING PROVIDED. M/S HICON CONSTRUCTIONS, THE APPELLANT IN THIS APPEAL, WAS ONE SUCH BENEFICIARY. SHRI GUPTA ADMITTED TO PROVIDING BOGUS BILLS IN HIS STATEMENT RECORDED U/S 1 31 AND LISTED THE ENTITIES INVOLVED. TO SPECIFIC QUESTIONS, SHRI GUPTA CONFIRM ED THAT CREDIT OF CHEQUES FROM M/S HICON CONSTRUCTIONS REFLECTED IN BANK STATEM ENT OF MUNI TRADE LTD AND YASHOBHUMI TRADERS P. LTD. INJANAKALYAN SAHAKAR I BANK LTD, WERE IN RESPECT OF BOGUS BILLS AND THAT NO MATERIAL WAS ACTUAL LY SUPPLIED AND THAT CASH WAS RETURNED TO M/S HICON CONSTRUCTIONS. AN OPEN ENQUI RY WAS THEREAFTER CONDUCTED. STATEMENT OF MOHD. RAFIQUE NAZIR SHAIKH WAS RECORDED U/S 131. THE BILLS WHICH HAD EITHER NO DELIVERY CHALLANS OR T HERE IS NO MENTION OF TRUCK/VEHICLE/LORRY NO. OR STAMPING OF RECEIPT OF MATE RIAL WERE IDENTIFIED AS BOGUS BILLS. 10 SUCH PARTIES FROM WHOM SUCH PURCHASE S WERE CLAIMED WERE IDENTIFIED. SHRI SHAIKH WAS CONFRONTED WITH THE DISCR EPANCIES AND ALSO SHOWN THE STATEMENT RECORDED OF SHRI GUPTA. SHRI SHAIKH IN HI S STATEMENT THAT WAS RECORDED, ADMITTED TO THE DISCREPANCIES POINTED OUT BY THE DDIT(INV) IN RESPECT OF VARIOUS BILLS BY COMPARING BILLS OF ASHOKA BUILD CON LTD, MAHAVIR INDUSTRIES WITH THE BILLS ISSUED BY ELECON IMPEX P LTD., MUNI TRADE P LTD. SHRI SHAIKH ADMITTED TO THE FACT THAT THERE WAS NO STAMP OF DELIVERY , TRUCK NOS, IN THE BILLS WHICH WERE SUSPECT. BASED ON THIS EXERCISE, THE PURCH ASES CLAIMED FROM THE 10 PARTIES WERE IDENTIFIED INCLUDING MUNI TRADE P. LTD A ND YASHOBHUMI TRADERS P. LTD. FROM WHOM PURCHASES OF RS 4,93,70,825/- WAS CLA IMED BY THE APPELLANT OVER AY 2007-08, 2008-09 AND AY 2010-11. SHRI SHAIK H ADMITTED ALSO THAT THESE 10 PARTIES WERE ALSO LISTED BY THE MAHARASHTRA S ALES TAX AUTHORITIES AS HAWALA DEALERS. SHRI SHAIKH WAS EVASIVE IN HIS REPL IES IN AS MUCH AS HE STATED THAT MATERIAL WAS ACTUALLY PURCHASED THOUGH THE DOCUMEN TATION WAS INCOMPLETE. HE ALSO STATED THAT HE WAS UNABLE TO COMMENT ON THE STATEMENT OF SHRI GUPTA. HOWEVER, FINALLY HE DID STATE THAT PURCHAS ES OF RS 11,20,777/- IN FY 2006-07, RS 2,88,45,497/- IN FY 2007-08 IS OFFER ED AS INCOME IN AY 2009- 10 WHEN PROJECT WAS COMPLETED AND RSL,94,04,551/- IN AY 2010-11. 6.2. THUS IT IS OBSERVED THAT THE CONTENTION THAT OPPORTUN ITY WAS NOT GIVEN TO REBUT THE FINDINGS IN RESPECT OF IMPUGNED PURCHASES IS NOT FACTUALLY CORRECT. THE APPELLANT HAS ALSO CONTENDED THAT WITHOUT PREJUDICE TO ITS CONTENTION THAT THERE ARE NO BOGUS PURCHASES, THE PURCHASES FROM OTHE R PARTIES MAY HAVE BEEN MADE AND THE DISALLOWANCE BE RESTRICTED TO PROFIT ELE MENT AND FURTHER THAT THE PROFITS ACTUALLY DECLARED IS QUITE HIGH AND FURTHER DISALLOWANCE BY ASSESSING OFFICER HAS RESULTED IN PROFITS THAT ARE UNREALISTIC AND IMPROBABLE. THE APPELLANT HAS FILED A WORKING AS PER WHICH IT IS CLAI MED THAT THE NET PROFIT OFFERED ON ITS CONSTRUCTION PROJECT IS RS 10.72 CRORES WHICH IS 31.66% OF THE PROJECT SALES. M/S. ARIHANT UNIVERSAL REALTY PVT. LTD. & OTHERS 3 6.3. ON MERITS IT IS NOTED THAT THE TAX AUDIT REPORT STATES THAT QUANTITATIVE ACCOUNTS ARE NOT MAINTAINED. THE INCOME AND PROFITS R EFLECTED IN AUDITED ACCOUNTS AND RETURNS OF INCOME FILED ARE AS TABULATE D BELOW. A.Y.2007-08 A.Y. 2008-09 A.Y. 2009-10 A.Y.2010-11 PROJECT INCOME 17,96,996 25,44,757 33,86,92,450 - OTHER INCOME 51,049 - - 20,45,457 TOTAL INCOME 18,48,045 25,44,757 33,86,92,450 20,45,457 PROFIT BEFORE APPROPRIATION 12,65,618 19,44,836 9,95,41,860 152,170 SALARY TO PARTNERS 5,58,748 8,00,000 10,00,000 1,13,368 NET PROFIT 7,06,870 11,44,836 9,85,41,860 38,802 NP AS % OF INCOME 38.20% 44.96% 29.09% 1.89% ADDITION TO CONSTRUCTION COST (INCLUDING PURCHASES) DURING THE YEAR 4,49,48,79T (2,83,61,309) 636,18,918 (3,86,00,898) 6,32,12,585 3,21,82,195 (57,29,669) DISALLOWANCE 11,20,777 2,88,45,497 - 1,94,04,551 6.4. PERUSAL OF DETAILS CALLED ALSO SHOWS THAT IN AY 2009-10, THE AUDITED ACCOUNTS SHOWED ON MONEY RECEIVED AS RS.4.86 CRORES AGAINST WHICH EXPENDITURE AS PER SEIZED DOCUMENTS WAS CLAIMED AS R S. 4.87 CRORES. IF THE ON-MONEY IS INCLUDED IN PROJECT SALES, THE PROFIT DISC LOSED ON THE PROJECT COMES DOWN TO 25.6%. HOWEVER, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER RESULTS IN NET PROFIT ON PROJECT AT 38.22%. THIS CERTAINLY IS QUITE HIGH AND OUT OF INDUSTRY NORMS. THIS, IN MY VIEW, SUGGESTS THAT THE PURCHASES ARE MADE, BUT FROM ELSEWHERE. 6.5. EVEN IF MATERIALS HAVE BEEN PURCHASED, THEY AR E NOT PURCHASED FORM THESE PARTIES AND MAY BE IN CASH FROM UN-DISCLOSED PA RTIES. BY PURCHASING FROM THE GREY MARKET, THE APPELLANT WOULD HAVE BENEFITT ED BY THE SAVINGS OF TAXES. DIRECT STATEMENT OF SHRI GUPTA APPLIES TO PURCHASE S FROM ONLY TWO ENTITIES VIZ. MUNI TRADE P. LTD AND YASHOBHUMI TRADERS P. LTD. FROM WHOM PURCHASES CLAIMED ARE RS 2.88 CRORES. THE BALANCE P URCHASES OF RS 1.94 CRORES ARE DISALLOWED BASED ON PATTERN NOTED ON BILLS AND RECEIPT. I AM GUIDED BY THE RATIO OF DECISION OF THE HON'BLE GUJARA T HIGH COURT IN THE CASE OF CIT VS SIMIT P. SHETH PRONOUNCED ON 16.1.2013 IN TA X APPEAL NO.5531 OF 2012 WHEREIN THE HON'BLE COURT HAVE HELD THAT WHEN THE TOTAL SALE IS ACCEPTED BY THE AO, THEN THE ENTIRE PURCHASES CANNOT BE ADDED TO THE M/S. ARIHANT UNIVERSAL REALTY PVT. LTD. & OTHERS 4 INCOME OF THE APPELLANT. THE HON'BLE COURT HAVE, THERE FORE, HELD THAT FAIR PROFIT RATIO WOULD BE NEEDED TO BE ADDED BACK TO THE I NCOME OF THE ASSESSEE. 6.6. THUS IN THE FACTS OF THE CASE, CONSIDERING THE HIGH LEVEL OF NET PROFIT DISCLOSED, IT IS DEEMED PROPER TO RESTRICT THE DISALLOW ANCES AT 25%. THE DISALLOWANCES ARE THEREFORE RESTRICTED TO RS.2,80,19 5/- IN AY 2007-08, RS.72,11,374/- IN AY 2008-09 AND RS.48,51,140/- IN AY 2010-L1. 4. AGAINST ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. UPON CARE FUL CONSIDERATION WE FIND THAT ASSESSEE HAS PROVIDED THE DOCUMENTARY EVIDENCE FOR THE PURCHASE. ADVERSE INFERENCES HAVE BEEN DRAWN DUE TO THE INABI LITY OF THE ASSESSEE TO PRODUCE THE SUPPLIERS AND ALSO THE STATEMENT OF THE PARTNER OF THE ASSESSEE FIRM. WE FIND THAT IN THIS CASE THE SALES OR ANY OT HER ASPECT OF ASSESSEE'S WORKINGS HAVE NOT BEEN DOUBTED. IT IS SETTLED LAW T HAT WHEN SALES ARE NOT DOUBTED, HUNDRED PERCENT DISALLOWANCE FOR BOGUS PUR CHASE CANNOT BE DONE. THE RATIONALE BEING NO SALES IS POSSIBLE WITHOUT AC TUAL PURCHASES. THIS PROPOSITION IS SUPPORTED FROM HONOURABLE JURISDICTI ONAL HIGH COURT DECISION IN THE CASE OF NIKUNJ EXIMP ENTERPRISES (IN WRIT PETIT ION NO 2860, ORDER DATED 18.6.2014). IN THIS CASE THE HONOURABLE HIGH COURT HAS UPHELD HUNDRED PERCENT ALLOWANCE FOR THE PURCHASES SAID TO BE BOGU S WHEN SALES ARE NOT DOUBTED. HOWEVER IN THAT CASE ALL THE SUPPLIES WERE TO GOVERNMENT AGENCY. IN THE PRESENT CASE THE FACTS OF THE CASE INDICATE THA T ASSESSEE HAS MADE PURCHASE FROM THE GREY MARKET. THIS IS ALSO THE FIN DING OF LEARNED CIT(A). MAKING PURCHASES THROUGH THE GREY MARKET GIVES THE ASSESSEE SAVINGS ON ACCOUNT OF NON-PAYMENT OF TAX AND OTHERS AT THE EXP ENSES OF THE EXCHEQUER. IN SUCH SITUATION IN OUR CONSIDERED OPINION ON THE FAC TS AND CIRCUMSTANCES OF THE CASE THE 12.5% DISALLOWANCE OUT OF THE BOGUS PU RCHASES MEETS THE END OF JUSTICE. 5. IN THIS REGARD WE ALSO NOTE THAT ID COUNSEL OF T HE ASSESSEE HAS SUBMITTED THAT IN ASSESSEE'S OWN CASE FOR A.Y. 2007-08, ITAT IN SIMILAR FACTS HAS RESTRICTED THE DISALLOWANCE TO 12.5%. A.Y. 2007-08 IS ALSO A PORT OF COMMON ORDER OF LEARNED CIT(A) AND IT IS NOT THE CASE OF T HE REVENUE THE ITAT ORDER HAS BEEN REVERSED BY HON'BLE HIGH COURT. HENCE, IN THE BACKGROUND OF THE M/S. ARIHANT UNIVERSAL REALTY PVT. LTD. & OTHERS 5 AFORESAID DISCUSSION AND PRECEDENT WE MODIFY THE OR DER OF LEARNED CIT(A) AND DIRECT THAT DISALLOWANCE BE RESTRICTED TO 12.5% OF THE BOGUS PURCHASES. 6. IN THE RESULT, THESE APPEALS FILED BY THE ASSESS EE ARE PARTLY ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE ITAT RULE S BY PLACING THE RESULT ON NOTICE BOARD ON 10.2.2021. SD/- SD/- (VIKAS AWASTHY) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 10/02/2021 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR) PS ITAT, MUMBAI