ACIT 9(3(2), MUMBAI V. G.L. CONSTRUCTIONS P.LTD, MUMBAI

ITA 6663/MUM/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0492 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 11-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: N R AGARWAL
• Keywords: Bogus purchase; Business expenditure; Maximum Marginal Rate
• Section: 143(3); 133A; 133(6); 148; 10

Judgement Text

P A G E | 1 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, M UMBAI BEFORE SHRI RAJENDRA , AM AND SHRI RAVISH SOOD, JM ITA NO S. 6663 /MUM/201 6 ( / ASSESSMENT YEAR S : 2009 - 10 ) ASSTT. COMMISSIONER OF INCOME TAX - 9(3 )( 2 ), R. NO. 18, 4 TH FLOOR, AAYAKAR BHAWAN , M.K ROAD, M UMBAI - 400 0 20 . / VS. M/S G.L. CONSTRUCTION PVT. LTD . PLOT NO. 5, ROAD NO. 6, HATKESH CO - OPERATIVE HOUSING SOCIETY, JVPD SCHEME, VILE PARLE (E), MUMBAI - 400 05 6 . ./ ./ PAN NO. AAACG3438P ( / REVENUE ) : ( / ASSESSEE ) / REVENUE BY : SHRI RAM TIWARI , D.R / ASSESSEE BY : SHRI N.R. AGARWAL / DATE OF HEARING : 07 . 1 1 .201 7 / DATE OF PRONOUNCEMENT : 31 .01 .2018 / O R D E R PER RAVISH SOOD, JUDICIAL MEMBER: THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 16 , MUMBAI, DATED 24.08.2016 , WHICH IN ITSELF ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC.143(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT), DATED 30.03.2015 . THE REVENUE HAD ASSAIL ED BEF ORE US THE ORDER OF THE CIT(A) ON THE F OLLOWING GROUNDS : P A G E | 2 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE ON ACCOUNT OF BOGUS PURCHASES IGNORING THE FACT THAT DURING THE COURSE O F SURVEY PROCEEDINGS, THE MANAGING DIRECTOR OF THE COMPANY ADMITTED THAT PURCHASE MADE FROM THE PARTIES WERE NON - GENUINE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A O ON ACCOUNT BOGUS PURCHASES WHEN THE ASSESSEE HAS FAILED TO GIVE ANY QUANTITY WISE TALLY OF PURCHASES AND ITS CONSUMPTION IN MANUFACTURING PROCESS TO ESTABLISH THE GENUINENESS OF THE PURCHASES MADE FROM VARIOUS HAWALA PARTIES? 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE SUPPRESSED PROFIT ON ACCOUNT OF BOGUS TRANSACTION WAS TO ESTIMATED AT 12.5% OF THE NET PURCHASES IGNORING THE FACT THAT THE ASSESSEE WAS A CONTRACTOR WHO CONSUMES TH E PURCHASES MADE BY IT IN THE COURSE OF ITS BUSINESS; THAT ONE TO ONE CO - RELATION BETWEEN ITEM OF PURCHASE AND SALE CANNOT BE ESTABLISHED IN SUCH CASE; AND THEREFORE, THE TOTAL INCOME ARRIVED ON THE BASIS OF ESTIMATION OF PROFIT ATTRIBUTABLE TO SUCH BOGUS PURCHASE IS NOT VALID IN SUCH CASES? THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY WHICH IS ENGAGED IN THE BUSINESS OF A CIV IL CONTRACTOR HAD HAD FILED ITS RETURN OF INCOME FOR A.Y. 2009 - 10 ON 29.09.2009 , DECLARING TOTAL INCOME OF RS. 3,73,64,826 / - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED AS SUCH UNDER SEC. 143(1) OF THE ACT. THE CASE OF THE ASSESSEE WAS THEREAF TER TAKEN UP FOR SCRUTINY ASSESSMENT AND ITS INCOME WAS ASSESSED U/S 143(3) ON 13.06.2011 AT RS. 3,18,38,780/ - . SUBSEQUENTLY, ON THE BASIS OF INFORMATION RECEIVED BY THE A.O FROM THE SALES TAX AUTHORITY THAT THE ASSESSEE COMPANY WAS INVOLVED IN BOGUS PURCH ASE/HAWALA TRANSACTIONS DURING THE YEAR UNDER CONSIDERATION , THE CASE OF THE ASSESSEE WAS REOPENED U NDER SEC. 147 OF THE ACT. THE ASSESSEE IN COMPLIANCE TO THE NOTICE UNDER SEC. 148 REQUESTED THAT ITS ORIGINAL RETURN OF INCOME MAY BE TREATED AS THE RETURN OF INCOME FILED IN RESPONSE TO THE SAME . P A G E | 3 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. 3. TH E A. O WHILE FRAMING THE ASSESSMENT OBSERVED THAT SURVEY PROCEEDINGS UNDER SEC. 133A OF THE ACT WERE CONDUCTED BY THE DDIT(INV.), UNIT - IV(4), MUMBAI ON 07.06.2012 AT THE OFFICE PREMISES OF THE ASSESSEE COMPANY AT 304, GOKUL ARCADE - B, SUBHASH ROAD, NEAR GARWARE, VILE PARLE (EAST), MUMBAI. THAT DURING THE COURSE OF THE SURVEY PROCEEDINGS THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY , VIZ. SH. SUNIL MATHREJA IN HIS STATEMENT ADMITTED TO HAVE GENERATED CASH BY BOOK ING BOGUS PURCHASES. THAT SH. SUNIL MATHREJA ON BEING CALLED UPON TO DESCRIBE THE PROCESS THROUGH WITH THE SHARE CAPITAL WAS RAISED BY THE ASSESSEE COMPANY , ADMITTED THAT THE SHARE CAPITAL APPEARING IN THE BOOKS OF ACCOUNT WERE JUST ENTRIES WHICH THE ASSES SEE COMPANY HAD PROCURED FROM THE RESPECTIVE PARTIES AFTER PROVIDING EQUIVALENT AMOUNT OF CASH TO THEM. THE A.O OBSERVED THAT THE ASSESSEE DURING THE COURSE OF THE SURVEY PROCEEDINGS HAD ADMITTED OF HAVING BOOK ED BOGUS PURCHASES IN ORDER TO MEET OUT CERTAIN EXPENDITURE WHICH WERE INCURRED FOR SMOOTH RUNNING OF BUSINESS, BUT HOWEVER, THE SAME DID NOT QUALIFY FOR THE CLAIM OF DEDUCTION AS A BUSINESS EXPENDITURE UNDER THE PROVISIONS OF THE INCOME TAX ACT. THE A.O OBSERVED THAT THE ASSESSEE ON THE BASIS O F HIS AFORESAID REVELATIONS HAD CAME UP WITH A N OFFER OF ADDITIONAL INCOME OF RS. 6,50,00,000/ - FOR A.YS 2010 - 11, 2011 - 12 AND 2013 - 14. HOWEVER, ON A SUBSEQUENT DATE I.E. 27.12.2012 SH. SUNIL G. MATHREJA BY WAY OF A SWORN AFFIDAVIT RETRACTED HIS EARLIER STA TEMENT RECORDED IN THE COURSE OF THE SURVEY PROCEEDINGS ON 07 TH /08 TH JUNE, 2012. 4. THAT DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O ON THE BASIS OF THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT THE ASSESSEE HAD MADE BOGUS PURCHAS ES FROM THE FOLLOWING PARTIES : - P A G E | 4 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. PARTY NAME AMOUNT SHYAM TRADERS 14,35,965/ - SANDESH SALES P. LTD. 8,59,242/ - MANI BHADRA SALES P. LTD. 10,64,079/ - RELIANCE STEEL TRADERS 19,98,493/ - AAYUSH ENTERPRISES 5,48,854/ - REAL TRADERS 29,05,418/ - ADARSHA TRADING COMPANY P. LTD. 19,81,376/ - SUNICO TRADERS P. LTD. 21,54,686/ - DHIREN MERCANTILE P. LTD. 6,20,038/ - ANSHU MERCANTILE P. LTD. 8,88,909/ - RISHABH ENTERPRISES 37,38,430/ - NEW ERA ENTERPRISES 37,88,572/ - CHAIR IMPEX TRADING P. LTD. 58,79,513/ - NAVYUG ENTERPRISES 4,12,261/ - SHARDA ENTERPRISES 6,33,776/ - HETA SALES P. LTD. 9,05,981/ - AKSHATA ENTERPRISES 9,07,546/ - SHANTI ENTERPRISES 11,58,195/ - SURYA ENTERPRISES 13,02,151/ - SIDDHIVINAYAK TRADERS 13,51,201/ - ANSA SALES AGENCY P. LTD. 14,09,930/ - UMIYA SALES AGENCY P. LTD. 15,40,266/ - CIMCO CORPORATION 15,59,095/ - CENTENARY TRADE LINK 18,25,163/ - SUSHMITA INTERNATIONAL 27,17,961/ - BHAVI SALES AGENCY P. LTD. 67,98,765/ - TOTAL 5,03,85,966/ - P A G E | 5 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. , THEREFORE , IN ORDER TO VERIFY THE AUTHENTICITY OF THE AFORESAID PURCHASE TRANSACTIONS ISSUED SUMMONS UNDER SEC. 131(1) TO THE SAID PARTIES, WHICH HOWEVER WERE RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARKS LEFT OR NOT KNOWN. THE A.O DEPUTED TWO INSPECTORS O F INCOME TAX TO EFFECT SERVICE OF THE SUMMONS ON THE SAID PARTIES . THE INSPECTORS OF INCOME TAX REPORTED THAT AS THREE OF THE AFORESAID PARTIES, VIZ. (I) M/S ABHI SALES; (II) M/S ADARSH TRADING CO. PVT. LTD.; AND (III) M/S SUNICO TRADERS PVT. LTD. WERE NOT EXISTING AT THE IR RESPECTIVE ADDRESSES , THEREFORE, THE SUMMONS COULD NOT BE SERVED ON THEM. TH E A.O OBSERVED THAT AS REGARDS THE OTHER THREE PARTIES ON WHOM SUMMONS WERE SERVED AT THE GIVEN ADDRESSES, NEITHER OF THEM APPEARED IN PERSON IN RESPONSE TO THE SAME. THE A.O FURTHER ISSUED LETTERS UNDER SEC. 133(6) TO ALL OF THE AFORESAID PARTIES, WHICH HOWEVER WERE RETURNED U NSERVED BY THE POSTAL AUTHORITIES. 5. THE A.O IN THE BACKDROP OF THE AFORESAID FACTS DIRECTED THE ASSESSEE TO PROVE THE AUTHENTICITY OF THE PURCHASE TRANSACTIONS UNDER CONSIDERATION AND PLACE ON RECORD DOCUMENT S EVIDENCING THE TRANSPORTATION OF THE GOODS AND CONSUMPTION OF THE SAME IN THE COURSE OF ITS BUSINESS. THE ASSESSEE IN COMPLIANCE TO THE DIRECTIONS OF THE A.O SUBMITTED A CERTIFICATE OF MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY (FOR SHORT MMRDA) AND THE AUTHORIZED CERTIFIED LAB/AGENCY TO S HOW THAT THE MATERIALS HAD BEEN CONSUMED AS PER THE FORMULA SPECIFIED IN THE CONTRACT DOCUMENT, WHICH WOULD NOT HAD BEEN POSSIBLE HAD THE ABOVE PURCHASE S BEEN BOGUS. THE ASSESSEE IN ORDER TO DRIVE HOME THE GENUINENESS OF THE PURCHASE TRANSACTIONS UNDER CON SIDERATION , SUBMITTED THAT THE PAYMENTS WERE RELEASED TO THE ASSESSEE BY THE GOVERNMENT AND MMRDA ETC. AFTER DETAILED INSPECTIONS OF THE ROADS CONSTRUCTED BY IT, WHICH TH US IRREFUTABLY PROVED THAT THE MATERIALS PURCHASED HAD BEEN CONSUMED P A G E | 6 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. IN THE EXECUTION OF THE CONTRACT WORKS OF CONSTRUCTION OF ROADS BY THE ASSESSEE. THE ASSESSEE TAKING SUPPORT OF THE FACT THAT THE PAYMENT OF THE PURCHASE CONSIDERATION TO THE AFOREMENTIONED SUPPLIER PARTIES WAS MADE VIDE ACCOUNT PAYEE CHEQUES, THUS, TRIED TO FORTIFY ITS CLAIM AS REGARDS THE VERACITY OF THE PURC HASE TRANSACTIONS UNDER CONSIDERATION. THE ASSESSEE FURTHER IN ORDER TO DISPEL THE DOUBTS RAISED BY THE A.O AS REGARDS THE GENUINENESS OF THE AFOREMENTIONED PARTIES , SUBMITTED THAT ALL OF THE SAID PARTIES WERE REGIS TERED UNDER THE SALES TAX AND V AT, WHICH FACT COULD SAFELY BE GATHERED ON A PERUSAL OF THEIR RESPECTIVE INVOICES. HOWEVER, THE A.O WAS NOT PERSUADED TO ACCEPT THE GENUINENESS OF THE PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONE D PARTIES , FOR CERTAIN REASONS, VIZ. (I) THE ASSESSEE HAD FAILED TO PRODUCE STOCK REGISTER OR TRANSPORT DETAILS, LORRY RECEIPTS, DELIVERY CHALLANS ETC. WHICH WOULD PROVE THAT THE GOODS PURCHASE D WERE ACTUALLY DELIVERED TO THE ASSESSEE; (II) THAT SH. SUNIL MATHREJA, THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY IN HIS STATEMENT RECORDED DURING THE COURSE OF SURVEY PROCEEDINGS HAD ADMITTED OF HAVING MADE BOGUS PURCHASES; (III) THAT THE SUPPLIER PARTIES FROM WHOM THE ASSESSEE HAD CLAIMED TO HAVE MADE PURCHASES WERE BLACKLISTED BY THE SALES TAX (VAT) DEPARTMENT, STATE GOVERNMENT OF MAHARASHTRA AS HAWALA DEALERS WHO WERE MERELY ISSUING BILLS/INVOICES TO VARIOUS PARTIES WITHOU T ANY ACTUAL SUPPLY OF GOODS/MATERIAL; (IV) THAT AS PER THE INFORMATION RECEIVED FROM T HE SALES TAX DEPARTMENT THE ASSESSEE WAS ONE OF THE BENEFICIA RY OF THE AFORESAID HAWALA TRANSACTIONS; (V) THE ASSESSEE HAD FAILED TO BRING ON RECORD RELEVANT DOCUMENTARY EVIDENCE IN THE FORM OF GOODS RECEIVED NOTE (GRN), GOODS/SURVEY INSPECTION REPORT, INS TALLATION REPORT, WORK COMPLETION NOTE, LORRY RECEIPTS AND DETAILS OF TRANSPORTATION OF GOODS AND DOCUMENTARY EVIDENCE REFLECTING THE RELEVANT ENTRIES OF HAVING RECEIVED AND CONSUMED SUCH GOODS IN THE PREMISES OF THE ASSESSEE ; P A G E | 7 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. (V I ) THE HAWALA PARTIES HAD ADMITTED IN THEIR STATEMENTS RECORDED BEFORE THE SALES TAX AUTHORITIES THAT THEY HA D NOT DONE ANY GENUINE BUSINESS AND HAD MERELY ISSUED BOGUS SALES BILLS; (VI I ) THAT THE ASSESSEE DID NOT PRODUCE ANY OF THE ABOVEMENTIONED SUPPLIER PARTIES FOR EXAMINATION, SPECIFICALLY WHEN IT REMAINED AS A MATTER OF FACT THAT NEITHER OF THE SAID PARTIES WERE EXISTING AT THE GIVEN ADDRESSES. THE A.O FURTHER OBSERVED THAT THOUGH SH. SUNIL MATHREJA HAD IN HIS STATEMENT CLAIMED THAT TH E DELIVERY CHALLANS WERE DESTROYED AS A MAT TER OF ROUTINE PRACTICE IN THE LAST 5 - 6 YEARS, HOWEVER, THE SAID CLAIM MILITATED AGAINST THE FACT THAT THE SALES TAX DEPARTMENT IN THE COURSE OF THE SEARCH CONDUCTED AT THE PREMISES OF THE ASSESSEE COMPANY HAD LAID THEIR HANDS ON THE COPIES OF THE DELIVERY CHALLANS WHICH WERE AVAILABLE WITH THE ASSESSEE . THE A.O ON THE BASIS OF HIS AFORESAID OBSERVATIONS , H OLDING A CONVICTION THAT THE ASSESSEE HAD FAILED TO ESTABLISH THE GENUINENESS OF THE PURCHASES WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES, THEREFORE, DISALLOWED THE BOGUS PURCHASES AGGREGATING TO RS. 5,03,85,966/ - AND ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESSEE . 6. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). TH AT BEFORE THE CIT(A ) THE ASSESSEE FURNISHED COPY OF STOCK REGISTER ALONG WITH THE DETAILS OF CONSUMPTION OF THE MATERIAL PURCHASE D , DETAILS OF OPENING WORK IN PROGRESS, CLOSING WORK IN PROGRESS, STOCK STATEMENT AS ON 31.03.2008 AND 31.03.2009 AND THE CONSUMPTION FORMULA REQU IRED AS PER THE GOVERNMENT BOOKS. THE CIT(A) AFTER DELIBERATING ON THE MATERIAL PLACED ON RECORD BY THE ASSESSEE , OBSERVED THAT THE ASSESSES OWN CASE FOR A. Y . 2010 - 11 INVOLVING IDENTICAL FACTS WAS ADJUDICATED BY THE TRIBUNAL IN ITA NO. 2269/MUM/2015 . THE C IT(A) OBSERVED THAT THE TRIBUNAL WHILE DISPOSING OF THE AFORESAID APPEAL OF THE ASSESSEE HAD AFTER CONSIDERING P A G E | 8 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. AT LENGTH THE MATERIAL PLACED ON RECORD C ONCLUDED THAT NOW WHEN THE ASSESSEE HAD PROVE D THE CONSUMPTION OF THE MATERIAL IN THE COURSE OF THE EXECUTION OF CONTRACTS FOR CONSTRUCTION OF ROADS FOR GOVERNMENT AND MMRDA, WHICH WERE SUBJECT TO STRICT INSPECTION ON THE PART OF THE SAID AUTHORITIES , THEREFORE, THERE REMAINED NO OCCASION FOR DISALLOW ING THE ENTIRE AMOUNT OF PURCHASES CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES. THE CIT(A) OBSERVED THAT THE TRIBUNAL KEEPING IN VIEW THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE VIS - A - VIS THE RATE OF NET PROFIT SHO WN BY THE ASSESSEE, IN ORDER TO COVER UP LEAKAGE OF REVENUE, IF ANY , HAD RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 2% OF THE AGGREGATE OF THE PURCHASES UNDER CONSIDERATION. THE CIT(A) BEING OF THE VIEW THAT AS THE FACTS OF THE CASE FOR THE YEAR UNDER CO NSIDERATION, VIZ. A.Y. 2009 - 10 WERE PARI MATERIA TO THE FACTS AS WERE INVOLVED IN ITS CASE FOR A.Y. 2010 - 11 WHICH HAD BEEN DECIDED BY THE TRIBUNAL, THEREFORE, FOLLOW ED THE SAME AND RESTRICTED THE DISALLOWANCE OF THE PURCHASES TO THE EXTENT OF 2% OF THE AL LEGED BOGUS PURCHASES. 7. THE REVENUE BEING AGGRIEVED WITH THE ORDER PASSED BY THE CIT(A) HAD CARRIED THE MATTER IN APPEAL BEFORE US . THE LEARNED DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDER PASSED BY THE A.O AND SUBMITTED THAT THE CI T(A) HAD ERRED IN DISLODGING THE SAME. THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED THAT AS THE ISSUE UNDER CONSIDERATION WAS SQUARELY COVERED BY THE ORDER PASSED BY THE TRIBUNAL IN THE ASSESSE S OWN CASE FOR A.Y. 2010 - 11 IN ITA NO. 2269/MUM/2015, THEREFORE, THE CIT(A) OBSERVING THAT THE FACTS AND THE ISSUE INVOLVED IN THE CASE OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION, VIZ. A.Y. 2009 - 10 REMAINED THE SAME, HAD THUS RIGHTLY RESTRICTED THE DISALLOWANCE TO THE EXTEN T OF 2% OF THE ALLEGED BOGUS PURCHASES. P A G E | 9 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. 8. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES , PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT A B ARE PERUSAL OF THE FACTS AS HAD EMERGED FROM THE RECORDS CLEARLY REVEALS THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THE GENUINENESS AND VERACITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES WHICH HAD BEEN BLACKLISTED BY THE SALES TAX DEPARTMENT, MAHARASHT RA AS HAWALA DEALERS WHO WERE INVOLVED IN PROVIDING BOGUS ENTRIES WITHOUT ANY GENUINE SALE/SUPPLY OF GOODS. WE ARE OF THE CONSIDERED VIEW THAT KEEPING IN VIEW THE SUBSTANTIAL MATERIAL WHICH HAD BEEN PLACED ON RECORD BY THE ASSESSEE BEFORE THE LOWER AUTHORI TIES , VIZ. COPY OF THE STOCK REGISTER AND DETAILS OF CONSUMPTION AND MATERIAL PURCHASED, DETAILS OF OPENING WORK IN PROGRESS, CLOSING WORK IN PROGRESS, STOCK STATEMENT AS ON 31.03.2008 AND 31.03.2009 AND CONSUMPTION FORMULA REQUIRED AS PER GOVERNMENT BOOKS , IT CAN SAFELY BE CONCLUDED THAT THE PURCHASES CLAIMED BY THE ASSESSES TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTIES WERE UTILIZED BY THE ASSESSEE FOR THE CONSTRUCTION OF THE ROADS CARRIED OUT BY THE ASSESSEE IN THE COURSE OF THE EXECUTION OF ITS CONT RACT WORK S. WE FIND THAT A COORDINATE BENCH OF THE TRIBUNAL WHILE DISPOSING OF THE APPEAL IN THE ASSESSE S OWN CASE FOR A.Y 2010 - 11, WHEREIN IDENTICAL FACTS AND ISSUE WERE THERE BEFORE THE TRIBUNAL, HAD RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 2% OF AL LEGED BOGUS PURCHASES BY OBSERVING AS UNDER : 14. NOW, COMING TO THE DISALLOWANCE OF PURCHASES OF RS. 4,86,22,753/ - , WE FOUND THAT THESE SUPPLIERS WERE FOUND TO BE NON - GENUINE BY THE SALES TAX DEPARTMENT, EVEN THOUGH IT WAS CONTENTION OF LD. A.R THAT SUP PLIERS WERE REGISTERED WITH VAT WHERE STRINGENT PROCESS OF FOLLOWED FOR ISSUING VAT REGISTRATION LIKE PHOTO, VERIFICATION OF ADDRESS (RESIDENTIAL AND OFFICE), RATION CARD AND PROOF OF RESIDENCE, HOWEVER, WE FOUND THAT NOT ONLY AS PER P A G E | 10 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. THE SALES TAX DEPARTME NT BUT ALSO AS PER THE ENQUIRY MADE BY THE A.O. THESE SUPPLIERS WERE NOT FOUND AT THE GIVEN ADDRESS. HOWEVER, AT THE VERY SAME TIME, WE CANNOT IGNORE THE ACTUAL PURCHASES MADE BY THE ASSESSEE, WHICH WAS UTILIZED FOR ITS CONSTRUCTION PURPOSE AND SALES. BEFO RE THE AO THE ASSESSEE HAS FILED DETAILED STATEMENT OF CONSUMPTION OF QUANTITY OF MATERIAL SO PURCHASED VIS - A - VIS REQUIREMENT AS PER GOVERNMENT FORMULA AS PER THE THANE DISTRICT SCHEDULE AND RATES. THE ASSESSEE HAD ALSO FILED MATERIALS, DETAILS GIVING QUAN TITIES OF PURCHASE AND SALES, SUMMARY OF MONTHLY PURCHASES, QUANTITATIVE DETAILS OF DAILY PURCHASES FOR 12 MONTHS. THE ASSESSEE HAS FILED CORRESPONDING MONTHLY CONSUMPTION AND SALES AND QUANTITATIVE DETAILS OF SALES FOR 12 MONTHS, DETAILS OF WORK - IN - PROGRE SS AS AT THE END OF THE YEAR AND ALSO QUANTITATIVE DETAILS OF OPENING AND CLOSING STOCK. THE ASSESSEE HAS ALSO SUBMITTED BEFORE THE AO THE DETAILED STATEMENT OF MATERIAL REQUIRED AS PER FORMULA LAID DOWN BY THE STATE GOVERNMENT. WE HAD CAREFULLY GONE THROU GH ALL THESE STATEMENT PLACED ON RECORD AND FOUND THAT DURING THE YEAR ASSESSES HAD SHOWN TOTAL PURCHASES OF RS. 50,95,77,140/ - , WHICH WAS CONVERTED INTO SALES AMOUNTING TO RS. 57,77,31,972/ - . THUS, THE ASSESSEE HAS EARNED NET PROFIT OF RS. 3,87,60,606/ - W HICH WORKS OUT TO BE 6.70%. THE PROFIT OF 6.70% IN THE NATURE OF WORK BEING UNDERTAKEN BY THE ASSESSEE IS QUITE REASONABLE LOOKING TO THE NET PROFIT RATE SHOWN BY OTHER CONTRACTOR IN THE SIMILAR LINE OF BUSINESS. ACCORDINGLY, MERELY ON THE GROUND THAT SUPP LIER WAS FOUND TO BE BOGUS BY THE SALES TAX DEPARTMENT OR NOT AVAILABLE AT THE GIVEN ADDRESS IN RESPECT OF CERTAIN PURCHASES WHICH WERE ACTUALLY MADE FROM OTHERS AND ALSO USED IN CONSTRUCTION AND SALES, THE ENTIRE PURCHASE SO MADE CANNOT BE DISALLOWED, FOR THIS PROPOSITION RELIANCE CAN BE PLACED ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF NIKUNJ EXIM (SUPRA), ATMA PRAKASH BATHRA AND ALSO DELHI HIGH COURT IN THE CASE OF SUNRISE TOLLING PVT. LTD. (SUPRA). FROM THE RECORD WE ALSO FOUND THAT THE MATERIAL SO PURCHASES FOR CONSTRUCTION WAS AS PER THE WORK CONTRACT AND MMRDA AND CONSULTANT CERTIFICATE WAS OBTAINED FOR THE UTILIZATION OF THOSE MATERIALS. WE HAD ALSO COMPARED THE RATES AT WHICH ASSESSEE HAS PURCHASED THE GOODS WITH THE RATES P RESCRIBED BY THE THANE DISTRICT SCHEDULE RATE AS CONTAINED AT PAGE 73 TO 126 OF THE PAPER BOOK. WE HAD ALSO VERIFIED THE CERTIFICATE ISSUED BY MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY P A G E | 11 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. WITH REGARD TO AWARDING OF CONTRACT WORK OF WIDENING AND CONSTRU CTION OF EASTERN EXPRESS HIGHWAY TO THE ASSESSEE. THE CERTIFICATE SO ISSUED BY THE MUMBAI METROPOLITAN REGION DEVELOPMENT AUTHORITY ALSO CERTIFIED THAT THEY HAVE BEEN SUPERVISING THE WORK REGULARLY AND TAKING THE SAMPLES OF MATERIAL AND TESTING THE SAME AT GOVERNMENT AND PRIVATE LABORATORIES AS PRESCRIBED BY MMRDA. THE MATERIAL SO PURCHASED AND CONSUMED WAS FOUND TO BE CORRECT AS PER THE TENDER SPECIFICATIONS AND AS REQUIRED BY THE DSR PRESCRIBED BY PWD MAHARASHTRA GOVERNMENT. RELEVANT CERTIFICATES ARE PLAC ED AT PAGE 142 & 143 OF THE PAPER BOOK. THUS, THE ASSESSEE HAD PROVED THAT ROADS HAVE BEEN CONSTRUCTED AND MATERIALS ARE USED BY THE ASSESSEE WITHOUT WHICH ROAD COULD NOT HAVE BEEN CONSTRUCTED. ALL THE ABOVE DETAILS WERE FILED WITH THE AO ALONGWITH THE LAT TER DATED 05.02.2013. THE STATEMENT OF QUANTITATIVE PURCHASES YEARLY, MONTHLY AND DATE WISE IS PLACED AT PAGE1 TO 37 OF THE PAPER BOOK. CONSUMPTION REQUIRED DETAILS AS PER FORMULA FROM STATE GOVERNMENT IS PLACED AT PAGE 38 OF THE PAPER BOOK. YEARLY AND MON TH WISE AND BILL WISE SALES DETAILS WITH CONSUMPTION ARE PLACED AT PAGE 69 OF THE PAPER BOOK. DETAILS OF CLOSING WORK IN PROGRESS AS ON 31.03.2009 AND 31.03.2010 ARE PLACED AT PAGE 69 AND 70 OF THE PAPER BOOK. ITEM WISE PURCHASE AND STATEMENT FROM SUPPLIERS ARE PLACED AT PAGE 134 AND 135 OF THE PAPER BOOK. FROM THE RECORD, WE ALSO FOUND THAT ENGINEERS FROM GOVERNMENT AND MMRDA ARE CHECKING THE ROAD CONSTRUCTION AT REGULAR INTERVALS WHILE CONSTRUCTIONS IS IN PROGRESS & SAMPLES ARE SENT TO LABORATORIE S TO VERIFY CONSUMPTION , STRENGTH & QUALITY OF MATERIALS USED. THE AGENCIES COLLECT SAMPLES AT RANDOM AND SEND IT TO APPROVED LABORATORIES FOR CHECKING STRENGTH, CONSUMPTION & QUALITY OF MATERIALS USED AND THE ONLY REALISED PAYMENT TO THE ASSESSEE AGAINST THE SALES BILL. WE ALSO FOUND THAT PURCHASE AND CONSUMPTION OF THE MATERIAL IS AS PER PRESCRIBED FORMULA. 15. IN VIEW OF THE ABOVE DISCUSSION AND APPLYING THE PROPOSITION OF LAW LAID DOWN BY THE COORDINATE BENCH OF THE TRIBUNAL AS WELL AS HIGH COURTS REFER RED ABOVE, WE DO NOT FIND ANY MERIT FOR DISALLOWANCE OF ENTIRE AMOUNT OF PURCHASES. KEEPING IN VIEW THE TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE VIS - A - VIZ RATE OF NET PROFIT SHOWN BY THE ASSESSEE, TO COVER UP LEAKAGE OF REVENUE, IF ANY, WE RESTRICT THE DISALLOWANCE OF PURCHASES TO THE EXTENT OF 2% OF THE PURCHASES OF RS. 4,88,22,753/ - . WE DIRECT ACCORDINGLY. P A G E | 12 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE FACTS OF THE CASE AND ARE OF THE CONSIDERED VIEW THAT AS SIMILAR FACTS AND ISSUE WAS INVOLVED IN THE ASSESSES OWN CASE FOR A.Y. 2010 - 11, THEREFORE , THE CIT(A) HAD RIGHTLY FOLLOWED THE ORDER OF THE TRIBUNAL FOR THE SAID YEAR AND RESTRICTED THE DISALLOWANCE TO THE EXTENT OF 2% OF THE ALLEGED BOGUS PURCHASES. WE THUS FINDING NO INFIRMITY IN THE ORDER OF THE CIT(A), THEREFORE, UPHOLD HIS ORDER. 9. THE APPEAL OF THE REVENUE IS DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT 31 . 01 .2018 SD/ - SD/ - (RAJENDRA ) ( RAVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; 31 .0 1 .2018 PS. ROHIT KUMAR / 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 . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 13 ITA NO . 6663 /MUM/201 6 ACIT VS. M/S G.L. CONSTRUCTIONS PVT. LTD.