ASST CIT 16(2), MUMBAI V. EARTH SALVAGING CONST. CORPN, MUMBAI

ITA 6668/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3363 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 03-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Bogus purchase; Unexplained expenditure; Tax effect
• Section: 69C; 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH , MUMBAI BEFORE SRI MAHAVIR SINGH, J M AND SRI B. R. BASKARAN, AM ITA NO . 6668 & 6669 /MUM/201 4 (A.Y:200 9 - 10 & 2010 - 11 ) THE ASST. COMMISSIONER OF INCOME TAX - 16(3), MATRU MANDIR, TARDEO ROAD, MUMBAI 400 007 VS. M/S. EARTH SALVAGING CONSTRUCTION CORPORATION, 37, 2 ND FLOOR, LOKHANDWALA BUILDING, 114/124, BHANDARI STREET, MUMBAI 400 004 PAN:AACFE 0513A APPELLANT .. RESPONDENT APPELLANT BY .. MS. POOJA SWAROOP, DR RESPONDENT BY .. SHRI JITENDRA SINGH, AR DATE OF HEARING .. 31 - 08 - 2016 DATE OF PRONOUNCEMENT .. 31 - 08 - 2016 O R D E R PER MAHAVIR SINGH , JM : THESE TWO APPEAL S BY THE REVENUE ARE ARISING OUT OF THE COMMON ORDER OF CIT ( A) - 27 , MUMBAI IN PEAL NO. CIT (A) - 27 / A C 16(3) / 493 AND 80 / 1 3 - 14 DATED 12 - 0 8 - 2014 . ASSESSMENT S WERE FRAMED BY ACIT - 16 (3 ), MUMBAI U/S 143(3) / READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT) FOR THE ASSESSMENT YEAR 2009 - 10 & 2010 - 11 VIDE HIS ORDER DATED 20 - 03 - 2013 . 2. WITH REGARD TO THE REVENUES APPEAL FO R IN ITA NO.6669/MUM/2014 FOR ASSESSMENT YEAR 2010 - 11, AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE QUANTUM IN DISPUTE I N THIS REVENUES APPEAL IS RS. 17,49,667 / - AND NET TAX I S RS. 5,59,893/ - . HENCE, NET TAX EFFECT IN THIS APPEAL OF REVENUE ON THE DISPUTED ADDITIONS MADE BY AO AND DELETED BY CIT (A), IS LESS THAN RS. 10 LACS. 3. DURING THE COURSE OF HEARING BEFORE US, T HE LEARNED COUNSEL FOR THE ASSESSEE, POINTED OUT THAT IN THIS CASE, THE NET TAX DEMAND IS RS. 5,59,893 / - AND THUS , THE TAX EFFECT IN THIS APPEAL IS BELOW RS.10.00 LACS. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT IN VIEW OF THE CBDT CIRCULAR NO.21/2015, DATED 10.12.2015 BROUGHT OUT BY THE CENTRAL BOARD OF DIRECT TAXES, DEPARTMENT OF REVENUE, MINISTRY OF FINANCE, GOVERNMENT OF INDIA, THE APPEAL WAS NOT MAINTAINABLE AND BE DISMISSED. ITA NO. 66 68 & 6669 /MUM/20 1 4 2 THE LEARNED SR. DR ALSO AGREED TO THE FACTS STATED BY THE LEARNED COUNSEL FOR THE ASSESSEE BUT COULD NOT POINT OUT WHETHER THIS CASE FALLS UNDER ANY OF THE EXCEPTION PROVIDE D IN THE CIRCULAR. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND FROM THE RECORDS BEFORE US THAT THE TAX INVOLVED IN THE DISPUTED ISSUE IS BELOW RS.10 LACS AND THEREFORE, IN VIEW OF THE CIRCULAR NO. 21/2015 DATED 10 T H DECEMBER, 2015 NO APPEAL SHOULD BE FILED BY THE REVENUE BEFORE THE TRIBUNAL WHICH HAS TAX EFFECT OF RS. 10.00 LACS OR LESS AND THIS CIRCULAR IS ALSO APPLICABLE RETROSPECTIVELY TO ALL PENDING APPEALS. THE RELEVANT EXTRACT THE SAID CBDT CIRCULAR (SUPRA) IS AS UNDER: - THIS INSTRUCTION WILL APPLY RETROSPECTIVELY TO PENDING APPEALS AND APPEALS TO BE FILED HENCEFORTH IN HIGH COURTS/TRIBUNALS. PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN PARA 3 ABOVE MAY BE WITHDRAWN/NOT PRESSED. APPEALS BEFORE THE SUPREME COURT WILL BE GOVERNED BY THE INSTRUCTIONS ON THIS SUBJECT, OPERATIVE AT THE TIME WHEN SUCH APPEAL WAS FILED. 5. CONSIDERING THE ABOVE, THE APPEAL FILED BY THE REVENUE, IS THEREFORE, DISMISSED. 6. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IN ITA NO. 6668/MUM/2014 FOR ASSESSMENT YEAR 2009 - 10 IS AS REGARDS TO THE ORDER OF THE CIT (A) DELETING THE ADDITION MADE BY THE AO OF BOGUS PURCHASES. 7. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE, A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONTRACT UNDER THE TRADE NAME OF M/S. EARTH SALVAGING CONSTRUCTION CORPORATION . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE AO ON PERUSAL OF TRADING/PROFIT & LOSS ACCOUNT NOTICED THAT THE ASSESSEE HAD MADE PURCHA SES, WHICH REQUIRE VERIFICATION. THE AO REQUIRED THE ASSESSEE TO FURNISH THE DETAILS OF PURCHASES ALONG WITH THE NAMES, ADDRESSES AND TIN NUMBERS AND AMOUNT DEBITED IN THE PROFIT & LOSS ACCOUNT. ACCORDING TO THE AO THE ASSESSEE HAD MADE PURCHASES FROM 11 PARTIES TO THE TUNE OF RS.78,01,780/ - AS UNDER: - ITA NO. 66 68 & 6669 /MUM/20 1 4 3 SR. NO. NAME OF THE PARTIES AMOUNT (RS.) A M/S. RENUKA SALES 2,95,151/ - B M/S. S. S. ENTERPRISES 1,91,759/ - C M/S. PARAS SALES CORP. 15,11,119/ - D M/S. DHRUV SALES CORPN. 12,09,144/ - E M/S. DEEP ENTERPRISES 8,39,247/ - F M/S. ASTHAVINAYAK SALES A GENCY 10,66,301/ - G M/S. KRC TRADING CO. PVT. LTD. 10,38,535/ - H M/S. NATIONAL TRADING CO. 2,80,283/ - I M/S. DEEPALI ENTERPRISES 5,17,021/ - J M/S. REKHA TRADING CO. 4,38,033/ - K M/S. ISK TRADING CO. PVT. LTD. 4,15,187/ - ACCORDING TO THE AO, NO D ETAIL WAS FILED AND HENCE, THE AO TREATED THESE PURCHASES AS BOGUS AND ADDED THE SAME AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT (A) AND THE CIT (A) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESS EE AND THE DOCUMENTS NOTED THAT THE PURCHASES MADE WERE FOUND TO BE BOGUS FOR THE REASON THAT THESE PARTIES WERE NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. ACCORDING TO THE CIT (A) THE MOTIVE BEHIND OBTAINING BOGUS BILLS APPEARS TO BE INFLATION OF PU R CHASE PRICE SO AS TO SUPPRESS TRUE PROFIT. ACCORDINGLY, AFTER GOING THROUGH THREE YEARS GROSS PROFIT; HE ESTIMATED THE GROSS PROFIT OF ABOVE BOGUS PURCHASES AT 12.5% AND DELETED THE BALANCE ADDITION BY OBSERVING IN PARA 2.4.32 AND 2.4.33 OF HIS ORDER AS UN DER: - 2.4.32 AS NARRATED EARLIER, THE LD. A. O. IN THIS CASE HAS HERSELF HELD THAT THE PARTIES FROM WHOM THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS. SHE HAS NOT HELD THE PURCHASES PER SE TO BE BOGUS AND THAT IS THE REASON FOR WHICH TH ESE PARTIES WERE NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. THE MOTIVE BEHIND OBTAINING BOGUS BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRICE SO AS TO SUPPRESS TRUE PROFITS. I ALSO FIND THAT THE APPELLANT HAS ITSELF ADMITTED THAT IT HAD MADE A G . P. OF 7.54% ON THE SALE OF GOODS IN A. Y. 2009 - 10, 5.92% IN A. Y. 2010 - 11 AND 31.32% IN A. Y. 2011 - 12 RESPECTIVELY. 2.4.33 IN ORDER TO ESTIMATE AS TO WHAT COULD BE THE GP THAT THE APPELLANT HAS SUPPRESSED AND WHICH WAS EMBEDDED IN THE ALLEGED PURCHASE S, IT IS THUS NOTED THAT THE APPELLANTS GP FOR A. Y. 2009 - 10 WAS 7.54% WHICH FELL TO 5.92% FOR A. Y. 2010 - 11 AND DRAMATICALLY ROSE TO 31.32% FOR A. Y. 2011 - 12, THUS, BETRAYING ANY CLEAR PICTURE ABOUT THE ACTUAL GP. SUCH LARGE VARIATION ALSO ITA NO. 66 68 & 6669 /MUM/20 1 4 4 POINTS TO THE FACT THAT THE APPELLANT HAS MANIPULATED ITS ACCOUNTS THOUGH LD. ASSESSING OFFICER HAS NOT DOUBTED THE CONTRACT RECEIPTS FROM BMC WITH WHICH THE APPELLANT IS ENGAGED. HENCE, IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF CIT VS. SIMIT P. SHETH (S UPRA, I HOLD THAT THE PROFIT ELEMENT EMBEDDED AND SUPPRESSED IN THE ALLEGED PURCHASES WERE TO THE EXTENT OF 12.5%. HENCE, ADDITION TO THE EXTENT OF 12.5% IS UPHELD AND BALANCE IS DELETED. ACCORDINGLY, THESE GROUNDS OF APPEAL ARE PARTLY ALLOWED. AGGRIEVED , NOW THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. ADMITTEDLY, THESE PURCHASES ARE BOGUS BUT, THERE ARE SALES /WORK - IN - PROGRESS ALSO WHICH IS NOT DISTURBED BY THE REVENUE . ADMITTEDLY, ASSESSEES GROSS PROFIT IS CALCULATED BY THE CIT (A) IS AVERAGE D OUT AT 12.5% IN LAST THREE YEARS. ACCORDINGLY, WE ARE OF THE VIEW THAT THE CIT (A) HAS RIGHTLY APPLIED EXTRA GROSS PROFIT RATE AT 12.5% AND SUSTAINED THE ADDITION QU A BOGUS PURCHASES. WE FIND NO INFIRMITY IN THE ORDER OF THE CIT (A) AND HENCE, WE DISMISS THE APPEAL OF THE REVENUE. 9. IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31 - 08 - 2016 . SD/ - (B. R. BASKARAN) ACCONTANT MEMBER MUMBAI, DATED: 31 - 08 - 2016 LAKSHMIKANTA DEKA/SR.PS SD/ - ( MAHAVIR SINGH ) JUDICIAL MEMBER ITA NO. 66 68 & 6669 /MUM/20 1 4 5 BY ORDER, ASSISTANT REGISTRAR ITAT, MUMBAI SR.NO. PARTICULARS DATE INITIALS MEMBER CONCERNED 1 DICTATION GIVEN ON 06 /09/16 LK DEKA JM 2 DRAFT PLACED BEFORE AUTHOR 07/09/16 3 DRAFT PROPOSED/PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.PS 6 KEPT FOR PRONOUNCEMENT ON 7 FILE SENT TO THE BENCH CLERK 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT (A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//