DY CIT CIRCLE-3 , THANE V. SHREE SADGURUKRUPA CONSTRUCTION, THANE

ITA 6718/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 6771 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2010-2011
• Appeal Filed On: 31-10-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBODH RATNAPARKHI
• Keywords: Bogus purchase; Set aside
• Section: 143(3); 133(6); 143(2)

Judgement Text

DY. CIT, CIRCLE 3, THANE VS. SHREE SADGURUKRUPPA CONSTRUCTION ITA NO. 6718/MUM/2019 A.Y 2010 - 11 1 IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI MANOJ KUMAR AGGARWAL , ACCOUNTANT MEMBER AND SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO. 6718 /MUM/2019 (ASSESSMENT YEARS: 2010 - 11) DY . COMMISSIONER OF INCOME TAX, CIRCLE 3, THANE, ROOM NO. 02, 6 T H FLOOR, B - WING, WAGLE INDUSTRIAL ESTATE, THANE (WEST) - 400 604 VS. SHREE SA D GURUKRUPA CONSTRUCTION 211, MEENA APARTMENT, ABOVE H E RITAGE MOTORS, NEAR NITIN COMPANY, SERVICE ROAD, THANE (W) 400 602 PAN ABHFS4404N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI. SUSHIL KUMAR MISHRA , D.R RESPONDENT BY: SHRI. SUBODH RATNAPARKHI, A.R DATE OF HEARING: 05.04.2021 DATE OF PRONOUNCEMENT: 06 . 04 .202 1 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) - 2 , NASHIK , DATED 08.07.2019 WHICH IN TURN ARISES FROM THE ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT ACT) DATED 26.03.2013 FOR A.Y. 2010 - 11. THE REVENUE HAS ASSAILED THE IMPUGNED ORDER ON THE FOLLOWING GROUNDS OF APPEAL BEFORE US : ' 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE GENUINENESS OF THE PURCHASES FROM THE NON - EXISTENT VENDORS AS PER INFORMATION RECEIVED FROM LAW E NFORCEMENT AGENCY OF STATE GOVT. OF MAHARASHTRA I.E. SALES TAX DEPARTMENT, AND ESTABLISHED BY THE ASSESSING OFFICER. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD.CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ONUS TO J USTIFY THE CLAIM OF EXPENSES IS ON THE DY. CIT, CIRCLE 3, THANE VS. SHREE SADGURUKRUPPA CONSTRUCTION ITA NO. 6718/MUM/2019 A.Y 2010 - 11 2 ASSESSEE AND THE SAME HAS FAILED TO DISCHARGE IT IN RELATION TO THE PURCHASES MADE FROM THE NON - EXISTENT VENDORS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING, THE FACT THAT THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM OF PURCHASES FROM NON - EXISTENT VENDORS BY MEANS OF RELEVANT SUPPORTING DOCUMENTS RELATED TO MOVEMENT OF GOODS, STOCK REGISTER, ETC. TO RESTRICT THE ADDITION TO 20% OF BOGUS PURCHASES FROM THE NON - EXISTENT VENDORS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AND/IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE LAW CORRECTLY THAT ONCE THE PURCHASES ARE UNVERIFIABLE/NOT GENUINE/BOGUS, THE SAME SHOULD HAVE BEEN DISALLOWED IN ENTIRE TY, PARTICULARLY IN VIEW OF THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN TAX APPEAL NO. 242 OF 2003 DATED 20/06/2016 IN THE CASE OF N. K. PROTEINS LTD. AGAINST WHICH THE SLP WAS DISMISSED BY THE HON'BLE APEX COURT. 5. IT IS HUMBLY REQUES TED THAT PRESENT APPEAL IS BEING FILED IN ACCORDANCE WITH THE CBDT'S INSTRUCTION NO. 3/2018 DATED 11.07.2018 AMENDED VIDE LETTER DTD. 20.08.2018 AS PER PARA 10(E) OF THE SAID CIRCULAR. THEREFORE, THE ORDER OF THE CIT(A) MAY KINDLY BE VACATED AND THAT OF TH E AO MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY GROUND OF APPEAL. 2. BRIEFLY STATED, THE ASSESSEE FIRM WHICH IS ENGAGED IN THE BUSINESS OF A CIVIL CONTRACTOR HAD E - FILED ITS RETURN OF INCOME FOR A.Y 2010 - 11 ON 18 .09.2010, DECLARING A TOTAL INCOME OF RS. 48,58,434/ - . SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE ACT. 3. DURING THE COURS E OF THE ASSESSMENT PROCEEDINGS , THE A.O, INTER ALIA OBSERVED THAT THE ASSE SSEE HAD CLAIMED TO HAVE MADE PURCHASES OF RS. 34,60,226/ - FROM M/S SHREE GANESH TRADING COMPANY. I N ORDER TO VERIFY THE GENUINENESS AND VERACITY OF THE SAID PURCHASE TRANSACTIONS THE A.O ISSUED NOTICE UNDER SEC. 133(6) TO THE AFORESAID SUPPLIER PARTY, WHI CH, HOWEVER REMAINED UNCOMPLIED WITH BY THE LATTER. THE A.O DIRECTED THE ASSESSEE TO SUBSTANTIATE THE AUTHENTICITY OF THE PURCHASES CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED PARTY. HOWEVER, THE ASSESSEE EXCEPT FOR PLACING ON RECORD THE SALE BILLS OF THE AFORESAID PARTY DID NOT LEAD ANY SUCH DOCUMENTARY EVIDENCE WHICH WOULD SUBSTANTIATE THE AUTHENTICITY OF THE IMPUGNED PURCHASE TRANSACTIONS TO THE SATISFACTION OF THE A.O. APART FROM THAT, IT WAS GATHERED BY THE A.O THAT THE AFORESAID SUPPLIER PARTY WA S BLACK LISTED AS A HAWALA ENTRY PROVIDER BY THE SALES TAX DEPARTMENT, MAHARASHTRA. BACKED BY THE AFORESAID DY. CIT, CIRCLE 3, THANE VS. SHREE SADGURUKRUPPA CONSTRUCTION ITA NO. 6718/MUM/2019 A.Y 2010 - 11 3 FACTS, THE A.O DISALLOWED THE ENTIRE AMOUNT OF THE IMPUGNED PURCHASES OF RS. 34,60,226/ - WHICH WERE CLAIMED BY THE ASSESSEE TO HAVE BEEN MADE FRO M THE AFORESAID SUPPLIER PARTY. 4. ON APPEAL, THE CIT(A) CALLED FOR A REMAND REPORT FROM THE A.O. IT WAS OBSERVED BY THE CIT(A) THAT THE ASSESSEE HAD CLAIMED TO HAVE PURCHASED M.S CHANNELS, ANGLES, JOINTS AND ALUMINIUM SECTIONS FROM THE AFORESAID SUPPLI ER PARTY I.E M/S SHREE GANESH TRADING COMPANY. IT WAS FURTHER OBSERVED BY THE CIT(A) THAT THE ASSESSEE IN ORDER TO SUPPORT ITS CLAIM OF HAVING MADE GENUINE PURCHASES FROM THE AFOREMENTIONED SUPPLIER PARTY HAD IN THE COURSE OF THE ASSESSMENT PROCEEDINGS PLACED ON RECORD CERTAIN DOCUMENTARY EVIDENCES, VIZ. COPY OF THE LEDGER ACCOUNT OF THE SUPPLIER PARTY; PURCHASE BILLS; DELIVERY CHALLANS ALONGWITH EVIDENCE THAT THE PAYMENT OF THE PURCHASE CONSIDERATION TO THE SAID PARTY WAS MADE THROUGH BANKING CHANNEL. I T WAS NOTICED BY THE CIT(A) THAT THE A.O IN THE COURSE OF THE REMAND PROCEEDINGS COULD NOT REBUT OR DISLODGE THE AUTHENTICITY OF THE DOCUMENTS ON THE BASIS OF WHICH THE ASSESSEE HAD CLAIMED TO HAVE MADE GENUINE PURCHASES FROM THE AFOREMENTIONED PARTY. IT W AS OBSERVED BY THE CIT(A) THAT THE A.O HAD DISALLOWED THE PURCHASES FOR TWO FOLD REASONS, VIZ. (I). THAT THE AFORESAID SUPPLIER PARTY HAD NOT RESPONDED TO HIS NOTICE ISSUED UNDER SEC. 133(6) OF THE ACT; AND (II). THAT THE NAME OF THE AFOREMENTIONED SUPPLIE R PARTY FIGURED IN THE LIST OF THE HAWALA PARTIES AS WAS UPLOADED BY THE SALES TAX DEPARTMENT, MAHARASHTRA. OBSERVING, THAT THOUGH THE ASSESSEE HAD MADE THE IMPUGNED PURCHASES BUT COULD NOT SUBSTANTIATE THE VERACITY OF T HE PURCHASE TRANSACTION S DUE TO UN AV AIL A BILITY OF THE SUPPLIER PA RTY, THE CIT(A) HELD A CONVICTION THAT DISALLOWANCE OF 20% OF THE IMPUGNED PURCHASES WOULD MEET THE ENDS OF JUSTICE. 5. AGGRIEVED, THE REVENUE HAS ASSAILED THE ORDER OF THE CIT(A) IN APPEAL BEFORE US. IT WAS AVERRED BY THE LD. D.R THAT THE CIT(A) HAD WITHOUT ANY JUSTIFIABLE REASON SCAL ED DOWN THE DISALLOWANCE OF THE IMPUGNED PURCHASES SO MADE BY THE A.O TO 20% OF ITS AGGREGATE VALUE . ACCORDINGLY, IT WAS SUBMITTED DY. CIT, CIRCLE 3, THANE VS. SHREE SADGURUKRUPPA CONSTRUCTION ITA NO. 6718/MUM/2019 A.Y 2010 - 11 4 BY THE LD. D.R THAT THE ORDER OF THE A.O MAY BE RESTORED AND THAT OF THE CIT(A) BE SET ASIDE. 6. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE RELIED ON THE ORDER PASSED BY THE CIT(A). 7. WE HAVE HEARD THE AUTHORISED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAD FAILED TO SUBSTANTIATE TO THE HILT THE AUTHENTICITY OF THE IMPUGNED PURCHASES WHICH WERE CLAIMED TO HAVE BEEN MADE FROM THE AFOREMENTIONED SUPPLIER PARTY I.E M/S SHREE GANESH TRADING COMPANY . AS IS DISCERNIBLE FROM THE ORDERS OF THE LOWER AUTHORITIES, THE ASSESSEE HAD TRIED TO SUBSTANTIATE THE AUTHENTICITY OF THE IMPUGNED PURCHASES ON THE BASIS OF SUPPORTING DOCUMENTARY EVIDENCE, VIZ. COPY OF THE LEDGER ACCOUNT OF THE SUPPLIER PARTY; PURCHASE BILLS; DELIVERY CHALLANS ALONGWITH EVIDENCE THAT THE PURCHASE CONSIDERATION WAS PAID TO THE AFORESAID PARTY THROUGH BANKING CHANNEL. IN OUR CONSIDERED VIEW, TH E AFORESAID DOCUMENTARY EVIDENCE PLACED ON RECORD BY THE ASSESSEE, VIZ. PURCHASE BILLS, DELIVERY CHALLANS, COUPLED WITH THE FACT THAT THE PAYMENT OF THE PURCHASE CONSIDERATION TO THE SUPPLIER PARTY WAS MADE BY IT THROUGH BANKING CHANNEL THOUGH MAY NOT CONC LUSIVELY PROVE THE AUTHENTICITY OF THE IMPUGNED PURCHASE TRANSACTIONS, BUT, THE SAME, DOES INSPIRE SUFFICIENT CONFIDENCE AS REGARDS THE GENUINENESS OF THE PURCHASE TRANSACTION IN QUESTION. APART FROM THAT, WE FIND THAT THE A.O HAD NEITHER REJECTED THE BOOK S OF ACCOUNTS OF THE ASSESSEE NOR DOUBTED ITS CORRESPONDING SALES. AS SUCH, THE FACT THAT THE ASSESSEE HAD PURCHASED THE IMPUGNED GOODS, THOUGH, NOT FROM THE AFOREMENTIONED SUPPLIER PARTY BUT FROM THE OPEN/GREY MARKET CANNOT BE RULED OUT. IN OUR CONSIDERED VIEW, THE CIT(A) HAD RIGHTLY OBSERVED THAT IT IS A CASE WHERE THE ASSESSEE COULD NOT GET THE IMPUGNED PURCHASES VERIFIED DUE TO UNAVAILABILITY OF THE SUPPLIER PARTY. I N THE TOTALITY OF THE AFORESAID FACTS, WE CONCUR WITH THE VIEW TAKEN BY THE CIT(A) THAT IN ALL FAIRNESS DISALLOWANCE OF 20% OF THE UNVERIFIED PURCHASES IN QUESTION DY. CIT, CIRCLE 3, THANE VS. SHREE SADGURUKRUPPA CONSTRUCTION ITA NO. 6718/MUM/2019 A.Y 2010 - 11 5 WOULD MEET THE ENDS OF JUSTICE. ACCORDINGLY, FINDING NO INFIRMITY IN THE VIEW TAKEN BY THE CIT(A), WE UPHOLD HIS ORDER. 8. RESULTANTLY, THE APPEAL FILED BY THE REVENUE IS DISMISSED . ORDER PRO NOUNCED IN THE OPEN COURT ON 06 .04 .202 1 SD/ - SD/ - M ANOJ KUMAR AGGARWAL RAVISH SOOD ( ACCOUNTANT MEMBER ) ( JUDICIAL MEMBER) MUMBAI, DATE: 06 . 04 .202 1 PS: ROHIT COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. DR H BENCH , ITAT, MUMBAI 6. GUARD FILE BY ORDER, DY./ASST. REGISTRAR ITAT, MUMBAI