DCIT CEN CIR - 1(4), MUMBAI V. NITIN RAJMAL SHAH, MUMBAI

ITA 7155/MUM/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8352 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-10-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 18-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; TDS
• Section: 43B; 143(3); 133A; 153A; 143(2); 131; 148

Judgement Text

1 ITA NO.7155/MUM/2017 M/S. NITIN RAJMAL SHAH ASSESSMENT YEAR-2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.7155/MUM/2017 ( / ASSESSMENT YEAR:2008-09 ) D CIT - CENTRAL CIRCLE - 1( 4 ) ROOM NO.902, PRATISTHA BHAVAN 9 TH FLOOR, OLD CGO BLDG. ANNEX. MUMBAI-400 020. / VS. M/S. NITIN R. SHAH C-113, SHYAM KAMAL BUILDING 27, TEJPAL ROAD, AGARWAL MARKET VILE PARLE (E), MUMBAI-400 057. 56789 ./ 9 ./ PAN/GIR NO. AADPS 5476 M ( TU / APPELLANT ) : ( WXTU / RESPONDENT ) TUY / APPELLANT BY : MS. SAMATHA MULLAMUDI - LD.SR.DR WXTUY / RESPONDEN T BY : NONE / DATE OF HEARING : 30/09/2019 / DATE OF PRONOUNCEMENT : 04/10/2019 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER):- 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR [AY] 2008-09 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-47, MUMBAI, [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-47/AP.68/15- 16 DATED 26/09/2017 ON FOLLOWING GROUNDS OF APPEAL:- 2 ITA NO.7155/MUM/2017 M/S. NITIN RAJMAL SHAH ASSESSMENT YEAR-2008-09 I. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT (A) ERRED IN RESTRICTING THE DISALLOWANCE OF RS. 1,54,966/- TO R S.1,24,829/- ON ACCOUNT OF BOGUS PURCHASE MADE BY THE ASSESSEE TO SUPPRESS THE GP, O N THE GROUND THAT, AFTER MAKING A COMPARISON OF PROFITS DECLARED BY OTHER MCGM /BMC C ONTRACTORS AND OTHER GROUP CONCERNS OF M/S RPS GROUP A UNIFORM FLAT RATE OF 7% HAS BEEN APPLIED IN APPELLATE PROCEEDINGS WHICH IS NOT BASED ON FACTS AND WITHOUT RULING OUT SUPPRESSION OF G.P.?' II. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) ERRED IN RESTRICTING THE ADDITION ON GP ON ACCOUNT OF BOGUS PURCHASE FROM 8,69% TO UNIFORM RATE OF 7% ON THE GROUND THAT, AFTER MAKING A COMPARISON OF PROFITS DECLARED BY OTHER MCGM /BMC CONTRACTORS AND OTHER GROUP CONCERNS OF M/S RP S GROUP A UNIFORM FLAT RATE OF 7% HAS BEEN APPLIED IN APPELLATE PROCEEDINGS WHICH IS NOT BASED ON FACTS AND WITHOUT RULING OUT SUPPRESSION OF G.P.?.' III. 'ON THE FACTS AND CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT (A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF VAT INPUT CREDIT AS THE SAME WAS NOT PAID, STATING THAT DEDUCTION OF VAT AS PER SECTION 43B OF THE ACT IS A VAILABLE ONLY ON PAYMENT BASIS AND THE ASSESSEE HAS CLAIMED VAT INPUT CREDIT ON THE IM PUGNED PURCHASE BILLS AND THE LIABILITY TO PAY SUCH VAT IS OF THE SUPPLIER AND NO T THE ASSESSEE WITHOUT CONSIDERING THE FACT THAT SINCE VAT WAS NOT PAID, INPUT CREDIT FOR VAT CANNOT BE ALLOWED?'. IV. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT()A ERRED IN DELETING THE ADDITION OF RS. 29,37,557/- ON ACCOUNT OF 'PROV ISION TOWARDS DEFECT LIABILITY' WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAS DEBITED THE AMOUNT TO P&L ACCOUNT, INDICATING THAT THE GROSS CONTRACTS AMOUNT HAS BEEN CREDITED TO THE P&L ACCOUNT AND CREDIT FOR TDS AMOUNT ON THE ENTIRE AMOUNT INCLUDIN G RETENTION MONEY HAS BEEN CLAIMED?' V. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AN D IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS. 29,37,557/- ON ACCOUNT OF 'PROV ISION TOWARDS DEFECT LIABILITY' BY RELYING UPON SEVERAL JUDICIAL PRONOUNCEMENT WITHOUT APPRECIATING THAT THE FACTS OF THE REFERRED CASE LAWS ARE NOT IDENTICAL TO THAT OF THE INSTANT CASE?' NONE HAS APPEARED FOR ASSESSEE. LEFT WITH NO OPTION , WE PROCEED TO DISPOSE-OFF THE APPEAL AFTER HEARING LD. DEPARTMENT AL REPRESENTATIVE AND ON THE BASIS OF MATERIAL ON RECORD. WE HAVE CONSIDE RED THE ARGUMENTS MADE BY LD.DR. 2.1 FACTS ON RECORD WOULD REVEAL THAT THE ASSESSEE BEING RESIDENT INDIVIDUAL STATED TO BE ENGAGED AS CONTRACTOR UNDER PROPRIETORSHIP CONCERN NAMELY M/S SPECO INFRASTRUCTURE, WAS ASSESSED FOR I MPUGNED AY U/S. 143(3) R.W.S. 147 ON 31/03/2015 WHEREIN THE INCOME OF THE ASSESSEE WAS 3 ITA NO.7155/MUM/2017 M/S. NITIN RAJMAL SHAH ASSESSMENT YEAR-2008-09 DETERMINED AT RS.255.43 LACS AFTER CERTAIN ADDITION S AS AGAINST INCOME OF RS.223.80 LACS ASSESSED U/S 143(3) R.W.S. 153A ON 2 8/09/2011. THE CASE WAS REOPENED BY ISSUANCE OF NOTICE U/S 148 DATED 17 /01/2014 FOLLOWED BY STATUTORY NOTICES U/S 143(2) & 142(1). A SURVEY ACT ION WAS CONDUCTED U/S 133A ON 26/11/2012 IN THE CASE OF M/S RPS INFRAPROJ ECTS PRIVATE LIMITED AND ITS GROUP CONCERNS. THE ASSESSEES PROPRIETORSH IP CONCERN NAMELY M/S SPECO INFRASTRUCTURE, BEING PART OF THE GROUP, WAS ALSO COVERED UNDER SURVEY OPERATIONS. IT TRANSPIRED THAT THE GROUP OBT AINED ACCOMMODATION PURCHASE BILLS FROM VARIOUS ENTITIES LISTED AS HAWA LA DEALERS ON SALES TAX WEBSITE WITH A VIEW TO INFLATE THE EXPENSES AND SUP PRESS THE PROFITS. THE STATEMENT U/S 131 WAS RECORDED FROM THE KEY PERSONS INCLUDING THE ASSESSEE, THE RELEVANT EXTRACTS OF WHICH HAVE ALREA DY BEEN REPRODUCED IN THE QUANTUM ASSESSMENT ORDER. HOWEVER, THE ASSESSEE SUBSEQUENTLY RETRACTED THE ANSWER GIVEN IN QUESTION NO. 5-9 OF T HE STATEMENT. 2.2 THE LEARNED AO, IN THE LIGHT OF FINDINGS IN SUR VEY PROCEEDINGS, SHOW- CAUSED ASSESSEE TO JUSTIFY THE GENUINENESS OF PURCH ASES MADE FROM TAINTED / SUSPICIOUS PARTIES. THE ASSESSEE, IN DEFE NSE, SUBMITTED THAT PURCHASES WERE GENUINE SINCE MATERIAL WAS UTILIZED IN CONTRACT WORK AND THE PAYMENT TO SUPPLIERS WAS THROUGH BANKING CHANNE LS. IN THE ALTERNATIVE, IT WAS SUBMITTED THAT GROSS PROFIT ON TAINTED PURCH ASE OF RS.17.83 LACS @8.69% AMOUNTING TO RS.1.54 LACS MAY BE ADDED TO TH E INCOME ALONG WITH ADDITIONAL DISALLOWANCE OF 4% FOR VAT ELEMENT. CONCURRING WITH ALTERNATIVE SUBMISSIONS, LD. AO ADDED AN AMOUNT OF RS.1.54 LACS ON 4 ITA NO.7155/MUM/2017 M/S. NITIN RAJMAL SHAH ASSESSMENT YEAR-2008-09 ACCOUNT OF GROSS PROFIT AND ANOTHER AMOUNT OF RS.0. 71 LACS BEING 4% VAT ON TAINTED PURCHASES. 2.3 THE ASSESSEE WAS SADDLED WITH ANOTHER ADDITION OF RS.29.37 LACS ON ACCOUNT OF DEFECT LIABILITY PROVISIONS. IT WAS EXPL AINED THAT THE ASSESSEE WAS CARRYING OUT CONTRACT FOR MUNICIPAL CORPORATION. TH E CONTRACTEE WOULD RETAIN CERTAIN PERCENTAGE (USUALLY 5%) TOWARDS DEFECT LIAB ILITY ON ACCOUNT OF DEFECT IN CONTRACT WORK. THEREFORE, THE GROSS AMOUNT WAS C REDITED TO PROFIT & LOSS ACCOUNT AND AMOUNT RETAINED BY CONTRACTEE ON ACCOUN T OF DEFECT LIABILITY WAS DEBITED TO PROFIT & LOSS ACCOUNT AND REFLECTED AS DEFECT LIABILITY PAYABLE ACCOUNT IN THE BALANCE SHEET. THE ACTUAL EXPENSES INCURRED, FROM TIME TO TIME, ON ACCOUNT OF DEFECT, WAS DIRECTLY DE BITED TO THE PAYABLE ACCOUNT INSTEAD OF DEBITING THE SAME TO PROFIT & LO SS ACCOUNT. HOWEVER, DISREGARDING THE EXPLANATION, THE SAID AMOUNT WAS A DDED TO THE INCOME OF THE ASSESSEE. 3. THE LEARNED CIT(A), AFTER DUE CONSIDERATION OF F ACTUAL MATRIX AS WELL AS ASSESSEES SUBMISSIONS REACHED A CONCLUSION THAT ONLY THE PROFIT ELEMENT EMBEDDED IN THE BOGUS PURCHASES WAS TO BE T AXED. HOWEVER, THE ESTIMATION OF 8.69% AS MADE BY LEARNED AO WAS REDUC ED TO 7%, BEING RATE UNIFORMLY APPLIED BY REVENUE TO THE GROUP ENTITIES. THE SAID WORKING REDUCED THE ADDITION OF RS.1.54 LACS TO RS.1.24 LAC S. CONSEQUENTLY, ADDITIONAL DISALLOWANCE ON ACCOUNT OF VAT ELEMENT A S MADE BY LD. AO WAS DELETED. THE ADDITION OF RS.29.37 LACS ON ACCOUNT O F DEFECT LIABILITY WAS DELETED IN VIEW OF THE FACT THAT NO ADVERSE VIEW WA S TAKEN IN ASSESSEES OWN CASE FOR AY 2007-08 AND SECONDLY, THE DEFECT LI ABILITY WAS NEITHER 5 ITA NO.7155/MUM/2017 M/S. NITIN RAJMAL SHAH ASSESSMENT YEAR-2008-09 RECEIVED NOR ACCRUED TO THE ASSESSEE AND THEREFORE, NOT TAXABLE IN THE HANDS OF THE ASSESSEE. RELIANCE WAS PLACED ON THE D ECISION OF HONBLE CALCUTTA HIGH COURT RENDERED IN CIT V/S SIMPLEX CONCRETE PILES INDIA PVT. LTD. 179 ITR 8 AS WELL AS THE DECISION OF HONBLE BOMBAY HIGH COUR T RENDERED IN CIT V/S ASSOCIATED CABLES PVT.LTD. 286 ITR 596. AGGRIEVED AS AFORESAID, THE REVENUE IS UNDER APPEAL BEFORE US . 4. AFTER CAREFUL CONSIDERATION OF FACTS AND CIRCUMS TANCES, WE FIND THAT FIRST APPELLATE AUTHORITY HAS CLINCHED ALL THE ISSU ES IN THE RIGHT PERSPECTIVE. THE ESTIMATED ADDITION OF 7% WAS UNIFORM RATE APPLI ED TO THE GROUP CONCERNS. THE ADDITION ON ACCOUNT OF DEFECT LIABILI TY WAS DELETED KEEPING IN VIEW THE FACT THAT NO SUCH ADDITIONS WERE MADE IN E ARLIER YEARS. NOTHING ON RECORD WOULD SUGGEST THAT THE ACCOUNTING METHODOLOG Y BEING FOLLOWED BY THE ASSESSEE, IN THIS REGARD, WAS NOT CONSISTENT ME THOD OF ACCOUNTING. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE IMPU GNED ORDER. 5. THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 04 TH OCTOBER, 2019. SD/- SD/- (SAKTIJIT DEY) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04/10/2019 SR.PS:-JAISY VARGHESE 6 ITA NO.7155/MUM/2017 M/S. NITIN RAJMAL SHAH ASSESSMENT YEAR-2008-09 NO PO / COPY OF THE ORDER FORWARDED TO : 1. TU / THE APPELLANT 2. WXTU / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. A B W C , C , / DR, ITAT, MUMBAI 6. B DEF / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.