ITO 27(1)(2), NAVI MUMBAI V. BHANU CONSTRUCTION, MUMBAI

ITA 734/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0113 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 02-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Bogus purchase; Unexplained expenditure; Transfer pricing
• Section: 69C; 143(3); 133(6)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL F BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO. 682 /MUM/2 017 ( / ASSESSMENT YEAR: 2 0 10 - 11 ) ASSTT. COMMISSIONER OF INCOME CIRCLE - 27(1), ROOM NO. 415 , 4 TH FLOOR , TOWER NO.6 VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI - 400703 / VS. M/S BHANU CONSTRUCTION UNIT NO.107, HILL VIEW INDUSTRIAL, ESTATE, OFF LBS MARG, AMRUT MNAGAR, GHATKOPAR (W), MUMBAI - 400086 ( / APPELLANT) : ( / RESPONDENT ) ITA NO. 734/MUM/2017 ( / ASSESSMENT YEAR: 2 011 - 12 ) INCOME TAX OFFICER - 27(1)(2), ROOM NO. 407, 4 TH FLOOR , TOWER NO.6 VASHI RAILWAY STATION COMPLEX, VASHI, NAVI MUMBAI - 400703 / VS. M/S BHANU CONS TRUCTION UNIT NO.107, HILL VIEW INDUSTRIAL, ESTATE, OFF LBS MARG, AMRUT MNAGAR, GHATKOPAR (W), MUMBAI - 400086 PAN:AABFB8940R ( / APPELLANT) : ( / RESPONDENT ) / APPELLANT BY : SHRI T A KHAN / RE SPONDENT BY : NONE / DATE OF HEARING : 23.8.2017 / DATE OF PRONOUNCEMENT : 28. 8 . 201 7 2 ITA NO. 682/M/2017 AND 734/M/2017 / O R D E R PER RAJESH KUMAR, A. M: THE CAPTIONED IS APPEAL S BY THE ASSESSEE PERTAINING TO ASSESSMENT YEAR S 20 10 - 11 AND 20 11 - 12 . THE APPEAL S ARE DIRECTED AGAINST THE TWO SEPARATE ORDER S OF LD. CIT(A) - 25 , MUMBAI , DATED 11.11.2016 WHICH IN TURN HAS ARISE N FROM AN ORDER PASSED BY THE ASSESSING OFFICER DATED 18.3.2011 AND 28.3.2014 RESPECTIVELY UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT) . SINCE ISSUE INVOLVED IN BOTH THESE APPEALS PERTAINS TO THE ADDITION ON ACCOUNT BOGUS PURCHASES, THESE APPEALS WERE CLUBBED TOGETHER, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENC E . 2. AT THE OUTSET, WE WOULD LIKE TO MENTION HERE THAT NEITHER THE ASSESSEE OR HIS AUTHORIZED REPRESENTATIVE APPEARED BEFORE THIS TRIBUNAL WHEN THE APPEALS WERE CALLED FOR HEARING NOR WAS ANY APPLICATION SEEKING ADJOURNMENT OF THE HEARING RECEIVED IN THE OFFICE OF THE TRIBUNAL DESPITE SERVICE OF NOTICE THROUGH RPAD ON THE PREVIOUS HEARING ON 2 3.8. 201 7 . THEREFORE, WE PROCEED TO DISPOSE OF THE APPEALS OF THE ASSESSEE EX - PARTE AFTER HEARING THE LD.DR. 3 ITA NO. 682/M/2017 AND 734/M/2017 3 . THE ONLY COMMON ISSUE IN THESE APPEALS OF REVENUE IS W ITH REGARD TO THE ORDER OF LD.CIT(A) RESTRICTING ADDITION MADE BY T HE AO ON ACCOUNT OF BOGUS PURCHASE AT THE RATE OF 25% OF BOGUS PURCHASE TAKEN AS GP. 4 . BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF CONSTRUCTION AND CONTRA CT AND ALSO UNDERTAKE S JOB WORK OF REPAIRING OF EXISTING STRUCTURES. THE AO DURING THE ASSESSMENT YEAR S 2010 - 11 AND 2011 - 12 NOTICED THAT THE ASSESSEE HAVE MADE PURCHASE S TO THE TUNE OF RS.90,33,362/ - AND RS.57,55,182/ - RESPECTIVELY FROM THE HAWALA PARTIES . ACCORDING TO THE DGIT (INV), MUMBAI RECEIVED INFORMATION FROM THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA THAT THERE ARE MANY REGISTERED DEALERS WHO ARE INDULGED IN ISSUING HAWALA /BOGUS BILLS TO THE PARTIES WITHOUT SELLING ANY GOODS. ACCORDING TO THE AO, HE HAS THE INFORMATION THAT THE ASSESSEE HAS MADE ABOVE PURCHASE S FROM THESE TYPE OF HAWALA DEALERS . THE AO BY INVOKING THE PROVISIONS OF ACT CALLED FOR THE DETAILS OF THE PARTIES. THE AO REQUIRED THE ASSESSEE FOR BOTH THE YEARS TO PRODUCE T HESE PARTIES FOR VERIFICATION AND ALSO ISSUED NOTICE U /S 133(6) OF THE ACT , WHICH RETURNED UNSERVED BY POSTAL AUTHORITIES OR THESE PARTIES HAVE DENIED FOR MAKING ANY TRANSACTIONS OR THE PARTIES HAVE NOT RESPONDED. THE ASSESSEE, BEFORE THE AO PRODUCED BIL LS AND VOUCHES, PAYMENT MADE BY ACCOUNT PAYEE CHEQUES, STOCK TREATMENT AND UTILIZATION 4 ITA NO. 682/M/2017 AND 734/M/2017 OF THE MATERIAL PURCHASED IN THE CONSTRUCTION BUSINESS. AS THE ASSESSEE WAS UNABLE TO PROVE BEYOND DOUBT ADMITTEDLY THESE PARTIES HAVE ISSUED BOGUS BILLS, THE AO DISA LLOWED THE BOGUS PURCHASES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT AMOUNTING TO RS.90,33,362/ - IN ASSESSMENT YEAR 2010 - 11 AND RS.57,55,182/ - IN ASSESSMENT YEAR 2011 - 12. AGGRIEVED BY THE ORDER O F THE AO, THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A) , WHO RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE CIT V/S SIMITH P SHETH, 356 ITR 451 (GUJ) AND THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF VIJAY PROT EINS LTD. V . ASSISTANT COMMISSIONER OF INCOME - TAX [1996] 58 ITD 428 (AHD.) RESTRICTED THE DISALLOWANCE AT THE RATE OF 25% OF THE ALLEGED BOGUS PURCHASE BY OBSERVING AND HOLDING AS UNDER : H. THEREFORE IS THE INSTANT CASE, ALL THE FACTS AND CIRCUMSTANCES O UTLINED ABOVE LEAD TO THE CONCLUSION THAT ALTHOUGH THE PURCHASE MADE BY T HE APPELLANT FROM THE ABOVE MENTIONED PARTIES DURING T HE YEAR UNDE R CONSID E R A TION CANNOT BE SUMMARILY REJECTED BUT AT THE SAME TIME IT DIFFICULT TO A CCEP T THAT THE PURCHASE SHOWN O N THE INVOICES/BILLS ISSUE D BY THESE PARTIES ARE AS PER THE PREVAILING MARKET PRICE OF THOSE MATERIALS OR ACTUALLY BEEN MADE FROM SUCH PARTIES AND MIGHT HAVE BEEN PURCHASED IN THE GREY MARKET. THE APPELLANT HAS NOT PLACED ANY EVIDENCE ON RECORD THAT THE GOODS WERE PURCHASED FROM THE ABOVE PARTIES AT ARMS LENGTH PRICE. THE APPELLANT HAS ALSO NOT PLACED ON RECORD ANY COMPARABLE BILLS/INVOICES FOR PURCHASES OF SIMILAR ITEMS MADE FROM OTHER PARTIES TO ESTABLISH THAT THE PURCHASES FROM THE ABOVE PARTIERS IN QUESTION WERE AT PAR WITH THE PURCHASES MADE FROM OTHER PARTIES DURING THE PERIOD UNDER 5 ITA NO. 682/M/2017 AND 734/M/2017 CONSIDERATION. THE POSSIBILITY OF SUCH PURCHASES FROM UNREGISTERED DEALERS WITHOUT INVOICES CANNOT BE RULED OUT. IN VIEW OF THE ABOVE, THE CORRECTNESS OF THE PURCHASE PRICES MENTIONED ON SUCH BILLS/INVOICES ISSUED BY THE ABOVE MENTIONED PARTIES IN QUESTION CANNOT BE ACCEPTED AND SOME ADDITIONAL PROFIT NEEDS TO BE ESTIMATED ON SUCH PURCHASES MADE FROM THE ABOVE PARTIES IN QUESTION. AS STATED ABOVE, FOLLOWING THE GUIDEL INES LAID DOWN IN THE CASE OF VIJAY PROTAIN P LTD. (SUPRA), DISALLOWANCE OF 25% ON SUCH ALLEGED BOGUS PURCHASES OF RS. 90,33,3621 - I.E., RS. 22,58,340/ - IS CONFIRMED, WHICH NEEDS TO BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF ALLEGED BOGU S PURCHASES AND THE BALANCE ADDITION OF RS. 67,75,0221 - IS HEREBY DELETED. HENCE, THE GROUNDS RAISED IN THE APPEAL ARE PARTLY ALLOWED. SIMILAR ARE THE FINDINGS OF THE LD . CIT(A) FOR THE ASSESSMENT YEAR 2011 - 12. AGGRIEVED IN BOTH, THE REVENUE IS IN AP PEAL BEFORE THIS TRIBUNAL . 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE , WE FIND THAT ADMITTEDLY, THE ASSESSEE HAS MADE PURCHASES FROM HAWALA DEALERS AS ASCERTAINED BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA. EVEN NONE OF THESE PARTIES APPEARED BEFORE THE AO DESPITE REPEATED QUERIES AND DESPITE ISSUANCE OF NOTICE U/S 133(6) OF THE ACT . A DMITTEDLY, THE ASSESSEE PRODUCED COMPLETE DETAILS AND SALES EXTRACT S , MOVEMENT OF GOODS AND STOCK REGISTER A ND THE REVENUE HAS NOT DENIED THE SALES. IT MEANS THAT THE ASSESSEE MIGHT HAVE TAKEN BILLS FROM THESE HAWALA PART IES ON ACCOUNT OF PURCHASE OF GOODS BUT MADE PURCHASE S FROM G REY MARKET AT A LESSER PRICE THAN THE BILLS. IT 6 ITA NO. 682/M/2017 AND 734/M/2017 MEANS TH A T THE ASSES SEE HAS EARN ED MORE PROFIT ON ACCOUNT OF LOWER PRICE AND ALSO SAVED VAT. IN VIEW OF THIS POSITION AND FACTUM OF THE CA S E, WE ARE OF THE CONSIDERED VIEW THAT THE LD.CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE AT THE RATE OF 25% OF THE BOGUS PURCHASES. ACCORDINGLY , WE CONFIRM THE ACTION OF THE LD.CIT(A) AND DISMISS THE REVENUES APPEALS. 6 . IN THE RESULT, THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28TH AUG , 2017. S D SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 8 .2017 SRL,SR.PS / COPY OF THE ORDER FORWARDED TO : 1. / THE A PPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI