ACIT CIRCLE 17 (2), MUMBAI V. NAAFE CONSTRUCTION, MUMBAI

ITA 7371/MUM/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2709 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 24-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KIRAN UNAVKAR
• Keywords: Bogus purchase; Rejection of books of accounts; Accommodation entries
• Section: 133(6); 143(1); 13; 145(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC , MUMBAI BEFORE SHRI C.N. PRASAD, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , HON'BLE ACCOUNTANT MEMBER ITA NO. 7371 /MUM/201 8 (A.Y: 2009 - 10) ACIT CIRCLE 17(2) ROOM NO. 123A, 1 ST FLOOR, AAYAKAR BHAVAN, M.K. ROAD MUMBAI 400 020 V. M/S NAAFE CONSTRUCTION 9, 3 RD FLOOR, 148/150 MYHN HOUSE GHOGHARI STREET, PYDHONIE MUMBAI 40 0 003 PAN: AAHFN0991Q (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE DEPARTMENT BY : SHRI KIRAN UNAVKAR DATE OF HEARING : 26 .02.2020 DATE OF PRONOUNCEMENT : 13 .03 . 2020 O R D E R PER C. N. PRASAD (JM) 1. THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE L EARNED COMMISSIONER OF INCOME TAX (APPEALS) 58 , MUMBAI [HEREINAFTER IN SHORT LD.CIT(A)] DATED 04.10.2018 FOR THE ASSESSMENT YEAR 2009 - 10 . 2. REVENUE HAS RAISED THE FOLLOWING GROUNDS IN ITS APPEAL: - 1. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) JUSTIFIED IN RESTRICTIN G THE ADDITION MADE BY THE A.O. TO 15% OF RS.14,46,222/ - AGAINST THE ADDITION MADE AT 25% OF THE BOGUS PURCHASES, IGNORING THAT THE ASSESSEE WAS UNABLE TO PROVE THE GENUINENESS OF THE PURCHASES EITHER BY PRODUCING THE 2 ITA NO. 7371/MUM/2018 (A.Y: 2009 - 10) M/S NAAFE CONSTRUCTION SUPPLIER FOR EXAMINATION OR BY FURNISH ING OTHER SUBSTANTIATING DOCUMENTS WHICH WERE REQUIRED BY THE ASSESSING OFFICER?' 2. 'WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN OVERLOOKING THE FACT THAT THE ADDITION MADE BY THE A.O. WAS BASED ON THE DETA ILS OF THE SCAM UNEARTHED BY THE SALES TAX DEPARTMENT, WHEREIN IT WAS ESTABLISHED THAT THE ASSESSEE HAS TAKEN MERE ACCOMMODATION ENTRIES/BOGUS BILLS FROM THE SUPPLIERS WITHOUT ACTUALLY MAKING PURCHASE FROM THEM?' (THIS CASE FALLS UNDER THE EXCEPTION 10(E ) OF THE CIRCULAR NO.03/2018 DATED 11.0 7.2018 AS AMENDED ON 20.08.2018) 3. 'THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND WHICH MAY BE NECESSARY 3. BRIEFLY STATED THE FACTS ARE THAT, THE ASSESSEE IS A FIRM ENGAGED IN THE BUSINESS OF C IVIL C ONTRACTORS AND DERIVES INCOME FROM BUSINESS AND PROFESSION, FILED ITS RETURN OF INCOME FOR THE A.Y. 2009 - 10 ON 30.09.2009 DECLARING INCOME OF . 8,18,835 / - AND THE RETURN WAS PROCESSED U/S. 143(1) OF THE ACT. SUBSEQUENTLY, ASSESSING OFFICER RECEIV ED INFORMATION FROM THE DGIT(INV.), MUMBAI ABOUT THE ACCOMMODATION ENTRIES PROVIDED BY VARIOUS DEALERS AND ASSESSEE WAS ALSO ONE OF THE BENEFICIARY FROM THOSE DEALERS. THE ASSESSMENT WAS REOPENED U/S. 147 OF THE ACT BASED ON THE INFORMATION RECEIVED FROM DGIT(INV.), MUMBAI, THAT THE ASSESSEE HAS AVAILED ACCOMMODATION ENTRIES FROM VARIOUS DEALERS WHO ARE SAID TO BE PROVIDING ACCOMMODATION ENTRIES WITHOUT THERE BEING TRANSPORTATION OF ANY GOODS. IN THE RE - ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS REQUIRED TO PROVE THE GENUINENESS OF THE PURCHASES MADE FROM THE ABOVE PARTIES WHICH ARE REFERRED TO IN THE ASSESSMENT ORDER. IN REPLY, ASSESSEE HAS 3 ITA NO. 7371/MUM/2018 (A.Y: 2009 - 10) M/S NAAFE CONSTRUCTION FURNISHED COP IES OF LEDGER ACCOUNT OF THE PURCHASE PARTY, PURCHASE BILL AND PAYMENT DETAILS TO PURCHASE PARTIES AND S UBMITTED THAT PURCHASES ARE GENUINE. HOWEVER, THE ASSESSEE FAILED TO PRODUCE THE PARTIES . 4. NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE THE ASSESSING OFFICER TREATED THE PURCHASES AS NON - GENUINE AND HE WAS OF THE OPINION THAT ASSESSEE HAD OBTAINED ONLY ACCOMMODATION ENTRIES . ASSESSING OFFICER HOWEVER ESTIMATED T HE PROFIT ELEME NT IN THOSE PURCHASES AT . 11,88,390/ - @ 25% OF THE NON - GENUINE PURCHASES AND ADDED TO THE INCOME OF THE ASSESSEE. ON APPEAL THE LD.CIT(A) CONSIDERING THE EVIDENCES AND VARIOUS SUBMISSIONS OF THE A SSESSEE RESTRICTED THE DISALLOWANCE TO THE EXTENT 15 % OF THE NON - GENUINE PURCHASES. 5. INSPITE OF ISSUE OF NOTICE NONE APPEARED ON BEHALF OF THE ASSESSEE NOR ANY ADJOURNMENT WAS SOUGHT BY THE ASSESSEE. THEREFORE, WE PROCEED TO DISPOSE OFF THIS APPEAL ON HEAR ING THE LD. DR ON MERITS . 6. LD. DR VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 7. HEARD LD. DR ON MERITS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. ON A PERUSAL OF THE ORDER OF THE LD.CIT(A), WE FIND THAT THE LD.CIT(A) CONSIDERED THIS ASPECT OF THE MATTER ELABORATELY WITH REFERENCE 4 ITA NO. 7371/MUM/2018 (A.Y: 2009 - 10) M/S NAAFE CONSTRUCTION TO THE SUBMISSIONS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO 15 % OF THE NON - GENUINE PURCHASES, WHILE HOLDING SO, THE LD.CIT(A) OBSERVED AS UNDER: - 1 3. ORDINARILY ONCE PURCHASE IS HELD BOGUS, ENTIRE PURCHASE IS TO BE DISA LL OWED AS A BOOK ENTRY HAVING EFFECT OF REDUCING PROFIT IS CREATED SOLELY FOR REDUCING NORMAL PROFIT. HOWEVER JUDICIAL DECISIONS NEED TO BE FOLLOWED BY WHICH A FIXED P ER CENT OF SAME I.E BOGUS ENTRY/ACCOMMODATION ENTRY IS ADDED TO INCOME [ EG: DCIT, 14(1)(2), MUMBAI VS V /S FAGIOLI INDIA PVT. LTD. (ITA NO. 4557 & 4558/MUM/2015 DATED 28.07.2017, WHICH INTER ALIA CONSIDERED DECISION OF HON. SUPREME COURT IN N K PROTEINS VS DCIT (SLP 759 TO 2017) DATED 16.01.2017]. IN THE CITED CASE OF M/S FAGIOLI INDIA PVT. LTD. GROSS PROFIT WAS 37% AND HON.LTAT DECIDED THAT ESTIMATE OF PROFIT BE 12.5% ON THE FIGURE OF ACCOMMODATION ENTRY OR BOGUS PURCHASE. FURTHER IN SHRI MEHUL K. MEHTA PRO P. VAISHNAVI ENTERPRISES VS INCOME TAX OFFICER 15(1 )(3), MUMBAI IN L.T.A. NO.3 227/MUM/2016 DATED 14.03.2017 IN THE CONTEXT OF THE CASE THE HON. I TAT ORDERED AS UNDER: 'WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED APPELLATE ORDER OF LEARNED CIT(A) WH ICH WE ARE INCLINED TO AFFIRM/SUSTAIN EXCEPT THAT, IN OUR CONSIDERED VIEW , THE END S OF JUSTICE WILL BE MET IN THE INSTANT CASE IF GP IS ESTIMATED TO TUNE OF 12.5% OF THE PURCHASES FROM THESE ALLEGED HAWALA OPERATORS WHICH WILL COVER ANY LEAKAGE OF REVENUE BY WAY OF VAT, COMMISSION ETC. . THUS, AS COMPARED TO THE GP RATIO AT 7.11% DECLARED BY THE ASSESSEE , WE ARE ESTIMATING GP RATIO AT THE RATE OF 12 .5% ON THE SAID BOGUS PURCHASES WHEREIN THE ASSESSEE WILL BE ALLOWED CREDIT OF DECLARED GP RATIO OF 7.11% AND NET ADDITION TO GP RATIO SHALL BE TO THE TUNE OF 5.39% ON BOGUS PURCHASES, HENCE, WE ALLOW PARTIAL RELIEF TO THE ASSESSEE. WE ORDER ACCORDINGLY.' IT CAN BE SEEN THAT IN THE ABOVE THE HON. LTAT HAS REDUCED ADDITION FURTHER VIS - A - VIS THE ORIGINALLY ACCEPTED FIGURE OF 12.5%. 14. THE STATEMENT OF FACTS CONCLUDES AS UNDER: 'THE APPELLANT SUBMIT THAT IN THE LINE OF BUSINESS OF CIVIL CONTRACTOR & SUPPLIERS. THE ASSESSEE HAS DECLARED GROSS PROFIT AND NET PROFIT OF 7.45% AND 4.03% RESPECTIVELY WHICH IS QUITE FAIR IN THE LINE OF BUSINESS. OVER AND ABOVE THE BOOKS OF ACCOUNTS ARE TAX AUDITED AND ASSESSEE MAINTAINS STOCK RECORDS AND REGISTER. ON THE FACE OF THESE EVIDENCES, REJECTION OF BOOKS OF ACCOUNTS U/S 145(3) OF THE ACT IN A S UMMARY MANNER IS UNJUSTIFIED AN UNCALLED FOR . 5 ITA NO. 7371/MUM/2018 (A.Y: 2009 - 10) M/S NAAFE CONSTRUCTION THE APPELLANT SUBMIT THAT THE AO HAS NOT ASSIGNED ANY SPECIFIC REASON FOR COMPUTING 25% PROFIT OF ALLEGED BOGUS PURCHASES OVER AND ABOVE 4.03% OF NET PROFIT ALREADY DISCLOSED. AND TH EREFORE AN ADDITION OF RS. 361555/ - MAY KINDLY BE DELETED.' 15. THERE IS NO EXPLANATION BEFORE ME. THE ASSESSEE IS IN CIVIL CONTRACT BUSINESS. THE ASSESSING OFFICER DISALLOWED ONLY A PART OF THE ALLEGED AMOUNT OF ACCOMMODATION ENTRIES AMOUNTING TO . 14,46, 222 AS RECORDED IN PARAGRAPH 4.1 OF ASSESSMENT ORDER. ON FACTS AND CIRCUMSTANCES OF THE CASE, AND CONSIDERING THE ELABORATE STATEMENT OF FACTS, THERE IS DEFICIENCY ON PART OF ASSESSEE IN PRODUCING RIGHT DOCUMENTS. THE COUNTER ACTION TO NON SERVICE OF NOTIC E UNDER SECTION 133(6) IS INADEQUATE FROM SIDE OF ASSESSEE. 16. IN VIEW OF, ABOVE DISCUSSION, AFTER CONSIDERING ALL ASPECTS, I FIND NO SCOPE FOR RELIEF IN FULL AS SOUGHT FOR. ON FACTS AND CIRCUMSTANCES OF CASE A DISAL LOWANCE OF 15% OF RS. 14,46,222/ - WOULD SUFFICE. THE ASSESSING OFFICER IS DIRECTED TO MODIFY DISALLOWANCE. 8. ON A CAREFUL PERUSAL OF THE ORDER OF THE LD.CIT(A) AND THE REASONS GIVEN THEREIN, WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE LD.CIT(A) IN RESTRICTING THE ADDITION/DISALLOWANCE TO THE EXTENT OF 15 % OF THE PURCHASES. GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER P RONOUNCED IN THE OPEN COURT ON THE 13 TH MARCH, 2020 SD/ - SD/ - ( S. RIFAUR RAHMAN) (C.N. PRASAD) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI / DATED 13 / 0 3 / 2020 GIRIDHAR , S R. PS 6 ITA NO. 7371/MUM/2018 (A.Y: 2009 - 10) M/S NAAFE CONSTRUCTION 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// BY ORDER (ASSTT. REGISTRAR) ITAT, MUM