M/S MAX REALTIES (FORMERLY M/S MAX REALTIES PVT LTD), MUMBAI V. DCIT CC-2, , THANE

ITA 7544/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 8487 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 09-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THARIAN OOMMEN
• Keywords: Bogus purchase; Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH MUMBAI BEFORE : SHRI VIKAS AWASTHY, JUDICIAL MEMBER & SHRI M.BALAGANESH, A CCOUNTANT MEMBER ITA NO. 7544 /MUM/ 20 19 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. MAX REALITIES LLP (FORMER LY M/S. MAX REALITIES PVT. LTD.,) PLOT NO.3 & 5, BALAJI BUSINESS PARK OPP. MITTAL INDUSTRIAL ESTATE M.V. ROAD, A.K. ROAD ANDHERI EAST MUMBAI 400 059 VS. DCIT, CENTRAL CIRCLE - 2 THANE 6 TH FLOOR, ASHARJI PARK WAGLE INDUSTRIAL ESTATE MUMBAI 400 604 PAN/ GIR NO. AAECM4100G (APPELLANT ) .. (RESPONDENT ) ITA NO. 161 /MUM/ 2020 ( ASSESSMENT YEAR : 2010 - 11 ) DCIT, CENTRAL CIRCLE - 2 THANE 6 TH FLOOR, ASHARJI PARK WAGLE INDUSTRIAL ESTATE M ` UMBAI 400 604 VS. M/S. MAX REALITIES LLP (FORMERLY M/S. MAX REALITIES PVT. LTD .,) PLOT NO.3 & 5, BALAJI BUSINESS PARK OPP. MITTAL INDUSTRIAL ESTATE M.V. ROAD, A.K. ROAD ANDHERI EAST MUMBAI 400 059 PAN/GIR NO. AAECM4100G (APPELLANT ) .. (RESPONDENT ) ASSESSEE BY SHRI RUSHABH MEHTA REVENUE BY SHRI THARIAN OOMMEN DATE OF HEA RING 11/08 /2021 DATE OF PRONOUNCEMENT 16 / 08 /202 1 ITA NO S . 7544/MUM/2019 & 161/MUM/2020 M/S. MAX REALITIES LLP (FORMERLY MAX REALITIES PVT. LTD., 2 / O R D E R PER M. BALAGANESH (A.M) : TH ESE CROSS APPEAL S IN ITA NO. 7544/MUM/2019 & 161/MUM/2020 FOR A.Y. 2010 - 11 ARISES OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) - 11, PUNE IN APPEAL NO. CIT(A) - 11/ACIT CEN. CIR - 2/THANE/542 & 753/2014 - 15 DATED 31/10/2019 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 25/03/2013 BY THE L D. ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE - 2, THANE (HEREINAFTER REFERRED TO AS LD. AO). 2. THE ONLY ISSUE TO BE DECIDED IN THESE CROSS APPEALS IS WITH REGARD TO DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASES. 3. WE HAVE HEARD RIVAL SUBMISSION S AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE A SSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF BUILDING AND DEVELOPMENT OF PROJECT BY THE NAME OF BHOOMI MALL AT PLOT NO.9, SECTOR 15, BELAPUR, NAVI MUMBAI AND HAD ELECTRON ICALLY FILED ITS RETURN OF INCOME FOR THE A.Y.2010 - 11 ON 08/09/2010 DECLARING TOTAL INCOME OF RS.NIL AND SHOWING CARRY FORWARD LOSS OF RS.32,30,652/ - . THE COMMENCEMENT CERTIFICATE FOR THE SAID PROJECT I.E. BHOOMI MALL WAS GRANTED ON 28/04/2006 BY THE L OCAL A UTHORITY, NAVI MUMBAI MUNICIPAL CORPORATION, NAVI MUMBAI. THE ASSESSEE IS ONE OF THE ENTITIES OF GAJARA GROUP. A SEARCH AND SEIZURE ACTION U/S.132(1) OF THE ACT WAS CONDUCTED IN THE CASE OF GAJARA GROUP ON 19/02/2009 . D URING THE COURSE OF REGULAR ASSESSM ENT PROCEEDINGS FOR A.Y.2010 - 11, THE ASSESSEE WAS ASKED TO PRODUCE THE ENTIRE BOOKS OF ACCOUNTS BY THE LD. AO WHICH WERE DULY PRODUCED AND VERIFIED BY THE LD. ITA NO S . 7544/MUM/2019 & 161/MUM/2020 M/S. MAX REALITIES LLP (FORMERLY MAX REALITIES PVT. LTD., 3 AO. THE LD. AO OBSERVED THAT ASSESSEE HAD MADE CERTAIN PURCHASES FROM CERTAIN DEALERS WHOSE NAMES APPEAR TO BE TAINTED DEALERS IN THE WEBSITE OF SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AND ACCORDINGLY , THE SAID INFORMATION WAS PASSED ON BY THE SALES TAX DEPARTMENT TO DGIT ( INVESTIGATION ), MUMBAI AND PUNE , WHICH EVENTUALLY WAS PASSED ON TO THE ASSESSING OFFICER ASSESSING THE ASSESSEE. THE LD. AO OBSERVED THAT ASSESSEE HAD MADE PURCHASES FROM THE TAINTED DEALERS AS UNDER: - SR. NO. NAME OF THE PARTIES AMOUNT 1 M/S. R.K.ENTERPRISES RS.73,27,463/ - 2 M/S. BAJARANGI STEEL AND METAL PVT. LTD., RS.8 4,21,794/ - 3 M/S. BALAJI TRADING RS.38,88,708/ - TOTAL RS.1,98,37,965/ - 3.1. THE LD. AO ISSUED NOTICE U/S.133(6) OF THE ACT ON THE ADDRESS PRODUCED BY THE ASSESSEE TO VERIFY GENUINENESS OF THE PURCHASES MADE BY THE ASSESSEE. THESE NOTICES WERE RETURNE D UNSERVED . THE LD. AO ACCORDINGLY , CONCLUDED THAT THESE PARTIES ARE NON - EXISTENT AND ALSO BASED ON THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT THAT THESE PARTIES ARE TAINTED DEALERS AND ARE ENGAGED IN PROVIDING ONLY ACCOMMODATION BILLS TO VARIO US AUTHORITIES, HE PROCEEDED TO DISALLOW THE ENTIRE PURCHASE S OF RS.1,98,37,965/ - MADE FROM THE AFORESAID THREE PARTIES , AS NON - GENUINE. HOWEVER, THE ASSESSEE CLAIMED BEFORE THE APPELLATE PROCEEDINGS THAT IT HA D FILED THE COPIES OF LEDGER ACCOUNTS OF THE S UPPLIERS FOR THE RELEVANT PERIOD, COPIES OF TAX INVOICE WHICH BEAR TIN OF THE DEALERS / SUPPLIERS, COPIES OF DELIVERY CHALLANS, COPIES OF CONFIRMATION RECEIVED FROM THE DEALERS / SUPPLIERS AND COPIES OF BANK STATEMENT EVIDENCING THE PAYMENTS MADE TO THOSE SUPPLIERS BY ACCOUNT PAYEE ITA NO S . 7544/MUM/2019 & 161/MUM/2020 M/S. MAX REALITIES LLP (FORMERLY MAX REALITIES PVT. LTD., 4 CHEQUES BEFORE THE LD. AO. IT WAS ALSO CLAIMED THAT DUE TO LACK OF SUFFICIENT OPPORTUNITIES TO PROVE THE GENUINENESS OF PURCHASES, THE QUANTITATIVE DETAILS C OULD NOT BE FURNISHED BEFORE THE LD. AO. ACCORDINGLY, THE QUANTITATIVE D ETAILS WERE FURNISHED BEFORE THE LD. CIT(A) BY THE ASSESSEE PROVING THE FACT THAT THE MATERIALS PURCHASED FROM THE AFORESAID SUPPLIERS WERE ACTUALLY CONSUMED BY THE ASSESSEE IN VARIOUS PROJECTS. ACCORDINGLY, IT WAS CLAIMED THAT THE PURCHASES MADE BY THE AS SESSEE WERE GENUINE. THE ASSESSEE ALSO PLEADED THAT THE SUPPLIERS ARE VAT DEFAULTERS AND IT IS BEYOND THE CONTROL OF THE ASSESSEE TO PRODUCE THEM BEFORE THE LD. AO. THE ASSESSEE ALSO SUBMITTED BY FURNISHING THE STATEMENT / AFFIDAVIT RECEIVED FROM SALES TAX DEPARTMENT OF MR. HANUMAN H BISHNOI, DIRECTOR OF BAJARANGI STEEL AND METAL PVT. LTD., AND AFFIDAVIT OF MR. MEHUL DARJEE PROPRIETOR OF BALAJI TRADING TO CLAIM THAT THEY HAD OBTAINED SALES TAX REGISTRATION AND CARRYING OUT BUSINESS OF TRADING OF CONSTRUCTIO N MATERIAL. IT WAS ALSO CLAIMED THAT AFFIDAVIT / STATEMENT ON OATH OF M/S. R.K. ENTERPRISES WAS NOT PROVIDED TO IT. IT WAS SUBMITTED THAT ASSESSEE HAD ALSO OFFERED TOTAL GROSS PROFIT OF 31.59% AND NET PROFIT OF 15.07% IN THE PROJECT AND IF THE ENTIRE PURCH ASES AMOUNTING TO RS.1,98,37,965/ - IS DISALLOWED, THEN THE GROSS PROFIT WOULD RAISE TO 71.1% AND NET PROFIT WOULD RAISE TO 54.62% WHICH IS PRACTICALLY NOT POSSIBLE TO EARN IN THE LINE OF BUSINESS OPERATED BY THE ASSESSEE. THE ASSESSEE REQUESTED THE LD. CI T(A) THAT THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH PURCHASES MAY BE BROUGHT TO TAX ON REASONABLE BASIS. ACCORDINGLY, THE LD. CIT(A) OBSERVED THAT IF THE VALUE OF BOGUS PURCHASES OF RS.1,98,37,965/ - IS REDUCED FROM THE COST OF CONSTRUCTION , THEN THE GROSS PROFIT RATE OF THE ASSESSEE OF THE BUSINESS BECOMES 94.69% WHICH WHEN COMPARED WITH THE GP PERCENTAGE FOR F.Y.2011 - 12 TO 2014 - 15 WOULD BE 55.13% THEREBY RESULTING IN DIFFERENCE IN GP RATE OF 39.56%. ACCORDINGLY, THE LD. CIT(A) PROCEEDED TO MAKE ADDI TION @39.56% OF VALUE OF DISPUTED ITA NO S . 7544/MUM/2019 & 161/MUM/2020 M/S. MAX REALITIES LLP (FORMERLY MAX REALITIES PVT. LTD., 5 PURCHASES OF RS.1,98,37,965/ - AND RESTRICTED THE ADDITION AMOUNT TO 7 8 ,47,900/ - . AG AINST THIS ORDER OF THE LD CIT(A) , BOTH REVENUE AS WELL AS ASSESSEE ARE IN APPEAL BEFORE US. 3.2. WE FIND THAT THERE IS NO DISPUTE THAT TH E ASSESSEE HAD MADE PURCHASES FROM TAINTED SUPPLIERS . WE FIND THAT THOUGH THESE PARTIES HAD FILED AN AFFIDAVIT BEFORE THE SALES TAX DEPARTMENT THAT THEY ARE GE NUINELY ENGAGED IN THE BUSINESS, THE A SSESSEE HEREIN COULD NOT PROVE THE GENUINENESS OF PURCHASES MADE FROM THOSE PARTIES WITH CONCLUSIVE EVIDENCE S . HENCE, IT COULD BE SAFELY CONCLUDED THAT ASSESSEE COULD HAVE MADE PURCHASES ONLY FROM GREY MARKET IN ORDER TO HAVE SAVINGS FROM VAT AND INCIDENTAL PROFIT ELEMENT THEREON. IT WOULD BE JUST AND FAIR TO BRIN G TO TAX ONLY THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH DISPUTED PURCHASES IN AS MUCH AS THE LD. CIT(A) ACCEPTED THE FACT THAT THE GOODS MADE BY THE ASSESSEE FROM THE AFORESAID SUPPLIERS HAD BEEN ACTUALLY CONSUMED BY IT IN THE PROJECTS . F OR THE PURP OSE OF DETERMINATION OF PROFIT ELEMENT EMBEDDED IN THE VALUE OF SUCH DISPUTED PURCHASES, SINCE THE ASSESSEE HAD MADE PURCHASES FROM THE GREY MARKET, WE HOLD THAT IT COULD HAVE SAVED IN VAT PORTION AND INCIDENTAL PROFIT ELEMENT THEREON MAKING CASH PURCHASES . HENCE, WE DIRECT THE LD. AO TO DETERMINE THE PROFIT ELEMENT AS UNDER: - SR. NO. NAME OF THE SUPPLIER AMOUNT OF PURCHASE VAT RATE AS STATED BY THE LD AR INCIDENTAL PROFIT ELEMENT TOTAL PROFIT PERCENTAGE AMOUNT TO BE ADDED 1 M/S. R.K.ENTERPRISES RS.73,27, 463/ - 12.5% 1% 13.5% 9,89,207/ - 2 M/S. BAJARANGI STEEL RS.84,21,794/ - 4% 1% 5% 4,21,089/ - ITA NO S . 7544/MUM/2019 & 161/MUM/2020 M/S. MAX REALITIES LLP (FORMERLY MAX REALITIES PVT. LTD., 6 AND METAL PVT. LTD., 3 M/S. BALAJI TRADING RS.38,88,708/ - 4% 1% 5% 1,94,435/ - 3.3. THE LD. AO IS DIRECTED TO DETERMINE THE PROFIT ELEMENT EMBEDDED IN THE VALUE OF DISPUTED PURCHASES IN THE AFORESAID MANNER IN THE TOTAL SUM OF RS 16,04,733/ - . ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE PARTLY ALLOWED. 4. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED AND APPEAL OF REVENUE IS DISMI SSED. ORDER PRONOUNCED ON 1 6 / 08 /202 1 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD / - ( VIKAS AWASTHY ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 16 / 08 / 202 1 KARUNA , SR.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//