RAMESHKUMAR & CO., MUMBAI V. ACIT 21(1), MUMBAI

ITA 7598/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8682 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 16-09-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 19-12-2014
• Court: TRIBUNAL
• Department Lawyers: ANU K AGGARWAL
• Assessee Lawyers: SANJAY KAPADIA
• Keywords: Bogus purchase
• Section: 44AD; 69C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI PAWAN SINGH (JM) I.T.A. NO. 7598 /MUM/20 14 (ASSESSMENT YEAR 20 11 - 12 ) M/S. RAMESHKUMAR & CO. MOHANLAL JAIN & CO., CAS 10, CHARTERED HOUSE GROUND FLOOR DR.C.H.STRE ET, MARINE LINES MUMBAI - 400 002. VS. ACIT 21(1) AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400020. ( APPELLANT ) ( RESPONDENT ) I.T.A. NO. 608 /MUM/201 5 (ASSESSMENT YEAR 2011 - 12) ACIT 25(3) 6 TH FLOOR PRATYAKSHKAR BHAVAN, BANDRA KURLA COMPLEX BANDRA EAST MUMBAI - 400 051. VS. M/S. RAMESHKUMAR & CO. 50, 2 ND FLOOR SWASTIK PLAZA V.L. MEHTA ROAD JVPD SCHEME VILE PARLE WEST MUMBAI - 400 049. ( APPELLANT ) ( RESPONDENT ) PAN NO . AAAFR1612D ASSESSEE BY SHRI SANJAY KAPADIA DEPARTMENT BY S MT. ANU K. AGGARWAL DATE OF HE ARING 18 .1 1 . 201 6 DATE OF PRONOUNCEMENT 27 .0 1 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 7.11.2014 PASSED BY THE LEARNED CIT(A) - 32, MUMBAI AND THEY RELATE TO A.Y. 2011 - 12. 2. ISSUE URGED BY BOTH THE PARTIES RELATES TO ADDITION OF ` 3.12 CRORES MADE BY THE ASSESSING OFFICER AS BOGUS PURCHASES U/S. 69C OF THE ACT. M/S. RAMESHKUMAR & CO. 2 3. LEARNED AR SUBMITTED THAT THE ASSESSEE FIRM IS CARRYING ON THE BUSINESS OF UNDERTAKING G OVERNMENT CIVIL CONTRACT WORK S . THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED ON 29.9.2011 DECLARING A TOTAL INCOME OF ` 3.00 CRORES AND THE SAME WAS PROCESSED U/S. 1 43(1) OF THE ACT. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED INFORMATION FROM DIT (INV) THAT THE ASSESSEE HAS PURCHASE D FROM CERTAIN PARTIES, WHO WERE DE CLARED TO BE HAWALA TRADERS BY S ALES TAX DEPARTMENT OF MAHARASHTRA . AS PER THE INFORMATION OF THE SALES TAX DEPARTMENT , THESE PARTIES HAVE PROVIDED ONLY ACCOMMODATION BILLS WITHOUT ACTUALLY SUPPLYING MATERIAL S . AGGREGATE AMOUNT OF PURCHASE S MADE FROM TEN PARTIES WAS STATED AT ` 3,12,34,214/ - . THE ASSESSEE SUBMITTED THAT IT HAD PURCHASE D GOODS FROM THE PARTIES , W HO WERE DULY REGISTERED UNDER M V A T ACT. THE ASSESSEE FURTHER SUBMITTED THAT IT HAS PAID THE SUPPLIER S THROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE ALSO FURNISHED BILLS , COPY OF BANK STATEMENT, LEDGER ACCOUNT AND ALSO PAN OF THE SUPPLIERS. THE ASSESSEE , HOWEVER , COULD NOT FURNISH CONFIRMATION LETTERS FROM THE SUPPLIERS. HENCE, THE ASSESSING OFFICER TOOK TH E VIEW THAT THE PURCHASES MADE FROM THE ABOVE REFERRED TEN PARTIES ARE BOGUS IN NATURE AND ACCORDI N GLY DISALLOWED THE PURCHASES AGGREGATING TO ` 3,12,34,214/ - U/S. 69C OF THE ACT. 4. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) HOWEVER RESTRICTED THE ADDITION TO ` 12.5% OF THE AGGREGATE AMOUNT OF PURCHASE , SINCE THE ASSE SSING OFFICER HAS ACCEPTED THE G ROSS CONTRACT RECEIPT S DECLARED BY THE ASSESSEE. AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) , BOTH THE PARTIES ARE IN APPEAL BEFORE US. 5. LEARN ED AR SUBMITTED THAT THE ASSESSING OFFICER HAS MADE IDENTICAL ADDITION IN A.Y. 2010 - 11 ALSO , BUT THE SAID ADDITION WAS DELETED BY THE COORDINATE BENCH OF THE TRIBUNAL VIDE ITS ORDER DATED 28.11.2014 PASSED IN ITA NO. 2959/MUM/2014. LEARNED AR SUBMITTED THA T THE FACTS RELATING TO THE ADDITION ARE IDENTICAL IN THE CURRENT YEAR ALSO. LEARNED AR FURTHER SUBMITTED THAT THE RECEIPT AND USAGE OF MATERIAL ARE ENTERED IN THE MATERIAL IN WARD AND OUTWARD REGISTER MAINTAINED AT THE WORK SITE. THE WORKS EXECUTED BY THE M/S. RAMESHKUMAR & CO. 3 ASSESSEE ARE EXAMINED BY THE BMC AUTHORIZED PERSONNEL. HE FURTHER SUBMITTED THAT THE MATERIALS ARE BEING ORDERED BY THE PROJECT MANAGER DIRECTLY FROM THE SUPPLIERS AND THE ASSESSEE HAS NO ROLE IN THAT MATTER. LEARNED AR SUBMITTED THAT THE ASSESSEES WORK H AS BEEN FOUND TO BE SATISFACTORY BY THE BMC AUTHORITIES AND SO FAR THERE WAS NO COMPLAINT, DISPUTE OR LITIGATION IN ANY OF THE PROJECTS UNDERTAKEN BY THE ASSESSEE. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS DECLARED GROSS PROFIT AT 17.18% AND NET PROFIT O F 10.19% DURING THE YEAR UNDER CONSIDERATION AS AGAINST GP RATE OF 14.20 % AND NET PROFIT RATE OF 9.75% DECLARED IN THE IMMEDIATELY PRECEDING YEAR. HE SUBMITTED THAT THE PROFIT RATE DECLARED IN AY 2010 - 11 WAS FOUND TO BE SATISFACTORY BY THE TRIBUNAL IN THE ORDER PASSED FOR THAT YEAR. HE SUBMITTED THAT THE PROFIT RATE HAS IMPROVED DURING THE YEAR UNDER CONSIDERATION AND HENCE THERE IS NO REASON TO SUSPECT THE GENUINENESS OF THE PURCHASE S MADE BY THE ASSESSEE MERELY ON THE REASONING THAT THE NAME OF SUPPLIER S FIND PLACE IN THE LIST OF HAWALA DEALER S PUBLISHED BY THE SALES TAX AUTHORITIES. 6. ON THE CONTRARY, LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAS FAILED TO OBTAIN CONFIRMATION LETTERS FROM THE SUPPLIERS NOR DID IT PRODUCE THE SUP PLIERS TO PROVE THE GENUINENESS. ACCORDINGLY, HE SUBMITTED THAT THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE ENTIRE PURCHASE MADE FROM THE ABOVE SAID TINTED DEALERS AND THE LEARNED CIT(A) WAS NOT JUSTIFIED IN RESTRICTING THE ADDITION TO 12.5% OF THE AMOUNT PURCHASED. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURSUED THE RECORD. WE NOTICED THAT THE ASSESSING OFFICER HAS MADE IDENTICAL ADDITION IN THE EARLIER YEAR AND THE SAME HAS BEEN DELETED BY THE COORDINATE BENCH OF THE TRIBUNAL WITH THE FOLLO WING OBSERVATIONS: - 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVANT DOCUMENTARY EVIDENCES BROUGHT BEFORE US. WE FIND THAT THE AO HAS MADE THE ADDITION AS SOME OF THE SUPPLIERS OF THE ASSESSEE WERE DECLARED HAWALA DEALER B Y THE SALES TAX DEPARTMENT. THIS MAY BE A GOOD REASON FOR MAKING FURTHER INVESTIGATION BUT THE AO DID NOT MAKE ANY FURTHER INVESTIGATION AND MERELY COMPLETED THE ASSESSMENT ON SUSPICION. M/S. RAMESHKUMAR & CO. 4 ONCE THE ASSESSEE HAS BROUGHT ON RECORD THE DETAILS OF PAYMENTS BY AC COUNT PAYEE CHEQUE, IT WAS INCUMBENT ON THE AO TO HAVE VERIFIED THE PAYMENT DETAILS FROM THE BANK OF THE ASSESSEE AND ALSO FROM THE BANK OF THE SUPPLIERS TO VERIFY WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THEIR ACCOUNT. NO SUCH EXERCISE HAS BEE N DONE. THE LD. CIT(A) HAS ALSO CONFIRMED THE ADDITION MADE BY THE AO BY GOING ON THE SUSPICION AND THE BELIEF THAT THE SUPPLIERS OF THE ASSESSEE ARE HAWALA TRADERS. WE ALSO FIND THAT NO EFFORT HAS BEEN MADE TO VERIFY THE WORK DONE BY THE ASSESSEE FROM THE MUNICIPAL CORPORATION OF GREATER MUMBAI. WE AGREE WITH THE SUBMISSIONS OF THE LD. COUNSEL THAT IF THERE WERE NO PURCHASES, THE ASSESSEE WOULD NOT HAVE BEEN IN A POSITION TO COMPLETE THE CIVIL WORK. 8.1. ON CIVIL CONTRACT RECEIPTS OF RS. 32.05 CRORES, TH E ASSESSEE HAS SHOWN GROSS PROFIT AT 14.2% AND NET PROFIT AT 9.72%. 8.2. EVEN IF FOR THE SAKE OF ARGUMENT, THE BOOKS OF ACCOUNTS ARE REJECTED, THE PROFIT HAS TO BE COMPUTED ON THE SALES MADE BY THE ASSESSEE U/S. 44AD OF THE ACT, THE PRESUMPTIVE PROFIT IN CASE OF CIVIL CONTRACTORS IS 8% AND IN CASE OF A PARTNERSHIP FIRM, A FURTHER DEDUCTION IS ALLOWED IN RESPECT OF SALARY AND INTEREST PAID TO THE PARTNERS. THE RATIO ANALYSIS OF THE PROFITABILITY IS ALSO IN FAVOUR OF THE ASSESSEE. IN OUR CONSIDERED OPINION, THE PURCHASES ARE SUPPORTED BY PROPER INVOICES DULY REFLECTED IN THE BOOKS OF ACCOUNT. THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE WHICH ARE DULY REFLECTED IN THE BANK STATEMENT OF THE ASSESSEE. THERE IS NO EVIDENCE TO SHOW THAT THE ASSESSEE HAS R ECEIVED CASH BOOK FROM THE SUPPLIERS. THE ADDITIONS HAVE BEEN MADE MERELY ON THE REPORT OF THE SALES TAX DEPARTMENT BUT AT THE SAME TIME IT CANNOT BE SAID THAT PURCHASES ARE BOGUS. WE, THEREFORE, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND DIRECT THE AO T O DELETE THE ADDITION OF RS. 4,98,80,892/ - . 8. DURING THE YEAR UNDER CONSIDERATION, WE NOTICE THAT THE ASSESSEES PERFORMANCE HAS IMPROVED NAMELY GROSS PROFIT RATE HAS SHOT TO 17.18% AS AGAINST 14.20% DECLARED IN THE IMMEDIATELY PRECEDING YE AR. THE ASSESSEE HAS ALSO STATED THAT THE GOODS PURCHASED HAVE BEEN ENTERED INTO MATERIAL IN WARD REGISTER AND CORRE S PONDING UTILIZATION IS ALSO RECORDED. AS OBSERVED BY THE COORDINATE BENCH OF THE TRIBUNAL, THE ASSESSING OFFICER HAS MADE IMPUGNED ADDITION MERELY BY PLACING RELIANCE ON THE REPORT GIVEN BY THE SALES TAX DEPARTMENT WITHOUT CONDUCTING ANY FURTHER INVESTIGATION. HENCE, CONSISTENT WITH THE VIEW TAKEN BY THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR A.Y. 2010 - 11, WE ARE OF THE VIEW THAT THE ADDI TION MADE BY THE ASSESSING OFFICER M/S. RAMESHKUMAR & CO. 5 SHOULD BE DELETED. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY THE LEARNED CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 27 . 1 .201 7. SD/ - SD/ - (PAWAN SINGH ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 27 / 1 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI