EXCEL REALITY N INFRA LTD., MUMBAI V. ACIT 9 (2)92), MUMBAI

ITA 8017/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4629 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 27-12-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR MENON
• Assessee Lawyers: N R AGARWAL
• Keywords: Bogus purchase; Unexplained expenditure; Accommodation entries; Reason to believe
• Section: 69C; 143(3); 142(1); 133(6); 143(1); 250; 143(2); 22; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI S RIFAUR RAHMAN, ACCOUNTANT MEMBER & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER NO ITA / CO NO. A.Y APPELLANT RESPONDENT 1 8017/MUM/2019 2012-13 M/S EXCEL REALITY N INFRA LTD, 31/A, LAXMI INDUSTRIAL ESTATE NEW LINK ROAD, MUMBAI. AABCE1172H ROOM NO. 665A, 6 TH FLOOR, AYAKAR BHAVAN, MK ROAD, MUMBAI. 2 1180/MUM/2020 2012-13 DCIT 9(2)(2) ROOM NO. 665A, 6 TH FLOOR, AYAKAR BHAVAN, MK ROAD, MUMBAI. M/S EXCEL REALITY N INFRA LTD, 31/A, LAXMI INDUSTRIAL ESTATE NEW LINK ROAD, MUMBAI. AABCE1172H APPELLANT BY : SHRI N . R . AGARWAL. AR RESPONDENT BY : SHRI VIJAY KUMAR MENON. DR DATE OF HEARING 22 .0 9 .2021 DATE OF PRONOUNCEMENT 28 .0 9 .2021 / O R D E R PER PAVAN KUMAR GADALE JM: THE CROSS APPEAL IS FILED BY THE ASSESSEE AND THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)- 16, MUMBAI PASSED U/S 143(3) R.W.S 1 47 AND 250 OF THE INCOME TAX ACT, 1961. ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 2 - FOR THE SAKE OF CONVENIENCE WE SHALL TAKE UP ASSE SSEE APPEAL ITA NO. 8017/MUM/2019, A.Y 2012-13 AS A LEAD CASE AND THE FACTS NARRATED THEREIN. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF 91,69,500/- BEING 12.5% OF PURCHASES RS. 7,33,56,00 0/-. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF 14,67,120/- FOR COMMISSION BEING 2% OF PURCHASES RS . 7,33,56,000/-. 3. THE LD. CIT(A) ERRED IN NOT ADJUDICATING GROUND FOR REOPENING U/S 147 OF THE ACT. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF CIVIL CONSTR UCTION WORKS. THE ASSESSEE HAS FILED THE RETURN OF INCOME FOR THE A.Y 2012-13 ON 27.09.2012 DECLARING A TOTAL INC OME OF RS.3,65,62,010/- AND THE RETURN OF INCOME WAS PROCESSED U/S 143(1) OF THE ACT AND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT ON 16.03.2015 DETERMINING A TOTAL INCOME OF RS. 3,65,68,910/- SUBSEQUENTLY, THE ASSESSING OFFICER (A.O.) HAS RECE IVED INFORMATION FROM DCIT, CENTRAL CIRCLE MUMBAI THAT T HE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRIES FROM M/S.PARANETA INDUSTRIES LTD. THEREFORE THE A.O. HAS REASON TO BELIEVE THAT THE INCOME HAS ESCAPED ASSES SMENT AND AFTER RECORDING THE REASONS FOR REOPENING, THE A.O. ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 3 - HAS ISSUED NOTICE U/S 148 OF THE ACT. THE ASSESSEE HAS FILED A LETTER TO TREAT THE RETURN OF INCOME FILE D ON 27-09- 2012 AS COMPLIANCE. THE ASSESSEE WAS PROVIDED THE REASONS FOR REOPENING OF THE ASSESSMENT AND HAS FIL ED THE OBJECTIONS. SUBSEQUENTLY, THE A.O. HAS ISSUED NOTIC E U/S 143(2) AND 142(1) OF THE ACT. IN COMPLIANCE TO THE NOTICES, THE LD. AR OF THE ASSESSEE FURNISHED THE DETAILS A ND APPEARED FROM TIME TO TIME AND THE CASE WAS DISCUSS ED. THE A.O. FOUND THAT THE ASSESSEE HAS MADE NON GEN UINE PURCHASE TRANSACTIONS AS PER THE INFORMATION OF DCI T, CC-2(2), MUMBAI. SUBSEQUENTLY, THE A.O. HAS ISSUED NOTICE U/S 133(6) OF THE ACT ON THE PARTY AND TH E SAID NOTICE WAS RETURN UN-SERVED. THE AO HAS CALLED FOR THE DETAILS IN RESPECT OF THE TRANSACTION OF PURCHASES, AGREEMENT ETC AND INCOMPLIANCE THE ASSESSEE HAS FI LED THE INFORMATION IN RESPECT OF THE TRANSACTIONS REFE RRED IN THE ASSESSMENT ORDER. FINALLY, THE A.O WAS NOT SATI SFIED WITH THE EXPLANATIONS AND OF THE OPINION THAT IT IS A CLEAR CASE OF BOGUS PURCHASE TRANSACTION AND MADE 100% ADDITION OF RS. 7,33,56,000/-.FURTHER, THE A.O. HA S RELIED ON THE STATEMENT IN RESPECT OF THE ACCOMMOD ATION ENTRIES PROVIDED ON COMMISSION. THE A.O. HAS OBSERV ED THAT THE AMOUNT OF COMMISSION HAS TO BE TREATED AS UNEXPLAINED EXPENDITURE U/S 69C OF THE ACT AND ASSESSED THE TOTAL INCOME OF RS. 11,13,92,030/- AND ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 4 - PASSED THE ORDER U/S 143(3) R.W.S 147 OF THE ACT ON 20.12.2018. 3. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED A N APPEAL BEFORE THE CIT(A). THE CIT(A) IN THE APPELLA TE PROCEEDINGS CONSIDERED THE GROUNDS OF APPEAL, FINDI NGS OF THE A.O IN THE SCRUTINY ASSESSMENT, SUBMISSIONS OF THE ASSESSEE ON THE DISPUTED ISSUE. FINALLY THE CIT(A) CONSIDERED THE JUDICIAL DECISIONS OF THE HONBLE HI GH COURT AND HONBLE TRIBUNAL AND RESTRICTED THE ADD ITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES AND CONFI RMED THAT ACTION OF THE A.O. IN RESPECT OF COMMISSION EXPENDITURE DISALLOWANCE AND PARTLY ALLOWED THE APP EAL. AGGRIEVED BY THE CIT(A) ORDER, THE ASSESSEE HAS FIL ED AN APPEAL BEFORE THE HONBLE TRIBUNAL. 4. AT THE TIME OF HEARING, THE LD.AR SUBMITTED THAT THE CIT(A) HAS ERRED IN ESTIMATION OF INCOME @12.5% ON THE GENUINE TRANSACTIONS OF PURCHASES WHICH A RE WRONGLY TREATED AS ACCOMMODATION ENTRIES BY THE A.O . FURTHER THE INCOME/PROFIT ESTIMATED ON THE PURCHASE S IS ON THE HIGHER SIDE. THE ASSESSEE HAS DISCLOSED T HE PROFIT IN THE FINANCIAL STATEMENTS ON THE PROJECTS AND WAS ACCEPTED IN THE EARLIER YEARS AND THE GROSS PRO FIT RATE WORKED OUT @3.25%. FURTHER ON THE SIMILAR FAC TS ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 5 - AND JOINT VENTURES, THE INCOME IS ESTIMATED @4% A ND PRAYED FOR REDUCTION OF ESTIMATION OF PROFIT AND SUPPORTED THE SUBMISSIONS WITH THE JUDICIAL DECISIO NS. FURTHER,THE LD.AR EMPHASIZED THAT THE CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF COMMISSION BE ING @2% OF BOGUS PURCHASES AS THE A.O. HAS SOLELY MADE ADDITION BASED ON THE STATEMENT AND WITHOUT ANY MATERIAL EVIDENCE. LASTLY, THE LD.AR MADE SUBMISSIONS ON VALIDITY OF THE REASSESSMENT AND SUBSTANTIATED ON THE DISPUTED ISSUES WITH THE PAPER BOOK AND JUDICIAL DECISIONS AND PRAYED FOR ALLOWING THE APPEAL. 5. CONTRA, THE LD.DR ON THE FIRST GROUND OF APPEA L WITH RESPECT TO GENUINESS OF PURCHASES SUBMITTED THAT THE ASSESSEE COULD NOT ESTABLISH THE FACTS WIT H PROOF WITH THE A.O NOR BEFORE THE CIT(A). WHEREAS, IN RESPECT OF ADDITION OF COMMISSION PAYMENTS, THE ASSESSEE MUST HAVE INCURRED EXPENSES FOR OBTAINING THE BOGUS PURCHASE TRANSACTION. ON LAST DISPUTED ISSUE, WITH REGARD TO VALIDITY OF ASSESSEEMENT, THE LD.DR SUBMITTED THAT THE NOTICE WAS ISSUED WITHIN THE TIME AND THE RECORDING OF REASONS IS BASED ON THE INFORMATION RECEIVED FROM DCIT(CENTRAL CIRCLE) ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 6 - MUMBAI AND THE JUDICIAL DECISIONS RELIED BY THE ASSESSEE ARE DISTINGUISHABLE ON FACTS. 6. WE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA-FACIE THE LD.AR CONTENTIO NS ARE ON THREE ASPECTS, FIRST WE SHALL TAKE-UP ISSUE WERE THE ASSESSING OFFICER( A.O.) HAS MADE 100% ADDITION OF BOGUS PURCHASES AND THE CIT(A) HAS ESTIMATED INCOME/PROFIT @12.5%. THE LD.AR CONTENTIONS ARE THAT THE ASSESSEE IS ENGAGED IN CIVIL CONSTRUCTION WORKS AND THE PROFIT MARGIN IS VERY LESS DUE TO OPERATIONAL DELAYS AND CAPITALIZATION COST AND THE ASSESSEES GROSS PROFIT RATE IS AROUND @3.25%.WE CONSIDER IT APPROPRIATE TO REFER TO THE OBSERVATION S OF THE CIT(A) AT PAGE 9 PARA 4.1.26 OF THE ORDER, WHIC H IS READ AS UNDER: 4.1.26. AS NARRATED EARLIER, THE LD. AO IN THIS CA SE HAS HELD THAT THE PARTIES FROM WHICH THE PURCHASES WERE MADE BY THE APPELLANT WERE FOUND TO BE BOGUS AND TH AT IS THE REASON FOR WHICH IT WAS NOT PRODUCED DURING THE ASSESSMENT PROCEEDINGS. NOT HAVING DOUBTED THE CONSUMPTION/SALES, THE MOTIVE BEHIND OBTAINING BOGU S BILLS THUS, APPEARS TO BE INFLATION OF PURCHASE PRI CE SO AS TO SUPPRESS TRUE PROFITS. CONSIDERING THE FACTS OF THE CASE AS WELL AS THE VARIOUS CASE LAWS CITED (SUPRA), I E STIMATE THE SUPPRESSED PROFIT TO THE EXTENT OF 12.5% OF THE PURCHASES MADE FROM THE BOGUS ENTITIES, AS THE ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 7 - SUPPRESSED PROFIT ELEMENT EMBEDDED IN SUCH PURCHASE S. THIS ESTIMATION IS IN ADDITION TO THE GP SHOWN BY THE APPELLANT. ACCORDINGLY, THIS GROUN D OF APPEAL IS PARTLY ALLOWED. 7. THE CRUX OF THE DISPUTED ISSUE AS ENVISAGED BY THE LD.AR THAT THE CIT(A) HAS RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF THE BOGUS PURCHASES CONSIDERING PROFIT ELEMENT EMBEDDED. THE LD. AR EMPHASIZED THAT THE ADDITION OF GROSS PROFIT SHOULD BE RESTRICTED T O THE G.P RATE. WE CONSIDERING THE FACTS AND CIRCUMSTANCE S OF THE INSTANT CASE ARE OF THE OPINION THAT THE GRO SS PROFIT RATE DISCLOSED IN THE FINANCIAL STATEMENT IS @3.25% AND THE ASSESSEE IS IN THE CIVIL CONSTRUCTIO N BUSINESS AND THE MARGIN OF PROFIT AS MENTIONED BY T HE LD.AR IS COMPARATIVELY VERY MUCH LOWER THAN 12.5% ESTIMATED BY THE CIT(A). ACCORDINGLY, TO MEET THE E NDS OF JUSTICE, WE RESTRICT THE PROFIT PERCENTAGE TO 6% AS AGAINST 12.5% AND MODIFY THE ORDER OF THE CIT(A). FURTHER, WE MAKE IT CLEAR THAT THIS REDUCED PERCENT AGE IS APPLICABLE ONLY TO THIS ASSESSEEMENT YEAR. ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 8 - 8. IN RESPECT OF ADDITION OF ESTIMATION OF COMMISS ION. WE ARE OF THE OPINION THAT THE A.O. HAS ONLY ESTIMA TED THE COMMISSION PAYMENT WITHOUT ANY EVIDENCE AND THE ADDITION WAS SOLELY MADE ON THE BASIS OF STATEMENT RECORDED. ACCORDINGLY, THE ADDITION IS WITHOUT EVIDENCE AND THE REVENUE HAS NOT DISCHARGED THE BURDEN WITH ANY INCRIMINATING MATERIAL AND WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION AND ALLOW THIS GROUND OF APPEAL. LASTLY, ON THE GROUND OF APPEAL OF VALIDITY OF REASSEEMENT PROCEEDINGS, WE FIND THE REOPENING WAS MADE WITH PROPER INFORMATION FROM DCIT(CENTRAL CIRCLE) AND WE ARE NOT CONVINCED WITH SUBMISSIONS OF THE LD.AR AND WE DISMISS THIS GROUN D OF APPEAL OF THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1180/MUM/2020, A.Y 2012-13. 10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. WHETHER ON THE FACTS AND CIRCUMSTANCES O THE CAS E, AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN RESTRICTIN G THE SUPPRESSED PROFIT TO THE EXTENT OF 12.5% OF BOGUS P URCHASES, WHEN THE ASSESSEE COULD NOT PRODUCE ANY PARTIES OR EVIDENCE ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 9 - THAT THE SAID GOODS WERE PURCHASED AND THE ONUS OF PROVIDING GENUINENESS OF PURCHASES WAS NOT DISCHARGED BY THE ASSESSEE? 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION ON ACCOUNT OF BOGUS TRANSACTION WITHOUT APPRECIATING T HE FACT THAT THE ASSESSEE COULD NOT ESTABLISH THE ONE TO ONE CO- RELATION BETWEEN ITEM OF PURCHASE AND SALE? 3. WHETHER THE LD. CIT(A) HAS IGNORED THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF N.K. PROTEINS VS. DCIT SLP NOS. 769 OF 2017 DATED 16.01.2017, WHEREIN THE HON BLE SC HAD DISMISSED THE SLP FILED BY THE TAX PAYER AND CO NFIRMED THE DECISION OF THE HONBLE HIGH COURT FOR ADDITION OF ENTIRE INCOME IS TO BE MADE ON ACCOUNT OF BOGUS PURCHASES AS AGAINST THE ITATS DECISION RESTRICTING IT TO 25% 11. AT THE TIME OF HEARING, THE LD.DR SUBMITTED THA T THE CIT(A) HAS ERRED IN RESTRICTING THE ADDITION TO THE EXTENT OF 12.5% IRRESPECTIVE OF THE FACT THAT THE ASSESSEE HAS ENTERED INTO BOGUS PURCHASE TRANSACTIONS AND THE CIT(A) HAS OVER LOOKED THE GENUINENESS OF PURCHASES. CONTRA, THE LD.AR SUBMITTED THAT THE ASSESSEE HAS FILED THE CROSS APPEAL. THE LD.DR COULD NOT CONTROVERT THE FINDINGS OF THE CIT(A) WITH ANY COGENT MATERIAL OR NEW INFORMATION AND RELIED ON THE ORDER OF THE A.O. 12. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE CIT(A) HAS ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 10 - CONSIDERED THE FACTS OF GROSS PROFIT/ PROFIT EMBED DED IN THE NON GENUINE PURCHASES AND HAS RESTRICTED THE ADDITION TO THE EXTENT OF 12.5% OF BOGUS PURCHASES. THE A.O. HAS NOT DOUBTED THE SALES AND WE RELY ON THE RATIO OF THE HONORABLE JURISDICTIONAL HIGH COUR T IN THE CASE OF M/S NIKUNJ EXIMP ENTERPRISES VS CIT (W.P.NO 2860 DATED 18-06-2014). ACCORDINGLY, WE ARE NOT INCLINED TO INTERFERE WITH THE ORDER OF THE CIT (A) AND UPHOLD THE SAME AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 13. IN THE RESULT, THE ASSESSEE APPEAL IS PARTLY ALLOWED AND THE REVENUE APPEAL IS DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 28.09.2021. SD/- SD/- ( S RIFAUR RAHMAN ) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED 28.09.2021 KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) ITA NO. 8017/MUM/2020 & 1180/MUM/2019 M/S. EXCEL REALTY N INFRA LTD,, MUMBAI - 11 - 4. ( ) / CONCERNED CIT 5. !!' , $ % , / DR, ITAT, MUMBAI 6. () * + / GUARD FILE. / BY ORDER, ! //TRUE COPY// 1. ( ASST. REGISTRAR) ITAT, MUMBAI