ACIT - 25(2), MUMBAI V. DYNAMIC ENGINEERS, MUMBAI

ITA 858/MUM/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0059 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2009-2010
• Appeal Filed On: 07-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR RAIDR
• Assessee Lawyers: KEYURI DESAIAR
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained expenditure
• Section: 69C; 69; 145

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL IBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./858/MUM/2017, /ASSESSMENT YEAR: 2009-10 ACIT-25(2),ROOM NO.508, C-10,5TH FLOOR,PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. VS. M/S. DYNAMIC ENGINEERS 1, RAJHANS, NARIMAN ROAD, VILE PARLE (E),MUMBAI-400 057. PAN:AAFFD 5202 N ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI SAURABHKUMAR RAI-DR ASSESSEE BY: SHRI KEYURI DESAI-AR / DATE OF HEARING: 22/08/2017 / DATE OF PRONOUNCEMENT: 22/08/2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED, 30/11/2016, OF THE CIT (A)-37, MUMBAI, THE ASSESSING OFFICER (AO) HAS FILED THE PRESENT APPEAL.ASSESSEE-FIRM,ENG AGED IN THE BUSINESS OF CIVIL CONSTRUCTION, FILED ITS RETURN OF INCOME ON 26/09/2009, DECLARING TOTAL INCOME OF RS. 39.24 LAKHS. THE AO COMPLETED THE ASSESSMENT,U/S.143(3)R.W.S.147 OF THE ACT,ON 14/03/2015,DETERMINING ITS INCOME AT RS.85.72 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT ALLOWING A RELI EF OF RS. 40, 66, 726/-TO THE ASSESSEE FOR THE ALLEGED BOGUS PURCHASES.DURING THE ASSESSMENT P ROCEEDINGS, THE AO RECEIVED INFORMATION FROM THE SALES TAX AUTHORITIES THAT THE ASSESSEE HA D OBTAINED BOGUS BILLS FROM UNIQUE ENTER - PRISES(RS.11.21 LAKHS),SHREYAS MARKETING AGENCY (12 .70 LAKHS),SHRI GANESH TRADING CO. (RS.12.63 LAKHS),KRISHI ENTERPRISES(4.27 LAKHS),SUN DER CORPORATION (5.65 LAKHS),THAT IT HAD NOT RECEIVED ANY GOODS FROM THE SUPPLIERS.HE DIRECT ED THE ASSESSEE TO PRODUCE SUFFICIENT EVIDENCE AND ESTABLISH THE GENUINENESS OF THE TRANS ACTION.AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE,HE HELD THAT THERE WAS NO PROOF/EVIDEN CE THAT GOODS PURCHASED FROM THE ABOVE FIVE PARTIES HAD BEEN USED/CONSUMED BY THE ASSESSEE IN ITS BUSINESS,THAT IT HAD FAILED TO PRODUCE QUANTITATIVE DETAILS AND TO ESTABLISH THAT THE GOODS WERE ACTUALLY USED. HE FURTHER OBSERVED THAT THE PURCHASES BY THE ASSESSEE WERE NO T VERIFIABLE, THAT THE BOOKS OF ACCOUNTS OF THE ASSESSEE WERE NOT RELIABLE,THAT SAME WERE NOT R EFLECTING COMPLETE PICTURE OF THE ASSESSEES BUSINESS,THAT THE BOOKS OF ACCOUNTS WERE TO BE REJE CTED AS PER THE PROVISIONS OF SECTION 145 858/M/17-DYNAMIC ENGINEERS 2 (3)OF THE ACT.INVOKING THE PROVISIONS OF SECTION 69 C OF THE ACT, HE MADE AN ADDITION OF RS. 46.47 LAKHS TO THE TOTAL INCOME OF THE ASSESSEE UND ER THE HEAD UNEXPLAINED EXPENDITURE. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE ELABORATE SUBMISSI ONS BEFORE HIM.AFTER CONSIDERING THE AVAILABLE MATERIAL,HE HELD THAT WHERE PURCHASE WAS HELD AS BOGUS THEN THE CORRESPONDING SALES MUST ALSO BE HELD NON-GENUINE,THAT WITHOUT TH E MATERIAL BEING PURCHASED NO PRODUCTION OR SALES WOULD TAKE PLACE,THAT PURCHASE FROM BOGUS PARTIES AND BOGUS PURCHASES WERE TWO DIFFERENT THINGS,THAT THE STATEMENT OF HAWALA PROVI DERS WERE MERE INDICATOR AND WERE NOT DECISIVE FACTORS TO DRAW A CONCLUSION REGARDING GEN UINENESS OF THE PURCHASES, THAT ASSESSEE HAD MADE PAYMENT TO THE SUPPLIERS WHO WERE ENGAGED IN PROVIDING BOGUS BILLS WITHOUT ACTUAL DELIVERY OF GOODS,THAT THE PAYMENTS WERE MADE THROU GH NORMAL BANKING CHANNEL AND WERE DULY REFLECTED IN THE BANK STATEMENT,THAT THE ASSES SEE HAD PRODUCED DOCUMENTARY EVIDENCES LIKE COPY OF INVOICES AND LEDGER ACCOUNTS OF THE VE NDORS IN ITS BOOKS OF ACCOUNTS REGARDING THE PURCHASES TO SUBSTANTIATE THE GENUINENESS OF TH E TRANSACTIONS,THAT THE AO COULD NOT DENY THAT PURCHASES WERE NOT MADE AT ALL AND THAT MATERI AL WAS NOT USED FOR THE BUSINESS, THAT WHAT WAS UNDER DISPUTE WAS THE PURCHASES FROM THE PARTIE S FROM BILLS HAD BEEN TAKEN AND THE CHEQUES HAD BEEN ISSUED, THAT PURCHASESWERE NOT IN DISPUTE BUT THE PARTIES FROM WHOM PURCHASES WERE SHOWN TO HAVE BEEN MADE WERE SUSPICI OUS, THAT THE INFORMATION RECEIVED FROM THE SALES TAX DEPARTMENT WAS A GOODLY FOR MAKING FU RTHER INVESTIGATION, THAT THE AO DID NOT MAKE ANY INVESTIGATION AND COMPLETED THE ASSESSMENT ON SUSPICION,THAT HE SHOULD HAVE VERIFIED THE DETAILS OF BANK TRANSACTIONS OF THE SU PPLIERS TO VERIFY AS TO WHETHER THERE WAS ANY IMMEDIATE CASH WITHDRAWAL FROM THOSE ACCOUNTS, THAT THERE WAS NO EVIDENCE TO SHOW THAT ASSESSEE HAD RECEIVED THE CASH BACK FROM THE SUPPLI ERS. HE REFERRED TO THE CASE OF NIKUNJ EXIMP ENTERPRISES(216 TAXMAN 171) AND HELD THAT THE AO HAD NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT THERE WAS SUPPRESSION OF SALES, THAT PROFIT FROM BUSINESS COULD NOT BE ASCERTAINED WITHOUT DEDUCTING COST OF PURCHASE FROM THE SALES, THAT ESTIMATION OF PROFIT RANGING FROM 12.5% TO 15% HAD BEEN UPHELD BY THE HO NORABLE GUJARAT HIGH COURT IN THE CASE OF SIMIT P SETH(356 ITR 451),DEPENDING UPON THE NAT URE OF THE BUSINESS.FINALLY,HE HELD THAT THE AO HAD DISALLOWED AND AMOUNT OF RS. 46.48 LAKHS ON ACCOUNT OF BOGUS PURCHASES,THAT ESTIMATED PROFIT @12.5% WOULD MEET THE END OF JUSTI CE. HE DIRECTED THE AO TO ESTIMATE PROFIT OF 12.5% ON TOTAL PURCHASES IN QUESTION WHICH WORKE D OUT RS. 5.80 LAKHS (12.5% OF RS. 46.47 LAKHS).THUS,THE ASSESSEE GOT RELIEF OF RS. 40.66 LA KHS. 858/M/17-DYNAMIC ENGINEERS 3 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO AND ARGUED THAT ASSESSEE HAD NOT PR ODUCED THE PARTIES DURING THE ASSESSMENT PROCEEDINGS TO SUBSTANTIATE THE CLAIM OF PURCHASES MADE BY IT,THAT THE AO HAD REJECTED THE BOOKS OF ACCOUNTS,THAT THE ASSESSEE HAD NOT GIVEN A NY PROOF OF PHYSICAL RECEIPT OF THE GOODS. THE AUTHORISED REPRESENTATIVE(AR)STATED THAT STATEM ENTS OF THE ALLEGED HAWALA DEALERS WERE NEVER SUPPLIED TO THE ASSESSEE,THAT THE PAYMENTS WE RE MADE THROUGH BANKING CHANNEL, THAT THE AO HAD NOT DOUBTED THE SALES.. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD PURCHASED GOODS FROM FIVE PARTIES MENT IONED IN PARAGRAPH TWO,THAT HE HAD HELD THAT SUPPLIERS WERE INDULGED IN ISSUING BOGUS BILLS WITHOUT SUPPLYING THE GOODS,THAT THE AO HAD NOT DOUBTED THE SALES MADE BY THE ASSESSEE,THAT HE HAD HELD THAT GOODS WERE NOT SUPPLIED BY THE PARTIES THAT WERE APPEARING IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE.THUS, HE HAD NOT DOUBTED THE GENUINENESS OF THE PURCHASE AS SUCH BUT HE HAD DOUBT ABOUT THE PARTIES SUPPLYING THE GOODS.IN OUR OPINION,IN SUCH CASES THE PROFIT E MBEDDED IN THE TRANSACTION COULD BE ADDED TO THE INCOME OF THE ASSESSEE AND THE ENTIRE PURCHA SES CANNOT BE DISALLOWED.WE FIND THAT THE AO HAD INVOKED THE PROVISIONS OF SECTION 69C OF THE ACT.BUT,HE HAS NOT DELIBERATED UPON THE ISSUE AS TO HOW THE PROVISIONS OF SAID SECTION WERE APPLICABLE.IT IS ONE OF THE DEEMING SECTIONS AND HAS TO BE CONSTRUED STRICTLY.IN OUR OP INION, THE ORDER OF THE FAA, ESTIMATING THE PROFIT AT THE RATE OF 12.5% OF THE TOTAL PURCHASES IS A BETTER ESTIMATE THAN THE ESTIMATE MADE BY THE AO WHEREIN HE HAD DISALLOWED THE HUNDRED PERCEN T OF THE PURCHASES. THEREFORE,WE DO NOT WANT TO INTERFERE WITH THE ORDER OF THE FAA.CONSIDE RING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE AND,WE DECIDE THE EFFECTIVE GROUND OF A PPEAL AGAINST THE AO. AS A RESULT,APPEA L FILED BY THE AO STANDS DISMISSED. . ORDER PRONOUNC ED IN THE OPEN COURT ON 22 ND AUGUST, 2017. 22 , 2017 SD/- SD/- ( (( ( / RAVISH SOOD ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 22.08.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR J BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// 858/M/17-DYNAMIC ENGINEERS 4 / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.