ADDL CIT 24(3), MUMBAI V. MAHAVIR CONSTRUCTION CO, MUMBAI

ITA 998/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0147 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAMNIKLAL V JAIN
• Assessee Lawyers: K RAVI RAM CHANDRAN
• Keywords: Bogus purchase; Additional evidence
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH , JM AND SHRI RAJESH KUMAR, AM ITA NO S. 998 / MUM/ 20 1 3 ( / ASSESSMENT YEAR: 20 0 9 - 10 ) A DDL .COMMISSIONER OF INCOME TAX - 2 4 ( 3) ROOM NO.701, C - 11, 7TH FLOOR, PRATYAKSHAKAR BHAVAN, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400051. / VS. M/S MAHAVIR CONSTRUCTION CO.1/106, RAM NAGAR, S V ROAD, GOREGAON (W), MUMBAI - 400062 ( / APPELLANT) : ( / RESPOND ENT ) ./ PAN : AA GFM3933Q ( / APPELLANT) : ( / RESPONDENT ) / A SSESSEE BY : SHRI K.RAVI RAMCHANDRAN /R EVENUE BY : SHRI RAMNIKLAL V JAIN / DATE OF HEARING : 1 5 .6. 2017 / DATE OF PRONOUNCEMENT : 5 . 7 . 201 7 / O R D E R PER RAJESH KUMAR , AM : THE CAPTIONED APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A) - 34 , MUMBAI , DATED 2 0 . 11 .201 2 , PERTAINING TO THE ASSESSMENT YEAR 20 0 9 - 10 WHICH IN TURN HA S ARISEN FROM THE ORDER PASSED BY THE ASSESSING OFFICER DATED 29.1 2 .201 1 UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961(IN SHORT THE ACT). 2 ITA NOS. 998 /MUM/201 3 2. GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER : 1. ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.91,39,215/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON - GENUINE PURCHASES FROM THE PARTIES LISTED BY THE SALES TAX DEPARTMENT AS SUSPICIOUS DEALERS AND FURTHER ERRED BY ADM ITTING ADDITIONAL EVIDENCE IN CONTRAVENTION OF RULE 46A DESPITE SEVERAL OPPORTUNITIES GIVEN BY THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) ERRED IN RESTRICTING THE DI SALLOWANCE OF LABOUR CHARGES TO RS.75,540/ - OUT OF DISALLOWANCE OF RS.1,50,000/ - DESPITE LABOUR EXPENSES OF RS.10,16,016/ - ARE INCURRED IN CASH AND ASSESSEE FAILED TO PROVE GENUINENESS OF EXPENSES AND ITS RELATION WITH BUSINESS. 3. THE FIRST ISSUE RAISED BY THE ASSESSEE IN GROUND NO.1 IS AGAINST THE DELETION OF ADDITION OF RS.91,39,215/ - BY THE L D. CIT(A) AS MADE BY THE AO TOWARDS NON GENUINE PURCHASES FROM THE PARTIES AS LISTED BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AS SUSPICIOUS D EALERS. DURING THE COURSE OF ASSESSMENT PROCEEDING THE AO FOUND THAT THE ASSESSEE HAS MADE PURCHASES FROM SEVERAL PARTIES AGGREGATING TO RS.91 , 39,215/ - AS MENTIONED IN PARA 4.1 OF THE ASSESSMENT ORDER, WHO WERE DECLARED BY SALES TAX DEPARTMENT, GOVERNMEN T OF MAHARASHTRA AS SUSPICIOUS AND HAWALA DEALERS. ACCORDINGLY, THE ASSESSEE WAS GIVEN SHOW CAUSE NOTICE VIDE ORDER SHEET NOTE WHICH WAS COMPLIED WITH BY THE ASSESSEE BY FILING A REPLY DATED 19.12.2011, 23.12.2011 , 26.12.2011 AND 28.12.2011. HOWEVER, TH E ASSESSEE - COMPANY COULD NOT PRODUCE PARTIES AND CONFIRMATIONS THERE FROM . HOWEVER, AO WAS NOT SATISFIED WITH THE REPLY OF THE ASSESSEE AND DISALLOWED THE ENTIRE AMOUNT OF PURCHASES MADE 3 ITA NOS. 998 /MUM/201 3 FROM THE PARTIES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSES SEE TO THE TUNE OF RS.91,39,2 15 / - . 4. IN THE APPELLATE PROCEEDINGS, THE LD. CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY DELETING THE ENTIRE ADDITION BY OBSERVING AND HOLDING AS UNDER : 3.10 MERELY BECAUSE THE PARTIES COULD NOT BE PRODUCED BY T H E APPE LLANT, THE ENTIRE PURCHASES CANNOT BE TREATED AS BOGUS BY THE AO WHEN THE AO HAS NOT GATHERED ANY OTHER EVIDENCES TO SHOW THAT REALLY THE APPELLANT DID NOT CARRY OUT THE CONTRACT WOK. THE EVIDENCE FURNISH BEFORE ME CLEARLY INDICATES THAT THE CONTRACT HAS BEEN EXECUTED FOR WHICH PAYMENT RECEIVED FROM MCGM BY THE MAIN CONTRACT WAS IN TURN PARTED WITH THE APPELLANT WHO IS A SUB - CONTRACTOR IN VIEW OF E ABOVE , THE ADDITION MADE BY THE AO ID DELETED. THIS GROUND OF APPEAL IS ALLOWED. 5 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE IMPUGNED ORDERS OF THE LOWER AUTHORITIES. THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAS MADE PURCHASE S FROM 8 PARTIES WHICH WAS DECLARED TO BE HAWALA OPERATORS BY THE SALES TAX DEPARTMENT, GOVERNMENT OF MAHARASHTRA AND THE ASSESSEE COULD NOT PRODUCE THESE PARTIES BEFORE THE AO AND VERIFICATION FOR THE PURCHASES OF MATERIAL COULD NOT BE MADE. T HE ASSESSEE ALSO COULD NOT PRODUCE DELIVERY CHALLANS BEFORE THE AO FOR VERIFICAT ION. ON THE OTHER HAND, THE LD. CIT(A) DELETED THE ADDITION BY HOLDING THAT MERELY BECAUSE THE PARTIES COULD NOT BE PRODUCED BY THE APPELLANT, THE ENTIRE PURCHASES C OULD NOT BE TREATED AS BOGUS AS THE AO HAS NOT GATHERED ANY OTHER EVIDENCES TO SHOW THAT 4 ITA NOS. 998 /MUM/201 3 THE MATERIAL WAS NOT RECEIVED. HOWEVER, THE PRACTICE PREVAILING IN M AHARASHTRA QUA HAWALA PRACTICE IS THAT THE BOGUS BILLS A R E RAISED FROM THE HAWALA OPERATORS WHEREAS THE ACTUAL MATERIAL IS PURCHASED FROM THE GRAY MARKET AND THUS TAXES AND OTHER INCIDEN TAL EXPENDITURES ARE SAVED BY THE PURCHASERS. T HEREFORE WE ARE NOT IN AGREEMENT WITH THE LD.CIT(A) THAT THE ENTIRE DELETION IS JUSTIFIED. THERE HAS TO BE SOME ADDITION ON THE BASIS OF PERCENTAGES OF THE PURCHASE IN SUCH CASES TO COVER UP THE SAVINGS MAD E BY THE ASSESSEE. ACCORDINGLY, WE HOLD THAT THE 8% WOULD BE FAIR AND REASONABLE. IN VIEW OF THE ABOVE FACTS, WE SET ASIDE HE ORDER OF LD.CIT(A) AND DIRECT THE AO TO ADD 8% OF THE TOTAL BOGUS PURCHASES OF RS.91,39,215/ - WHICH WORKS OUT TO RS. RS.7 , 31 , 137/ - . THE GROUND OF THE DEPARTMENT IS PARTLY ALLOWED. 6 . THE ISSUE RAISED IN SECOND GROUND OF APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF TO THE EXTENT OF RS.74,460/ - BY THE LD.CIT(A) AS MADE BY THE AO OF RS.1,50,000/ - OUT OF LABOUR EXPENSES OF RS.10,16,016/ - BEING INCURRED IN CASH. 7 . DURING THE COURSE OF ASSESSMENT PROCEEDING, THE AO FOUND THAT THE ASSESSEE HAS CHARGED A SUM OF RS.10,06,016/ - ON ACCOUNT OF LABOUR CHARGES WHICH WERE PAID IN CASH AND THE AO ON ADHOC BASIS DISALLOWED A SUM OF RS.1,5 0 ,000 BY HOLDING THAT SOME PERSONAL ELEMENT IN SUCH PAYMENT CANNOT BE RULED OUT . IN THE APPELLANT PROCEEDINGS , THE LD.CIT(A) 5 ITA NOS. 998 /MUM/201 3 RESTRICTED THE ADDITION TO THE EXTENT O F RS.75 , 450/ - BY OBSERVING AND HOLDING AS UNDER : 4 . 3 I HAVE CAREFULLY CONSIDE RED THE ABOVE SUBMISSIONS OF T HE APPELLANT. THE APPELLANT HIMSELF ACCEPT THAT EXPENSE S BY WAY OF CASH TOWARDS CASUAL LABOUR IS INEVITABLE AND IN A LABOUR CONTRACT TAKEN BY THE APPELLANT. THE APPELLANT COULD NOT FURNISH ANY EVIDENCE TO SHOW THAT THE ENTIR E EXPENDITURE INCURRED TOWARDS LABOUR WAS EXCLUSIVELY TOWARDS THE BUSINESS PURPOSES. I FEEL DISALLOWANCE OF RS.1,50,000/ - OUT OF RS.10.06,016/ - CASH PAYMENT WORKS OUT TO 14.9% WHICH IS ON A HIGHER SIDE. THE DISALLOWANCE IS RESTRICTED TO 7.5% OF THE TOTA L CASH PAID. HENCE, THE ADDITION MADE BY T HE AO TO THE EXTENT OF RS.75,450/ - IS SUSTAINED AND THE APPELLANT GETS RELIEF OF RS.74,550/ - . THIS GROUND OF APPEAL IS PARTLY ALLOWED 8 . WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL PLACED B EFORE US. WE FIND THAT THE AO HAS MADE THE DISALLOWANCE ON THE GROUND THAT THE EXPENDITURES WERE INCURRED IN CASH AND THERE WAS PERSONAL ELEMENT IN THE SAID EXPENSES AND THE LD.CIT(A) REDUCE D THE SAME TO RS.75 , 450/ - BY HOLDING THA T THE DISALLOWANCE WAS O N THE HIGHER SIDE . WE ARE IN FUL L AGREE MENT WITH THE CONCLUSION DRAWN BY THE LD.CIT(A) THAT THE DISALLOWANCE WAS ON HIGHER SIDE AND THEREFORE UPHELD THE ORDER OF T HE LD.CIT(A). THIS GROUND OF REVENUE STANDS DISMISSED. 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 5TH JU L , 2017. S D SD ( MAHAVIR SINGH ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 5 . 7 .2017 SRL,SR.PS 5 6 ITA NOS. 998 /MUM/201 3 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, T RUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI