MANGALAM INFRA DEVELOPMENT P.LTD, V. DCIT 9(2),

MA 238/MUM/2015

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 4328 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 4 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 20-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 16-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ASGHAR ZAIN
• Keywords: Bogus purchase; Income from undisclosed sources; Corroborative evidences

Judgement Text

MA-238/15 & 239/15 1 , INCOME TAX APPELLATE TRIBUNAL,MUMBAI- B,BENCH , , BEFORE S/SHJOGINDER SINGH, JUDICIAL MEMBER & RAJENDRA, ACCOUNTANT MEMBER MA NO.238/MUM/2015 (ARISING OUT OF ITA/684/MUM/2014) &MA-239/MUM/2015(ARISING OUT OF C.O.53/MUM/2015)- ASSESSMENT YEAR2010-11 M/S. MANGALAM INFRA DEVELOPMENT PVT. LTD.16, GROUND FLOOR, SHREEJI SHOPPING CENTRE, BORIVALI (E),MUMBAI 400066 VS. DY. COMMISSIONER OF INCOME TAX (9)(2)ROOM NO. 218, 2 ND FLOOR,AAYAKAR BHAVAN, M.K. ROAD,MUMBAI 400020 ( / ASSESSEE) ( / RESPONDENT) /ASSESSEE BY : SH. ASGHAR ZAIN / REVENUE BY :SH. DHARMESH SHAH / DATE OF HEARING : 18 -03-2016 / DATE OF PRONOUNCEMENT : 20 -05-2016 / O R D E R PER RAJENDRA, A.M. : VIDE ITS APPLICATION,DATED 16.10.201, THE ASSESSEE- COMPANY HAS STATED THAT THERE ARE CERTAIN MISTAKES IN THE ORDER OF THE TRIBUNAL, THAT SAME AR E TO BE RECTIFIED AS PER THE PROVISIONS OF SECTION 254 OF THE ACT,THAT THE AO HAD FILED APPEAL CHALLENGING THE ORDER OF THE FIRST APPELLATE AUTHORITY (FAA),THAT ASSESSEE HAD FILED C ROSS OBJECTION, THAT THE ISSUE IN THE APPEAL WAS ABOUT ADDITION OF RS.3.09 CRORES TO THE INCOME OF THE ASSESSEE, THAT THE FAA HAD PARTLY ALLOWED THE APPEAL BY REJECTING THE BOOKS OF ACCOUN T AND UPHOLDING THE ADDITION OF RS.1.23 CRORES ON ACCOUNT OF ESTIMATED NET PROFIT @ 11%,THA T WHILE DECIDING THE APPEAL THE TRIBUNAL HELD THAT DISALLOWANCE SHOULD BE RESTRICTED TO 11% OF THE ALLEGED DOUBTFUL PURCHASE, I.E. RS.3.09 CRORES OR TO THE PEAK INVESTMENT, WHICHEVER WAS HIGHER, THAT THE TRIBUNAL HAD PARTLY REVERSED THE ORDER OF FAA,THAT IT HAD TREATED THE C O, FILED BY THE ASSESSEE, AS INFRUCTUOUS, THAT THE ISSUE OF ADDITION ON THE BASIS OF PEAK INV ESTMENT HAD NEVER AROSE BEFORE THE AO OR THE FAA, THAT SAME WAS NOT ARGUED BY EITHER OF THE PARTIES, THAT THE TRIBUNAL HAD HELD THAT ADDITION WAS TO BE RESTRICTED TO THE EXTENT OF 11% OF THE BOGUS PURCHASES, THAT THE FAA HAD ESTIMATED NET PROFIT AT 11% OF GROSS SALES AND NOT ON PURCHASES, THAT THE CORE ISSUE WAS THE NET PROFIT PERCENTAGE ON GROSS SALE,THAT THE MANNER OF CALCULATION OF PEAK INVESTMENT WAS NOT EXPLAINED,THAT A CLARIFICATION IN THAT REGARD SHOUL D BE ISSUED. 2 .DURING THE HEARING BEFORE US, AUTHORISED REPRESENT ATIVE(AR) REITERATED THE ARGUMENTS THAT ARE PART OF THE APPLICATION FILED BY THE ASSESSEE.H E FURTHER STATED THAT THE TRIBUNAL HAD NOT EXPLAINED THE MANNER IN WHICH PEAK WAS TO BE CALCUL ATED. HE REQUESTED THAT A CLARIFICATION IN THAT MATTER WAS ESSENTIAL FOR THE GUIDANCE OF THE A O.THE DEPARTMENTAL REPRESENTATIVE(DR) ARGUED THAT THERE WAS NO MISTAKE IN THE ORDER OF TH E TRIBUNAL, THAT THE TRIBUNAL HAD DECIDED THE ISSUE AFTER CONSIDERING THE AVAILABLE MATERIAL. WITH REGARD TO METHOD OF CALCULATING THE PEAK,HE STATED THAT MATTER COULD BE DECIDED ON MERI TS. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO HAD CHALLENGED THE ORDER OF THE FAA, THAT THE FA A HAD PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, THAT HE HAD DIRECTED TO CALCULATE THE NP ON SALES, THAT WHILE DECIDING THE APPEAL THE TRIBUNAL HAD MENTIONED THAT NP SHOULD BE CALCULATED ON PURCHASES. IN OUR OPINION IT WAS A MA-238/15 & 239/15 2 MISTAKE APPARENT ON RECORD AND HENCE HAS TO BE RECT IFIED. THE OPERATIVE PART OF OUR ORDER READS AS UNDER: - THE FACT MENTIONED BY THE FAA THAT IT IS A CASE OF A BUILDER AND CONSUMPTION OF GOODS HAS NOT BEEN DOUBTED. IN SUCH CASES, GENERALLY THE PEAK INVESTMENT IS ADDED TO THE TOTAL INCOME OF THE ASSESSEE, AS THE WHOLE TURNOVER CANNOT BE HELD TO BE UNACCOUNTED INCOME OR INVESTMENT WITHOUT SUPPORTING EVIDENCES. IN THESE PECULIAR FAC TS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE THE DIS ALLOWANCE SHOULD BE RESTRICTED TO 11% OF THE ALLEGED DOUBTFUL PURCHASES.. THE LAST LINE OF THE ORDER SHOULD BE READ AS FOLLOW S: - THAT IN THE INTEREST OF JUSTICE THE DISALLOWANC E SHOULD BE RESTRICTED TO 11% OF THE SALES . WITH REGARD TO METHOD OF CALCULATING THE PEAK INVES TMENT, WE WANT TO CLARIFY THAT PEAK SHOULD BE CALCULATED AFTER CONSIDERING THE CREDIT PERIOD O F THE NORMAL TRADING CYCLE OF THE BUSINESS. AS A RESULT RESULT,MA FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. MA FILED BY THE ASSESSEE FOR C.O. IS DECIDED ACCORDINGLY. . ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MAY,2016. 20 ,2016 SD/- SD/- ( /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 20.05.2010 . . . JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR B BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI. DATE INITIALS 1. DRAFT DICTATED ON 18.3.16 2. DRAFT PLACED BEFORE AUTHOR 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5. APPROVED DRAFT COMES TO THE SR.PS 6. KEPT FOR PRONOUNCEMENT 20.5.16 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK