SHRI JATINKUMAR AMRUTLAL SHAH,,AHMEDABAD vs. THE ASSTT. COMMISSIONER OF INCOME TAX, CIRCEL-5(1),, AHMEDABAD

आदेश/O R D E R

PER SHRI MANISH BORAD, A.M:

The above captioned appeal filed at the instance of assessee pertaining to Assessment Year 2013-14 is directed against the orders of Ld. Commissioner of Income Tax (Appeals)-5 (in short ‘Ld.CIT(A)’], Ahmedabad dated 02.12.2016 which is arising out of the order u/s 143(3) of the Act, 1961 dated 28.03.2016 framed by ACIT, Ahmedabad.

2. The assessee has raised following grounds of appeal:

Jatinkumar Amrutlal Shah For AY 2013-14 2 “1.The order passed by the Ld CIT is without giving any opportunity to the appellant and hence same is against law, equity & justice. 2. The Ld. CIT(A) has erred in law and facts in upholding the order of the Ld. AO for disallowance of purchases of Rs.51,12,040/- treating it as bogus expenses. 3. The appellant graves leave to add, alter modify or amend any or all ground of appeal before final hearing.”

3. Briefly stated facts as culled out from the records are that the assessee is an individual earning income from salary and capital gain. Return of income for A.Y. 2013-14 was e-filed on 30.01.2014, declaring income of Rs.21,75,220/-. Case selected for scrutiny followed by serving of notices u/s 143(2) & 142(1) of the Act. Ld. Assessing Officer during the course of assessment proceedings on observing that the assessee had shown income under the head of short term capital gain from sale of land claiming certain expenses relating to Boundry wall construction, land leveling etc. called for the details. The Land purchase account for F.Ys 2010-11, 2011-12 & 2012-13 was filed with supporting documents which included bills for purchase of cement, sand, bricks and labour charges. The Ld. AO further observed that the various bills were issued between January, 2011 to June, 2011 were settled in the month of June, 2012 which created doubts in his mind regarding genuineness of the expenses. Information was called from the Commercial Tax Department about the alleged supplier of goods. The assessee submitted before the Ld. AO that all the Jatinkumar Amrutlal Shah For AY 2013-14 3 bills are genuine and the parties are regular suppliers of building material. Request was also made to the Ld. AO to send the inspector to verify the claim of the assessee of having constructed Boundary wall and land leveling work. Ld. AO however, was not convinced and disallowed the claim of expenses paid to five suppliers totaling to Rs.51,12,040/- holding them to be bogus observing as follows:

6. Even the concerns from which material has been purchase are not big dealer/wholesaler/authorized dealer of reputed companies rather they are retailers having no turnover/low turnover as informed by Commercial Tax Authorities. If they would have actually sold material to the assessee they also should not have waited so long for payment.

7. Looking to the quantity of bricks purchased, it does not seem possible that a retailer will have such huge quantity in his possession because it will require a lot of open space. If the assessee would have made purchase directly from the kiln than it will have been possible. It also created doubts above the genuineness of bills.

Therefore, the amount of Rs.51,12,040/- is disallowed and added to the income of the assessee. The assessee has furnished inaccurate particulars of its income by claiming bogus expenses. In view of above facts, the penalty proceedings from furnishing inaccurate particulars of taxable income are being initiated u/s 271(1)(c) of the I.T. Act. 1961.

4. Accordingly, income assessed at Rs.72,87,260/- after making disallowance of bogus expenses/purchase at Rs.51,12,040/-.

Jatinkumar Amrutlal Shah For AY 2013-14 6 5. Aggrieved assessee preferred an appeal before the Ld. CIT(A) but failed to succeed, as the view taken by the Ld. AO was confirmed by the Ld. CIT(A) observing as follows: “3.3. The AO has noticed that the assessee has declared income of Rs.20,07,255/- under the head short term capital gain. Further, by verification of details filed by the assessee the AO has noticed that the assessee had claimed huge expenses in the form of expenses incurred on cement purchase, sand purchase, bricks purchases and mati puran expenses. The AO has further noticed that all the bills were is used between January, 2011 to June, 2011 whereas payments to all the parties have been made in the months of June, 2012. The AO has made further inquiries to verify these expenses and letters were written to officers of commercial (trade) tax department. From the replies received in response to letter issued u/s 133(6) of the Act, The AO has observed that all the concerns from whom the assessee had obtain bills in respect of alleged purchases were engaged in the activity of issuing bogus bills and the commercial authorities after making detailed inquiries have cancelled their TIN number ab-initio. The AO has not accepted the reply of the assessee on the grounds stated in para-5 of the assessment order. The AO has disallowed an amount of Rs.51,12,0407- treating these expenses as bogus. 3.4. During the appellate proceedings, the appellant has contended that he has made purchases from 5 parties to do improvement on land sold. It is further contended that disallowance of land improvement expenses relying only on information collected from Commercial Tax Department and failure t& make purchases of materials in order of work required to be done ignoring explanations, facts and evidences filed during the assessment proceedings is not justified. It is further contended that the appellant has furnished required details of above suppliers including copies of invoices incorporating their VAT Registration Number and details of materials purchased from them for improvement cost claimed with reference to land sold during the year claimed as expenses while working out

Jatinkumar Amrutlal Shah For AY 2013-14 7 chargeable short term capital gain. The appellant has also contended that the AO has concluded that issuance of bill as colorful device for inflating expenses and further presumed that money have come back to the appellant after deducting certain amount of commission without bringing any clinching evidences on record that support said presumption on the part of the AO. It is also contended that the AO without pointing out any specific defect with reference to aforesaid evidences filed for land development expenses disallowed the expenses. It is also contended that the AO could have collected relevant details of construction directly from material suppliers and contractors for construction work done for which he has legitimate right. The has relied upon various judgments as reproduced in the preceding paras of this order. 3.5. The facts of the case and the submissions are considered. The AO has disallowed the expenses on the basis of inquiries conducted from the commercial tax (trade) officers and other circumstantial evidences as discussed in the assessment order. On the other hand the case of the appellant is that he has furnished all the relevant details and the AO has not made any independent inquiry before disallowing the said expenses. The appellant has claimed that he has incurred land development expenses in the form of cement purchases, sand purchases, bricks purchases and mati puran expenses which are genuine expenses. However from the details filed by the assessee during the course of assessment proceedings the AO has doubted genuineness of these expenses and made inquiries from the Officers of Commercial Trade Tax Department. The replies of these officers are part of the assessment order. From the replies it is clearly established that these parties from whom the assessee has shown purchases were engaged in the activity of issuing bogus bills. During the assessment proceedings, the AO has brought all these facts to the knowledge of the assessee and asked to justify these expenses. In response to that the assessee has simply stated that full details in this regard have been furnished with necessary supporting and these expenses are genuine

Jatinkumar Amrutlal Shah For AY 2013-14 8 one. It is important to mention here that on the basis of these details only the AO has doubted the genuineness of these expenses and made inquiries u/s. 133(6) of the Act. After getting the communication regarding the inquiries and the results thereof the assessee has not furnished anything further to prove the genuineness of these expenses. During the appellate proceedings the only contention made by the appellant is that the AO has not made any independent inquiries before disallowing the said disallowances. Once the AO has prima-facie found that certain expenses are not genuine and made further inquiries to verify the genuineness of those expenses and satisfied that these expenses are not genuine then the onus shifts to the assessee to prove the genuineness of those expenses. Here in the instant case the appellant has failed to discharge the onus. As the assessee has failed to prove the genuineness of these expenses, the disallowance made by the AO is justified and the same is confirmed.

6. Aggrieved assessee is in appeal before the Tribunal.

Jatinkumar Amrutlal Shah For AY 2013-14 9 for the years 2010-11, 2011-12 and 2012-13, copies of relevant Expenses Accounts year wise, copy of Bank Statements with Ahmedabad District Co-op Bank Ltd from where appellant made payments for land improvement expenses. Copies of deed for purchases and sale of relevant land vide Annexure-VI of letter dated 26/08/2015 copy of said letter with Annexure-VI has been filed supra. AO again required appellant to establish genuineness of land improvement expenses. Appellant vide latter "dated' 21/03/2016 have furnished explanation and reiterated that Land improvement expenses are genuine incurred with reference to Capital Asset sold during the year. Copy of letter dated 21/03/2016 filed before AO is attached herewith (Page No. 87 to 88). Further, explained that land in question was 4 feet below the Road Level requiring level of 2 feet above Road as well as boundary wall to protect land from encroachment. Appellant also explained that normally type of work discussed above pertaining to land is carried out through reliable local labor contractors for proper and timely execution and avoiding loss of materials. He assigned land leveling and Boundary Work to local contractors with intension that issues of encroachment pertaining to land in question by owners of adjoining land, if any, can be set right without trouble. Hence said work was assigned to local contractor and he was shouldered responsibility of arranging materials at sight upon condition that purchases and. payment will be in the name of appellant and direct payment by appellant. Appellant stated that expenses are genuine Land Improvement expenses

Jatinkumar Amrutlal Shah For AY 2013-14 10 requested to allow while determining chargeable STCG. AO without pointing out any defect with reference to afore said evidences filed for Land Improvement expenses, which proves that above expenses as non- genuine except presumption based on information received from jurisdictional commercial tax officer, disallowed out of land improvement expense. The disallowance out of land improvement expenses of Rs.51,12,040/- for computing chargeable STCG based merely on surmises and conjectures is not justified and deserves to be deleted.”

1. Arasuri Enterprise Rs.4,676,625/- 2. Bhavi Trading Co. Rs.1,50,180/- 3. Hariom Sales Rs.20,47,500/- 4. Mahavir Traders Rs.18,72,610/- 5. Varahi Contractor Co. Rs.5,65,125/- Total Rs.51,12,040/-

12.In respect of the parties which have shown Tax Identification No.(TIN) in their bills. Ld. AO called information from the Commercial Tax Department. As far as the identity of the alleged suppliers is concerned their was on assessee favouring report from the Commercial Tax Department but with regard to the sales turnover it was not matching with the sales shown by Jatinkumar Amrutlal Shah For AY 2013-14 12 these suppliers. This was the main reason which created doubts in the mind of the assessing authority. However, the assessee placed all the documentary evidences before the Ld. AO along with photographs of the land and the work carried out thereon. It was specifically requested during the assessment proceedings by the assessee to the Ld AO to depute inspector for site visit so that the issue relating to genuineness of development expenses can be resolved but the request was declined by the Ld. AO. No summons was issued to the alleged suppliers of the Ld. AO directly and only report of Commercial Tax Department was taken as the basis.

Jatinkumar Amrutlal Shah For AY 2013-14 13 No valuation report was filed. Payments for various expenses made after a period of 12 months also raises doubts. However, merely for the payments being late and the suppliers having retail business, and not produced before the Ld. AO cannot be a sound basis to disprove the claim of expenses made by the assessee.

15.We, therefore, in the given facts of the case, and being fair to both the parties, are of the considered view that sustaining of disallowance @ 15% of the alleged amount of Rs.51,12,040/- will meet the end of justice. We accordingly, order so and confirm the disallowance of expenses at Rs.7,66,806/- and partly allow assessee’s appeal.

Order pronounced in the Court on 20 .09.2019.