THAKUR BUILDCON (P) LTD. ,RAJSAMAND vs. ITO, WARD-1, RAJSAMAND

आदेश / O R D E R

Manoj Kumar Aggarwal (Accountant Member): - 1. Aforesaid cross appeals for Assessment Year [AY] 2009-10 contest the order passed by Ld. Commissioner of Income-Tax (Appeals)-1, Udaipur, [in short referred to as ‘CIT(A)’], Appeal No.71/IT/UDR/2014-15 dated 26/06/2019. The assessment for year under consideration was framed by Ld. Assessing Officer (AO) on 14/03/2014 u/s 143(3) read with Section 148 of the Income Tax Act, 1961. In the said assessment, the assessee was saddled with certain peak additions of Rs.216.77 Lacs on account of alleged bogus purchases and the same is the sole subject matter of cross- appeals before us since Ld. CIT(A) has granted partial relief to the assessee in the impugned order. 2. The effective grounds raised by the assessee read as under:- 1. That on the facts and in the circumstances of the case, the ld. CIT(A)-I, Udaipur has erred in confirming the action initiated by the ld. AO u/s. 147/148 of the Act. 2. That on the facts and in the circumstances of the case, the ld. CIT(A)-I, Udaipur has erred in sustaining the addition of Rs.33,99,436/- to the total income out of Rs.216,77,531/- made by the ld. AO u/s. 69 of the Act as undisclosed investment treating the same as not genuine. The effective grounds raised by the revenue read as under:- 1. Whether on the facts and in the circumstances of the case, the ld. CIT(A)-I, was justified in restricting the addition of Rs.33,99,436/- (i.e. 15% of Rs.2,26,62,908/-) instead of Rs.216,77,531/- made by the ld. AO holding the same as undisclosed investment in cash purchases. 3. We have carefully heard the rival submissions and perused relevant material on record including written submissions and documents placed in the paper book. The judicial precedents as

3 ITA Nos.345-346/Jodh/2019 Thakur Buildcon Private Limited Assessment Year: 2009-10 relied upon during the course of hearing have duly been deliberated upon. Our adjudication to the subject matter would be as given in succeeding paragraphs. 4.1 The relevant facts are that the assessee being resident corporate assessee was subjected to re-assessment proceedings for the year under consideration and an assessment was framed on 14/03/2014 wherein the assessee was saddled with peak addition of Rs.216.77 Lacs as undisclosed investment on account of cash purchases. The reassessment proceedings got triggered pursuant to receipt of certain information from VAT department, Mumbai wherein it was alleged that M/s Bapu Diamond (a unit of Assessee Company) made suspicious purchases of Rs.226.62 Lacs from an alleged hawala dealer M/s Larchan Trading Pvt. Ltd. (LTPL). Accordingly, the case was re-opened as per due process of law vide notice u/s 148 on 21/05/2013. The original return of income filed by the assessee at a loss of Rs.1.66 Lacs was processed u/s 143(1). 4.2 The assessee reflected Gross Profit (GP) rate of 13.47% against sales of Rs.169.90 Lacs. This was stated to be first year of assessee’s business under that unit. The assessee maintained that the purchases were genuine, regular books were maintained which were duly audited and payment to the said supplier was through banking channels. However, primarily going by the findings of VAT Department, Ld. AO concluded that M/s LTPL was hawala entry provider and no movement of goods was ever done. It was alleged that the said entity provided hawala entries for sale of diamonds

4 ITA Nos.345-346/Jodh/2019 Thakur Buildcon Private Limited Assessment Year: 2009-10 without carrying out any actual business. A presumption was also raised by Ld. AO that the assessee made cash purchases from undisclosed parties and procured the bills from the stated entity. Finally, Ld. AO worked out peak additions of Rs.216.77 Lacs as undisclosed income in cash purchases and added the same to the income of the assessee. 5.1 The assessee assailed the stand of Ld. AO on legal grounds as well as on merits. The challenge to jurisdiction u/s 148 met with no success since Ld. CIT(A) opined that reassessment notice issued by Ld. AO on the basis of information received from investigation wing of the department, was a valid one. 5.2 On merits, the assessee, inter-alia, maintained that all sales were fully vouched which were accepted by revenue and there could be no sale without purchases. It was also pointed out that no meaningful inquiry was done by Ld. AO u/s 133(6) to verify the authenticity and veracity of information received from VAT department. Reliance was placed on various judicial decisions in support of the submissions which have already elaborated in the impugned order and not repeated here for the sake of brevity. The assessee again furnished copies of bills, ledger accounts, confirmation of account from the concerned party, bank details etc. and submitted that it has discharged the primary onus casted upon it to establish the genuineness of the purchases. 5.3 The Ld. CIT(A) concurred that Ld. AO was not justified in making addition on the basis of third party statements without conducting any further investigation. The assessee was having all

5 ITA Nos.345-346/Jodh/2019 Thakur Buildcon Private Limited Assessment Year: 2009-10 the documentary evidences in support of the purchases and maintained requisite stock registers. Further, sales were accepted and the payment to the supplier was through banking channel. Therefore, the peak additions as worked out by Ld. AO were not justified. At the most, the purchase amount would have been inflated and therefore, the additions were finally estimated at 15% of these suspicious purchases of Rs.226.62 Lacs which reduced the additions to Rs.33.99 Lacs. The adjudication by Ld. CIT(A) has given rise to cross-appeals before us. 6. So far as the validity of reassessment jurisdiction is concerned, we find that the original return was processed u/s 143(1) and subsequently, specific tangible information was received by Ld. AO which indicated possible escapement of income in the hands of the assessee. In our considered opinion, nothing more was required at this stage to trigger reassessment proceedings against the assessee. The proceedings were initiated as per due process of law after issuance of prescribed statutory notices. We do not find any legal infirmity in the jurisdiction acquired by Ld. AO. Therefore, the ground thus raised by the assessee stands dismissed. 7. So far as the estimates are concerned, it is quite evident that the assessee was in possession of primary purchase documents and the goods purchased were duly accounted for in the books of accounts. The payment to the supplier was through banking channels and the sales turnover reflected by the assessee has been accepted by the revenue. Undoubtedly, there could be no sale

6 ITA Nos.345-346/Jodh/2019 Thakur Buildcon Private Limited Assessment Year: 2009-10 without actual purchase of material keeping in view the assessee’s nature of business. However, at the same time, genuineness of the purchases could not be established beyond doubt. The assessee could not produce the tainted party so as to confirm the transactions. The stated factual matrix, in our considered opinion, would make it a fit case to make estimated additions to account for profit element embedded in these suspicious / unverified purchases to factorize for profit earned by assessee against possible purchase of material in the grey / unorganized market and undue benefit of VAT against such bogus purchases, which Ld.CIT(A) has rightly done so. However, keeping in view the fact that the assessee had already reflected GP rate of more than 13%, further addition of 15% was not justified. Therefore, we reduce the estimation to 3% of alleged bogus purchases of Rs.2,26,62,908/- which comes to Rs.6,79,887/-. The balance additions stand deleted. The Ld. AO is directed to re-compute the income of the assessee in terms of estimation made by us. Accordingly, the revenue’s appeal stands dismissed whereas the assessee’s ground stands partly allowed. 8. Finally, the revenue’s appeal stands dismissed whereas the assessee’s appeal stands partly allowed in terms of our above order. Order pronounced u/r 34(4) of Income Tax (Appellate Tribunal) Rules, 1963. Sd/- Sd/- (Sandeep Gosain) (Manoj Kumar Aggarwal) �ाियक सद� / Judicial Member लेखा सद� / Accountant Member

ITA Nos.345-346/Jodh/2019 Thakur Buildcon Private Limited Assessment Year: 2009-10

मुंबई Mumbai; िदनांकDated : 21/12/2020 Sr.PS:-Jaisy Varghese आदेश की �ितिलिप अ�ेिषत/Copy of the Order forwarded to : अपीलाथ�/ The Appellant 1. ��थ�/ The Respondent 2. आयकरआयु�(अपील) / The CIT(A) 3. आयकरआयु�/ CIT– concerned 4. िवभागीय�ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Jodhpur 5. गाड�फाईल / Guard File 6.

आदेशानुसार/ BY ORDER,

उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, जोधपुर / ITAT, Jodhpur.