ACIT, -32(1), MUMBAI vs. M/S TIMES CONSTRUCTION CO., MUMBAI

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ITA 1728/MUM/2020Status: DisposedITAT Mumbai01 October 2021AY 2011-125 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) restricted the disallowance to 12.5% of the purchases, considering the profit embedded in the transactions. The Tribunal found no infirmity in this decision.

What were the facts?

The Assessing Officer disallowed entire purchases of ₹.6,92,980/- treating them as non-genuine accommodation entries. The assessee had provided purchase bills, sales bills, ledger accounts, and bank statements evidencing cheque payments.

What were the issues?

Whether the entire purchases should be disallowed as non-genuine when the assessee provided documentary evidence and made payments through cheques, or if a partial disallowance based on profit estimation is appropriate.

Which sections of the Income-tax Act were involved?

Section 143(1),Section 143(2),Section 133(6)

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, VIRTUAL COURT

Before: SHRI C.N. PRASAD, HONBLE

For Respondent: Shri Sajay J. Shethi
Hearing: 22.09.2021Pronounced: 01.10.2021

O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the revenue against the order of the Learned Commissioner of Income Tax (Appeals) – 46, Mumbai [hereinafter in short “Ld.CIT(A)”] dated 29.01.2020 for the A.Y. 2011-12 in restricting the disallowance to 12.5% of purchases as against the entire purchases disallowed as non-genuine/bogus by the Assessing Officer.

(A.Y. 2011-12) M/s. Times Construction Company 2. Briefly stated the facts are that, the assessee engaged in the business of “Civil Engineers and Contractors”, filed return of income on 23.09.2011 for the A.Y.2011-12 declaring income of ₹.33,98,345/- and the return was processed u/s.143(1) of the Act. The case was selected for scrutiny and notice u/s.143(2) of the Act was issued. Subsequently, Assessing Officer received information from the Sales Tax Department, Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. In the reassessment proceedings, the assessee was required to prove the genuineness of the purchases made from the parties as referred in Assessment Order. In response, Assessee furnished purchase bills reflecting the quantities and items purchased as also the sales bills reflecting the quantities and items sold, ledger account, copy of bank statement evidencing cheque payment to the parties and submitted that the purchases made are genuine. Assessee further submitted that the payments are made through account payee cheques as such contended that all the purchases are genuine.

3.

Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion that assessee had obtained only accommodation entries without there

(A.Y. 2011-12) M/s. Times Construction Company being any transportation of materials and the assessee might have made purchases in the gray market. Assessing Officer observed that the notices issued u/s. 133(6) of the Act to the parties are returned unserved and the assessee has not produced the parties before the Assessing Officer. It is the finding of the Assessing Officer that the assessee failed to produce the parties in support of its claim that purchases are genuinely made from the parties. Therefore, Assessing Officer treated entire purchases of ₹.6,92,980/- as non-genuine and added to the income of the assessee. On appeal the Ld.CIT(A) considering the evidences and various submissions of the assessee restricted the disallowance to an extent of 12.5% of the non-genuine purchases.

4.

Inspite of issue of notice none appeared nor any adjournment was sought. Therefore, I proceed to dispose of this appeal on hearing Ld.DR on merits.

5.

Ld. DR vehemently supported the orders of the Assessing Officer.

6.

Heard Ld.DR, perused the orders of the authorities below. On a perusal of the order of the Ld.CIT(A), I find that the Ld.CIT(A) considered this aspect of the matter elaborately with reference to the submissions of the assessee and the averments in the Assessment Order and following (A.Y. 2011-12) M/s. Times Construction Company decision of the Hon'ble Gujarat High Court in the case of CIT v. Simit P. Sheth [356 ITR 451] restricted the addition to 12.5% of the non-genuine purchases. While holding so, the Ld.CIT(A) observed as under: - “5. I have considered the facts of the case submission made and the assessment order. My considered opinion is as under: I have considered the AO's contentions and the reasons for making the addition. Based on information from the Investigation wing and as per the information available from the web site of the Maharashtra Sales Tax Department the parties listed are one who have issued bogus purchase bills. The notices u/s. 133(6) have not been served / replied. Assessee did not produce the parties. Onus is on the assessee to establish the genuineness. Based on this aspects the Ao has made the addition to income in respect of the purchases made from the listed parties of Rs. 6,92,980/- The AR has submitted that the material was used for executing work for MCGM and that without the use of the material the work could not have been completed. He further stated that the work execution is in the presence of the engineers of MCGM and material is received in their presence and after verification the material is consumed at the sites. Under such circumstances to contend that no material was receive at all is incorrect. He further pleaded that if the party was not available the legal procedure should have been followed to trace the party. He cited decisions wherein the addition has been deleted in entirety. He has also contended that the profits embedded in such transactions should be considered and has cited decisions in tins context. I have considered both the submissions. It cannot be denied that if sales are accepted then a corresponding purchase/expense are a corollary. Under such circumstances the estimation of the profit embedded in the transaction would be a fair basis to determine the income. Relying on the decision of Simith P Sheth, I consider 12.5 % of the transaction amount of Rs. 6,92,980/- I. e. Rs. 86,623/- as the income to be considered in these transactions. The appellant gets a relief of RS.6,06,357/-.”

7.

On a careful perusal of the order of the Ld.CIT(A) and the reasons given therein, I do not find any infirmity in the order passed by the (A.Y. 2011-12) M/s. Times Construction Company Ld.CIT(A) in restricting the addition/disallowance to the extent of 12.5% of the purchases. Grounds raised by the revenue are dismissed.

8.

In the result, appeal of the Revenue is dismissed.

Order pronounced on 01.10.2021 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.

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