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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI S RIFAUR RAHMAN & SHRI PAVAN KUMAR GADALE
O R D E R PER PAVAN KUMAR GADALE, JM: These two appeals are filed by the revenue against the separate orders of the Commissioner of Income Tax (Appeals) -42 Mumbai, passed u/s. 143(3) r.w.s 147 for A.Y.2009-10 and U/sec 143(3) for A.Y.2011-12 and 250 of the Income Tax Act, 1961.
Since the issues involved in the appeals are identical and similar, hence they are clubbed, heard and consolidated order is passed. For the sake of convenience we shall
ITA Ns. 6452 & 6453/Mum/2019 Manisha Construction Co., Mumbai - 2 - takeup the A.Y 2009-10 as a lead case and the facts narrated therein. The revenue has raised the following grounds of appeal:
“i. On the facts and circumstances of the case the Ld. CIT(A) has erred in restricting addition of Rs. 9,41,503/- made by the A.O on account of bogus purchases to only 12.5% without appreciating the fact that the assessee failed to substantiate that the goods were received by him, which per se demonstrates enhancing the purchases by the bogus purchases amount hereby reducing its profits. ii. On the facts and circumstance of the case the Ld. CIT(A) has erred by not applying the decision of Hon’ble Supreme Court in the case of NK Proteins Ltd., (250 Taxmann 22(SC)) dismissing the SLP thereby upholding the decision of Hon’ble Gujarat high Court in the case of NK Industries Ltd (292 CTR 354 (GUJ) wherein it is held that the addition on the basis of undisclosed income could not be restricted to certain percentage when the entire transaction was found bogus.
The Brief facts of the case are that the assessee is engaged in the business as a civil contractor and filed the return of income for the A.Y 2009-10 on 09.09.2009 with the total income of Rs. 66,35,974/-, the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny the notice u/s 143(2) and 142(1) of the Act along with questionnaire were issued to the assessee. In compliance the Ld AR of the assessee appeared from time to time and furnished the details and the case was discussed. On the perusal of the financial statements the A.O found that the assessee being a ITA Ns. 6452 & 6453/Mum/2019 Manisha Construction Co., Mumbai - 3 - partnership firm engaged in the business of civil contractor and subcontractor works. During the financial year the assessee has declared net profit of Rs.66,34,971 on total contract receipts of Rs.17,13,22,467/-.The A.O has dealt on the various facts and observed that most of the expenses are not properly supported. Further there was difference in receipts as per TDS certificates and the books of accounts and the A.O. has made an addition of difference of Rs. 27,73,793/-and on perusal of the balance sheet the assessee was holding national savings certificates therefore accrued interest has been worked out @ 7.5%p.a. which work out to Rs. 22,500/- and made an addition. In respect of telephone expenses, sundry expenses and conveyance expenses the A.O found that most of the expenses are made in cash and are not fully verifiable. Since no proper documentary evidence has been produced and the A.O. made an addition @20% of the total expenses which works out in respect of telephone expenses of Rs. 13,101/-, sundry expenses Rs. 15,762/- and conveyance charges of Rs. 23,374/- and assessed the total income of Rs.94,84,500/- and passed order u/s 143(3) of the Act dated 19.12.2011.
Subsequently, the A.O has received the information from the DGIT(inv) Mumbai that the assessee has obtained the bogus purchases bills from traders listed on ITA Ns. 6452 & 6453/Mum/2019 Manisha Construction Co., Mumbai - 4 - the website of sales tax department and therefore notice u/s 148 of the Act was issued. The assessee has filed a letter to treat the return of income filed originally on 29.09.2009 in compliance to notice u/s 148 of the Act. Subsequently the A.O has issued notice u/s 143(2) and 142(1) to the assessee. In compliance the LD. AR of the assessee appeared from time to time and furnished the details. The A.O also issued summons to the assessee and the notice u/s 133(6) of the Act. The A.O. found that the assessee has obtained the bogus purchase bills from the three concerns aggregating to Rs. 9,41,503/- and since the assessee could not prove the genuineness of the transactions. Finally the A.O. has made addition of Rs. 9,41,503/- to assessed income as per the order passed u/s 143(3) dated 19.12.2011 and determined the total income of Rs.1,04,26,000/- u/s 143(3) r.w.s 147 dated 31.01.2014.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A). The CIT(A) considered the grounds of appeal, findings of the A.O, submissions of the assessee and dealt on the disputed issue, where the A.O. has made entire addition of bogus purchases. The CIT(A) has considered the assessee’s submissions and in the assessee’s own case for the A.Y 2010-11 where the disallowance in respect of bogus purchases was ITA Ns. 6452 & 6453/Mum/2019 Manisha Construction Co., Mumbai - 5 - considered and only GP average for the past three years has been worked out and the A.O. was directed to accept GP @ 11% on bogus purchases and the appeal was partly allowed. In the present case, the facts are identical and similar, the CIT(A) relied on the Hon’ble High Court and Coordinate Bench of Honble Tribunal decisions and sustained the addition/income in respect of bogus purchases @ 12.5% of Rs.9,41,503/- which worked out to Rs.1,17,688/- and partly allowed the assessee appeal. Aggrieved by the order of the CIT(A,) the revenue has filed the appeal before the Honble Tribunal.
5. At the time of hearing none appeared on behalf of the assessee. The Ld.DR supported the order of the A.O where 100% addition was made on bogus purchases. Further, the CIT(A) has erred in restricting the bogus purchase addition to the extent of GP rate @12.5% and prayed for allowing the revenue appeal.
6. We heard the Ld.DR submissions and perused the material on record. The sole crux of the disputed issue as envisaged by the ld. DR is that the CIT(A) has restricted the addition to the extent of 12.5% of the bogus purchases considering the GP ratio and profit element embedded. We found that the CIT(A) has dealt on the facts and jurisdictional Hon’ble High Court decisions
ITA Ns. 6452 & 6453/Mum/2019 Manisha Construction Co., Mumbai - 6 - and Coordinate Bench of Honble Tribunal decisions and took a view dealt at Para 7.3.3 to 7.3.9 of the order. The Ld.CIT(A) has relied on the Jurisdictional Honble High Court decision in the case of Pooja Paper Trading Co. Vs. ITO, (104 taxmann.com 95) and the decision of CIT Vs. Simit P Sheth (2013) (356 ITR 451) (Guj) where the Hon’ble High Court has upheld the disallowance @ 12.5% on such purchases.
6.1 The Ld.CIT(A) took a reasonable view that the only GP percentage has to be added and estimated the GP rate @ 12.5% and sustained the addition of Rs.1,17,688/-. The Ld.DR could not controvert the observations of the Ld. CIT(A) with any new cogent evidence and material but relied only the A.O order. We are of the opinion that the CIT(A) dealt on the facts and considered the profit element in the bogus purchases and also the A.O has not disputed the sales. The Ld.CIT(A) has relied on the Hon’ble High Court and Hon’ble Tribunal decisions and passed a reasoned order. Accordingly, we do not find any infirmity in the order of the CIT(A) and uphold the same and dismiss the grounds of appeal raised by the revenue.
In the result, the appeal filed by the revenue is dismissed.
ITA Ns. 6452 & 6453/Mum/2019 Manisha Construction Co., Mumbai - 7 - , For the A.Y 2011-12.
As the facts and circumstances in this appeal are identical to A.Y. 2009- 10, the decision rendered in above paragraphs would apply mutatis mutandis for this case also. Accordingly, grounds of appeal of the revenue are dismissed
In the result, both the appeals filed by the revenue are dismissed.