ITO 21(2)(1), MUMBAI vs. M/S KINJAL CONSTRUCTION CO & CHIRAG CONSTRUCTION CO (JOINT VENTURE), MUMBAI

Briefly stated the facts are that, the assessee engaged in the business of “Civil Contractor, filed return of income on 29.09.2011 for the A.Y.2011-12 declaring income of ₹.19,39,660/- and the return was processed u/s. 143(1) of the Act. Subsequently, Assessing Officer received information from the DGIT (Inv.,), Mumbai about the accommodation entries provided by various dealers and assessee was also one of the beneficiary from those dealers. The assessments were reopened U/s. 147 of the Act based on the information received from DGIT(Inv.) Mumbai, that the assessee has availed accommodation entries from M/s. Karan Enterprises who is said to be providing accommodation entries without there being transportation of any goods. In the reassessment proceedings, the assessee was required to prove the genuineness of the purchases made from various parties referred in Assessment Order. Assessee has furnished ledger copies of purchase 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. However, parties were not produced before the Assessing Officer and no explanation was offered.

Not convinced with the submissions of the assessee the Assessing Officer treated the purchases as non-genuine and he was of the opinion

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

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

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 (A.Y.2011-12) M/s. Kinjal Construction Co. & Chirag Construction Co. the assessee and the averments in the Assessment Order and restricted the disallowance @30% of the non-genuine purchases. While holding so, the Ld.CIT(A) observed as under: - “Decision: 8. I have carefully considered the above submission of the appellant, impugned assessment order on this issue and the material available on record. My observations and findings are as under- 8.1 There is no dispute that the name of the alleged supplier Karan Enterprises was appearing in the list of suspicious dealers identified by the Sales Tax Department and the information against that party along with their statement and affidavits were received by the AO. 8.2 During the course of assessment, notice issued u/s 133(6) also returned unserved. The inspector could not locate the said party. The appellant also failed to produce the party or confirmation from the said party. 8.3 During the course of survey and post survey, statements recorded from the persons connected with one of the venturers cannot be stated to be irrelevant as they have also stake in the joint venture. 8.4 To conclude, the evidences suggest that the party Karan Enterprises have provided accommodation bills without actual delivery of goods. The N.P. Ratio in AY 2011-12 has come down at 4.37 % as against 6.07 % in AY 2010-11. However, as the work done was in respect of Govt. Contract, it is concluded that some materials must have been utilised for the said work. Therefore, the issue comes to estimation of profits earned by the appellant by obtaining bills from the alleged supplier and actually purchasing material from somewhere else. In other words, a portion of purchase needs to be disallowed since the rate and quantity of materials purchased could not be verified. 8.5 Considering the totality of facts, the disallowance @30% of Rs. 16,05,493/- = Rs.4,81,648/- is hereby sustained and balance 70% being Rs. 11,23,845/- is deleted. The ground is partly allowed.”

In result, the appeal of the appellant is partly allowed.”

In the result, appeal of the Revenue is dismissed.