M/S. PATKON CONSTRUCTION INDIA PVT. LTD.,MUMBAI vs. ITO-14(2)(1), MUMBAI

In ground no.1, the assessee has challenged the validity of re– opening of assessment under section 147 of the Income Tax Act, 1961 (for short "the Act"). Whereas, in grounds no.2 and 3, the assessee has challenged the merits of the addition/disallowance made on 2 Patkon Construction India RPvt. Ltd.

Brief facts are, the assessee, a resident company, is engaged in the business of civil construction. For the assessment year under dispute, the assessee filed its return of income on 30th September 2011, declaring total income of ` 11,97,841. Initially, the return of income was processed under section 143(1) of the Act. Subsequently, on the basis of information received from the external sources that certain purchases made by the assessee are non–genuine as they are in the nature of hawala transaction, the Assessing Officer re–opened the assessment under section 147 of the Act. In the course of assessment proceedings, the Assessing Officer informed the assessee that purchases worth ` 27,92,583, claimed to have been made during the year from eight parties are non–genuine as the concerned selling dealers have been identified as hawala operators by the Sales Tax Department, Government of Maharashtra. He, therefore, called upon the assessee to prove the genuineness of such purchases by furnishing various documentary evidences, such as, purchase orders, bills raised, goods received note, goods survey/inspection report, delivery challan, lorry receipt, details of payment, details of transportation of goods, etc. As stated by the Assessing Officer, in response, the assessee furnished ledger details, tax invoice, bank statement showing payment

The learned Authorised Representative submitted, the assessee undertakes contract work of various Government agencies only, such as, BHEL, BPCL, Tata Power, etc. He submitted, goods were directly supplied to the sites of the contractees. He submitted, the assessee has duly recorded the purchases and sales effected by it in the books of account. The assessee had also submitted purchase bills, ledger account copies, bank statement, etc. to establish the genuineness of purchases. Thus, he submitted, without rejecting the books of account, the Assessing Officer could not have disallowed part of the purchases. Without prejudice, he submitted, since the assessee has offered gross profit @ 9.5%, the addition, if any, be restricted to 3% being the 4 Patkon Construction India RPvt. Ltd.

The learned Departmental Representative strongly relying upon the observations of the Assessing Officer and learned Commissioner (Appeals) submitted, since the assessee failed to prove the genuineness of purchases, the disallowance made should be upheld.

I have considered rival submissions and perused the material on record. Though, it may be a fact that the assessee was unable to prove that purchases indeed were made from the declared sources, however, it is equally true that the Assessing Officer has accepted the fact that all the purchases have been duly reflected in the books of account no sales outside the books of account have been detected by him. Thus, it is a fact on record that the Assessing Officer has not found any discrepancy or inaccuracy in the books of account maintained by the assessee. For this reason alone, the Assessing Officer instead of disallowing the entire purchases has restricted it to 12.05% of the non–genuine purchases. The reason being, what the assessee might have gained by way of income is suppressed profit on the unproved purchases. The claim of the assessee that it has declared gross profit rate of 9.5% has not been disputed by the Revenue. That being the case, the contention of the learned Authorised

As regards the issue of re–opening of assessment under section 147 of the Act, in my considered opinion, since such re–opening is on the basis of information received from external sources, post processing of return of income under section 143(1) of the Act, it constitutes tangible material. Therefore, re–opening of assessment under section 147 is valid. Grounds are disposed off accordingly.

Ground no.4, having not been pressed is dismissed.

Grounds no.5 and 6, being consequential and pre–mature, are dismissed.

In the result, appeal is partly allowed. Order pronounced in the open court on 24.11.2020