TRIVENI CONSTRUCTIONS,MUMBAI vs. ACIT CC 2, MUMBAI

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ITA 3778/MUM/2017Status: DisposedITAT Mumbai11 November 2020AY 2010-116 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal directed the Assessing Officer to adopt a profit percentage of 3% on the value of alleged bogus purchases. This quantum would reduce the work in progress for the assessment year, with corresponding effects on subsequent years.

What were the facts?

The assessee, a builder and developer, faced additions for alleged bogus purchases. The Assessing Officer treated 100% of these purchases as bogus, while the CIT(A) restricted the addition to 12.5% as the profit element. The assessee argued that the purchases were utilized in projects and provided supporting documents.

What were the issues?

The primary issue was the determination of the profit element attributable to non-genuine purchases made by a builder and developer.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, VIRTUAL COURT

Before: SHRI SAKTIJIT DEY & SHRI M.BALAGANESH

For Appellant: Shri Rushabh Mehta, AR
For Respondent: Shri Amit Pratap Singh, DR
Hearing: 29/10/2020Pronounced: 11/11/2020

per sq.ft considered by the ld. AO. In this regard, the Ld. AR drew our attention to fact that average cost of construction declared by the assessee at Rs.3002.55 per sq ft, whereas the average cost adopted by its sister concerns i.e Triveni Properties was at Rs. 2907 per sq.ft, which was accepted by the revenue. It was also pleaded by him that the project carried out by both the concerns are in the same vicinity i.e Kamothi, Navi Mumbai. The Ld. AO also stated that the difference in average cost between Rs. 3002.55/- and Rs.2907/- works out to 3.28%, he also placed on record, the copy of the co- ordinate bench of this Tribunal passed in the case of sister concerns i.e Triveni Realities in & 4356/Mum/2017, wherein under identical facts ,the profit percentage was estimated at 3%, which would go to reduce the work in progress and not to be added to the total income for the year under consideration. When all these arguments were put to Ld. DR, the Ld. DR, fairly agreed for adoption of profit percentage of 3% as held in the case of M/s.Triveni Reality in the peculiar facts and circumstances of the instant case. Accordingly, we direct the Ld. AO to adopt the profit percentage of 3% on the value of alleged bogus purchases and the said quantum arrived thereon would go to reduce the work in progress for AY 2010-11. Needless to mention that the work in progress duly restated would have corresponding effect in subsequent years also and accordingly, the work in progress figures of the subsequent years also need to be restated suitably. Accordingly, the grounds raised by the assessee for both the AYs 2010-11 & 2012-13 are disposed off in the aforesaid terms.

6.

In the result, both the appeals of the assesse are partly allowed with regard to the issue of addition made on account of alleged bogus purchases.

Order pronounced in the open court on this 11/11/2020

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