ACIT 20(1), MUMBAI vs. M/S.CONSTRUCTION TECHNIQUE, MUMBAI

O R D E R Per Pawan Singh, JM : 1. This appeal by revenue is directed against the order of ld. CIT(A)-32, Mumbai dated 27.07.2018 for Assessment Year 2010-11. The revenue has raised the following grounds of appeal:

“1. On the facts and in the circumstances of the case and in law, the Ld. CIT(AJ has erred in granting relief of Rs.19,46,816/- by restricting the addition to 18.25% of the G.P ratio.

2. On the facts and in the circumstances of the case and in law, the Ld.CIT(AJ failed to appreciate the fact that onus is on the assessee to explain and substantiate the genuineness and true nature of the transaction.

ITA 6163/Mum/2018 Construction Technique 2010 declaring total income at Rs.20,25,960/-. The case was selected for scrutiny. In the course of assessment proceedings the assessing officer noted that information was received from DDIT (Inv) that the certain purchases shown by the assessee during the FY 2009-10 is from hawala traders, which have been identified by the sales tax department of Government of Maharashtra. The said hawala traders are indulging in providing the bogus bills. The DDIT (Inv) has also forwarded copies of relevant statements / documents, made before Sales Tax Authorities wherein thy have categorically admitted that they have not done any actual business transactions such as sales, purchases, etc. with the assessee and no actual delivery of goods has taken place. Their modus operandi is taking crossed cheques from parties, depositing the same in the bank and after deducting the commission at a fixed rate, withdrawing the cash and handing over the same to the party / intermediary on behalf of the party who sought bogus purchase bills. The assessee is one of the beneficiaries of the purchases shown from such parties. The assessing officer noted that the assessee has shown following purchases from such hawala parties.

Name of the parties Bill amount (Rs.) 1 HITEN ENTERPRISES 4,12,040 2 R.K. ISPAT 8,20,599 3 MERCURY ENTERPRISES 4,28,354 4 S M TRADING CO. 2,67,247 5 DIAMOND TRADERS 4,14,891 6 SHREE YAMUNA IMPEX 38,295

ITA 6163/Mum/2018 Construction Technique TOTAL 23,81,426 3. The assessee was issued notice u/s 142(1) dated 22-02-2013 and asked to submit details such as challans, records relating to receipt and dispatch of goods maintained, purchase related documents etc related to the above parties. In response, the assessee has stated that the information received from sales-tax authorities in respect of above parties is without any basis. The assessee submitted that it had effected the purchases of goods and received the delivery of goods. The payment was made through account payee cheque. However, records relating to receipts of goods, no proof such as delivery challans, lorry receipts, etc. have been submitted by the assessee. The assessing officer recorded a statement of Shri Harish Ruparel, partner of the assessee-firm under section 131 on 25-03-2013. In the statement the partner stated that he had only invoices / bills and delivery challans related to those parties and no other proof such as transport receipts etc. was produced to substantiate his claim. The explanation of the assessee was not found acceptable to the assessing officer. He observed that mere furnishing of invoices / bills did not suffice the purpose, as it has been established beyond doubt through concrete evidences that the aforementioned parties were bogus billers. In the face of such evidence any bills / invoices raised by them had no ITA 6163/Mum/2018 Construction Technique credibility. In this view of the matter, the assessing officer made addition of Rs.23,81,426/- being 100% of alleged bogus purchases. 4. On appeal, the ld. CIT(A) restricted the addition to the extent of 12.5% of such purchases being the profit element embedded in such purchases. Aggrieved by the order of ld. CIT(A), the revenue has filed the present appeal before us.

The assessing officer made assessment on the basis of material available on record and accordingly made additions of 100% of the bogus purchases shown by the assessee.

ITA 6163/Mum/2018 Construction Technique 7. We have considered the rival submissions of the parties and perused the order of the lower authorities. The assessing officer made the addition of 100% of the purchases shown from the alleged hawala dealers on taking his view that the assessee failed to produce the evidence related with the delivery of the goods. Before the ld. CIT(A) the assessee urged that the purchases shown by the assessee are genuine. The assessee has already paid sale tax to the vendors which can be set off against the output sale tax liability, if these parties have not deposited tax under Maharashtra Value Added Tax (MVAT). As those parties have defaulted in deposit of MVAT, thereby they were declared as suspicious dealers in the website of MVAT. The Assessing Officer has not considered the evidences furnished by the assessee.

The sale of the assessee was not disputed. The sale is not possible without the purchase. The ld. CIT(A) after considering the submission of assessee restricted the addition to the extent of profit element embedded in such bogus purchases. The ld. CIT(A) restricted the addition to the extent of 18.25% after considering the decision of the Hon’ble Gujarat High Court in CIT v/s Simit P. Sheth (2013) 356 ITR 451 (Guj). In our view, the ld. CIT(A) disallowed the bogus purchases on reasonable basis. We have further noted that the decision arrived by ld. CIT(A) is in conformity with the order of Hon’ble Gujarat High Court in CIT v/s Simit P. Sheth (supra), which we affirm. No other 5

ITA 6163/Mum/2018 Construction Technique contrary decision has been brought to our notice by the Ld. DR for the revenue. Therefore, in this view of the matter, we uphold the order of the Ld.CIT(A) and dismiss the appeal filed by the revenue. 8. In the result, appeal filed by the revenue is dismissed.

Order pronounced in the open court on 23-10-2019.