ACIT - 19(1), MUMBAI vs. HITECH ENGINEERS, MUMBAI

This appeal by revenue is directed against the order of ld. CIT(A)-30, Mumbai dated 13.06.2017 for Assessment Year 2009-10. The revenue has raised the following grounds of appeal:

Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in admitting additional evidence under 46A of the I T Rule 1962 ?"

Whether in the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in overlooking the fact that addition made by AO based on details of scam unearthed by Sales Tax Department wherein it was established that the assessee had taken bills from bogus parties without actually making purchases from them ?"

Brief facts of the case are that the assessee is a partnership-firm engaged in the business of civil contractor, filed its return of income for Assessment Year on 26.09.2009 declaring total income of Rs. 86,00,000/- (Approx.). The assessment was completed under section 143(1) on 28.11.2011. The assessment was re-opened under section 147 on the basis of information received from Sale Tax Department, Government of Maharashtra that certain hawala operators are indulging in providing accommodation bills without actual delivery of goods. The Sale Tax Department, Government of Maharashtra referred the list of such hawala dealers to the DGIT (Investigation), Mumbai. In the information it was alleged that the assessee is also one of the beneficiary who had made the purchases of Rs. 72,66,255/- from such hawala dealers. On the basis of information, the Assessing Officer made his belief that the income of the assessee escaped the assessment and re- Mum 2017-M/s Hi Tech Engineers. opened the assessment under section 147. Accordingly notice under section 148 was issued on 22.03.2014. The assessee in response to the notice under section 148 filed reply dated 29.05.2013 and stated that original return filed by assessee be treated as return in response to the said notice. The Assessing Officer after serving notice under section 143(2) dated 26.11.2014 proceeded for re-assessment. During the assessment, the Assessing Officer noted that the assessee has shown purchases from nine the parties, which has been declared as hawala dealers by the Sale Tax Department, Government of Maharashtra. The assessing officer summarised the details of purchases from such nine parties in the following manner;

We have considered the submissions of ld. DR for the revenue and perused the record. We have noted that during the re-assessment, the Assessing Officer noted that assessee has shown purchases of Rs. 72,66,255/- from nine parties, whose names were listed in the names of hawala dealers. The assessee was asked to substantiate the purchases by showing sufficient evidence. Before us none appeared on behalf of the assessee nor are any written submissions filed. We have seen the assessment was reopened on the basis of credible information received by assessing officer. During the reassessment the assessing officer made the addition of entire aggregate purchases shown from the said hawala dealer as non-genuine purchases. Before ld. Commissioner (Appeals) the assessee also furnished written submission, the submissions of the assessee were forwarded to the assessing officer for his remand report with the directions to conduct enquiries with regard to the genuineness of the payments. The remand report of the assessing officer was received by ld. Commissioner (Appeals) on 11.04.2017. In the remand 5 ITA No. 5877 Mum 2017-M/s Hi Tech Engineers. report the assessing officer retreated his earlier stand and also stated that the consumption sheet cannot be considered as basis of consumption as the same is not maintained on the basis of date wise consumption. The ld. Commissioner (Appeals) after considering the remand report and the other material considered the estimated profit on such bogus purchases and came to the conclusion that profit embedded in such non-genuine purchases are 15%. The learned Commissioner (Appeals) after considering the submission of assessee and various case laws including the decision of Hon’ble Gujarat High Court in Bholanath Poly Fab Private Limited 255 ITR 290 (Gujarat) and Sanjay Oil Cake Ltd 316 ITR 274(Gujarat) concluded that it is appropriate to made the addition to the extent of profit element on the alleged bogus purchases instead of adding the total amount of purchase. The learned Commissioner (Appeals) also concluded that the assessee executed works and received payment from Municipal Corporation of Greater Mumbai (MCGM) for completing the contract work. The execution of work cannot be made without making purchases and accordingly restricted the disallowance to that extent by following the decision of Gujarat High Court as noted above. Before us, though the learned DR for the revenue submitted that his department has made full-fledged investigation about the said hawala dealers which were engaged in providing bogus bill without actual delivery of goods. However, the learned DR for the revenue 6 Mum 2017-M/s Hi Tech Engineers. failed to convince us as to why the conclusion drawn by learned Commissioner (Appeals) in by taking into consideration the fact that only profit element embedded in such bogus purchases must be disallowed and not the entire purchases as held in various case laws referred by ld Commissioner (Appeals). Hence, we are in agreement with the conclusion arrived by ld. Commissioner (Appeals), which we affirm. No contrary fact or law is brought to notice to take other view.

In the result, appeal of the revenue is dismissed.