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Income Tax Appellate Tribunal, MUMBAI BENCHES “E”, MUMBAI
Before: Shri Saktijit Dey & Shri Ramit Kochar
O R D E R Per Saktijit Dey, Judicial Member
Aforesaid appeals filed by the assessee are against three separate orders, all dated 26.12.2016, of learned Commissioner of Income Tax (Appeals)-37, in short CIT(A), Mumbai for assessment years 2009-10, 2010 -11 and 2011-12.
The only common ground raised in these appeals relate to addition made @12.50% on account of alleged bogus purchases. Briefly, the facts which are more or less common in all these appeals, are that the assessee is a partnership firm stated to be engaged in executing civil contract work. On the basis of information received from the DGIT (Inv), Mumbai, that the assessee had shown purchases from certain parties/dealers, who have been identified as hawala operators and are engaged in providing accommodation bills only, re-opened assessment u/s. 147 of the Act for the aforesaid assessment years. During the assessment proceedings, the Assessing Officer found that purchases shown by the assessee from different parties identified as hawala operators in the aforesaid assessment years are as under:
2009 -10 1,61,66,864/- 2010 -11 1,13,75,816/- 2011-12 1,72,06,175/- The Assessing Officer found that the concerned parties have admitted before the Sales Tax Authorities that they are only providing accommodation entries without actual purchase and sale transactions. On the basis of such information, the Assessing Officer called upon the assessee to prove the genuineness of the purchases. Further the Assessing Officer also conducted independent inquiries to verify the genuineness of the purchases claimed to have been made from the concerned parties. As observed by the Assessing Officer, on inquiry being made by him, it was found that no such parties were available in the given addresses. Further, the Assessing Officer also called upon the assessee to produce copy of ledger account, delivery challans, lorry receipts, bank statements, octroi receipts, goods receipts, quantitative tally of sales and purchases, stock register etc. In addition, the Assessing Officer also issued notices u/s. 133(6) of the Act. As alleged by the Assessing Officer, many such notices were returned un-served by the postal authorities or, even if served, no reply was received. Further the assessee was also unable to produce the concerned parties. The assessee also could not prove the delivery of goods by furnishing the delivery challan or any other supporting evidence. Thus, ultimately, the Assessing Officer concluded that the assessee has not purchased goods from the concerned parties and at the same time he observed that the assessee has maintained quantitative tally of sales and purchases. Thus, he was of the view that the assessee has purchased goods from unknown sources and obtained accommodation bills from the hawala operators, thereby, suppressing payment of sales tax/VAT. The Assessing Officer upon consideration of the aforesaid facts and relying upon certain judicial precedents ultimately held that assesee’s claim of purchases cannot be accepted to be genuine hence proceeded to estimate profit of the alleged bogus purchases @12.5% for Assessment year 2009-10, which worked out to be ` 20,20,858/-. Though in like manner the Assessing Officer completed assessments for A.Ys. 2010-11 and 2011- 12, however, he estimated the profit on the alleged bogus purchases @25%, which worked out to ` 28,43,954/- and ` 43,01,544/- respectively. Being aggrieved of the additions so made, assessee preferred appeals before the learned CIT(A).
After considering submissions of the assessee in the context of facts and materials on record, learned CIT(A) sustained addition @12.5% in all the assessment years under dispute. In the process, he confirmed the addition made by the Assessing Officer in A.Y. 2009-10, whereas he reduced the additions made by the AO in A.Y. 2010-11 and 2011-12 to 12.5% of the alleged purchases. Still aggrieved, the assessee is in appeal before us.
The learned counsel for the assessee reiterated the stand taken before the departmental authorities and submitted that the assessee mainly undertakes work for Municipal Corporation of Greater Mumbai. He further submitted, the gross profit and net profit rate declared by the assessee in these years are as under:
Assessment Year Gross Profit Net Profit 2009-10 8.10% 5.62% 2010-11 10.36% 5.87% 2011-12 13.03% 6.85% The learned AR submitted, the assessee has reflected the purchases in its books of account and no defect was pointed out by the Assessing Officer. The Assessing Officer has also not rejected the books of account. In these circumstances the purchases cannot be treated as non-genuine. He submitted, assessee has furnished purchase invoices, sale invoices and payment details made through account payee cheque, which prove the genuineness of the transactions. He submitted, only on the basis of some information obtained from the Sales Tax Authorities the purchases made by the assessee cannot be treated as bogus. Without prejudice to the aforesaid submissions, learned counsel submitted, the estimation of profit @12.5% is on the higher side, hence, should be suitably scaled down. In support of such contentions, learned AR relied upon the following decisions: i) Fancy Wear vs. ITO [2017] 87 taxmann.com 183 ii) ACIT vs. Mahesh K Shah [2017] 88 taxmann.com 615
The learned DR strongly relied upon the findings of the CIT(A) and submitted that at no stage the assessee could prove the genuineness of purchases by producing proper documentary evidence like delivery challans, confirmations, stock register etc. He submitted, the assessee was unable to produce even a single party before the Assessing Officer. That being the case, the CIT(A) was justified in estimating profit @12.5% in all these assessment years. He submitted, the departmental authorities were rather lenient in restricting the addition to certain percentage instead of whole amount of bogus purchases.
We have considered rival submissions and perused the material on record. The facts and material on record reveal that certain parties have been identified by Sales Tax Authorities as hawala operators as they provide accommodation bills without actual purchase and sale transactions. From the information obtained from the Sales Tax Department, it was found that the assessee is one of the beneficiaries of such accommodation entries. On the strength of such information the Assessing Officer re-opened assessment and in course of assessment proceedings has called upon the assessee to prove the genuineness of the purchases. As could be seen from the facts on record, to verify the genuineness of purchases, the Assessing Officer conducted independent inquiries not only by issuing notices u/s. 133(6) of the Act but also physically. As alleged by the Assessing Officer, none of the parties from whom assessee claimed to have purchased the goods were available at the given address. Further, notices issued u/s. 133(6) of the Act, in most cases either were returned un-served or even if served were not responded to. In these circumstances, the genuineness of purchases claimed to have been made by the assessee could not be cross-verified. The assessee also failed to produce a single party before the Assessing Officer to prove the existence of such parties. Not even a single confirmation letter was filed by the assessee before the departmental authorities. No delivery challan or proof of receipt of goods could be produced by the assessee either before the Assessing Officer or before the first appellate authority. In these circumstances, the claim of the assessee that the purchases were made from the declared source is unacceptable. However, it is a fact on record that the assessee did produce quantitative tally of purchase and sale. Under these circumstances, the only conclusion which one can arrived at is, the assessee had purchased goods not from the declared source but from some other source at a lesser price for avoiding payment of sales tax/VAT etc. In these circumstances, the only course open is to estimate the profit element embedded in such unproved purchases to take care of revenue leakage. It is relevant to observe, learned DR has not brought any material to our notice to indicate that Revenue filed appeals against the order passed by the learned CIT(A). Considering the overall facts and circumstances, we are of the considered opinion that estimation of profit @12.5% as done by the learned CIT(A) is fair and reasonable, hence, do not require any interference from us. As regards the decision relied upon by the learned AR, on careful consideration we are of the view that those decisions have been rendered on the basis of peculiar facts involved in those cases and hence, are not applicable to the case of the assessee. In the aforesaid view of the matter, we uphold the order passed by the learned CIT(A) in all the assessment years under dispute. Consequently, grounds raised are dismissed.
In the result, assessee’s appeals are dismissed.
Order pronounced in the open court on this day of 27th July, 2018.