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Income Tax Appellate Tribunal, “SMC”, BENCH
Before: SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI, JM
आदेश / O R D E R PER R.C.SHARMA (A.M):
This is an appeal filed by assessee against the order of CIT(A)-34, Mumbai dated 24/08/2017 for A.Y.2009-10 in the matter of order passed u/s.143(3) r.w.s. 147 of the Income Tax Act, 1961. 2. In this appeal, assessee is aggrieved for reopening of assessment u/s.147 as well as merit of the addition made on account of bogus purchases amounting to Rs.22,52,569/-. 3. Rival contentions have been heard and record perused.
M/s. Laxmi Sanitary Engineers & Contracts 4. The facts of the case are that the assessee is Registered Firm and is engaged in the business of service contract of plumbing and Sanitary work. The return of Income for A.Y 2009-10 was filed by the assessee on 30.09.2009 declaring the total income of Rs.10.37,530/-. Subsequently, an information has been received by the AO from Sales Tax Authorities that the assessee had taken bogus bills amounting to Rs.90,10,276/- from 7 parties, as mentioned in para 4.1 of the assessment order, without actually purchasing and taking delivery of good.
On the basis of information from Sales Tax Department, AO reopened the assessment and added 25%of such bogus purchases in assessee’s income, on the plea of profit embedded in such purchases.
By the impugned order, CIT(A) confirmed the action of the AO against which assessee is in further appeal before us.
It was argued by learned AR that during the course of assessment proceeding, the Assessee had submitted all the details regarding alleged bogus bills including copy of ledger account appearing in the books of accounts of the Assessee, copies of purchase bills along with the delivery challans of all the parties from whom the Assessee has purchased goods and copies of bank statement reflecting the payment of the said bill and also stated that the suppliers have issued proper invoices, goods have actually been delivered and all the payments to the suppliers were through account payee cheques only.
M/s. Laxmi Sanitary Engineers & Contracts 8. As per learned AR, the assessee has also submitted the comparison chart for consumption of materials as regards to % of purchase to sale explaining the consumption of materials includes materials purchase from the said parties. It was contended that inspite of genuine purchase and consumption of materials for on-going 'projects ultimately converted in to sales and credited to profit and loss account and declared as revenue while filing of Return of Income. As per learned AR, the assessee has genuinely purchased materials of Rs. 90,10,276/- from the said parties. These suppliers are having registration certification (TIN) granted by the Sales Tax Department. This certificate is given to them after thorough inquiry and all relevant documents i.e. PAN, proof of residence, proof of place of business, bank details, identity proofs, are kept on registration record. There after officer from "advisory cell" of sales tax department visit their place of business to verify the business activities and give report to authority, this is standard procedure followed by the sales tax department for all the dealers. All these suppliers were filing return under MVAT Act and CST Act and probably filed audit report under MVAT Act, duly certified by the Chartered accountants also. These facts can be verified from the sales tax department by your office. Learned AR submitted that mere on the basis of deposition by said persons before the sales tax officer, these suppliers have been declared hawala dealer; it has hardly any evidence value against their client in proceedings under Income Tax Act Further, no opportunity was given M/s. Laxmi Sanitary Engineers & Contracts to assessee to cross examine these parties, neither by sales tax department nor income tax department. These suppliers have issued proper invoices, goods has been actually delivered to us and all the payments to these suppliers were through account payee cheques only, which are debited in our bank account and properly accounted in the books of accounts 9. In view of the above, it was contended that genuine purchases used in manufacturing process and when the assessee has earned very good profit thereon there is no reason for considering such purchases as bogus. Accordingly, it was requested that addition so made should be deleted.
On the other hand, learned DR relied on the order of the lower authorities and contended that AO has very reasonably estimated profit @25% of alleged bogus purchases.
We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that assessee is engaged in the business of service contract of plumbing and sanitary work. As per documents so placed on record, the purchases so made during the year was consumed in the process of plumbing and sanitary work. The ratio of purchase vis-à-vis sales during the year under consideration as well as during the earlier four years are as under:-
M/s. Laxmi Sanitary Engineers & Contracts Year Purchase Sales % of purchase of Remark sale 2005 - 06 2,77,48,377 4,56,90,387 60.73 - 2006-07 6,73,28,840 9,85,45,190 68.32 - 6,22,85,752 9,15,90,595 68.00 - 2007- 08 2008 - 09 10,33,95,073 78.61 13,15,32,639 increase m purchase mainly due to substantial increase in Sales 2009- 10 10,33,09,256 14,21,53,680 72.67 - 2010- 11 9,60,58,687 13,44,08,281 71.47 - 2011-12 4,06,17,640 6,01,25,668 67.55 - 2012- 13 12,86,75,014 16,73,51,298 76.89 increase m purchase mainly due to substantial increase in Sales