ATHENE CONSTRUCTION P. LTD,NAVI MUMBAI vs. ACIT 10(3), MUMBAI

The name of the assessee has subsequently been changed from Athene Construction Private Limited to Athene Construction LLP which is evident from Form No. 16 dated 26/02/2014 issued by Ministry of Corporate Affairs, a copy of which has been placed on record. The assessee has already filed revised Form No. 36 reflecting such change. Finding the same in order, we proceed to dispose-off the assessee’s appeal.

The assessee, being resident corporate assessee during impugned AY was engaged in the business of construction and development of property. It reflected Net Profit of Rs.65.19 Lacs against turnover of Rs.527.76 Lacs. The construction expenses were shown at Rs.4.17 crores. The assessee undertook a project at Navi Mumbai in joint venture and reflected purchase of steel for Rs.250.75 Lacs from following two entities:-

No. Name Amount (Rs.) 1. Anshu Mercantile Pvt. Ltd. 1,25,38,912/- 2. Dhiren Mercantile Pvt. Ltd. 1,25,36,468/- Total 2,50,75,380/- To confirm the purchase transactions, notices u/s 133(6) were issued to the above entities, however, the same were returned un-served by postal authorities with remarks ‘Not known’. Consequently, the assessee was Athene Construction LLP Assessment Year-2009-10 directed to substantiate the purchases made by him. The assessee defended by the purchases made by him by submitting copies of invoices, delivery challans and Architect’s certificate to support the stand that the purchased material was used in the construction activities. However, not convinced, Ld. AO, after considering the factual matrix, disallowed the same and added the same to the income of the assessee.

Aggrieved, the assessee contested the same without any success before Ld. CIT(A) vide impugned order dated 12/03/2013 wherein the matter was concluded against the assessee in the following manner: 6.5. I have gone through the assessment order and the submission made by the appellant during the course of appellate proceeding. The issue of bogus purchases has been taken by the A.O. properly during the course of assessment proceeding. The objections raised by the A.O. have not been satisfactorily met by the assessee. Even during the course of appeal proceeding, the appellant could not substantiate this. However, from the details submitted by the appellant it is seen that Rs.89,31,312/- has been paid on different dates vide ICICI Bank but the payment dates pertain to F.Y.2009- 10 whereas, assessment is being made for the F.Y.2008-09. Since during the F.Y.2008- 09, the purchases could not be proved satisfactorily by the appellant, nor the payments took place, the same cannot be considered in the present appeal and the additions made on account of bogus purchases amounting to Rs.2,50,75,380/- is confirmed.

The Ld. Counsel for assessee [AR], Shri Piyush Chhajed contesting the stand of lower authorities, pointed out that the assessee purchased steel during the impugned AY which was used in construction activities as certified by the Architect. It was further submitted that the impugned disallowance translates into exorbitant Gross profit Rate of more than 60% in the hands of the assessee, which was not, at all justified, in the Athene Construction LLP Assessment Year-2009-10 assessee’s line of business. The same was controverted by Ld. Departmental Representative [DR], Shri Rajesh Kumar Yadav, by submitting that the assessee miserably failed to prove the transactions, which justifies the stand of lower authorities in making full disallowance.

We have carefully heard the rival contentions and perused relevant material on record. We are of the considered opinion that the assessee was engaged in construction activities during the year which could not be carried out without consumption of steel. The aforesaid fact is undisputed and duly supported by the Architect’s certificate. The assessee was in possession of primary purchases documents. Further, the said disallowance has resulted into shooting of Gross profit Rate to such a level which is unconceivable in assessee’s line of business. However, at the same time, the assessee is unable to prove the purchase transactions carried out by him by producing any of the two suppliers under dispute. There was a long delay in making payment to the suppliers and both suppliers were new entities. The notices issued u/s 133(6) elicited no satisfactory response. The assessee is also unable to controvert the argument that majority of the work was completed in earlier years. All these factors cast serious doubt on assessee’s claim. Therefore, in such a situation, the addition, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit element earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases. Athene Construction LLP Assessment Year-2009-10 Therefore, keeping in view the overall factual matrix, we estimate the additions @8% of alleged bogus purchases of Rs.2,50,75,380/-. In other words, the impugned disallowance shall be restricted to Rs.20,06,030/- whereas the balance disallowance shall stand deleted. The Ld. AO is directed to re-compute the income of the assessee in terms of our above directions.

Resultantly, the assessee’s appeal stand partly allowed. Order pronounced in the open court on 13th July,2018 Sd/- Sd/- (C.N.Prasad) (Manoj Kumar Aggarwal) �ाियकसद� / Judicial Member लेखासद� / Accountant Member मुंबई Mumbai; �दनांक Dated : 13.07.2018 Sr.PS:-Thirumalesh