DCIT CENT. CIR. - 1(3), MUMBAI vs. POONAM SKYLINE CONSTRUCTION, MUMBAI

order dated 19/02/2016 of the CIT(A)- 9, Mumbai,the Assessing Officer (AO)has filed present appeal.Assessee – engaged in the business of building and development of property filed its return of income on 28/09/2011,declaring total income at Rs.5.01 crores. The AO completed the assessment,on 25/03/2014,u/s. 143(3) of the Act,determining the income of the assessee at Rs.5.89 crores. 2.Effective Ground of appeal is about direction given by the First Appellate Authority (FAA) to the AO to reduce the closing WIP proportionately .The AO had received information from the investigation wing that the assessee had entered into bogus transaction with 8 parties and the amount involved was Rs.87.66 lakhs.During the assessment proceedings the AO directed the assessee to produce details of purchases made from those parties as also details of purchase bills, proofs of delivery of goods and transports and lorry receipts etc. He also required it to produce the parties before him. In response, the assessee furnished purchase bills, ledger accounts copies of bank statements details of payments made.However, it could not produce lorry receipts or transportation details.It also could not produce the parties before AO for examination nor did he provide the addresses.Therefore, the AO disallowed the entire bogus purchase of Rs.87.66 lakhs and added it to the total income of the assessee. 3.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority(FAA)and made detailed submission.It also relied upon certain case laws.After considering the available material,he held that AO had held that purchases from 8 parties has actually been made,that same were held to be bogus as the assessee could not

2311/M/16-Poonam Skyline Construction produce those parties before him for examination,that there was no proof of identity of suppliers, that the AO did not doubt the sales revenue recognized from construction business, that he did not disturb the working of closing stock of flats or WIP of projects under construction . He referred to the order of ITAT Mumbai Benches where it was held that in the cases of bogus purchases entire purchases could not be disallowed and that only profit embedded in doubtful transactions had to be taxed. He referred to the cases of Madhukant B. Gandhi ITA/1950/Mum/2009 AY 05-06 dtd 23/2/2010),Bholana Polyfab Pvt. Ltd. (355 ITR 290), Sanjay Oil Cake Industries (316ITR274), Simit P. Sheth (356ITR451) and held that the assessee was not in a position to bring the existence of the suppliers, that there were enough circumstantial evidences casting a doubt on the nature of the transaction, that the assessee had made cash purchases from other parties which were not recorded in the books, he took only bills from 8 parties to explain the purchases, that nature of items purchased from alleged suppliers proved that same were utilized by it, that the purchases made from 8 parties were debited to P&L account that the total alleged purchases of Rs.87,66,486/- had been consumed by the assessee in 4 of his projects. He tabulated the breakup of purchases from 8 parties and utilization of purchases in 4 projects as under: