TRIVENI HOMES,MUMBAI vs ACIT CC 2, THANE

Income Tax Appellate Tribunal, “H”, BENCH MUMBAI

Before: SHRI R.C.SHARMA, AM & SHRI RAM LAL NEGI, JM

For Appellant: Shri Rushabh Mehta

For Respondent: Shri M.C.Omi Ningshen

Hearing: 12/02/2018Pronounced: 13/02/2018

आदेश / O R D E R PER R.C.SHARMA (A.M):

These are cross appeals filed by assessee and revenue against the order of CIT(A)-1,Aurangabad dated 01/03/2017 for A.Y.2010-11 in the matter of order passed u/s.143(3) of the IT Act.

4355/2017 M/s. Triveni Homes 2. The following grounds have been taken by the assessee:-

1. The Ld. CIT(A) erred in facts and law in disallowing and reducing a sum of Rs. 52,02,655/- from the closing WIP in respect of certain purchases alleged as bogus by the Id. Assessing Officer without appreciating the evidences placed on record.

2. The learned Commissioner of Income Tax (Appeals)and Assessing Officer erred in facts and law in not appreciating that the appellant had duly discharged its onus of establishing the genuineness of purchases and utilisation thereof in the business of the appellant and accordingly no disallowance was warranted.

3. The learned Commissioner of Income Tax (Appeals) and Assessing Officer erred in facts and law in relying upon the statement of certain persons without appreciating the defects pointed out therein and without affording the appellant any opportunity of cross-examination of these parties.

4. The appellant prays that - (a) WIP as shown in return of income be restored and disallowance of Rs. 52,02,6557- be deleted; (b) Any other relief, as may be deemed fit.

5. All the above grounds are independent and without prejudice to each other.

The grounds taken by Revenue are as under:- 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the addition of Rs.5,72,36,016/- on account of bogus purchases to Rs.52,02,655/-." - 2. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the addition was made on the basis of information received from sales Tax Department, Maharashtra with regard to bogus purchases made by the assessee from dealers without actual supply of goods." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the hawala dealers have admitted on oath before the Sales Tax Authorities that they have not sold any material to anybody." 4. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in not considering that the assessee could not prove the genuineness and creditworthiness of the purchase transactions during the course of assessment proceedings." 5. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has failed to conform to the ratio laid down by the Hon'ble Apex court in the case of N.K. Proteins Ltd. vs. DCIT in SLP (Civil) No.769/2017 dated 16.01.2017."

4355/2017 M/s. Triveni Homes 6. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating that purchases were made from some other parties which were not recorded in the books of accounts and only accommodation bills were obtained from hawala parties and there by attracting provisions of section 10A(3}." 7. "On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in not appreciating the fact that applicability of provisions of 40A(3) attracts 100% bogus purchases to be held as profit." 8. "The appellant prays that the order of the C1T(A) on the above grounds be set aside and that of the Assessing Officer be restored." 9. "The appellant craves leave to amend or to alter any ground or add a new ground, which may be necessary".

Rival contentions have been heard and record perused.

Facts in brief are that assessee is engaged in the business of builder and developer. For such building project assessee was following Project completion method. During the course of scrutiny assessment, as per information from Sales Tax Department, the AO observed that assessee has made purchases from hawala parties amounting to Rs.5,72,36,016/-. By observing that assessee has not submitted proof of transportation of material received from the parties and the notices issued u/s.133(6) were returned unserved, AO added entire amount in assessee’s income. 6. Before the CIT(A) assessee has submitted following additional evidence.  Copy of architect's certificate certifying the consumption of material .  Quantitative details of material purchased 7. The additional evidences were forwarded by CIT(A) to AO on 13.08.2014 and report was called for before 29.08.2014. Reminders dated 4355/2017 M/s. Triveni Homes 13.01.2015 and 14.12.2015 were also sent by the Id. CIT(A). However, no remand report was received till the date of order of the Id. CIT(A). 8. In the impugned order, CIT(A) observed that if entire purchases are disallowed, it would imply that 35% of the WIP is bogus, which does not seem to be logical. The average cost of construction declared at Rs.2812.07/- per sq.ft. of the assessee approximates the average rate of it sister concern - Triveni Properties accepted at Rs.2907/-per sq.ft., where there is no allegation of bogus purchases. Also, the project of both these concerns are in the same vicinity i.e. Kamothe, Navi Mumbai. Accordingly, the Id. CIT(A) has disallowed 6.5% on purchases where the VAT rate is 4% and 15% of purchases where the VAT rate is 12.5% based on the rationale laid down by the ITAT in the case of Simit P Sheth (supra) and approved by the Hon'ble Gujarat High Court. The said disallowance is worked out at Rs.52,02,655/-. (Refer page 39 of CIT(A) order)."

Since the assessee had not claimed any purchases as deduction for the year under consideration but accounted for in work in progress carried forward to subsequent years, the Id. CIT(A) reduced the work in progress by an amount of Rs.52,02,655/-. Accordingly, the Id. CIT(A) has deleted the disallowance for the year under consideration and enhanced the income of the assessee for A.Y. 2012-13 to the tune of Rs.52,02,655/- when the project was completed and the expenditure was claimed.

4355/2017 M/s. Triveni Homes 10. Against the above order of CIT(A), assessee and revenue are in further appeal before us.

11.

We have considered rival contentions and carefully gone through the orders of the authorities below and found from record that following evidences were filed during the assessment and appellate proceedings: i. Copy of ledger of the dealer for the period 01.04.2009 to 31.03.2010 ii. Copies of tax invoices which bear the TIN of the dealer iii. Copies of delivery challan iv. Copies of confirmation received from the dealers v. Copies of Bank statement highlighting the payment in cheque to the dealers vi. Copy of Architect's certificate certifying consumption of materials vii. Copy of quantitative details of materials purchased 12. However, no adverse finding is brought on record in relation to these evidences. Further, the architect's certificate along with quantitative details established the consumption of materials for the purpose of construction of the building.

13.

It was argument of learned AR that the non-service of notice u/s. 133(6) could not be viewed adversely against the assessee in view of the decision in the case of CIT v. Orrisa Corporation P. Ltd. (1986) 159 ITR 78 (SC) and CIT v. Nikunj Eximp Enterprises (P.) Ltd. [2015] 372 ITR 619 (Bom.). The Assessing Officer had not provided the opportunity of cross examining - Slid. Chandrakant Dheiai, on whose statement reliance was placed. Further, the said party was a MVAT defaulter and accordingly to avoid the consequences of default may have given such a statement. Reliance in this regard is placed on the decision in the case of 4355/2017 M/s. Triveni Homes CIT v. M/s. Ashish International (ITA no. 4299 of 2009) (Bom.) and H.R. Mehta v. ACIT [2016] 387 ITR 561 (Bom.)

TRIVENI HOMES,MUMBAI vs. ACIT CC 2, THANE