DCIT CC 3(1) CEN RG 3, MUMBAI vs. SAROVAR HOMES P.LTD, MUMBAI

order dated 30/11/2015 of the CIT(A)-9,Mumbai the Assessing Officer(AO) has filed the present appeals for the above mentioned two assessment years (AY.s).Assessee -company is a contractor & property developer and is also a trader in building material.The details of filing of return of income, returned income, date of assessment etc. are summarized below: A.Y. ROI filed on Returned Income Assessment dt. Assessed Income 2009-10 21/09/2009 Rs.6,14,308/- 30/09/2011 Rs.1,13,68,020/- 2010-11 13/10/2010 Rs.18,16,000/- 30/03/2014 Rs.2,96,35,580/- ITA.s/466-467/Mum/2016,AY.s.2009-10 & 2010-11: 2.Effective ground of appeal is about deletion/reduction of addition made by the AO.The AO received pieces of information from the Sales Tax Department that the assessee was one of the beneficiaries of hawala bills,that it had received bogus bill from three parties namely, Ambika Trade Impex(ATI),Rumeet Enterprises(RE)and ShivRaj Traders(SRT)for the AY. 2010-11 and from one party i.e.Deep Enterprise,that it had obtained bills of Rs. 98.22 lakhs and Rs.2.77 crores for the AY.2009-10 and 2010-11 respectively.He issued a noticed u/s. 148 of the Act,as he was of the opinion that taxable income had escaped assessment for the AY.s. He confronted the assessee with the information received from the Sales Tax Department and asked as to why the purchases made from ATI,RE(Rs.70.20 lakhs) and SRT(Rs.1.07 crores)should not be treated as bogus for the AY.2010-11.Similar query was raised for the purchases made from Deep Enterprises. 1 466/M/16- Sarovar Homes Pvt. Ltd. After considering the submission of the assessee,he held that purchases made from the above- mentioned parties were bogus in nature, that the delivery challans filed were incomplete,that the details of vehicle numbers were not mentioned on the delivery challans,that there was no acknowledgement on delivery challans.Invoking the provisions of section 69C of the Act, the AO held that the assessee had failed to prove the genuineness of the purchases, that the expenditure incurred by its had to be disallowed. He made a disallowance of Rs.2.77 crores to the total income of the assessee for the AY.2010-11. Disallowance of Rs.98.22 lakhs was made for the AY.2009-10. 3.Aggrieved by the orders of the AO,the assessee filed appeals before the First Appellate Authority (FAA) and made elaborate submissions before him. It also relied upon certain case laws.After considering the submissions of the assessee and the assessment order,the FAA referred to many a cases,dealing with bogus purchases,delivered by the Hon’ble Courts or the Tribunal. He He directed the assessee to furnish details of gross profit/net profit ratio of the earlier assessment years for comparison and to check the probable and possible leakage of revenue arising out of such transactions.After comparing the gross profit ratio of the year under consideration with the earlier assessment years, he prepared a chart as under:

AY.2010-11(Rs.) AY.2009-10(Rs.) 2008-09(Rs.) Sales 7,92,81,873 8, 09, 94, 231 8, 55, 73, 120 Purchase 6,31,00,178 7, 15, 20, 361 7, 96, 74, 974 Gross profit 1,41,77,397 92, 28, 786 5, 90, 11, 453 Profit before tax 13,40,040 4, 43, 305 3, 54, 949 Gross profit ratio 17.88 11.39 6.90 Net profit ratio 1.69 0.55 0.41 He further directed the assessee to give specific GP ratio for the trading activities in which the alleged hawala dealers were involved. He concluded that the comparative analysis of the data proved that the GP ratio in the AY.2009-10 was higher than the average GP ratio, that no addition was called for in that regard, that in the AY.010-11 there was a loss and the GP ratio had gone down into negative.He restricted the addition to Rs. 16.46 lakhs out of Rs. 2.77 crores for the AY.2010-11 and he deleted the addition for the earlier AY.In short, he gave a relief of Rs. 2.60 crore to the assessee for the AY.2010-11.For the AY.2009-10 he deleted the entire addition. 4.During the course of hearing before us,the Departmental Representative (DR) heavily relied upon the orders of the AO and stated that the FAA had not dealt with the issue of delivery challans,that there was no evidence of delivery of goods, that onus was on the assessee to prove the genuineness of the transanctions.He relied upon the case of NK Protins of the 466/M/16- Sarovar Homes Pvt. Ltd.

Hon’ble Supreme Court.The Authorised Representative stated that the assessee had furnished all the necessary details before the AO,that provisions of section 69C could not be applied to bogus purchase cases,that the AO had not doubted the genuineness of the sales,that without purchases there could not be any sales.He relied upon the cases of Karsan Nandu (77 taxmann.com.275),Geolife Organics(ITA/3699/Mum/ 2016,dtd.05.05.2017)and M/s.Steel Line(India)-(ITA/880/Mum/2016-dtd.29/ 08/ 2017). 5.We have heard the rival submission and perused the material before us.We find that the FAA had passed a thirty-seven page order wherein many a cases have been referred to. But, we are unable to find from the order as to which part of his order records submissions of the assessee and which of the paragraphs are his conclusion.In short,his order is a non speaking order.We do not want to direct the FAA as to how he should write his order.But,for deciding a case what we need is clear cut finding by the FAA as to why he arrives at a particular conclusion.Submission of the assessee and the order of the AO must find place in the order of the FAA,but,finally it should be clear as to why the appeal was allowed or dismissed. Secondly,how the case laws relied upon by the AO/ assessee has relevance to the facts of the case has to be brought out clearly.But,in both the cases we find that FAA has not dealt the issue in a systemic manner.For example no finding has been given about delivery challans or applicability of section 69C of the Act.As both the orders are not reasoned orders,so,in the interest of justice,we were restoring back them to the file of the FAA for fresh adjudication. He is directed to pass a speaking and reasoned order giving clear findings and after considering the cases relied upon by the AR and the DR before us.He would afford a reasonable opportunity of hearing to the assessee and the AO.Effective ground of appeal for both the AY.s.are decided in favour of the AO,in part.