INCOME TAX OFFICER, THANE vs. SACHIN LAXMAN JANGID, THANE

Accordingly, in view of the order passed by the coordinate bench of the Tribunal, notice under section 142(1) of the Act was issued to the assessee to substantiate the claim of purchases at Rs.2,48,49,832 from the afore-noted four parties. In response, the assessee uploaded its reply and furnished the audit report, work order, bank extracts, purchase account, and cash book. Upon perusal of the documents uploaded by the assessee, the AO noted that the assessee did not upload the simultaneous quantitative month-wise purchase and immediate consumption of the material in the construction activity depicting the opening stock plus purchase minus the use of material leaving behind the closing stock at the end of each month. Accordingly, vide order dated 30/09/2021 passed under section 143(3) read with section 254 of the Act, the AO held that the assessee has not submitted the requisite information required through the notices from time to time in support of its submission. The AO further held that despite the grant of sufficient opportunities, the assessee is not able to substantiate the purchases and their consumption in the completion of construction activity. The AO accordingly held that the assessee has failed to reconcile the quantity-wise details of purchases from the hawala parties vis-à-vis the exemption thereof and the assessee has also failed to show that these were actually consumed in the construction activity by the assessee. The AO further held that the assessee has not submitted the copy of challans, octroi receipts which would have supported the movement of goods from one place to another. Accordingly, the AO concluded that the purchases made by the assessee from the dealers, namely M/s Nikhil Enterprises, M/s Deep Enterprises, M/s Real Traders, and M/s Aryan Sales Corporation to the extent of Rs.2,48,49,832 are non-genuine, which was disallowed and added the total income of the assessee.

The learned CIT(A), vide impugned order, after taking into consideration the fact that the purchases from the aforesaid dealers remained payable as on 31/03/2011 and reflected as “sundry creditors” for the next assessment year, i.e. 2012-13 and the said sundry creditors amounting to Rs.2,43,81,036 remained outstanding as on 31/03/2012 were added to the returned income for the assessment year 2012-13 vide assessment order dated 30/03/2015 passed under section 143(3) read with section 147 of the Act, directed the AO to delete the addition to an extent of 2,43,81,036 as the same would otherwise result in making an addition of the same amount twice, once in the year under consideration and again in the subsequent assessment year, i.e. 2012-13. As regards the balance amount of Rs.4,68,796 in respect of purchases from the aforementioned dealers, the learned CIT(A) held that the addition of this amount cannot be sustained in view of the fact that the assessee submitted the details in response to the notice issued by the AO, which has been confirmed in the assessment order and the information called for in a specific format, devised by the AO, was not in line with the directions of the Tribunal. Therefore, after considering the information submitted by the assessee as noted in para-7.5 of the impugned order, the learned CIT(A) directed the AO to delete the balance addition of Rs.4,68,796. Thus, the learned CIT(A) directed the deletion of the entire addition of Rs.2,48,49,832. Being aggrieved, the Revenue is in appeal before us.

We have considered the submissions of both sides and perused the material available on record. The only grievance of the Revenue is against deletion of disallowance of Rs.4,68,796 made on account of alleged bogus purchases. It is evident from the record that initially on the basis of the information received from the Sales Tax Department, Maharashtra, the AO initiated the reassessment proceedings and made an addition of an amount of Rs.42,11,333. However, in further appeal, the learned CIT(A) taking into consideration the fact that the assessee in its books of accounts had disclosed purchases amounting to Rs.2,48,49,832 from the alleged hawala dealers made an enhancement and disallowed the entire amount of Rs.2,48,49,832 as bogus purchases. It is evident from the record that the coordinate bench of the Tribunal vide order dated 23/08/2019 granted another opportunity to the assessee to furnish quantitative details to show purchases and consumption of material in the construction activity and accordingly restored the issue to the file of the AO for de novo adjudication after the due opportunity of being heard to the assessee. The relevant findings of the coordinate bench, vide aforesaid decision, are reproduced as follows: –

From the perusal of the assessment order, it is also evident that the AO agreed to the fact that the assessee uploaded his reply on 04/09/2021 wherein the assessee submitted the audit report, work order, bank extracts, purchase account and cash book. We further find that in response to the show cause notice dated 17/09/2021, the assessee submitted that he has already made appropriate submissions (total 5 in no.) and given all the details called for. We find that the aforesaid details were in line with its submissionmade in the first round of proceedings before the Tribunal, wherein the assessee agreed to furnish the quantitative details to show purchases and consumption of material in construction activity. However, the AO did not agree with the submissions of the assessee and held that the assessee has not furnished the date-wise quantity details of purchase/sales on a month-to-month basis as per the format mentioned in the assessment order. In this regard, we agree with the findings of the learned CIT(A) that the format as suggested by the AO in the assessment order was not suitable for soliciting the required information from the assessee being a construction contractor and these formats at best could be used to get the information from a trader who will have the opening stock and closing stock of material purchased and finished goods. In the present case, there is no dispute regarding the deletion of addition to the tune of Rs.2,43,81,036 on the basis that the same has already been disallowed in the subsequent assessment year and the addition of the same amount in the year under consideration will tantamount to taxing the same amount twice, once in the impugned assessment year again in the assessment year, i.e. 2012-13. However, the Revenue is only aggrieved against the deletion of balance addition amounting to Rs.4,68,796.

Vide its written submission, the learned Departmental Representative (“learned DR”) submitted that the said deletion is due to factual misapprehension and this amount was not included as a liability in the assessment year 2012-13 under section 41(1) of the Act. Consequently, it is the submission of the learned DR that the deletion on the ground of preventing double taxation is untenable with respect to the deletion of the addition of Rs.4,68,796. In view of the facts and circumstances as noted above, it is clearly evident that the deletion of the addition of the balance amount of Rs.4,68,796 was not on account of the fact that the same will result in double taxation, however, the learned CIT(A) agreed with the submissions made by the assessee regarding the quantitative details to show purchases and consumption of material in the construction activity.

In the result, the appeal by the Revenue is dismissed.