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Income Tax Appellate Tribunal, BENCH “C” MUMBAI
Before: SHRI D.T.GARASIA, JM & SHRI RAJESH KUMAR, AM
सुनवाई की तारीख /Date of Hearing : 4.09..2017 घोषणा की तारीख /Date of Pronouncement : 13.11.2017 आदेश / O R D E R PER RAJESH KUMAR, A. M: These two appeals by the revenue are directed against the common order of dated 30.1.2017 passed by the CIT(A)-11, which pertains to the assessment year 2009-10 and 2011-12. The assessee also filed cross- objections thereto.
2 and 258 9/ Mum /2017 Co No.2 12 and 2 13/ M um /2017 2. Since the issues agitated in both the appeals and cross-objections are almost identical in nature, therefore, these were clubbed together, heard together and are being decided by this common order, for the sake of convenience. (by revenue) and CO 212/Mum/2017(by assessee) 3. The only ground raised by the revenue is against the deletion of addition of Rs.1,61,38,686/- by the ld.CIT(A) as made by the AO on account of bogus purchases being non-genuine, whereas the assessee filed cross-objection against the upholding the reopening u/s 147 r.w.s.148 confirming the addition to the tune of Rs.34,22,360/- being 17.5% of the total bogus purchases as against the 100% made by the AO.
4. Facts in brief are that the assessee was engaged in diversified businesses such as octroi and toll collection, steel Industries, development & construction of commercial , housing projects and government civil contracts. A search and survey actions were carried out on 18.2.2010 on Konarka Group and is associate concerns. Consequently the case of the assessee was assigned to Thane CIT-II. The assessee filed e-return of income u/s 139(1) on 30.9.2009 declaring total income at NIL. The AO received information from the State Sales Tax department that the assessee has availed entries of bogus purchase from hawala dealers to the tune of Rs.1,95,62,046/-. In order to verify the genuineness of the purchases, the AO issued notice to the 3 and 258 9/ Mum /2017 Co No.2 12 and 2 13/ M um /2017 7 parties u/s 133(6) dated 14.7.2014 calling upon them to file bills and delivery challans, payment details in respect of the sales made to M/s Konark Infrastructure (SW/KDMC)(J/V) but the notice sent to this party returned unserved by the postal authority. Thereafter, the AO deputed Inspector to verify these parties but the Inspector reported that no such parties were in existence and there was no business activities carried out in the said premises. Accordingly, the AO issued show cause notice to the assessee to furnish details of purchases above Rs.50,000/- with bills, names of the parties and PAN including TIN and to submit the bills and vouchers, transport receipt, delivery chalans and stock register for the period from 1.4.2010 to 31.3.2011. Thereafter, the assessee filed submissions from time to time filing the details called for by the AO partly. The AO after considering the same came to the conclusion that the purchases as made by the assessee were bogus and mostly made in the second week of the year 2009 and even if the purchases were considered as having been made actually they will fall u/s 40A(3) of the Act for having paid in cash. Therefore, the AO added the entire purchases of Rs.1,95,62,046/- to the income of the assessee by framing assessment u/s 143(3) of the Act r.w.s.147 vide assessment order dated 23.3.2015 by assessing the income at Rs.1,95,62,050/-. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A), who partly allowed the appeal of the assessee by upholding the reopening of 4 and 258 9/ Mum /2017 Co No.2 12 and 2 13/ M um /2017 assessment u/s 147 of the Act and partly sustaining the addition to the extent of 17.5% of the total purchases after hearing various contentions and submissions of the assessee and considering various decisions of Hon’ble High Courts and Tribunals.
We have carefully considering the rival parties and perused the material placed before us including the impugned orders and case laws relied upon by the assessee. In the cross-objection, the assessee has challenged the reopening of the assessment u/s 147 of the Act. After examining the records, we find that the reopening has been done on the basis of information from the Sales Tax Department, GOM that the assessee has availed hawala entries for purchase of goods from the hawala operators to the tune of Rs.1,95,62,046/-. In our opinion, the said information was not available before the AO at the time of framing of the assessment and therefore was constituted valid reason for reopening the assessment u/s 148 of the Act. We are in agreement with the conclusion drawn by the ld.CIT(A) on the issue of reopening of the assessment and accordingly the cross objection raised against re-opening is dismissed. So far as the part confirmation of addition at the rate of 17.5% is concerned, we are of the opinion that the addition has to be made to the tune of savings which the assessee may have made by purchase of goods from the gray market by non-payment of VAT and other incidental levies. We also find that in the similar and identical facts of the 5 and 258 9/ Mum /2017 Co No.2 12 and 2 13/ M um /2017 cases, the coordinate benches have been taking a consistent view that some percentage addition ranging from 4% to 12.50% or a reasonable percentage of the bogus purchase should be applied towards savings and the leakages of revenue for the reason that the assessee might have purchased the material from grey market thereby saving VAT and other incidental taxes. In the instant case, we find that the assessee failed to prove the genuineness of purchases by producing the relevant documentary and circumstances evidences before the lower authorities as desired by them whereas the consumption of the materials is not disputed. Therefore, we are of the considered view that a reasonable addition should be made to cover the various types of savings which the assessee might have made by purchasing the goods from the gray market. Accordingly, we feel reasonable if the addition is sustained to the tune of 5% of the amount of bogus purchases. Accordingly, the CO of the assessee is partly allowed and appeal of the revenue is dismissed. As the addition made by the ld. CIT(A) at the rate of 17.5% of the bogus purchase is on higher side, it should be made on reasonable account which brings the tax and savings which the assessee might have made. Resultantly, the appeal of the revenue stands dismissed. ITA No.2589/Mum/2017 (by revenue) and CO 213/Mum/2017(by assessee) 6. Since we have decided the issue in favaour of the assessee and against (by revenue) and CO the revenue in 6 I.T.A. No.2588 and 258 9/ Mum /2017 Co No.2 12 and 2 13/ M um /2017 212/Mum/2017(by assessee) by allowing the relief to the extent of 12.5% and dismissed the appeal of the revenue. The decision taken therein would mutatis mutandis apply to these suits as well. Accordingly, appeal of the revenue is dismissed and that of cross-objection filed by the assessee stands partly allowed.