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IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH “E”, MUMBAI BEFORE SHRI R. C. SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER (Assessment Year- 2011-12) Assistant Commissioner of M/s Sahakar Enterprises , 201, Ashirwad, 10th Road , Income-tax -32(3) Mumbai, Room No.,108, 1st Floor, Building Daulat Nagar, Borivali (E), Vs. No.C-11, Pratyaskshkar Bhavan, Mumbai Bandra Kurla Complex , PAN:ABKFS1799M Bandra(E) Mumbai-400051 (Appellant) (Respondent) Assessee represented by – Anuj Kishandwala-AR Revenue Represented by-- Sh. V. Justine –DR Date of hearing: 18.10.2017 Date of Order: 18.10.2017 Order Under Section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by revenue under section 253 of income tax act is directed against the order of Commissioner (Appeals) - 44, Mumbai dated 15.05.2015 for assessment year 2011-12. The revenue has raised following grounds of appeal; (i) On the facts and in the circumstances of the case and in law, the ld Commissioner (Appeals) erred in restricting the addition of unexplained expenditure to Rs. 25,91,829/- @ 12.5% of Rs.2,15,98,572/- under section 69 of the Income tax Act on account of bogus purchases as against the addition of Rs.2,15,98,572/- made by the AO without appreciating that the assessee has not produced any cogent evidence to substantiate the fact that it had taken actual delivery of goods purchased from these parties and that the notices under section 133(6) issued to the parties from whom alleged bills 1 were received were returned undelivered by the postal authorities with the remark ‘not available at the address ’and the assessee has also failed to produce the parties before the AO. (ii) On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in deleting the disallowance made by AO overlooking the statement given by the parties on explicit finding on the investigation carried out by the Sales tax Department and corroborated by the enquiries of the AO. (iii) On the facts and in the circumstances of the case and in law the learned Commissioner (Appeal) has erred in deleting the addition of Rs.12,49,701/- made on account of difference in the provision of TDR from Premleela Investment. (iv) The appellant prays that the order of ld Commissioner (Appeals) on the above grounds be set aside and that of the AO be restored.
Brief facts of the case are that assessee company is engaged in the business of Builders and Developers, filed its return of income for relevant assessment year declaring total income at Rs. 38,48,680/-. The assessment was completed under section 143(3) on 28 March 2014. The assessing officer while passing assessment order made the additions of Rs.2,15,98,572/- on account of bogus purchases and Rs. 12,49,701/- on account of difference in the provisions of Transfer of Development Right (TDR) from Premleela Investment. On appeal before Commissioner (Appeals) the additions on account of bogus purchases under section 69 was restricted to 12% of the impugned purchases and the addition on account of difference in TDR of Rs. 12,49,701/- was deleted. Thus, being aggrieved by the order of Commissioner (Appeals) the revenue has filed present appeal before us.
We have heard the ld. DR for the revenue and the ld AR of the assessee and perused the material available on record. Ground number 1 relates to restricting the addition at the rate of 12% of the alleged bogus purchases.
The learned AR for the revenue argued that during the assessment proceeding the assessing officer noticed that the assessee has shown purchases from 10 of parties, which were providing accommodation entries without sales of material and delivery of goods. The names of all those parties are listed in the list of hawala dealers. The list of Hawala dealers was provided by the Sale tax Department of government of Maharashtra. The Investigation wing of the Income –tax Department also investigated about the hawala dealers, which were engaged in providing accommodation entries without delivery of goods. During the assessment the assessee was asked to produce the documentary evidences like lorry receipt, mode of transport and payment of Octorai for movement of stock to prove the genuineness of the purchases the assessee failed to provide such evidences. Further, the assessee failed to produce the stock register about the consumption of material at different sites. The assessee failed to produce the parties for verification and cross-examination to verify the facts. The contention of the assessee that the payments were made through account payee cheque is not subsistent to substantiate the genuinity of purchases. The learned Commissioner (Appeals) wrongly restricted the addition at the rate of 12% without giving cogent reasons. On the other hand the learned AR for assessee argued that during the assessment proceedings the assessee filed the reply of show cause notice and filed the copy of bills, vouchers, accounts of parties, delivery challans, bank statement reflecting the payments made to the dealers. The assessing officer has not made any independent enquiry. The assessing officer relied upon the statement of third party without supply of such a statement to the assessee. The assessing officer has not issued any notice under section 133(6) or summon under section 131 of the Act. The material purchased by assessee have been utilised for the construction were carried out by the assessee at various site. The construction work could not be raised unless material have been utilised. The assessee has provided all details consisting TIN No., PAN No. and party wise all details. The assessing officer has not rejected the statement account of the assessee not disputed about the consumption of material in various project of the assessee.
We have considered the rival submission of the parties and have gone through the orders of authorities below. During the assessment proceeding the assessing officer noticed that in the Profit & Loss account the assessee debited an amount of Rs. 5,89,49,666/- on account of purchases. The assessee filed party wise details of the purchases along with VAT numbers, PAN numbers and the details of the purchases. The assessing officer noticed that the certain purchases shown by the assessee are from the dealers, the names of which are appearing in the list of Hawala dealers, provided by the Sale tax Department. The assessing officer in paragraph 5 of its order recorded the names of such dealers and the amounts of purchases shown by assessee. The assessing officer noted that assessee has made a purchase of Rs.2,15,98,572/- from such parties. The assessee was asked to substantiate the purchases from such parties. The assessee vide its reply dated 28th Feb 2014 contended that the purchases from the said parties are genuine purchases. The assessee filed copy of bills, delivery challans along with the statement of account and the ledger account of the parties showing the payment. The assessee specifically demanded the copy of statement of Hawala dealers which were allegedly recorded by the Sale tax Department. The contention of the assessee was not accepted by the assessing officer holding that the assessee failed to produce the documentary evidence about transport, movement of stock and delivery of goods. The assessee also failed to produce the stock register to show that the stock has been received and consumed at the different site. The assessing officer disallowed the aggregate amount of purchases from all 10 parties of Rs. 2,15,98,572/-. During first appeal the assessee urged the similar contention before Commissioner (Appeals). The ld. Commissioner (Appeals) observed that the assessing officer has not been able to question the availability of inventory and the consumption of material to the extent of purchases. The assessee filed its books of account, purchase bills, challans, ledger accounts and the bank statement to prove the genuinity of purchases. The assessing officer has not doubted the payments made through banking channels. The onus to prove the that the entire transaction are genuine is primarily on the assessee, when they are making the claim of purchase and especially in the light of the doubt that has been raised by the enquiries conducted by sales tax Department. The assessee has primarily discharge his onus. The assessing officer has not disputed the books of account of the assessee and the sale. The AO has not brought the evidence that amount paid through cheques have been received back in cash by the assessee. The learned Commissioner (Appeals) on the basis of her observation and relying on the decision of Gujarat High Court in case of CIT Vs Smith P Seth (ITA No. 5531 of 2013 dated 16.01.2013) restricted the addition @ 12% of the alleged bogus purchases. The addition was restricted on the basis of profit ratio of the impugned purchased (Rs.2159 8572/-). We have noticed that ld. Commissioner (Appeals) has restricted the addition on the basis of profit element embedded in the bogus purchases. We are of the considered opinion that under Income Tax Act only real income can be taxed by the Revenue. We may further conclude that even if the transaction is not verifiable, the only taxable is the taxable income component and not the entire transaction. And after considering the facts of the case and the rival contentions of the parties we are of the opinion that in order to fulfil the gap of revenue leakage the disallowance of reasonable percentage of such purchases would meet the end of justice. The Hon’ble Bombay High Court in CIT Vs Hariram Bhambhani in of 2013 decided on 04.2.2015 held that revenue is not entitled to bring the entire sales consideration to tax, but only the profit attributable on the total unrecorded sales consideration alone can be subject to income tax. In the result this ground of appeal
raised by revenue is dismissed.
5. Ground No,2 relates to deleting the addition on account of difference in TDR for Rs.12,49,701/-. The ld DR for the revenue supported the order of assessing officer and argued that ld CIT(A) granted relief to the assessee without appreciating the fact. The assessee has not provided the details of purchase of TDR during the assessment proceedings. The ld DR prayed that this ground of appeal may be restored to the file of assessing officer.
On the other hand the ld AR for the assessee supported the order of ld CIT(A). The ld AR for the assessee submits that all the details along with the evidences was furnished to the assessing officer and explained the facts before assessing officer. The ld CIT(A) granted the relief to the assessee after appreciating the facts explained before her. It was submitted that by virtue of Slum Rehabilitation Scheme Shri Ramesh a partner of M/s Sumer Corporation was having Development Right Certificate (DRC) for 13700 sq meter. M/s Sumer Corporation agreed to sell TDR of 1460 Sq Meter to M/s Sunil Maitry Realty vide agreement dated 15/05/2010. M/s Sunil Maitry Realty vide agreement dated 18.05.2010 sold the said TDR to M/s Shree Bhoomi Realtor. Thereafter, M/s Shree Bhoomi Realtor vide agreement dated 02.06.2010 sold TDR admeasuring 860 to M/s Premleeela Investments. During the year the assessee purchased the area of TDR of 860 from M/s Premleeela Investments on a consideration of Rs.1,99,02,636/-. Out of total consideration the assessee paid Rs.1,38,00,000/- and rest of Rs. 61,02,636/ - was payable. All the facts were verified by the ld Commissioner (Appeals) before granting the relief to the assessee.
We have considered the rival submission of the parties and have gone through the orders of authorities below. The assessing officer made the disallowance on account of difference on purchases of TDR from Premleela Investments holding that no tangible explanation was given by the assessee. The learned Commissioner (Appeals) while considering the submission on this ground of appeal
observed that the assessee purchased TDR from Premleela Investment, who, in turn, made purchases from Shree Bhumi Realtors. The original owner of TDR was one Shri Ramesh Shah Partner of M/s Sumer Corporation who had obtained DRC from Bombay Municipal Corporation (BMC). The assessee filed copy of agreements, ledger accounts of the assessee in the books of Premleela Investment and the confirmation of the opening balance with Premleela Investments to substantiate their contention. The actual transaction for purchase of TDR was examined by the learned Commissioner (Appeals) and also examined the value of transaction entered by the assessee as well as the value of agreement between seller Premleela Investments and come to the conclusion that the value of agreement is Rs.1,99,02,636/- and deleted the addition. We have seen that the learned Commissioner (Appeals) verified the facts and the consideration paid by the assessee for purchase of TDR from Premleela Investments. The learned DR has not been able to bring any incriminating fact or evidence to discard the finding of learned Commissioner (Appeals). Thus, we do not find any merit in the grounds of appeal raised by the revenue. In the result this ground of appeal raised by revenue is dismissed.
7. In the result the appeal of the revenue is dismissed.