MAFATSINGH MANSINGH PARMAR,THANE vs. ACIT CIR 1, KALYAN

We heard the parties and perused the record. The assessee is a civil contractor and transporter. Consequent to the information received from the 2 Mafatsingh Mansingh Parmar sales tax department that certain parties are indulging in providing accommodation bills without actually supplying the materials and upon noticing that the assessee has purchased materials from some of the suspicious dealers during the two years under consideration, the Assessing Officer reopened the assessments of both the years under consideration. It was noticed that the assessee has made purchases aggregating to ` 66.80 lakhs and ` 88.76 lakhs during the years relevant to A.Ys. 2009-10 and 2010-11 respectively. The Assessing Officer treated the above said purchases as bogus in nature and accordingly disallowed the same fully.

Before the learned CIT(A) the assessee furnished various details in order to prove the genuineness of purchases. Hence the learned CIT(A) called for the remand report from the Assessing Officer, wherein the AO stood by his addition. The learned CIT(A) examined the facts of the case, particularly the gross profit ratio and net profit ratio declared by the assessee over the years. He noticed that the assessee has declared gross profit ratio of 9.08% and 10.84% in A.Y. 2009-10 & 2010-11 respectively. However, in A.Y. 2011-12, the assessee has declared gross profit ratio of 20.98%. Accordingly, the learned CIT(A) took the view that gross profit ratio should be adopted at 20.98% in the two years under consideration also. Accordingly, he rejected the books of account of both the years and computed suppressed profit by adopting gross profit ratio of 20.98% on the value of alleged bogus purchases. The same worked out to ` 10.53 lakhs and ` 32.80 lakhs in A.Y. 2009-10 & 2010-11 respectively. The learned CIT(A) also applied another criteria, viz., 25% of the Hawala purchases and noticed that suppressed profit worked out for A.Y. 2009-10 was less than the amount computed at 25% of the value of hawala purchases. Accordingly, for A.Y. 2009-10 the learned CIT(A) confirmed the disallowance to the extent of 25% of the value of hawala purchases and in A.Y. 2009-10 the learned CIT(A) confirmed the disallowance to the extent of suppressed profit worked out by him earlier. Both the parties are aggrieved by the order passed by the learned CIT(A).

We noticed that the learned CIT(A) has considered various case laws and also the facts prevailing in the instant case. After comparing gross profit ratio declared by the assessee and also gross receipts of the assessee, the learned CIT(A) took the view that the entire purchases could not be disallowed, more particularly on the reasoning that the work executed by the assessee was subject to inspection and assessee could not have also executed work without actually purchasing materials. The case of the Ld CIT(A) was that the assessee could have sourced the materials from some other sources. Considering the facts and circumstances of the case, we are of the view that the reasoning given by the learned CIT(A) to estimate the disallowance cannot be found fault with. However, there is dichotomy in the method adopted by the learned CIT(A) in confirming the additions. As stated earlier the learned CIT(A) has sustained the addition to the extent of 25% the value of hawala purchases in A.Y. 2009-10 but computed addition in A.Y. 2010-11 on the basis of alleged suppressed profit. In our view, the learned CIT(A) should have adopted identical criteria for computing disallowance, since the facts underlying the issue are identical in nature. Accordingly while sustaining addition confirmed by the learned CIT(A) in A.Y. 2009-10, we are of the view that, in order to maintain consistency, the disallowance out of impugned hawala purchases made in AY 2010-11 should also be sustained @ 25% of the value of purchases in that year also. Accordingly, we modify the order passed by the learned CIT(A) in A.Y. 2010-11 and direct the Assessing Officer to sustain the disallowance @ 25% of the value of purchases made in A.Y. 2010-11. The order passed by Ld CIT(A) for AY 2009-10 is sustained.

In the result, both the appeals filed by the Revenue and appeal filed by the assessee for A.Y. 2009-10 are dismissed and appeal filed by the assessee for A.Y. 2010-11 is partly allowed.