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Income Tax Appellate Tribunal, “G” BENCH, MUMBAI
Mafatlal Moolchand Shah Asst. Commissioner of Income Tax 202 C Vaibhav Jamli Galli C-11 Pratyakshkar Bhavan, Borivali (W) Mumbai-400092 BKC Bandra (E) Vs. Mumbai-400 051 PAN No. AOCPS6439P .. Appellant Respondent Assessee by .. None .. Shri Pradeep Kumar Singh, DR Revenue by Date of hearing .. 15-05-2017 .. Date of pronouncement 19-05-2017 O R D E R PER MAHAVIR SINGH, JM:
These two appeals by the assessee are arising out of the different orders of CIT(A)-44, Mumbai, in appeal No. CIT(A)-44/ACIT.32(3)/ItA-157 & 159/2014- 15 even dated 28-04-2015. The Assessments were framed by ACIT. 32(2) Mumbai for the A.Y. 2009-10, 2010-11 vide order dated 27-02-2015 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only common issue in these appeals of assessee, arising out of the order of CIT(A) directing the AO to restrict the addition made by AO being estimating profit percentage at the rate of 8 % on bogus purchases. For this assessee has raised identically worded grounds in both the years except the quantum. The facts and circumstances are exactly identical in both the years and hence, we will take the facts from AY 2009-10 and will decide the issue. The grounds raised in AY 2009-10 reads as under: -
“On the facts and in the circumstances of the case, the Learned Commissioner of Income Tax (Appeal) - 44, MUMBAI ('hereinafter referred to as 'the CIT(A)') has Mafatlal Moolchand Shah AYs:09-10,10-11) erred in upholding the addition made u/s. 69C to the extent of Rs. 29,47,412/- being estimated © 8% of the purchases of Rs. 3,69,56,252/- the alleged bogus purchases from hawala dealers as appearing on the website of Sales Tax department of Government of Maharashtra.
The appellant being aggrieved, prays that the estimated addition made on account of unexplained bogus purchases u/s. 69C to the extent of Rs. 29,47,412/- being unjustified, unwarranted, bad in law and illegal be deleted in toto.”
Briefly stated facts are that the AO based on information received from DGIT(Inv) Mumbai, who in turn received information from Sale Tax Department, Maharashtra Govt., who carried out detailed enquiries in respect of the parties from whom the assessee made purchases and recorded statements, depositions and affidavits etc. of main person of concerns who admitted that they are into providing bogus bills without delivery or sale of actual goods or services to their customers. It was admitted that they issued only bogus bills after charging small commissions. The AO recorded the details of parties in both the years and assessee has took bills worth Rs. 3,68,42,648 in AY 2009-10 and for an amount of Rs. 3,69,56,252/- for AY 2010-11. Before the AO, the assessee contested but finally he made alternative plea that addition to the extent of net profit embedded in such purchases can be made. This is recorded by the AO in his assessment order. The AO estimated the profit rate at 12.5% being possible profit by observing in Para 5.5 as under:-
“5.5 Considering the nature of business and voluminous of sales, I hold that the declared G.P percentage for the year under consideration is low. The assessee has arranged bills worth Rs. 3,68,42,648/- from the aforesaid eleven hawala parties as reported hereinabove to suppress its true profits. Having regard to the facts and circumstances of the case as well as Gujarat Page 2 of 6 Mafatlal Moolchand Shah AYs:09-10,10-11) High Court decision in the case of Simit P. Sheth 92013) [365 ITR 451] (Guj), I hereby estimate, I hereby estimate the G.P. percentage at 12.5% being the possible profit out of the purchases made through non-genuine parties known as tainted purchases and therefore, I hereby make an addition of Rs. 46,05,331/- [12.5% of Rs. 3,68,42,648) as unexplained expenditure u/s 69C.”
Aggrieved assessee preferred the appeal before CIT(A), who restricted the addition at 8% of the bogus purchases by observing as under:-
I have gone the findings of the A.O., the submissions of the Authorised Representative of the appellant and the various judicial decisions in this regard. The appellant is engaged in the business of Civil Contractors for Municipal Corporation and Government agency etc. The AO has gone into the issue of suspected bogus purchases by sending 133(6) notices and making field enquiries, but has not found any concrete evidence to doubt the genuineness of the payments being shown by the appellant through the bank account. The AO has also definitely not been able to question the availability of the inventory that has been subsequently used. To that extent, the examination of that aspect has not created any doubt in terms of the purchases. However, as far as the evidence submitted by the appellant is also concerned, the appellant has filed his own books, ledger accounts and its own bank statement to further his argument. The fact that the payments are being made through cheques is not something that is being doubted. In fact, that is the contentious issue, that these parties which are indicated by the Sales Tax Department through a procedure which appears to be technically correct on paper, are in fact engaged in false billing for a fee/commission. The onus of proving the entire transactions to be genuine is definitely on the tax payer, when he is making the claim of purchase and especially in light of the doubt that has Page 3 of 6 Mafatlal Moolchand Shah AYs:09-10,10-11) been raised by the enquiries conducted by the Sales Tax Department, the onus is even more on the tax payer to show that as far as he is concerned, he has discharged his tax related liabilities in an accurate manner. So therefore, while on one hand the AO may not have had a clinching proof but the primary responsibility which is ensued on the tax payer has also not been discharged in terms of establishing the genuineness of the transaction. Merely filing copies of his own ledger accounts and bank accounts does in no way establish that the parties actually existed, but then considering that the books of accounts have not been disputed, sales have not been disputed and neither cheques have been shown to be received back as cash by the appellant, I am of the considered view that in the context of the situation where the AO has himself said that what is being doubted is not the quantity of purchases perse which has entered into the books of the appellant, but that the purchases were billed through bogus parties, then the cause of justice would be served by looking at the gross profit margins being declared by the appellant. I am guided by the ratio of decision of the Hon'ble Gujarat High Court in the case of CIT Vs Simit P. Sheth pronounced on 16.1.2013 in tax appeal No.553 1 of 2012 wherein the Hon'ble Court have held that when the total sale is accepted by the AG, then the entire purchases cannot be added to the income of the assessee. The Hon'ble Court have, therefore, held that fair profit ratio would be needed to be added back to the income of the assessee. The Hon'ble Court have, therefore, held that fair profit ratio would be needed to be added back to- the income of the assessee. Therefore, S% of the purchases i.e. 8% of Rs. 3,68,42,648/- which works out to of Rs. 29,47,412/- is upheld for lack of credible evidence being provided by the appellant to substantiate the purchases. The disallowance is restricted to Rs. 29,47,412/-. The appellant therefore gets a relief of Rs. 16,57,919/-.”
Aggrieved, assessee came in second appeal before Tribunal. Page 4 of 6 Mafatlal Moolchand Shah AYs:09-10,10-11) 5. We have heard Ld. Sr. DR and gone through the facts and circumstances of the case. The facts of the case are that the assessee is in the business of contractor of BMC, sub-contractor and repair contractor etc. To carry out the contract work the assessee claimed to have made purchases through account payee cheques and claimed that material purchased has been utilized/ consumed and the items purchased have been paid through banking channel. It was explained that the construction material so purchased by the assessee has been utilized in the execution of civil contracts awarded by the Govt. agencies like MMRDA or BMC. The assessee claimed that the purchase expenses have been corroborated by various evidences and assessee had made purchases from various parties but in absence of proper bills, they could have taken bills from parties which were later on declared by the Sales Tax Department of Maharashtra Govt. as hawala parties / suspicious dealers. The assessee before CIT(A) as well as AO only requested for estimation of profit rate and CIT(A) accordingly estimated the same. We find no infirmity in the order of CIT(A) and hence the same is confirmed. As regards to AY 2010-11, the same are the fact and hence, the order of CIT(A) in that appeal also confirmed.
In the result, both the appeals of assessee are dismissed. Order pronounced in the open court on 19-5-2017.