VISHAL RAM KHAKAL,THANE vs. ASST CIT CIR 3, THANE

These are the appeals filed by the assessee against the order of CIT(A)-2, Thane dated 29/08/2016, in the matter of order passed u/s.143(3) r.w.s.147 of the IT Act.

Grievance of assessee in both the years pertains to upholding disallowance of alleged bogus purchases.

I have gone through the orders of the authorities below and found that on the basis of information received from Sales Tax Department that assessee had effected purchases from various parties who have been declared as suspicion. The AO reopened the assessment and added the entire amount of such purchases in assessee’s income.

I have gone through the orders of the authorities below and found that assessee is a Civil Contractor mainly undertaking work relating to shelter supply projects, road projects and civil infrastructure projects. In the A.Y. 2009-10, assessee’s purchases of Rs.3,67,173/- and in the A.Y. 2010-11 Rs. 13,65,410 were found to be from bogus suppliers. During the course of assessment, assessee has filed ledger copies and bills of all these suppliers. Payment was paid to these suppliers by account payee cheque. Material so purchased was extensively used by assessee in his civil work contracts. Since the assessee undertakes Government Civil activities, the materials received at site was inspected by Government agencies, who are stationed at site and then only used in the construction activities. It is only after using such material on the work contract activities, that the sales bills was to be made by the assessee. The sales so made has been accepted by the AO. Under these facts and circumstances, there is no justification for adding the entire amount of purchases in assessee’s income.

Keeping in view the facts and circumstances of the case vis-a-vis nature of assessee’s business, profit rate declared in earlier years and the judicial pronouncements of Tribunal in similar cases, I restrict the addition to the extent of 12.5%.