Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “D” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)& Shri Pawan Singh (JM)
O R D E R Per B.R. Baskaran (AM) :-
These cross appeals are directed against the order dated 7.11.2014 passed by the learned CIT(A)-32, Mumbai and they relate to A.Y. 2011-12.
Issue urged by both the parties relates to addition of ` 3.12 crores made by the Assessing Officer as bogus purchases u/s. 69C of the Act.
2 M/s. Rameshkumar & Co.
Learned AR submitted that the assessee firm is carrying on the business of undertaking Government civil contract works. The return of income for the year under consideration was filed on 29.9.2011 declaring a total income of ` 3.00 crores and the same was processed u/s. 143(1) of the Act. Subsequently, the Assessing Officer received information from DIT(Inv) that the assessee has purchased from certain parties, who were declared to be hawala traders by Sales tax department of Maharashtra. As per the information of the sales tax department, these parties have provided only accommodation bills without actually supplying materials. Aggregate amount of purchases made from ten parties was stated at ` 3,12,34,214/-. The assessee submitted that it had purchased goods from the parties, who were duly registered under MVAT Act. The assessee further submitted that it has paid the suppliers through account payee cheques. The assessee also furnished bills, copy of bank statement, ledger account and also PAN of the suppliers. The assessee, however, could not furnish confirmation letters from the suppliers. Hence, the Assessing Officer took the view that the purchases made from the above referred ten parties are bogus in nature and accordingly disallowed the purchases aggregating to ` 3,12,34,214/- u/s. 69C of the Act.
In the appellate proceedings, the learned CIT(A) however restricted the addition to ` 12.5% of the aggregate amount of purchase, since the Assessing Officer has accepted the Gross contract receipts declared by the assessee. Aggrieved by the decision of the learned CIT(A), both the parties are in appeal before us.
Learned AR submitted that the Assessing Officer has made identical addition in A.Y. 2010-11 also, but the said addition was deleted by the coordinate Bench of the Tribunal vide its order dated 28.11.2014 passed in ITA No. 2959/Mum/2014. Learned AR submitted that the facts relating to the addition are identical in the current year also. Learned AR further submitted that the receipt and usage of material are entered in the material inward and outward register maintained at the work site. The works executed by the 3 M/s. Rameshkumar & Co.
assessee are examined by the BMC authorized personnel. He further submitted that the materials are being ordered by the project manager directly from the suppliers and the assessee has no role in that matter. Learned AR submitted that the assessee’s work has been found to be satisfactory by the BMC authorities and so far there was no complaint, dispute or litigation in any of the projects undertaken by the assessee. He further submitted that the assessee has declared gross profit at 17.18% and net profit of 10.19% during the year under consideration as against GP rate of 14.20 % and net profit rate of 9.75% declared in the immediately preceding year. He submitted that the profit rate declared in AY 2010-11 was found to be satisfactory by the Tribunal in the order passed for that year. He submitted that the profit rate has improved during the year under consideration and hence there is no reason to suspect the genuineness of the purchases made by the assessee merely on the reasoning that the name of suppliers find place in the list of hawala dealers published by the sales tax authorities.
On the contrary, learned Departmental Representative submitted that the assessee has failed to obtain confirmation letters from the suppliers nor did it produce the suppliers to prove the genuineness. Accordingly, he submitted that the Assessing Officer was justified in disallowing the entire purchase made from the above said tinted dealers and the learned CIT(A) was not justified in restricting the addition to 12.5% of the amount purchased.
We have heard the rival contentions and pursued the record. We noticed that the Assessing Officer has made identical addition in the earlier year and the same has been deleted by the coordinate bench of the Tribunal with the following observations:-
We have carefully perused the orders of the lower authorities and the relevant documentary evidences brought before us. We find that the AO has made the addition as some of the suppliers of the assessee were declared Hawala dealer by the Sales tax Department. This may be a good reason for making further investigation but the AO did not make any further investigation and merely completed the assessment on suspicion.
4 M/s. Rameshkumar & Co.
Once the assessee has brought on record the details of payments by account payee cheque, it was incumbent on the AO to have verified the payment details from the bank of the assessee and also from the bank of the suppliers to verify whether there was any immediate cash withdrawal from their account. No such exercise has been done. The Ld. CIT(A) has also confirmed the addition made by the AO by going on the suspicion and the belief that the suppliers of the assessee are Hawala traders. We also find that no effort has been made to verify the work done by the assessee from the Municipal Corporation of Greater Mumbai. We agree with the submissions of the Ld. Counsel that if there were no purchases, the assessee would not have been in a position to complete the civil work.
8.1. On civil contract receipts of Rs. 32.05 crores, the assessee has shown gross profit at 14.2% and net profit at 9.72%.
8.2. Even if for the sake of argument, the books of accounts are rejected, the profit has to be computed on the sales made by the assessee U/s. 44AD of the Act, the presumptive profit in case of civil contractors is 8% and in case of a partnership firm, a further deduction is allowed in respect of salary and interest paid to the partners. The ratio analysis of the profitability is also in favour of the assessee. In our considered opinion, the purchases are supported by proper invoices duly reflected in the books of account. The payments have been made by account payee cheque which are duly reflected in the bank statement of the assessee. There is no evidence to show that the assessee has received cash book from the suppliers. The additions have been made merely on the report of the Sales tax Department but at the same time it cannot be said that purchases are bogus. We, therefore, set aside the findings of the Ld. CIT(A) and direct the AO to delete the addition of Rs. 4,98,80,892/-.
8. During the year under consideration, we notice that the assessee’s performance has improved namely gross profit rate has shot to 17.18% as against 14.20% declared in the immediately preceding year. The assessee has also stated that the goods purchased have been entered into material inward register and corresponding utilization is also recorded. As observed by the coordinate bench of the Tribunal, the Assessing Officer has made impugned addition merely by placing reliance on the report given by the sales tax department without conducting any further investigation. Hence, consistent with the view taken by the coordinate Bench in assessee’s own case for A.Y. 2010-11, we are of the view that the addition made by the Assessing Officer
5 M/s. Rameshkumar & Co. should be deleted. Accordingly, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete the impugned addition.
In the result, appeal filed by the assessee is allowed and appeal of the Revenue is dismissed.
Order has been pronounced in the Court on 27.1.2017.