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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Revenue by .. Shri K.B. Shukla, CIT, DR Assessee by .. Shri Anuj Kisnadwala, AR Date of hearing .. 26-10-2016 .. Date of pronouncement 26- 10- 2016 O R D E R
PER MAHAVIR SINGH, JM:
This appeal by the Revenue is arising out of the order of CIT (A)-44, Mumbai in appeal No. CIT (A)-44/JCIT-32(1)/ITA-52/2013-14 order dated 17-12-14. The Assessment was framed by JCIT - 25(1) Mumbai for the AY 2010-11 vide order dated 12-03-2013 under section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT (A) deleting the addition of unexplained expenditure being bogus purchase claimed by assessee under section 69 C of the Act amounting to Rs. 44, 15, 407/-.
Briefly stated facts are that the assessee is against in the business of Civil Contract. During the course of assessment proceedings the AO gathered information from Maharashtra Sales Tax Department that the assessee had made purchases from the parties who are engaged only in providing accommodation
C.O. No.173/Mum/2016 entries/ bills for bogus purchase. The Assessee admits this type of purchase from the following parties.
Sr. No. Name of the party Amount (Rs.) 1. M/s Raj Traders 4,04,562 2. M/s Hitech Impex 2,53,760 3. M/s Daksh Enterprises 2,52,720 4. M/s Blue Nile Enterprises 1,77,280 5. M/s Bhumi Sales Corporation 4,64,162 6. M/s Shraddha Trading Co. 13,61,639 7. M/s V.M. Udyog 22,80,473 Total Rs.51,94,596
According to AO, the assessee was unable to prove the purchase and as such, he added the entire purchase as unexplained under section 69 C of the Act amounting to Rs. 51,94,596/-. Aggrieved, assessee preferred appeal before CIT (A), who restricted the disallowances to the extent of 15 % of the bogus purchases being amount of profit by observing in Para 4 is as under:-
“I have gone the facts of the case, contention of the Assessing Officer and submissions of the appellant. The Assessing Officer has gone into the issue by sending 133 (6) notices and making field enquiries, but has not found any concrete evidence to doubt the geniuses of the payments being shown by the appellant through the bank account. The Assessing Officer 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 corrected 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 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 had a clinching proof but the primary responsibility which is ensured 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
C.O. No.173/Mum/2016 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 Assessing Officer has himself said that what is being doubted is not the quantity of purchases per se, 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. 5331 of 2012 wherein the Hon’ble Court have held that when the total sale is accepted by the Assessing Officer, then the entire purchases cannot be added to the income of the assessee. The Hon’ble High Court have held that when the total sale is accepted by the Assessing Officer, then the entire purchases cannot be added to the income of the assessee. The Hon’ble Court has, therefore, held that fair profit ratio would be needed to be added back to the income of the assessee. Therefore, 15% of the purchases i.e. 51,94,596/- which works out to of Rs. 7,79,189/- is upheld for lack of credible evidence being provided by the appellant to substantiate the purchases. The appellant gets relief of Rs. 44,15,407/-.” Accordingly, the CIT (A) restricted the addition of Rs. 7,79,189/- and deleted the balance disallowance of bogus purchase amounting to Rs. 44,15,407/. Aggrieved, now Revenue is in second appeal before Tribunal.
We have heard the rival contentions and gone through the facts and circumstances of the case. We find from the facts of the case that the assessee has carried out the work and this purchase are verified by the AO when the assessee produced the evidence in respect of material received at site along with invoice of the same and on most occasions material that are received on site are verified by site engineer except in certain occasions of emergencies when verification was done by a later date. We find that the Revenue has not disputed this verification and even material utilized in construction by the assessee and even the work in progress available with the assessee. There is no discrepancy about stock statement. In such circumstances, we are of the view that the CIT (A) has rightly applied the embedded profit element in the case of the assessee and restricted the disallowances to the extent of that profit i.e. 15 % of the bogus purchase. We find no infirmity in the order of the CIT (A) and the same is confirmed. This issue of revenues appeal is dismissed.
C.O. No.173/Mum/2016 6. Coming to the cross of objection of the assessee, the learned Counsel for the assessee fairly conceded that the same is supportive of the order of the AO and hence, can be treated as infructuous. In view of the above, the cross objection of the assessee is dismissed as infructuous. Both the appeal of the revenue and the cross objection of the assessee are dismissed.
In the result, the appeal of the Revenue as well as the cross objection of the assessee, both are dismissed. Order pronounced in the open court on 26-10-2016.
Sd/ Sd/ (RAJESH KUMAR) (MAHAVIR SINGH) ACCONTANT MEMBER JUDICIAL MEMBER Mumbai, Dated: 26-10-2016 Sudip Sarkar/Sr.PS Copy of the Order forwarded to: