DCIT 25(1), MUMBAI vs. OM GAGANGIRI DEVELOPMENT CORPORATION, MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the order dated 02/12/2013 of the CIT (A) – 35, Mumbai, the Assessing Officer (AO) has filed the present appeal raising various grounds. Assessee – firm is engaged in the business of builders and developers. Return of income, declaring total income at Rs. 1.83 crores was filed on 03/09/2010. The AO completed the assessment under section 143 (3) of the Act on 30/01/2013 determining the income of the assessee at Rs. 2.20 crores.

2.Effective ground of appeal is about deleting the addition made by the AO on the basis of information gathered by him from the official website of Sales Tax Department Government of Maharashtra. During the course of assessment proceedings, the AO directed the assessee to furnish the list of the persons from whom purchases had been made. Out of the list nine parties, from whom it had made purchases, were appearing in the list of suspicious dealers who indulged in issuing only bills without any goods or materials for a commission as per the website of the Maharashtra Government . The assessee was asked to show cause as to why the alleged purchases aggregating Rs.37.29 lakhs should not be treated as unexplained expenditure. After considering the submission of the assessee, the AO made an addition of Rs.37.29 lakhs on account of unexplained expenditure, invoking the provisions of section 69C of the Act.

3.During the course of hearing before us,it was brought over notice that while deciding the appeal for the AY.2011-12, in assessee own case the Tribunal had dealt with the identical

1322/M/14 Om Gagangiri Development Corpn. issue (ITA/5687/Mum/2014, dated 30/06/ 2016). We find that the Tribunal has dealt the issue as under: “2.Brief facts of the case are that the assessee is engaged in business of builders and developers filed return of income for relevant AY on 16.09.2011. The return of income was selected for scrutiny. While framing assessment order, the Assessing Officer (AO) asked the assessee to furnish the list of the persons from whom the assessee purchased the material. The assessee submitted the list of persons from whom the purchases were made on receipt of the list of such person, the AO asked the assessee that out of the list submitted by assessee, the name of 9 persons are appearing in the list suspicious dealers who indulge in issuing only bills without supplying any goods or materials for a commission as per the official website of the Sales Tax Department, Government of Maharashtra. The assessee was show caused as to why the alleged purchases from 9 parties aggregating to Rs. 1,41,57,197/- should not be treated as unexplained expenditure. The assessee submitted its reply and contended that the assessee has actually purchased building material from the supplier and the assessee has received the material at site which is visible on the delivery challans. Against the supply, the assessee has made the payment which is duly reflected from ledger account. The contention of assessee was not accepted by AO and the AO made the addition of aggregate amount of the purchase of total Rs. 1,41,57,197/- treating as unexplained expenditure u/s 69C of the Act, in the assessment order dated 17.02.2014. Aggrieved by the order of AO, the assessee filed the present appeal before the CIT(A), wherein the entire addition was deleted by CIT(A) in its order dated 30.06.2014, against which the present appeal is filed before us. 3.We have heard the Ld. Departmental Representative (DR) for Revenue and Ld. Authorized Representative (AR) for assessee. Ld DR for Revenue argued that no confirmation was filed by the assessee. The assessee has obtained accommodation bills only no purchases was made and further relied upon the order of AO. Ld. AR of assessee argued that AO has not rejected the books of account of the assessee. The Revenue has not disputed use of the building material. The assessee further relied upon the decision of Hon’ble jurisdictional High Court in CIT vs. Nikunj Eximp Enterprises (P) Ltd. [2015] 372 ITR 619 (Bom) and the decision of Co-ordinate Bench in in DCIT vs. Rajeev G. Kalathil (which is authored by ld. AM). 4.We have considered the rival contention of the parties and perused the material available on record. The assessing officer during the assessment proceeding asked the assessee to furnish the list of the persons from whom purchases (building material) were made. The assessee submitted their list and details of the parties from whom assessee made the purchases. The AO further noticed that out of those parties, the names of 9 parties were appearing in the list of suspicious dealers who indulged in issuing only bills without supply of goods or material for commission, in the website of Sale Tax Department, Government of Maharashtra. In reply to the show cause notice, the assessee contended that he has actually purchased various building materials from the supplier. The delivery challans contained the signature along with seal at the time of delivery of goods. The assessee made the payments against the supplies to the parties which are duly reflected in their respective ledger accounts. The assessee further contended that for assessment year 2010-11. The similar additions were made in the scrutiny assessment proceeding under section 143(3). The assessee preferred appeal before Commissioner of Income Tax Appeals, wherein the additions were deleted, copy of the order of Commissioner of Income Tax Appeals was also filed. The contention of assessee was not accepted by AO, and AO made the addition of aggregate of the purchases of Rs. 1,41,57,197/- treating the same as unexplained expenditure under section 69 C of the Act. Before First Appellate Authority(FAA), the assessee repeated the contention as submitted before the AO and further relied upon the decision of jurisdictional High Court in case of Nikunj Exim Enterprises Private Limited 372 ITR 619 (Bombay). After considering the contention of assessee, Ld CIT appeals comes to the conclusion that AO made the addition on the basis that the 9 parties

1322/M/14 Om Gagangiri Development Corpn. appear in the list suspicious dealers, in Sale Tax Department of Govt. of Maharashtra. The AO issued notice under section 133 (6) of the act, to these 9 parties which were return unanswered. The assessee during the course of assessment proceeding submitted purchase invoices with signature of the recipient along with copy of delivery challan and copies of the bank statement from weird the payments were made to these 9 parties along with delivery challan with the signature of site supervisor. The Ld. CIT further concluded that in the case of assessee, the project was supervised by a Project Management Consultant (PMC) viz. Yash Consultants and the signature of Yash Consultant’s supervisor are also available on the purchase bills. The percentage of the sales per projects shown by the assessee is 24.33%, which cannot be taken to be to low profit ratio. The AO have not found and any reason to question the various evidence produced by the assessee before him. The issue that notices under section 133 (6) return unserved being enough to disbelieve the accounts and other evidence produced by the assessee, has already been decided by jurisdictional High Court in case of Nikunj Exim Enterprise Private Limited(supra), and accepted the arguments advanced before her and allowed the appeal of the assessee. The Co-ordinate Bench of this tribunal in in DCIT versus Rajeev G. Kalathil (supra) held as under: “5.1 Now the issue before us is whether the aforesaid case of the assesssee is covered in favour of the assessee by the various decisions cited by the ld. Counsel. In the case of ITA No.6727/Mum/2012 (AY-2009-10) dated 20.08.2014 we find that the similar addition was made on the basis of information available on website of Sales Tax Department, Government of Maharashtra, which was deleted by the Tribunal. The relevant para 2.4 is extracted as below. 2.4. "We have heard the rival submissions and perused the material before us. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. We find that no such exercise was done. Transportation of good to the site is one of the deciding factor to be considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries. www.taxguru.in ITA/6727/Mum/2012/RGK 4 (supra) is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash trail. Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there is no sufficient evidence on file to endorse the view taken by the AO. So, confirming the order of the FAA, we decide ground no.1 against the AO." Further the coordinate bench in case of Pratap U. Purohit, the Co-ordinate Bench of ITAT, Mumbai, holding as under: “13. In summary, we are of the opinion, considering the orders of the Tribunal in many cases of additions involving the Sales Tax Department, the disclosure of black-listed suppliers and when the Assessing Officer failed to discharge the onus as discussed above, the additions made u/s 69C amounting to Rs. 12,01,91,407/- out of total addition of Rs. 13.03 Crs is required to be deleted. CIT(A) is directed to examine this issue and pass a speaking order on the issues relating to the aspects of GP and the other independent addition of Rs. 1,00,86,929/- after gathering relevant facts from the survey statements, if any. CIT (A) shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, grounds raised by the Revenue are partly allowed for statistical purposes.”

5.Now, on coming to the facts of the present case, we find that AO had made the addition as 9 of the parties, who were declared as a Hawala dealer by the Sales Tax Department of Government of Maharashtra. The AO made the addition of aggregate value of the purchases from those impugned supplier instead of making any investigation, if any such payment were