Income Tax Appellate Tribunal - Mumbai
Acit 32(2), Mumbai vs Mangalsingh M Rathod, Mumbai on 14 June, 2017
ITA NO. 4022/Mum/2015 Mangalsingh M. Rathod Assessment Year 2007-08 आयकर अपीलीय अिधकरण "एच" ायपीठ मुंबई म ।
IN THE INCOME TAX APPELLATE TRIBUNAL "H" BENCH, MUMBAI ी सं जय गग , ाियक सद एवं ी मनोज कुमार अ वाल, ले खा सद केसम BEFORE SHRI SANJAY GARG, JM AND SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./I.T.A. No.4022/Mum/2015 (िनधा रण वष / Assessment Year: 2007-08) Assistant Commissioner of Mangalsingh M.Rathod Income Tax 32(2) B-406, Mayur CHS, Pratyakshkar Bhavan Sodawala X Lane बनाम/ Room No. 202, 2nd Floor Borivali BKC Vs. Mumbai 400 092 Bandra(E) Mumbai-400 051 थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AAIPR-6967-L (अ पीलाथ# /Appellant) : ($%थ# / Respondent) अ पीलाथ# की ओर से / Appellant by : M.C.Omi Ningshen,Ld.DR $%थ# की ओर से/Respondent by : Ratan Kumar Samal, Ld.AR सुनवाई की तारीख / : 12/06/2017 Date of Hearing घोषणा की तारीख / : 14 /06/2017 Date of Pronouncement 2 ITA NO. 4022/Mum/2015 Mangalsingh M. Rathod Assessment Year 2007-08 आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member)
1. The captioned appeal by revenue for Assessment Year [AY] 2007-08 assails the order of Ld. Commissioner of Income Tax (Appeals)-44 [CIT(A)], Mumbai dated 10/03/2015 primarily on three grounds viz. addition u/s 68, addition u/s 69C for bogus purchases and admissibility of expenditure u/s 37(1). This is second round of appeal. In the first round of appeal, the assessee as well as revenue aggrieved by the appellate order, contested the quantum additions before Tribunal vide ITA Nos. 3718/M/2010, 5109/M/2010 & CO.104/M/2011 order dated 16/12/2011 where the assessment was set aside and restored to file of AO for fresh adjudication. With this background, we proceed further on the merits of the appeal by culling out relevant facts during second round of appeal.
2. Briefly stated, the assessee, being resident individual assessee engaged as civil contractor under proprietorship concern namely Mundara Enterprises, was assessee u/s 143 read with Section 254 on 26/03/2013 at Rs.1,59,63,261/- after certain additions/disallowances as against returned income of Rs.72,18,510/- filed by the assessee on 31/10/2007.
3. During assessment proceedings, it was noted that the assessee received loans from seven agriculturists totaling Rs.11.55 Lacs. Since no reply was received in response to notice u/s 133(6) from the said party, the assessee was asked to produce the parties for confirmation of the loan 3 ITA NO. 4022/Mum/2015 Mangalsingh M. Rathod Assessment Year 2007-08 transactions. The assessee failed to do so but submitted copies of affidavits and land records of the said parties to prove the genuineness of the transaction. Not convinced, Ld. AO treated the same as unexplained cash credit u/s 68. The second addition is against bogus purchases of Rs.50,74,962/- purported to be made by the assessee from an entity namely 'Alok Impex' to whom notices sent u/s 133(6) were returned back un-served. The assessee could not produce the said party and also the requisite stock information, copy of invoices, delivery challans, bank statements etc. which led the AO to treat the said purchases as bogus and therefore added u/s 69C. The third addition was related with payment of Rs.25,14,789/- made to a sub-contractor namely Sunil Gupta since Ld. AO found discrepancies in the documents submitted by the assessee.
4. Aggrieved, the assessee contested the same with partial success vide impugned order dated 10/03/2015 where Ld. CIT(A) after appreciating the loan confirmations, ledger extracts, and land records confirmed addition of Rs.2.30 Lacs with respect to two parties and deleted the balance addition of Rs.9.25 Lacs with respect to five parties. The addition with respect to bogus purchases was deleted in total by relying upon the judgment rendered by Jurisdictional High Court in Nikunj Eximp Pvt. Ltd. [2013 216 Taxman 171]. The addition on account of sub-contract payment was also deleted by noticing that work done by the sub-contractor was not in dispute and the said payment was duly reflected by the sub-contractor in his return of income.
4ITA NO. 4022/Mum/2015 Mangalsingh M. Rathod Assessment Year 2007-08
5. Aggrieved, the revenue is in appeal before us. The Ld. Departmental Representative drew our attention to the fact that the assessee could not prove identity, genuineness and creditworthiness of the lender and therefore, rightly been saddled with disallowance u/s 68. Similarly, the assessee could not substantiate the delivery of material in any manner and therefore, relief provided to assessee by Ld. CIT(A) on account of purchases was not justified. Further, discrepancies were noticed in the agreement made by the assessee with the sub-contractor which reveals that the booking of impugned expenditure was simply an afterthought to reduce the taxable income of the assessee.
6. Per contra, Ld. Counsel for Assessee [AR] drew our attention to the documents placed in the paper book and placed reliance on the findings of Ld. CIT(A).
7. We have heard rival contentions and perused relevant material on record. So far addition u/s 68 is concerned, we find that the assessee produced confirmation of loans by adducing evidences in the form of affidavits, land records, Bill of Exchange etc. which were duly examined in detail by the Ld. CIT(A) who after due application of mind confirmed addition of Rs.2.30 Lacs with respect to two parties and deleted the balance addition. Upon perusal of the documents, we agree with the stand of Ld. CIT(A) and do not find any reason to interfere with the same. Similarly, regarding sub-contractual payment of Rs.25,14,789/- made to Sunil Gupta, we find that the addition has been sustained only on the basis 5 ITA NO. 4022/Mum/2015 Mangalsingh M. Rathod Assessment Year 2007-08 of discrepancies noticed by Ld. AO in the agreement. However, the assessee has made the said payment after deduction of applicable TDS and this income has duly been reflected by the payee in his return of income. The copy of the work order and invoice copy has been placed on record and the revenue could not controvert the factum of rendering of actual services. Therefore, finding the reason of Ld. CIT(A) fair and reasonable, we confirm the same. Accordingly, revenue's grounds of appeal with respect to these two additions are dismissed.
8. However, with respect to addition on account of bogus purchases, we find strength in the argument of the revenue that the assessee could not prove delivery of material and could not produce any confirmation, stock register etc. to substantiate the purchases made from 'Alok Impex'. The complete onus to substantiate the purchases squarely lied on the assessee, which it failed to discharge. Conversely, it is also a fact that the assessee was a civil contractor which was material intensive work as noted by the Ld. CIT(A) and therefore, could not undertake the said work without purchase of material. Therefore, finding substance in revenue's ground of appeal, we confirm disallowance to the extent of 10% of impugned purchases to account for the undue profits / VAT element embedded in those transactions. Accordingly, addition amounting to Rs.5,07,496/- is confirmed which results into revenue's ground of appeal being partly allowed.
9. In nutshell, the revenue's appeal stands partly allowed.
6ITA NO. 4022/Mum/2015 Mangalsingh M. Rathod Assessment Year 2007-08 Order pronounced in the open court on 14th June, 2017.
Sd/- Sd/-
(Sanjay Garg) (Manoj Kumar Aggarwal)
ाियक सद / Judicial Member लेखा सद / Accountant Member
मुंबई Mumbai; िदनांक Dated : 14 .06.2017
Sr.PS:- Thirumalesh
आदे श की ितिलिप अ ेिषत/Copy of the Order forwarded to :
1. अपीलाथ# / The Appellant
2. $%थ# / The Respondent
3. आयकर आयु-(अपील) / The CIT(A)
4. आयकर आयु- / CIT - concerned
5. िवभागीय $ितिनिध, आयकर अपीलीय अिधकरण, मुंबई / DR, ITAT, Mumbai
6. गाड फाईल / Guard File आदे शानुसार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपीलीय अिधकरण, मुंबई / ITAT, Mumbai