Income Tax Appellate Tribunal - Mumbai
Satellite Developers P. Ltd, Mumbai vs Dcit Cen Cir 37, Mumbai on 23 August, 2017
ITA NO. 4874/MUM/2015 1
M/S SATELLITE DEVELOPERS PVT. LTD.
IN THE INCOME TAX APPELLATE TRIBUNAL 'I' BENCH, MUMBAI
BEFORE SHRI G.S. PANNU, AM AND SHRI RAVISH SOOD, JM
आयकर अपीऱ सं./ I.T.A. No. 4874/Mum/2016
(निर्धारण वर्ा / Assessment Year: 2011-12)
M/s Satellite Developers Pvt. Ltd, Deputy Commissioner of
Building No. 12, 7 Floor,
th Income Tax, Central
बिधम/
Solitaire Corporate Park, Andheri- Circle-37, Mumbai.
Ghatkopar Link, Road, Andheri Vs.
(E), Mumbai-400 093.
स्थायीऱेखासं ./ जीआइआरसं ./ PAN/GIR No. AADCS0420Q
(अपीऱाथी/Appellant) : (प्रत्यथी / Respondent)
अपीऱाथी की ओर से/Assessee by : Sh. V.C. Shah
प्रत्यथी की ओर से/ Revenue by : Sh Saurabh Kumar, D.R.
सुनवाई की तारीख/
: 06/06/2017
Date of Hearing
घोषणा की तारीख /
: 23/08/2017
Date of Pronouncement
आदे श / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER
The present appeal filed by the assessee is directed against the order passed by the CIT(A)-53, Mumbai, dated 23.03.2016 for A.Y. 2011-12, which in itself arises from the order passed by the A.O u/s 143(3) of the Income-tax Act 1961 (for short ITA NO. 4874/MUM/2015 2 M/S SATELLITE DEVELOPERS PVT. LTD.
'Act'), dated 24.03.2014. The assessee assailing the order of the CIT(A) had raised the following grounds of appeal before us:-
" 1. On the facts and in the circumstances of the case and in law the learned Commissioner of Income Tax (Appeals) erred in sustaining the addition made in computing total income amounting to Rs. 7,28,613/- being the peak amount of purchases though the consumption records of such purchases with utilization was given and all payments to suppliers were made by account payee cheques as is done for all suppliers invoices in the normal course of business and your appellant can not be expected to produce any supplier of material particularly as he does not enjoy any such authority under any law and the suppliers has bank accounts and were registered dealer with the Maharashtra Sales Tax Department.
2. Your appellant craves, leave to add, alter, amend or delete any of the grounds as may be advised".
2. Briefly stated, the assessee company which is engaged in the business of real estate development, power generation (Wind Mill), Finance and Trading had e -filed its return of income declaring total income of Rs. 15,68,32,429/ -,which was processed as such u/s 143(1) of the 'Act'. The case of the assessee was thereafter taken up for scrutiny assessment u/s 143(2).
3. That the A.O was in receipt of information from the investigation wing that the assessee had made bogus purchases from the following concerns which had been declared as 'hawala parties' by the Sales Tax de partment :-
S. No. Particulars
1. Darshat Trading Pvt. Ltd.
2. Rahul Traders
3. Mairu Enterprises
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M/S SATELLITE DEVELOPERS PVT. LTD.
4. Ajay Stone
4. The assessee on being called upon by the A.O to put forth an explanation as regards the transaction s entered into with the aforesaid parties, therein filed his submissions as regards the purchase s made from the respective concerns, as under:-
a) M/s Darshat Trading Pvt. Ltd.
The assessee submitted that its main transaction with the aforesaid concern was for purchase of Ready Mix Concrete (RMC) during the period 17.02.2011 to 31.03.2011, vide four bills aggregating to Rs. 17,31,807/ -, against which transportation charges of Rs. 54,425/ - had been incurred. The total quantity of RMC purchased vide the four bills was said to be 311 cubic meters. That as per the assessee the RMC purchased from the aforesaid concern was used for casting 16 t h , 17 t h and 18 t h RCC slabs of their residential project known as 'Satellite Royale'. It was stated by the assessee that slabs of the said building had been physically casted, and the fact that the said building had been duly constructed stood as a physical evidence of the RMC procured and used. It was pointed out th at RMC purchased from the said party during the year was approximately 3% of RMC purchased during the year (aggregating to Rs. 5.38 crores) by the company. The assessee submitted that though the other suppliers of the assessee were reputed suppliers like Ultratech Cement, ACC Concrete, Relcon Infrapr ojects etc, however it was compelled to procure RMC from this small supplier for the reason that in September, 2010 the ITA NO. 4874/MUM/2015 4 M/S SATELLITE DEVELOPERS PVT. LTD.
Hon'ble Bombay High Court had imposed total ban on sand mining/extraction throughout Maharashtra, as well as had came up with severe restrictions on importing sand from other states. The assessee submitted that in the backdrop of the aforesaid state of affairs, sand which was an essential item in preparation of RMC became scarcely available in the state, as a consequence of which the construction industry was adversely hit in a big way. It was submitted by the assessee that in the aforesaid scenario large suppliers of RMC discontinued their supply and the assessee was thus compelled to procure RMC from th e aforesaid small supplier, viz. Darshat Trading Pvt. Ltd.,as the latter could manage to get sand through its own resources and provide the RMC required by the assessee for casting the slabs.
b) M/s Mairu Enterprises The assessee submitted that the sole transaction with the aforesaid concern was in respect of installation of an artificial cricket pitch in the club house , which was provided as an amenity in their project 'Sol itaire corporate park'. The expenditure incurred for the same was Rs. 1,59,000/ -, including VAT. It was claimed by the assessee that as the installation of an artificial cricket pitch was not a n usual item of supply, therefore, it was difficult for them to procure any regular/large supplier for such work. It was submitted by the assessee that it was in light of the aforesaid state of affairs that the said work was entrusted to the aforesaid supplier, viz. M/s Mairu Enterprises, who agreed to finish the work as per standards expected of the club.
ITA NO. 4874/MUM/2015 5M/S SATELLITE DEVELOPERS PVT. LTD.
c) M/s Rahul Traders The assessee submitted that it had purchased a small
quantity of rough marble (3,825 Sq. Ft.) for their project 'Satellite Royale', as well as a small quantity of c eramic tiles (1,453 Sq. Ft.) for the ir residential project known as 'Satellite Tower' from the aforesaid concern, viz. M/s Rahul Traders. It was submitted by the assessee that as large suppliers focused on value added/imported/premium quality marble, the assessee who required cheap quality marble and ceramic tiles was thus compelled to procure the same from the aforesaid supplier.
d) M/s Ajay Stone The assessee submitted that it had purchased a small
quantity of rough marble for the club house of 'Solitaire Corporate park' vide two purchase bill s, and a small quantity (50 Sq. Ft.) for their Nepean Sea Road Project vide one purchase bill from the aforesaid supplier, viz. M/s Ajay Stone.
5. The A.O after deliberating on the explanation/ submissions of the assessee, however did not find favor with the same and observed in respect of the aforesaid parties , as under:
i) M/s Rahul Traders : The concern M/s Rahul Traders was not traceable at the place of the business during the course of the investigation visit made by the 'Sales Tax Department'.ITA NO. 4874/MUM/2015 6
M/S SATELLITE DEVELOPERS PVT. LTD.
ii) M/s Darshat Trading Pvt. Ltd. : The person concerned was not found at his place of business.
iii) M/s Mairu Enterprises : Sh. Ramesh P Bafna of the said concern had in his statement recorded before the 'Sales Tax Department' admitted that he did not keep 'Books of accounts', but had only issue d bills on demand to the concerned parties and received one percent commission of the bill amount issued to the respective parties.
iv) M/s Ajay Stone : The aforesaid concern was providing accommodation entries and did n ot perform any business activity.
6. The A.O though held that the assessee had not made any actual purchases from the aforesaid four hawala parties, but conceded that the assessee had received the goods under consideration and consumed the same in the course of its business. The A.O observed that the assessee had made purchases of the goods under consideration in cash from the open market, and thereafter to route the same through its 'books of accounts' had taken bills from the aforesaid four hawala parties. The A.O thus on the basis of the af oresaid conviction worked out the peak investment in cash made by the assessee for the 'bogus purchases' (i.e. purchases made in cash by the assessee from the open market) at Rs. 7,28,613/- and added the same to the total income of the assessee. The A.O also made a separate addition of Rs. 24,404/- towards commission that must have been paid by the assessee to the aforesaid hawala parties for providing the accommodation entries.
ITA NO. 4874/MUM/2015 7M/S SATELLITE DEVELOPERS PVT. LTD.
7. The assessee being aggrieved with the order of the A.O carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the contentions raised by the assessee before him, therein did not find favor with the same and dismissed the appeal by observing as under : -
"I have co nsidered the submissions of the appellant and perused the material available on record. The point f or adjudication is whether on the peculiar f acts and circumstances of the case and in law, the A.O was justif ied in making additions of Rs. 7,28,613/ - on account of peak investment in cash made bogus purchases made f rom af oresaid f our parties and Rs. 24,404/ - on account of commission paid for obtaining accommodation entries. At the outset, it is proposed to take note of a f ew judicial precedents having bearing on the issue under adjudication. It is no w well settled that the onus is upon the assessee to prove the genuineness of the purchases [178 CTR (Raj) 420 and 186 CTR (MP) 718]. In the case of CIT Vs. Precision Finance Pvt. Ltd 208 ITR 465 (Cal.), it has bee n held that payment made by account payee cheque is not sacrosanct and it would not make an other wise non -genuine transaction genuine. A perusal of the assessment order reveals that the A.O's conclusion that the af oresaid f our parties f rom whom purchases were made were accommodation entry providers was based on the f ollowing : -
i) The af oresaid f our parties were declared as hawala parties on the website of Maharashtra Sales Tax/Vat authorities. M/s Rahul Traders was not traceable at his place of business during the spot inquiries made by the Sales Tax Department. The person concerned with M/s Darshat Trading Pvt. Ltd. Was also not f ound at its place of business.
Ramesh P. Baf na of M/s Mairu Enterprises in his state ment bef ore the Sales tax authorities admitted that he was only issuing bills to various parties and receiving 1% commission thereon. M/s Ajay Stone was also f ound to be providing accommodation entries only and not carrying on any genuine activity.
ii) Notices u/s. 133(6) issued by the A.O to the said parties were returned undelivered with the remarks "lef t" or "unkno wn".
iii) The appellant was asked to f urnish ne w or present addresses of the above mentioned parties but is f ailed to do so.
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iv) The appellant f ailed to f urnish conf irmations f rom the af oresaid f our parties in regard to the purchases sho wn to have been made from them.
v) Though the appellant contends the A.O could have obtained details of af oresaid parties f rom their bank accounts, it has not f urnished details of bank accou nts of suppliers despite having b een asked to do so. In the absence of these details, no enquiry can be made f rom the bank.
vi) The appellant f ailed to produce transport receipts/lorry receipt, octroi receipts etc. in support of its claim of purchases f rom the af oresaid parties.
vii) Although the appellant has f urnished copies of delivery challans, a close scrutiny of the same does not support the appellant's claim of genuineness of purchases made from the af oresaid parties. A f ew illustrative instances of delivery challans of M/s Darshat Trading P vt. Ltd. In respect of alleged supply and transportation of RMC f rom its business premises located at 14, Kadam Chawl, Ist Floor, Near Panjrapole Lane, Opp. Gaushala, Mumbai -400002 to the appellant at its Goregaon site (Satellite Royal D -6) are described in the table belo w :
Challan Date Quantity Plant Exit Site Reaching No. (M 3 ) Time Time* 2 27.02.2011 6.00 07:35 a.m. 08:10 a.m. 3 27.02.2011 6.00 08:00 a.m. 08:20 a.m. 5 27.02.2011 6.00 10:25 a.m. 10:40 a.m. 7 27.02.2011 6.00 11:00 a.m. 11:15 a.m. 10 27.02.2011 6.00 12:08 p.m. 12:20 p.m. 11 27.02.2011 6.00 12:50 p.m. 01:00 p.m. 12 27.02.2011 6.00 01:25 p.m. 01:35 p.m. 13 27.02.2011 6.00 01:41 p.m. 01:50 p.m. *as per Material Receipt State ment No. MR2044 dated 27.02.2011 In this connection, it is noticed from perusal of the said delivery challans that the address of the "RMC Plant" of M/s Darshat Trading Pvt. Ltd. (f rom which the material was dispatched) is not at all mentioned thereon. It is hard to believe that RMC of 102 M 3 allegedly dispatched to the appellant on 27.02.2011 would be stored on the 1 s t floor of chawl. And f inally, it is highly improbable or rather impossible that a truck or a vehicle carrying 6 M 3 of RMC can travel f rom Panjrapole to Goregaon site of the appellant within a short time ranging between 9 to 35 minutes beating ITA NO. 4874/MUM/2015 9 M/S SATELLITE DEVELOPERS PVT. LTD.
even the speed of f ast suburban trains.
It also deserves to be noted that the appellant merely furnished copies of ledger accounts, invoices of the af oresaid parties and its won bank statement bef ore the A.O whi ch are not enough to establish the genuineness of said purchases. In vie w of the f acts and circumstances stated above, it is held that the onus placed on the appellant to establish the genuineness of the af oresaid purchases remains undischarged, as rightly held by the A.O. Ho wever at the same time, I am in agreement with the A.O's f inding that the appellant was able to prove consumption of the materials. In these circumstances, the A.O is justif ied in coming to the conclusion that the appellant had purchase d the material in cash and arranged the bills f rom the af oresaid hawala parties. Theref ore, the additions made by the A.O to wards peak investments in cash f or bogus purchases (Rs. 7,28,613/-) and unaccounted commission paid f or procuring accommodation entr ies (Rs. 24,404/-) in the hands of the appellant cannot be said to be unreasonable or unjustif ied. Taking into account of totality of the f acts and circumstances as brought out above, I do not f ind any error or infirmity in the action of the A.O in making the af oresaid additions aggregating to Rs. 7,53,014/ - which are conf irmed. Grounds bearing Nos. 1 to 3 raised by the appellant are accordingly dismissed".
8. The assessee aggrieved with the order of the CIT(A) had carried the matter in appeal before us. The Learned authorized representative (for short 'A .R') for the assessee submitted that it was duly accepted by the A.O that the material purchased by the assessee from the aforesaid parties under consideration had been consumed in the course of its business. The Ld. A.R in order to fortify his contention took us through the relevant extract s of the order passed by the A.O. The Ld. A.R submitted that the CIT(A) failing to appreciate the facts of the case in the right perspective had thus erroneously sustained the addition made by the A.O. It was further averred by the Ld. A.R. that an addition of 2% of the value of the purchases made from ITA NO. 4874/MUM/2015 10 M/S SATELLITE DEVELOPERS PVT. LTD.
the aforesaid parties may only be sustained in all fairness . Per contra, the Ld. Departmental Representative (for short 'D.R') placed reliance on the order of the CIT(A). The Ld. D.R. submitted that the hawala parties had accepted that they were providing accommodation entries. It was further submitted by the Ld. D.R that neither the confirmations of the aforesaid parties we re furnished by the assessee with the A.O, nor the details of the bank account of the supplier, transport details, delivery challans were placed on record during the course of the assessment proceeding s. The Ld. D.R. taking support of the aforesaid facts , thus submitted that the CIT(A) had rightly upheld the addition made by the A.O, and as such no infirmity did emerge from his order. It was submitted by the Ld. D.R. that the appeal of the assessee lacked any merit and was liable to be dismissed.
9. We have heard the authorized representatives for both the parties, perused the order s of the lower authorities and the material available on record. We have given a thoughtful consideration to the facts of the case and are of the considered view that it remain s as a matter of fact that the assessee had carried out purchase of goods from the open/grey market, and had merely obtained the bills from the aforementioned four parties, viz. (i) Darshat Trading (P) Ltd., (ii) Rahul Traders, (iii) Mairu Enterprises and (iv) Ajay Stone, who we find had merely provided accommodation entries/bogus bills to the assessee and had not carried out any genuine sale of goods to the latter. We are of the considered view that the assessee had carried out purchases of the aforesaid goods from the open/grey market , and ITA NO. 4874/MUM/2015 11 M/S SATELLITE DEVELOPERS PVT. LTD.
thereafter in order to bring the said purchase transactions in its books of accounts had obtained 'bogus bills' from the aforementioned four parties. We have given a thoughtful consideration to the facts of the case and are of the considered view that the assessee who had purchase d the goods from the open/grey market must have been benefitted by procuring the same at a lower rate, as against that booked by it in its 'books of accounts' on the basis of the ' 'bogus bills' procured from the aforementioned four parties, viz. (i) Darshat Trading (P) Ltd., (ii) Rahul Traders, (iii) Mairu Enterprises and (iv) Ajay Stone. We though find ourselves to be in agreement with the view arrived at by the lower authorities that the assessee had not carried out any genuine purchases from the aforesaid parties, but had merely obtained bogus bills from them in order to facilitate routing of their purchases made from the open/grey market through its 'books of accounts', but however , are not persuaded to accept the exorbitant addition of Rs. 7,53,014/- (i.e. Peak investment towards cash purchases made from open/grey market : Rs. 7,28,613/ - + Commission charges paid to the entry providers (1%) : Rs. 24,401/ -) so made by the A.O on the said coun t in the hands of the assessee. We find that the lower authorities had duly accepted that the assessee had carried out purchases under consideration, though not from the aforementioned four parties, but however from the open/grey market, as a result whereof the only addition in the backdrop of the aforesaid factual position that could have been made in the hands of the assessee would be in respect of the profit margin made by the assessee by purchasing the said goods from the ITA NO. 4874/MUM/2015 12 M/S SATELLITE DEVELOPERS PVT. LTD.
open/grey market, as against the value booked on the basis of the bogus bills procured from the abovemention ed parties. We are of the considered view that the addition of Rs. 7,53,014/- (supra) made by the A.O in respect of the purchases aggregating to Rs. 24,40,309/ - made from the aforementioned four parties , would give a profit margin at 30.86%, which we are of the considered view is highly exorbitant and beyond our comprehension. We though are not oblivious of the fact that the assessee must have been been benefited from making the purchases from the open/grey market, and as such it can fairly be held that the purchases booked by the assessee in its 'books of accounts' on the basis of the bogus bills procured from the aforesaid parties were inflated, but such a profit/mar gin which in the absence of any concrete evidence has to be left to a fair estimate. We find that the Hon'ble High Court of Gujarat in the case of CIT-I Vs. Simit P. Sheth (ITA No. 553 of 2013, dated 16.01.2013) has held that the profit margin from making of bogus purchases can fairly be taken at 12.5% of the value of the bogus purchases. We thus in all fairness restrict the profit margin in respect of the bogus purchase of Rs.24,40,309/ - made by the assessee from the aforementioned four parties at 12.5% of the sa id amount, which therein shall work out at Rs. 3,05,039/ - (i.e. 12.5% of Rs. 24,40,309/ -). We thus substitute the addition of Rs. 7,53,014/- (supra) sustained by the CIT(A), by an amount of Rs. 3,05,039/- (supra). The Ground of Appeal No. 1 raised by the assessee before us is partly allowed in terms of our aforesaid observations.
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10. That as the Ground of Appeal No. 2 is general in nature, therefore, the same is dismissed as not pressed.
11. The appeal of the assessee marked as ITA No. 4874/Mum/2015 is partly allowed in terms of our aforesaid observations.
Order pronounce d in the open court on 23 /08/2017
Sd/- Sd/-
( G.S. PANNU ) (RAVISH SOOD)
Accountant Member Judicial Member
Dated 23/08/2017
Ps. Rohit Kumar
Copy of the order forwarded to :
1. The Appellant
2. The Respondent.
3. Concerned CIT
4. The CIT(A)
5. D.R.,
BY ORDER,
//True Copy//
(Dy./Asstt. Registrar)
ITAT, Mumbai
ITA NO. 4874/MUM/2015 14
M/S SATELLITE DEVELOPERS PVT. LTD.