Income Tax Appellate Tribunal - Mumbai
Pba Infrastructure Ltd., Mumbai vs Acit Cent Cir. 36, Mumbai on 8 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "E", MUMBAI
BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No. 2121 to 2125/Mum/2016 (Assessment Years- 2007-08 to 2011-12)
PBA Infrastructure Limited ACIT CC-36 (2)(1),
6/11, Prakash, V N Purav Marg, Aayakar Bhavan, M.K. Road,
Vs.
Chembur, Mumbai-400071. Churchgate, Mumbai-400020.
PAN: AAAC7564K
(Appellant) (Respondent)
Assessee by Shri Y.P. Trivedi Sr
: Advocate with Ms. Usha
Dalal, Advocate
Revenue by : Shri V. Justin (Sr. DR)
Date of hearing : 03.08.2017
Date of Pronouncement : 08.08.2017
Order Under Section 254(1) of Income Tax Act
PER PAWAN SINGH, JUDICIAL MEMBER
1. This bunch of five appeals by assessee under section 253 of the Income-tax Act (the Act) are directed against the order of ld. Commissioner of Income-tax (Appeals)-53, Mumbai (CIT(A)-53, Mumbai dated 21.10.2015 for Assessment Years (AY) 2007-08 to 2011-12. In all appeals, the assessee has raised the identical grounds of appeal. The facts for all AYs are almost similar except the variation of figures of addition. Considering the common grounds of appeal, similar facts in appeal all were heard together and are decided by common order to avoid to the conflicting decision. For appreciation of facts, we are referring the ITAs No.2121 to 2125/M/2016 PBA Infrastructure Limited facts for AY 2007-08 in ITA No. 2121/Mum/2016. The assessee has raised the following grounds of appeal:
1. The Id. CIT (A) erred in upholding the disallowance of Rs 43,84,084/- on account of unexplained expenditure paid by the Appellant without appreciating the facts and circumstances of the Appellant's case.
2. The learned CIT ( A) further erred in alleging that the Appellant was siphoning of profit by debiting bogus expenses without bringing any evidence on record.
3. While upholding the aforesaid disallowance , the Learned CIT (A) further erred in relying on evidences collected during search proceedings, which are having little evidentiary value and hence, not admissible in law as per various judicial pronouncement.
4. The Learned CIT (A) failed to appreciate the intricacies of the Appellant's business and hence, erred in upholding the order of the Assessing Officer, which was based on presumptions, conjectures and surmises.
5. The Learned CIT (A) failed to appreciate that the Appellant had retrieve income offered during the search on account of discrepancies in record of purchase of Rs. 7,03,09,621/- and hence a disallowance was unwarranted and illegal and/or excessive.
2. Though, the assessee has raised as many as six grounds of appeal, however, as per our considered view the sole and substantial ground of appeal is "If the ld. CIT(A) erred in upholding the disallowance of Rs. 43,84,084/- on account of unexplained expenditure.
3. The brief facts of the case are that the assessee-company is engaged in the business of construction of roads, laying of Paver Blocks and execution of various other infrastructure projects across the country. The assessee filed its return of income for relevant AY on 31.10.2007 declaring total income of Rs. 120,67,47,682/-. The assessment was completed u/s 143(3) of the Act on 31.12.2009 after making a certain additions and disallowances assessing the total income at Rs.13,55,16,460/- . Subsequently, the assessment was opened u/s 147 of the Act. The notice u/s 148 dated 31.03.2013 was served upon the assessee. The assessment was re-opened as a survey action was carried on the premises of the assessee on 14.02.2013 and 2 ITAs No.2121 to 2125/M/2016 PBA Infrastructure Limited during the survey Sh. Balkrishna Wardhawan to admit certain purchase as non- genuine. During the survey statement Balkrishna Wardhawan was recorded under section 132(4) of the Act, wherein he has offered (declared) income of Rs. 7.03 Crore. In response the notice under section 148, the assessee filed its return of income on 09.10.2013 declaring total income of Rs. 13,02,49,682/-. The AO completed the re-assessment proceeding on 26.03.2014 u/s 143(3) r.w.s. 147 of the Act. While framing re-assessment order, the Assessing Officer (AO) made the addition on account of unexplained expenditure of Rs. 43,84,084/-. On appeal before the ld. CIT(A), the order of AO was confirmed. Further, aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
4. We have heard the ld. Authorized Representative (AR) of the assessee and ld.
Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee argued that the major addition to the income during the re-assessment proceeding is on account of alleged unexplained expenditure u/s 69C of the Act. The AO disallowed the genuine and explained expenditure of Rs. 43,84,084/-. The material was purchased from the dealers after availing proper bills. The payments were made through cheques and all details regarding the consumption of material were shown. The assessee- company is engaged in the business of infrastructure project at various sites, all the material purchased from all the so-called hawala dealers were consumed. The work of the assessee is certified by independent agency. During the survey, the official of Income-tax Department pressurized Shri Balkrishna Wardhawan to admit certain purchase as non-genuine. The assessee filed affidavit dated 3 ITAs No.2121 to 2125/M/2016 PBA Infrastructure Limited 28.02.2013 retracted from the statement recorded during the survey. The retraction of the assessee was not considered by the lower authorities. The AO as well as ld. CIT(A) disallowed the purchases without appreciating the fact that assessee has consumed the material in execution of project. The ld. AR of the assessee specifically relied upon the sub-para (vi) of para-5 of order of AO. The ld. AR of the assessee in support of his submission further filed a written synopsis and relied upon certain decisions of Tribunal, as referred in his written submission. The written submissions of the assessee are also taken on record. On the other hand, the ld. DR for the Revenue supported the order of authorities below. It was argued that during the survey action u/s 133(A) statement of Shri Balkrishna Wardhawan was recorded. In his statement Shri Balkrishna Wardhawan admitted that they have made purchases from hawala parties consisting of Kapasi Family and M/s. Shivani Hot Rolled Steels Pvt. Ltd. and offered the additional income. During the re-assessment, the AO asked the assessee to furnish the list of parties from whom the assessee made purchases. From the list supplied by assessee, the AO noted that six of the parties from the assessee made purchases were listed in the list of hawala traders in the website of Sales Tax department, State of Maharashtra. The assessee was given sufficient opportunity to prove the genuineness of purchases. The assessee failed to prove the genuineness of the transaction from six parties. The names of all the parties have been mentioned by AO in para-4 of his order. As the assessee failed to prove the genuineness of the purchases, the AO was justified in disallowing the aggregate of purchases from these six parties. 4
ITAs No.2121 to 2125/M/2016 PBA Infrastructure Limited
5. We have considered the rival submission of representative of the parties and have gone through the orders of authorities below. The AO during the re-assessment proceedings asked the assessee to furnish the list of person from whom the purchases has made during the relevant period. The assessee furnished the detailed of the parties from the purchases were made. The AO from the list of such person noticed that the names of six parties were listed in the official website of Sales Tax Department, Government of Maharashtra. The assessee made the following purchased from those six parties.
Sr.No. Name of the Hawala dealer Amount of
purchases (Rs.)
1 M/s. Allied Industries 98,100
2 M/s Amar Enterprises 2,09,250
3 M/s. Geeta Enterprises 28,54,865
4 M/s. Gallent Traders Pvt. Ltd. 1,70,213
5 M/s. Ishita Enterprises 6,440
6 M/s. Alstom Trading Co. P. Ltd. 10,45,216
Total: 43,84,084
The AO issued notice u/s 133(6) to all the parties. However, no reply was received; the assessee was asked to produce the parties for verification. The assessee failed to produce the parties for verification. On show-cause notice as to why the aggregate of purchases be not treated as unexplained expenditure, the assessee furnished its reply dated 10.02.2014. In the reply the assessee contended that all the purchases were made through cheques. It was further contended on behalf of assessee that the admission/disclosure of additional income made during the survey has already been retracted. The contention of assessee was not accepted by AO. The AO made the disallowance of aggregate of purchases from six parties for Rs. 43,84,084/-. During the first appellate stage, the ld. CIT(A) also observed 5 ITAs No.2121 to 2125/M/2016 PBA Infrastructure Limited that the assessee has not produced the parties for verification despite the opportunity given to the assessee. The notice u/s 133(6) of the Act sent to all the parties were returned back. The assessee has not given any confirmation from the said parties either before the AO or during first appellate stage. The AO has no occasion to verify the books of account and the Bank account of the supplier. The document furnished by the assessee i.e. ledger account of aforesaid parties is itself not sufficient to establish the genuineness of the purchases. The assessee has not furnished the copy of relevant invoices, proof of transportation, bill, consumption of goods etc. The assessee could not produce any delivery challans or Lorry receipt in respect of goods which have been purchases from the aforesaid parties. For the retraction affidavit of Balkrishna Wadhawan, the ld CIT(A) observed that it is unworthy of credit. On the basis of above observation the ld CIT(A) confirmed the action of AO.
6. We have seen that the order in Point No. (vi) of sub-para (vi) of para-4. The AO observed that "the purchases of the assessee, per-se is not the issue and these alleged purchases are not being treated as bogus." The Sales Tax Department has come down hard on the pernicious practices indulged in by these unscrupulous traders figuring in the list of suspicious dealers and it is evident that the assessee has not purchased the goods from these alleged suppliers. It is equally true that the goods have somehow entered in the assessee's regular business. The assessee has been unable to give any convincing or cogent explanation as to how these goods happened to come in his possession. The assessee has, thus, incurred expenditure on such purchases which is not explained. The purchases are not treated as bogus 6 ITAs No.2121 to 2125/M/2016 PBA Infrastructure Limited or sham rather the expenditure incurred on such purchases is treated as unexplained. We have noted that the AO have disallowed the entire purchases from six parties. The books of accounts of assessee were not rejected by AO. The AO has not made any independent enquiry for bringing co-gent evidence on record. The assessing officer has not made any inquiry about the purchases from Kapasi Family and M/s. Shivani Hot Rolled Steels Pvt. Ltd, in respect of which the additional income of allegedly offered during the survey. The AO has not examined the ratio of impugned purchases qua the entire purchases made by assessee during the year under consideration. The AO relied upon the report of Sales Tax Department. The report of Sales Tax Department was not shared with the assessee. We are of the view that under Income-tax Act, the only real income can be taxed by the Revenue, even if the transaction is not verifiable due to any reason, the only taxable is the taxable income component and not aggregate of the transaction. After considering the fact and nature of business of assessee, we are of the opinion that in order to fulfill the gap of revenue leakage, the disallowance of reasonable percentage of impugned purchases would meet the end of justice. The Hon'ble Bombay High Court in CIT Vs Hariram Bhambhani in ITA No. 313 of 2013 decided on 04.2.2015 held that revenue is not entitled to bring the entire sales consideration to tax, but only the profit attributable on the total unrecorded sales consideration alone can be subject to income tax.
7. We have noted that neither the AO nor the ld. CIT(A) examined the Gross Profit or Net Profit ratio of assessee for previous or subsequent years. Considering the facts and the circumstances of the case, we are of the opinion that a reasonable 7 ITAs No.2121 to 2125/M/2016 PBA Infrastructure Limited disallowance of impugned purchases/ unexplained expenditure @ 12.5% would meet the end of justice. Hence, the AO is directed to restrict the disallowance on account of unexplained expenditure u/s 69C of the Act @ 12.5% of aggregate purchases (Rs. 43,84,048/-) of impugned purchases. With the directions the appeal of the assessee is partly allowed.
ITA No. 2122, 2123, 2124 & 2125/Mum/2016
8. In all appeals the facts of all Assessment Years are almost similar, except in variance of figure in additions/ disallowances, the assessee has raised identical grounds of appeal. As we have partly allowed the appeal for AY 2007-08. Considering the principle of consistency, all these appeals are allowed with similar directions.
9. In the result, all the appeals filed by assessee are partly allowed.
Order pronounced in the open court on 8th day of August 2017.
Sd/- Sd/-
(P.K. BANSAL) (PAWAN SINGH)
(VICE-PRESIDENT) JUDICIAL MEMBER
Mumbai; Dated 08/08/2017
S.K.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT BY ORDER,
5. DR, ITAT, Mumbai
6. Guard file. (Asstt.Registrar)
स या पत त //True Copy/ ITAT, Mumbai
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