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2015 (11) TMI 20 - ITAT MUMBAI

2015 (11) TMI 20 - ITAT MUMBAI - TMI - Disallowance at 11 % Net profit on entire bogus purchases - Held that:- As the assessee had claimed that all the transaction were through banking channels the claim had to be verified to find out the trail of the cheques. It appears that because of time constraint the AO could no complete the inquiries that he had started in right direction. The fact mentioned by the FAA that it is a case of a builder and consumption of goods has not been doubted. In such c .....

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AA. Effective ground of appeal filed by the AO is rejected. In light of our discussion, CO filed by the assessee is treated as infructuous. - Decided against assessee. - ITA No. 684/Mum/2014, Cross Objection No. 53/Mum/2015 - Dated:- 22-7-2015 - Joginder Singh, JM And Rajendra, AM For the Appellant : Shri Dharmesh Shah For the Respondent : Shri Asghar Zain VP-Sr AR ORDER Per Rajendra, AM Challenging the order dated 01.11.2013 of the CIT(A)-20, Mumbai, the Assessing Officer (AO) has raised follow .....

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Officer be restored. 3. The appellant craves leave to amend or alter any grounds or add a new ground which may be necessary." Assessee, has raised following grounds of appeal in the cross objections filed by it: 1. On the facts and circumstances of the case and law the Ld. CIT (A) erred in estimating net profit at 11% on turnover of the appellant. 2. On the facts and circumstances of the case and law the Ld. CIT (A) failed to appreciate the fact that in the business of civil contractor no s .....

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ly M/s. Nisha Enterprises (NE), M/s. Om Corporation (OC), M/s. Blue Nile Enterprises (BNE), M/s Naman Enterprises (Naman), M/s Savita International (SI) Navdeep Trading Corporation (NTC) and M/s Aryen Sales Corporation (ASC), that genuineness of the purchase from those parties had not been proved. The AO observed that the assessee had not produced the parties, that it had not produced any evidence in support of its explanation, that it had also not given any information regarding delivery-Challa .....

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essment order it had not produced any of such parties. As stated earlier two parties had denied of any such transactions. In such circumstances transactions shown in the name of these seven parties were regarded sham transactions. Therefore, the AO disallowed entire purchases shown in these names, totaling to ₹ 3.09 Crores. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority (FAA). Before him, it was argued that that the AO had disbeli .....

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ies of bills, that the AO started investigation on gathering some information from the Sales Tax Department, that a list of about 2,059 dealers who had issued bills but not paid the VAT had been displayed by the Sales Tax Department on its Website, that possibly the names of those seven parties could have appeared in the said list, that the AO did not make independent enquiry from the sale tax department nor had issued summons u/s.131 of the Act to those parties to know the actual facts, that ma .....

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or daily consumption register; a reasonable G.P. addition could be made instead of disallowing entire purchases. The assessee placed reliance on the decisions of M.K, Brothers (163 ITR 249) = 2003-TIOL-441-HC-AHM-IT, Baiaji Textiles Industries (P.) Ltd. (49 ITD 177), Permanand (107 TTJ 395), Sagar Bose (56 ITD 561), Rajesh P Soni (100 TTJ 892). After considering the submissions of the assessee and the assessment order the FAA held that the assessee had shown purchases from seven parties, that s .....

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not sufficient when genuineness of purchase had been doubted, that the AO had issued notice u/s.133 (6) to the seven parties on 11.02.2013, that out of those seven notices four were received unserved, that notice on Naman was served but no information was submitted, that two parties namely SI and ASC had categorically denied any such transaction with the assessee, that it was not able to produce the parties, that genuineness of purchases shown in the name of those parties was not established, th .....

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out that such material so shown had not been utilised in construction of buildings, that there was a certification from the competent authority, that utility of the material was not doubtful, that it was not legally approvable that addition of entire purchases should be made, that probability of inflation of expenditure could also not be discarded in such situation, that there was possibility of suppression of income. Referring to the records produced by the assessee, the FAA held that in the AY .....

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re the AO the = had submitted certain decision of the Tribunal, that it had also submitted the rate of N.P. to be adopted in the respective cases i.e. Modem Construction (46 SOT 309), Kanhiyalal Chaudhary (20taxmann. Com 368), Aggarval Construction Co. (198 Taxman.com 476), Prabhu Dayal Kanojiya (137 TTJ 4), Associated Contractors (16 taxman.com 36), BDR Projects P.Ltd. (23 taxmann.com 405). The FAA prepared a chart of the rate of reasonable profit and same reads as under: SN. Case Profit rate e .....

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uction account, use and input of material so purchased, that in the case under consideration maximum purchases were found to be genuine, that a few purchases were not believable because of lack of some evidence. The FAA further held that element of low G.P./N.P. was visible if result of this year were compared with the earlier year, that it would be justifiable and appropriate to ascertain the taxable income taking into consideration the possible profit in such business. Referring to the matter .....

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d the parties before the AO, that in four cases notices issued under 133 (6) remained unserved, that two of the suppliers had denied to have any transactions with the assessee, that AO had rightly added the purchases to the total income of the assessee. Authrorised Representative (AR) argued that out of the total purchase of 8. Crores there was doubt about purchases of ₹ 3.09 Crores only, that consumption of goods was not doubted by the AO or the FAA, that the AO did not provide opportunit .....

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The undisputed facts are that the assessee is a builder, that the AO made inquiries about purchases made by it in case of seven parties, that two of the suppliers denied to have entered in to any transaction with the assessee, that the AO did not allow the assessee to cross examine those two parties, that in case of four parties notices issue u/s.133 (6) could not be served on the given addresses, that it had not produced the parties before the AO, that in case of one party (out of the seven) w .....

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