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2016 (1) TMI 893

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..... m/2013 - - - Dated:- 4-11-2015 - SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For The Appellant by : Shri Vijay Shankar For The Respondent by : Shri Vijay C Kothari ORDER PER AMIT SHUKLA, JM: The aforesaid appeal has been filed by the revenue against impugned order dated 15.02.2013, passed by CIT(A)-35, Mumbai for the quantum of assessment passed u/s 143(3) for the assessment year 2009-10, on the following grounds :- (i) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 74,01,988/- on account of inflated and bogus purchases without appreciating the fact that the bills and cheque payment on which the assessee is placing reliance is accepted as bogus by the alleged supplier i.e. the Proprietor of M/s P K Trading, Shri Pascal Ferandes. (ii) On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting the addition of ₹ 74,01,988/0 without appreciating the facts that the Banker has stated in the letter dated 05.12.2012 that only one cheque bearing No. 420012 was credited in the current account No. 500797 of M/s P K T .....

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..... de by the assessee including with M/s P.K. Trading co. and the entire background of the nature of civil contract and was submitted that, the assessee is a sub-contractor who is carrying out the civil work for its main contractor, M/s S V Jiwani Co. The contract work is purely for the MCGM which use to release the payment only after complete verification and inspection of quality and quantity of material consumed and the work done of each work order. Only when the work has been done satisfactorily, the payment is to be released. Thus, all the purchases including purchase made from M/s P K Trading Co. was incurred for the Government contract and the materials have actually been consumed / utilized. The payment to M/s P K Trading Co. is reflected in the books of account and all the payments have been made through account payee cheques. Assessee s detailed submissions along with the various evidences were sent to the AO for submitting the remand report. Relevant extract of the remand report have been incorporated by the CIT(A) from pages 6 to 7 of the appellate order. In the remand report, the AO had contended that, summons was issued to M/s P K Trading Co. u/s 131 and ITI wa .....

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..... contract work and therefore, no addition on account of bogus purchases can be made. 5. Before us, the ld. DR, submitted that in this case, specific information was received from the sales tax authorities that the supplier, M/s P.K. Trading Co. has been found to be providing accommodation bills and entries. After confronting this information, the assessee could not prove that purchases made from said firm are genuine or not. During the course of the remand proceedings, the AO had carried out detailed enquiry and found that the said party was not traceable and even the payments through account payee cheques could not be completely verified from the bank as all the particulars were not made available. The assessee has completed failed to discharge the onus of showing/proving that purchases made from M/s P K Trading Co. of ₹ 70,41,088/- is genuine. He strongly referred to the remand report of the AO which has been placed in paper book pages 104 to 107, highlighting the points that the supplier as well as payments made could not be proved by the assessee. 6. On the other hand, the Ld. Counsel, pointed out that, the assessee being a civil contractor has to perform its su .....

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..... by MCGM. For executing the contract work, the assessee has to comply with the conditions and specifications of the tender document which prescribes the quantity and quality of the materials consumed, such as cement, steel, sands, stone grits etc. These materials are essentially required for carrying out the contract work. Not only that, right from the stage of quality testing of materials to actual work performed/executed, every stage is subject to inspection by engineers of MCGM to check the progress and the quality of work and sent a report to its Dy. Chief Engineers. Only after full verification and complete satisfaction of the work completed, the payments is released to the main contractor and from there it goes to the sub-contractor. Thus, in case of contract work performed by the assessee, every material consumed is accounted for. There is very little or no margin of manipulating the purchase of materials, because not only the quantity and quality of material is specified but even the range of profit percentage is also agreed upon. The entire conditions under which the civil contract work is carried out in the case of the assessee and the manner in which payment is released .....

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..... ntage of profit is also predetermined in the tender document or agreement. If the contract receipts are not disturbed and gross/net profit are not doubted, then how the purchases can be doubted. Such an addition will only disturb the trading account. If certain purchases are not open to verification and source are from books of account only, then at best the profit results can be disturbed and reasonable estimate can be made under the principle of best judgment assessment, only if it is found that assessee is suppressing his profit. Here in this case one very important fact which has been brought on record by Ld. Counsel is that, in the case of the main contractor i.e. M/s S.V. Jiwani Co., the Settlement Commission has given a categorical finding of fact that, entire net profit from the contract received from MCGM was @8% and the contract executed by subcontractor the net profit rate approximately ranges between 2.87% to 5%. Another categorical finding of fact which has been given is that there is no material difference in quantity data as per the records of the MCGM and as per the books of account of the main contractor. In this case also exactly similar addition of purchases we .....

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