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2016 (11) TMI 885 - ITAT MUMBAI

2016 (11) TMI 885 - ITAT MUMBAI - TMI - Addition as profit on purchases - Held that:- Assessee actually made the purchases from third parties and the invoices being inflated was the conclusion of the learned CIT(A) and accordingly addition was sustained by the learned CIT(A). It has not been brought on record that the Revenue has filed any appeal with the tribunal against the decision of learned CIT(A). The Revenue has accepted the profit rate of 10.43% earned by the assessee in the preceding ye .....

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har, Accountant Member Assessee by : Shri Anil Thakrar Revenue by : Shri A. Ramachandran ORDER Per Ramit Kochar, Accountant Member This appeal, filed by the assessee, being ITA No. 492/Mum/2016, is directed against the appellate order dated 30th December, 2015 passed by learned Commissioner of Income Tax (Appeals)- 3, Nasik(Camp office Thane) (hereinafter called the CIT(A) ), for the assessment year 2010-11, the appellate proceedings before the learned CIT(A) arising from the assessment order da .....

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ete the addition confirmed by the Ld. CIT(A). 3. The Brief facts of the case are that the assessee is a government electrical contractor working under the name and style of Shanti Electricals and Services. In this case, certain information was received by the AO from the DGIT (lnv.), Pune vide letter No.PN/DGIT/Sales Tax Hawala/2012- 13/2179 dated 6th February, 2013 to the effect that the Sales Tax Department, Mumbai has unearthed a racket involving more than 1935 hawala dealers involved in issu .....

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y goods. There were no corresponding purchases to such bogus sale bills. The bogus sale bills were supplied on commission basis. The payments received in the form of cheques have been credited in the bank account and thereafter cash was withdrawn and returned to the beneficiary after deducting their commission. It was observed by the AO that the investigation carried out by the Sales Tax Department revealed that the hawala operator posing as the seller exists only on paper, issues fake bill to a .....

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ies and are not genuine. Therefore as per the AO, these purchases of ₹ 31,70,670/- have escaped the assessment as envisaged u/s 147 of the Act for the impugned assessment year. The assessee in response to notice u/s 148 of the Act submitted that the original return of income filed u/s. 139 of the Act be treated as return of income filed in response to the notice u/s. 148 of the Act . The AO observed that as per information received from DGIT(Inv.), Mumbai, these hawala dealers have filed a .....

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ally asked to furnish account extracts of purchases made along with confirmation, purchase bill, relevant delivery challan, lorry receipts, stock register and escort receipts so as to verify the purchases. The assessee submitted ledger extract for purchases and also copies of purchase bills. The A.O. observed from the details available that the purchases made from the following parties were suspicious:- Tin of Hawala Dealer Name of Hawala Dealer PAN of hawala dealer Assessment year Amount in rup .....

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s asked by the AO to produce these hawala operators before the AO but the assessee failed to produce these vendors before the AO and expressed its inability to produce these vendors. The A.O. after considering submissions of the assessee observed that the assessee could not produce the related documentary evidences for verification such as octroi receipts, lorry receipts , stock register and escort receipts for the purchases made from these parties , and also failed to produce the vendors and as .....

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ieved by the assessment order dated 22-01-2015 passed by the A.O. u/s 143(3) r.w.s. 147 of the Act, the assessee filed first appeal before the ld. CIT(A). 5. Before the ld. CIT(A) , the assessee submitted copies of invoices in respect of all these purchases and ledger accounts of all the parties were also submitted , and it was submitted that the payments for these purchases were made through cheques. The assessee submitted comparative chart of Gross Profit and Net Profit for the year under cons .....

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tire bogus purchases are added, the Net Profit ratio would be 44% , which is abnormal in case of Contractor. The assessee also relied on following judicial decisions : a) Nikunj Exim Enterprises ITA no. 5604 of 2010- wherein Hon ble Bombay High Court held that merely because suppliers have not appeared before the AO or CIT(A), one cannot conclude that the purchases were not made by the assessee. b) ITO v. Paresh Arvind Gandhi ITA No 5706/Mum/2013 - The tribunal held that the AO did not conduct a .....

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0-12-2015 requested that the addition of 12.5% of alleged Hawala purchases be made to the income of the assessee in order to buy peace of mind. The ld. CIT(A) after considering the submissions of the assessee held that the assessee had shown purchases amounting to ₹ 31,70,670/- from various parties which were from hawala operators as appearing in the list prepared by Sales Tax Department and which were not genuine purchases. These dealers only gave the purchase bills and there were no actu .....

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long with thousands of other taxpayer in collusion with the selling dealers subverted and manipulated the system, wherein the selling dealers were only giving the bills and the amount paid by the purchasing dealer in the form of cheques were returned to the purchasing dealers in the form of cash without actual transaction of goods. The assessee showed that the material purchased has been used in execution of Government contracts and running bills were produced to show that the material namely MS .....

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elation with the material purchased from the said hawala dealers to have been completely used in the execution of work contracts. Thus, the assessee actually made the purchases from third parties and the invoices being inflated. The learned CIT(A) held that the assessee is in the business of electric contracts and the total contract receipts during the year was ₹ 90,70,063/- on which gross profit and net profit has been shown at ₹ 8,35,850/- which works out to 9.22%. Following the de .....

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vious year, the net profit was 10.43% and in view of this, the profit margin of 12.9% was not unreasonable after making the addition and was also in line with the finding of Tribunal in the case of Ramesh Kuma (supra) regarding the reasonability of profit in the case of contractor. The ld. CIT(A) accordingly restricted the addition to ₹ 3,96,333/- , vide appellate orders dated 30-12-2015 passed by learned CIT(A). 6. Aggrieved by the appellate order dated 30-12-2015 passed by the ld. CIT(A) .....

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d by Revenue. The ld. Counsel submitted that the assessee could not produce the vendors before the authorities below, however, all the details were furnished before the A.O. 8. The ld. D.R., however, relied upon the orders of authorities below. 9. We have considered the rival contentions and also perused the material available on record including the judicial decisions cited by the parties. We have observed that the assessee is a government electrical contractor working under the name and style .....

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ts. It was also revealed from the statements recorded by the Sales Tax Department u/s.14 of the Maharashtra Value Added Tax, 2002 of the hawala dealers and the affidavits filed by them, that the hawala dealers, in fact, did not do any genuine business and they have only issued bogus sale bills to various parties without supplying any goods. There were no corresponding purchases to such bogus sale bills. The bogus sale bills were supplied on commission basis. The payments received in the form of .....

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by bogus bills issued by hawala dealers . The said hawala dealers have given affidavit and statements before the Sales Tax Authorities that they were engaged in providing accommodation entries whereby bogus bills were issued against which no goods were supplied by them. As per the list received from the DGIT (Inv.), Pune, the assessee is found to be one of such beneficiary. The assessee submitted copies of purchase bills and also stated that payment have been made through cheques. The assessee c .....

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