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2017 (5) TMI 203 - ITAT MUMBAI

2017 (5) TMI 203 - ITAT MUMBAI - TMI - Bogus purchases - invoices were incomplete with respect to details of transportation etc. - Held that:- Prima facie, it appears that the addition has been made solely on the basis of information received from the Sales Tax department and statement made u/s 133A by the MD of assessee company during survey operations. Therefore, we find lapses on both the sides. The Tribunal, invariably, in all such cases, have taken a stand that even if presuming that all pu .....

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528/- which comes to ₹ 84,12,316/-. Hence, addition to that extent is confirmed. - Decided partly in favour of assessee - Addition on account of Service Tax Liability u/s 43B - Held that:- Respectfully following the jurisdictional High Court in CIT Vs. Ovira Logistics Private Limited [2015 (4) TMI 684 - BOMBAY HIGH COURT ] Rigor of Section 43B do not apply in case the liability to pay service tax did not arise as per the relevant Service Tax Rules notwithstanding the fact that the same .....

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-2017 - SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM For the Appellant : Dr. K.Shivram & Shri Rahul Hakani, Ld. ARs For the Respondent : Dr. A.K.Nayak, Ld. DR ORDER Per Manoj Kumar Aggarwal (Accountant Member) 1. The captioned appeals by assessee as well as by revenue for Assessment Years [AY] 2009-10 & 2010-11 assails common order of Ld. Commissioner of Income Tax (Appeals)-22 [CIT(A)], Mumbai dated 18/08/2014. Since the issues springs out of common sets of facts, we dispose- .....

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he total income of the assessee was determined at ₹ 10,09,83,380/- under normal provisions after addition of certain bogus purchases for ₹ 6,72,98,528/- as against income of ₹ 3,36,84,850/- determined in the original assessment u/s 143(3)(iii) dated 25/12/2011. The assessee had filed its return of income on 30/09/2009 declaring total income of ₹ 3,30,14,320/-. The assessee was engaged as civil and labour contractors during the impugned AY. The reassessment proceedings wer .....

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4V 46,528/- 3. Cosmos Enterprises 27490290339V 56,871/- 4. U.V.Distributors Pvt. Ltd. 27450611043V 5,38,670/- 5. Om Corporation 27310540795 V 20,856/- 6. Saican Mercantile Pvt. Ltd. 27290614817V 2,93,69,074/- 7. Subhlabh Metal and Alloys Pvt Ltd. 27940590646V 3,28,97,322/- Total 6,72,98,528/- During Survey operations, a statement u/s 133A was recorded from the MD of the assessee company which was retracted later on. The assessee denied having indulged in any such bogus purchases and contested th .....

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ould not furnish any evidence to controvert the declaration and disclosure made during the course of survey proceedings which led the AO to make impugned additions. 3. Aggrieved, the assessee contested the same before Ld. CIT(A) with partial success vide order dated 18/08/2014 where it raised similar pleas and contended that the assessee being civil contractors, could not have carried out its business without actual delivery of goods and therefore, the purchases were genuine particularly when th .....

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sidering various judicial pronouncements on the subject, the Ld. CIT(A) restricted the disallowance to 20% of alleged bogus purchases which came to ₹ 1,34,59,705/-. Still aggrieved, the assessee is in appeal before us. The revenue is in appeal against relief provided by the Ld. CIT(A). 4. The Ld. Counsel for assessee, Dr. K.Shivram, while drawing our attention to voluminous documents placed in the paper- book, contended that the assessee worked as contractor / sub-contractor mainly for gov .....

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chases could not be doubted. Per contra, the Ld. DR contended that adequate relief has already been provided by Ld. CIT(A) to the assessee and therefore, no further relief could be granted to the assessee on the facts of the case. The assessee produced additional evidences before Ld. CIT(A) which were never subjected to AO s scrutiny. Further, the onus to substantiate the purchase squarely lied on the assessee and the assessee has failed to discharge the primary onus of proving the purchases con .....

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rom these suppliers, the delivery of which required elaborate transportation and the assessee was expected to prove the actual delivery of material with transportation details, transport/GR receipts, Stock inward register etc. On the other hand, no concrete efforts has been made by revenue to establish the purchases as non-genuine beyond doubt by obtaining confirmatory letters etc. from the alleged bogus suppliers. Prima facie, it appears that the addition has been made solely on the basis of in .....

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xtent and the addition, if any, which has to be made in all such cases is to account for profit element embedded in such purchase transactions. Therefore, after due discussion with both the representative, we estimate the addition @12.5% of bogus purchases of ₹ 6,72,98,528/- which comes to ₹ 84,12,316/-. Hence, addition to that extent is confirmed. Consequently, the assessee s appeal stands partly allowed whereas the revenue s appeal stands dismissed. 6. Now, we take up Assessee s Ap .....

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led the relief provided by the Ld. CIT(A) whereas the assessee has assailed the addition confirmed by the Ld. CIT(A). 8. As we have already decided the issue in AY 2009-10 and partly allowed the appeal of the assessee by restricting the addition to 12.5%, there being no major change in facts or circumstances except for figures etc., taking the same stand, we restrict the impugned additions to 12.5% of ₹ 2,01,71,071/- which comes to ₹ 25,21,384/-. Hence, the revenue s appeal stands di .....

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he same attracted disallowance u/s 43B. The assessee contended that since the amount was not collected from the customers, the liability to pay the same did not arise in terms of Rule 6 of the Service Tax Rules. Further, the assesse never debited /routed the same though Profit & Loss account and therefore never claimed deduction thereof and hence, no such disallowance could be made. However, upon perusal of sub contract agreement entered into by the assessee with its customers, it was notice .....

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se laws, the Ld. CIT(A) partly allowed the claim of the assessee by directing the AO to verify the amount of Service Tax collected by the assessee and disallow that portion which was collected but not paid. Aggrieved, the assessee is in appeal before us. 10. The Ld. AR has raised similar contentions before us and contended that the assessee maintained separate account of Service Tax wherein the service tax collected was credited thereby showing payable and the service tax paid on material etc. f .....

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were not applicable to the same. Reliance has been placed on the judgment of Hon ble Delhi High Court in CIT Vs. Noble & Hewitt (I) Pvt. Ltd. [2008 305 ITR 324] which was followed by Mumbai Tribunal in Pharma Search Vs. ACIT [53 SOT 1]. 11. Per Contra, Ld. DR contended that the assessee could follow either inclusive method or exclusive method of accounting and the assessee followed exclusive method under which the service tax liability was not routed through Profit & Loss Account and dir .....

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end that as per this explanation, any sum payable means a sum for which the assessee incurred liability in the previous year even though such sum might not have been payable within that year under the relevant law. Therefore, the assessee incurred the liability during impugned AY which, in fact, may not be payable under the relevant service tax rules and therefore, Section 43B was rightly invoked. Reliance was placed on the judgment of Apex court in Chowringhee Sales Bureau P. Ltd. [1977 110 ITR .....

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e service tax rules, as they stood at relevant time, the assessee was liable to pay service tax only upon actual realization of services rendered against that liability and not on accrual basis. Therefore, we find although the service tax liability may have been shown as outstanding at year end, yet the same may not have become actually payable as per Service Tax Rules. At this juncture, the view taken by Mumbai Tribunal in Pharma Search Vs. ACIT [supra] becomes relevant where the Tribunal after .....

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ira Logistics Private Limited [ITA No. 1023 of 2013 17/04/2015] dealing with the same issue has made similar observations:- 9] Having perused the aforesaid decisions, we are clearly of the view that Section 43B does not contemplate liability to pay service tax before actual receipt of the funds in the account of the assessee. In our view, liability to pay service tax into the treasury will arise only upon the assessee receiving the funds and not otherwise. Accordingly, when services are rendered .....

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