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Deputy Commissioner of Income-Tax Versus IHR Associates

2018 (1) TMI 580 - ITAT CHANDIGARH

Bogus purchase - failure to discharge the onus of proving the purchase of material as genuine - Held that:- The assessee has been continuously declaring the net profit in the range of 1.71 per cent. to 4.65 per cent. and the disallowance made by the Assessing Officer if accepted would increase the net profit to the tune of 25.15 per cent. which is very abnormal. The contention of the authorised representative that the suppliers of these goods have no permanent place for carrying on the business .....

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ork done has been confirmed by the Government departments. - In the case of CIT v. Leader Valves P. Ltd. [2006 (2) TMI 126 - PUNJAB AND HARYANA High Court] wherein held that if the purchase were treated as bogus it would be impossible to manufacture the goods shown to have been manufactured by it. This is applicable in the case of the assessee also as the disallowance will lead to net profit of 25 per cent. and also the fact that the work executed by the assessee has been certified by the Go .....

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peals) deleting the addition is hereby confirmed. - Decided in favour of assessee. - I. T. A. No. 60 /Chd/ 2017 And Cross Objection No. 10 /Chd/ 2017 - Dated:- 2-11-2017 - Smt. Diva Singh (Judicial Member) And Dr. B. R. R. Kumar (Accountant Member) For the Assessee : Sudhir Sehgal For the Department : Manjit Singh for the Department. ORDER Dr. B. R. R. Kumar (Accountant Member).- 1. The present appeal has been filed by the assessee and cross-objection filed by the Revenue against the common orde .....

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(Appeals) was justified in not appreciating the fact that the assessee could produce confirmation/ supplier only to the tune of 61.93 per cent. of the total purchases of ₹ 5,27,81,496 and in not appreciating that the onus is on the asses see to prove the genuineness of the entice purchases claimed to have been made by it." 3. The assessee has raised the following grounds in its cross-objection : "1. That the worthy Commissioner of Income-tax (Appeals) has erred in restricting th .....

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rm who is a civil contractor carried on contract of construction of roads and building etc. The assessee had debited the purchases of construction material in the shape of bitumen, stone/crasher, sand, bricks, cement, mitti etc, to the tune of ₹ 5,27,81,496. The Assessing Officer further noted that almost all the payments were made in cash not exceeding the monetary limit laid down under section 40A(3) of the Act totalling ₹ 47,31,397. Further the Assessing Officer has issued notice .....

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f Income-tax (Appeals) vide order dated October 7, 2016 has restricted the addition of ₹ 1,97,55,357 to ₹ 15,00,000. While deleting the addition the learned Commissioner of Income-tax (Appeals) has held as under : "Apparently, this is the case wherein the Assessing Officer has not followed some basic facts of the case. Apparently, the appellant is engaged in the business of civil construction. The Assessing Officer made additions on account of unverifiable purchases to the tune .....

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ppellant during the course of assessment proceedings, was asked to file the party wise details of the purchases made by the assessee. The complete list of 30 persons along with the addresses of parties were filed with the Assessing Officer and this information was filed on the basis of whatever information the assessee had about such parties. The appellant further contended that the suppliers of these goods have no permanent places for carrying on the business. In view of the circumstances and t .....

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of hearing before the Assessing Officer. 3.7 The appellant has further strongly contended that the appellant is in line of this business from past many years and in the earlier years the book results of the appellant have been accepted consistently year after year on the basis of same set of records and books of account as maintained in this year. Apart from this the appellant has further contended that the appellant was asked to file the confirmation is in respect of such purchases of ₹ 1 .....

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ining to stone/crasher, sand, bricks, mitti and such items are necessary for the purposes of execution of the contract and without which, the various contracts could not be completed is not justifiable. The appellant has further submitted the quantitative tally in respect of various items as purchase by them and which proves that the actual material has been consumed by the appellant for the purpose of execution of time bound contract. The appellant has further strongly contended that the Assess .....

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o bogus purchases and it was held that since the assessee maintains proper quantitative details of the purchase/sales made and there was no outstanding balance of the parties in whose case addition on account of bogus purchase was made and therefore, the addition made by the Assessing Officer was deleted by the Income-tax Appellate Tribunal. 3.9. Apart from the above submission, the appellant has really strongly contended that it has declared a net profit rate of 2.07 per cent. in its profit and .....

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uent years the net profit rate is somewhere between 2.64 per cent. and 3.50 per cent. The appellant has relied upon a chart of net profit ratios of earlier years and subsequent years. Assessment year Gross Work Done i.e., Sales Net Profit N. P. Ratio N. P. after N. P. 2009-10 1,83,69,944 3,92,449 2.14 % NIL 2.14% 2010-11 3,95,09,598 6,75,578 1.71% NIL 1.71% 2011-12 8,56,17,738 17,72,675 2.07 % 2,15,28,032 25.14% 2012-13 9,80,97,467 20,37,288 2.08 % 25,89,027 2.64 % 2013-14 9,48,06,276 27,72,423 .....

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r Amount of purchases 1 Abinash Traders, Ludhiana ₹ 10,07,100 2. Guru Teg Bahadur Co., Ludhiana ₹ 10,45,800 3. Shivam Enterprises, Ludhiana ₹ 12,75,300 4. Vishal Stone Enterprises ₹ 11,45,350 5. Shiv Shankar Stone ₹ 14,97,100 6. Sukhdev Crasher and Stone, Ludhiana ₹ 10,12,965 7. Surjit Traders, Ludhiana ₹ 10,49,600 8. Sidhu Brickworks, Ludhiana ₹ 5,76,075 9. Punjab Cement, Ludhiana ₹ 2,00,440 b. The appellant did not produce following supplie .....

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10. Sharma and Co., HP ₹ 5,05,900 11. Radhey Sham and Co. HP ₹ 5,09,000 12. Janta Crusher, HP ₹ 5,85,600 13. J. S. Road Carriers, HP ₹ 6,84,797 14. Choudhary Traders Jalandhar, HP ₹ 8,25,425 15. Moqe Walian Di Company, Sarna (PB) ₹ 8,30,300 Total ₹ 1,97,55,537 Accordingly, in view of the above facts the Assessing Officer held that the purchases of ₹ 1,97,55,537 pertaining to purchases of construction material in the shape of bitumen stone/crasher, .....

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he appellant, in my opinion the Assessing Officer who had given show cause during the course of assessment proceedings of assessing income at the rate of 12 per cent. has failed to take steps which would statutorily casted upon him to arrive at the conclusion to make him adding the huge addition of ₹ 1,97,55,537 on account of discrepancies in verification of the purchasers. In my view, the Assessing Officer has failed to apply the logic behind the rejection of an entire purchase of ₹ .....

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before applying his logic of making such huge addition. The fact that of accounts of the appellant has been audited by the chartered accountant and the Assessing Officer has not pointed out any major defects and rejected the books of account in order to arrive the true affairs of the appellant. 3.12 Apparently, it is observed that the Assessing Officer has completely ignored the history of the appellant in preceding years and subsequent years. The net profit shown by the appellant shows that the .....

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wherein the turnover was ₹ 9,80,97,467 and the Assessing Officer made the addition of ₹ 25,89,027 which worked out the net profit at the rate of 2.64 per cent. Whereas, in the assessment year in question the profit rate after completion of assessment comes to 25.14 per cent. which is highly exorbitant. 3.13 Therefore, after considering all the facts of the case and the decisions relied upon by the appellant in my considered view the addition of ₹ 15 lakhs would be enough to tak .....

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essee has failed to produce the parties thus failed to discharge the onus of proving the purchase of material as genuine. It was further argued that since the business is on going process there should not have been any difficulty for the assessee to produce the parties pertaining to sand and bricks and also keeping in view the fact that it is very unlikely that the stone crushers shift their plant and operations frequently. 8. The learned authorised representative has submitted that out of the & .....

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d the material placed before us and also the order of the learned Commissioner of Income-tax (Appeals). 10. The assessee has been continuously declaring the net profit in the range of 1.71 per cent. to 4.65 per cent. and the disallowance made by the Assessing Officer if accepted would increase the net profit to the tune of 25.15 per cent. which is very abnormal. The contention of the authorised representative that the suppliers of these goods have no permanent place for carrying on the business .....

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ork done has been confirmed by the Government departments. In the case of CIT v. Leader Valves P. Ltd. [2006] 285 ITR 435 (P&H) wherein the hon'ble High Court held that if the purchase were treated as bogus it would be impossible to manufacture the goods shown to have been manufactured by it. This is applicable in the case of the assessee also as the disallowance will lead to net profit of 25 per cent. and also the fact that the work executed by the assessee has been certified by the Gov .....

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