Pr. Commissioner of Income Tax-19 v. S V Jiwani

2. The following questions of law have been proposed for our consideration: “6.[1] Whether on the facts and in the circumstances of the case and in law, the order of the Hon’ble ITAT is perverse in not considering the order of Hon’ble Supreme Court in the case of N K Protein Ltd. dated 16.01.2017, which is on the similar issue of bogus purchases and when the Hon’ble Apex Court order was already the law of the land when the Hon’ble ITAT has pronounced its order on 03.05.2017?

6.2. Whether on the facts and in the circumstances of the case and in law, the Honble ITAT erred in ignoring the decision in the case of N K Proteins by Hon’ble Ahmedabad High Court, further affrmed by Hon’ble Supreme Court, as mentioned at ground No. 1 above, wherein Hon’ble High Court, relying on the fndings of the Hon’ble ITAT, Ahmedabad, that the suppliers are bogus, has given a fnding that once the suppliers are R.V. Patil 2 of 7 held bogus, then it is not correct to tax only 25% of the bogus claims? This is further supported by the fact that in this case also, the AO has categorically and conclusively held that the parties from whom the purchases are shown to be made are bogus purchases as the concerns are providing bogus bills and this fnding of the AO has been further strengthened by the fndings of the higher appellate authority which is never controverted by Hon’ble ITAT? 6.[3] Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT erred in overlooking the fact that addition made by AO based on details of scam unearthed by Sales Tax Department wherein it was established that the assessee had taken bills from bogus parties without actually making purchases from them? 6.[4] whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT erred in ignoring that the purchases from bogus parties are debited in P & L Account for which the assessee had not submitted any evidences, and the same was not allowable?

6.5. Whether on the facts and in the circumstances of the case and in law, the Hon’ble ITAT erred in upholding the order of the Ld.CIT(A) who had limited and disallowance to the extent of 12.5% of the total alleged purchase without verifcation and confrmation of quantitative data of material sourced and its subsequent movement during the year?”

3. Briefly stated the material facts are as under: The Assessee undertakes civil contract works awarded R.V. Patil 3 of 7 mostly by Municipal Corporation of Greater Mumbai (MCGM). Return of income was fled for the assessment year 2009-10, declaring a total income of Rs.92,36,071/-. The assessment was completed under Section 143(3) of the Act, at a total income of Rs.93,72,290/-. The case of the assessee was reopened on the basis of information received from Sales Tax Department through DGIT (Inv.), Mumbai, that the assessee had made purchases of Rs.4,50,08,383/-, which seemed to be accommodation entries. An order under Section 143(3) r/w Section 147 was passed on 26th March, 2014, making an entire addition of Rs.4,50,08,383/- as bogus purchase under Section 69C of the Act, thereby determining the assessee’s income at Rs.5,43,80,670/-.

4. An appeal was preferred before the Pr. Commissioner of Income Tax, (Appeals), who allowed the appeal partly vide its order dated 19th May, 2015. The Appellate Authority held that payments made by the assessee were through banking channels and that there was no evidence to prove that the cash had flowed back to the appellant. Purchase invoices and R.V. Patil 4 of 7 ledger statements also appear to have been produced before the Appellate Authority. It was held that what was taxable under the Income Tax Act, was only the real income. Even when the transaction was not verifable only the income component, could be taxed and not the entire transaction amount. It was also held that it was undisputed that the sale proceeds of the goods had been duly accounted for in the books and offered to tax, hence, the entire purchase amount could not have been added in the present case and that with a view to plug any revenue leakage in the aforementioned circumstances, disallowance of @12.5% was held to be reasonable to safeguard the interest of revenue. It, therefore, confrmed the addition to the extent of 12.5% of the alleged purchases of Rs.4,50,08,383/- i.e. Rs.56,26,047/-, therefore, relief was granted to the appellant to the extent of Rs.4,50,08,383/- – Rs.56,26,047/- = Rs.3,93,82,336/-. The order of CIT (Appeals) was challenged before the Tribunal vide its order dated 03rd May, 2017, dismissed the same. It was held that without purchasing materials and R.V. Patil 5 of 7 goods, it would not have been possible on the part of the assessee to execute the contract work with the MCGM, which is a Government Authority. It also held that the A.O. had not disputed the turnover of the contract work executed by the assessee and that unless the assessee procured the materials and goods, if not from the declared sources but from some other sources, it would not be possible on the part of the assessee to execute work awarded by MCGM. The Tribunal, therefore, held that the entire purchase made by the assessee could not be added back as income, but only proft element embedded therein, be treated as income of the assessee.

5. We have gone through the well reasoned order of the Tribunal, which has taken into account all relevant facts before passing the order impugned. In our opinion, the order does not warrant any interference. No substantial questions of law arise in the present appeal and the same is, accordingly, dismissed.

6. Learned Counsel for the Respondent stated that he did not wish to press the cross objections in CROL No. 16 of 2018 R.V. Patil 6 of 7 and the same is, accordingly disposed of. (VALMIKI SA MENEZES, J.) (DHIRAJ SINGH THAKUR, J.) R.V. Patil 7 of 7