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TMI Blog2016 (11) TMI 885X X X X Extracts X X X X X X X X Extracts X X X X ..... amit 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 dated 22nd January, 2015 passed by the learned Assessing Officer (hereinafter called the AO ) u/s 143(3) r.w.s. 147 of the Income Tax Act,1961 (Hereinafter called the Act ). 2. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called the Tribunal ) read as under:- 1. The ld. CIT (Appeal) erred in confirming addition of ₹ 3,96,333/- as profit on purchases of ₹ 31,70,670/-. 2. The appellant requests to delete 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 D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged in genuine business. During the course of assessment proceedings, assessee produced bank book, cash book, ledger, sales register, purchase register and financial statements. The assessee was asked to furnish names and addresses of parties from whom purchases were made and to whom sales were made. Also, it was specifically 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 rupees 270503389521V Sidhivinayak Steels AGVPS7889Q 2009-10 2113302 27120627472V Harish Metal Tubes AHYPJ8223D 2009-10 1057368 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09-10 34,58,466/- 7,82,268/- 22.61% 3,60,670/- 10.43% 2010-11 90,70,063/- 19,12,587/- 21.09% 8,35,850/- 9.22% Particulars 2009-10 Net Profit as per books of a/c 8,35,850 Addition made by AO 31,70,670 Net profit after addition 40,06,520 Revised NP % 44% It was submitted by the assessee that if the entire 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 no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases in the open market but had obtained bills from the hawala operators , but however there is no one to one correlation 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 decision of the Hon'ble Gujarat High court in the case of CIT vs. Simith P. Sheth, the learned CIT(A) held that it would be appropriate if 12.5% of the amount of unproved purchases of ₹ 31,70,670/- amounting to ₹ 3,96,333/- is disallowed in the hands of the assessee. This addition will be over and above the profits of ₹ 7,82,140/- shown by the assessee in his return of income. Thus, the net profit would be ₹ 11,78,473, approximately 12.9% of contact receipts. In the previous year, the net profit was 10.43% and in view of this, the profit margin of 12.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts 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 concern and gets a cut in return. The beneficiary , in return gets the input tax credit on the material , he had never purchased in reality the material represented 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 could not produce the parties from whom the material was procured before the authorities below while notices u/s 133(6) of the Act issued by authorities below either remaine ..... X X X X Extracts X X X X X X X X Extracts X X X X
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