New Consolidated Construction Company Ltd. Vs DCIT (ITAT Mumbai)
The assessee conceded that to buy peace of mind he was ready to accept the percentage as consistently applied by the Tribunal in other cases. When a query was put to the revenue he also fairly agreed for a reasonable percentage.
ITAT held that Profit rate of 12.5% of bogus purchases was to be applied as had been applied by Gujarat High Court in Smith P. Seth’s case. AO was directed to compute the income of all these assessment years accordingly and not the entire bogus purchases were to be added.
FULL TEXT OF THE ITAT ORDER IS AS FOLLOWS:-
In these five appeals, one by Revenue and rest four by the assessee are arising out of the different order of Commissioner (Appeals)-5, Mumbai, (in short Commissioner (Appeals)) in appeal Nos. IT-270/31/16-17, IT-109/14-15, IT69/13-14/496/14-15, IT-906/13-14 dated 2-5-2016, 15-07-2015,31-03-2015, 19-11. The Assessments were framed by the Deputy Commissioner (OSD) & Addl. Commissioner, Circle-2(2), Circle 2(3), Mumbai (in short DCIT, ACIT) for the assessment years 2008-09, 2009-10, 2010-11, 2011-12 vide orders dated 2-12-2010, 27-12-2011, 28-3-2013, 31-1-2014 under section 143(3) of the Income Tax Act, 1961(hereinafter ‘the Act’).
2. The first common issue in all these appeals of assessee is as regards to the order of Commissioner (Appeals) confirming the action of the assessing officer in reopening the assessment under section 147 of the Act as well as on merits also holding that the purchases are bogus. For this assessee has raised identical worded grounds in all the years and hence, will take up the facts and ground from assessment year 2008-09 in ITA No. 4688/Mum/2016 i.e. ground No. 1 to 3 reads as under :–
“1. Disallowing a total sum of Rs. 1,25,07,876 in the reassessment order passed under section 143(3) r.w,s 147 of the Income Tax Act in respect of purchases made from the following parties on the alleged ground that genuineness of the said purchases could not be established.
2. That the learned Commissioner (Appeals) ought to have appreciated that your petitioners’ case for the aforesaid yea had gone through a detailed scrutiny and the then assessing officer after satisfying himself with regards to the expenses above S laths passed the order under section 143(3) of the income tax act. Accordingly, the 01(A) ought to have appreciated that the said reopening proceedings are invalid and bad in law on account of the fact :–
a. That there was no ‘reason to believe’ that the income chargeable to tax had escaped assessment and a mere change in opinion cannot be a basis for reopening of the assessment proceedings. December
b. That merely based on information provided by DGIT Investigation which in turn was received from the sales tax department, and not on the basis of independent application of mind by the assessing officer himself, cannot be a basis for reopening.
c. That merely based on general affidavits from above mentioned parties without the name of your petitioners being specifically mentioned cannot be basis to come to a conclusion that there is ‘reason to believe’ that income has escaped assessment.
That the Commissioner (Appeals) ought to have appreciated that your petitioners during the scrutiny proceedings have provided various documentations to justify that the said purchases are genuine and not bogus. The documents provided includes :–
♦ Ledger Account of the all the above mentioned parties in the books of your assesse.
♦ Invoices raised by all the above mentioned parties
♦ Sank statements showing payments made to the above parties
♦ Delivery challans.
♦ Purchase order
Also the TIN Number of the said parties was made available and was also reflected on the purchase invoices which establish the identity of the party and the genuineness of the said purchases.
3. At the outset, the learned Counsel for the assessee fairly conceded that in assessment year 2008-09 and 2009-10, the issue is regarding reopening and under the instructions of the assessee he is not interested in prosecuting the issue of reopening. As the learned Counsel for the assessee has not contested the issue of reopening and fairly conceded, the same can be dismissed as not pressed. Accordingly, we dismiss the issue of reopening as not pressed in these two assessment years.
4. Coming to merits of the case, the assessee had made the following purchases from the following parties :–
