TaxTMI 
TaxTMI 
2022 (7) TMI 1131
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....e has raised the following grounds of appeal. "1. On the facts and in the circumstance of the case and in law the Hon'ble CIT(A) erred in upholding the addition of Rs. 36,82,500/- made by the Ld. AO on account of genuine labour charges paid and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and Rules made there under. 2. On the facts and in the circumstances of the case and in law the Hon'ble CIT(A) erred in confirming the addition to the extent of Rs. 1,02,23,000/- being alleged bogus purchases as unexplained purchases u/s 69C without appreciating that all the purchases are genuine and have been used for execution of contract of BMC a semi Govt organization and the reason assigned for doing so are wrong and contrary to the provisions of Income Tax Act and rules made there under: 3. Your appellant craves leave to add to, amend alter or delete any of the above grounds of appeal on or before the date of hearing." 2. The Brief facts of the case are that the assessee is a civil contractor and Labour contractor. The assessee has filed the return of income for the A.Y 2008-09 on 10.03.2014 with a total income of Rs....
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....1321-. Please explain the same along with documentary evidence, furnish the copy of bank extract also. 5) As per AIR information you have purchase immovable property valued at Rs. 30,60,0001- on 1511212007 & Rs. 50,00,0001- on 2810112008. Please furnish copy of purchase deed & furnish the details of source of investments alongwith documentary evidence. 6) Please furnish copy of TDS Return filed. Furnish the details of payment to contractor & proof of TDS deposited into the Govt. account. 7) Please furnish loan confirmation of unsecured loan from various parties amounting to Rs. 40,00,0001- and Rs. 21,51,1201- along with proof of credit worthiness of donor as well as evidence of payment in the form of bank statement.. 8) Please furnish the details of deposit made amounting to Rs. 1,00,00,000/-. 9) Please furnish detail of sundry creditors of Rs. 1,57,78,772/- alongwith confirmation and copy of ledger extract party wise. 10) Please furnish details with Name, amount and PAN of sundry debtors of Rs. 1,03,26,215/- 3. The assessee has filed the details on 23.02.2015 and 27.02.2015 referred at page 4 and 5 of the order: Rep....
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....ersons to whom the amounts are paid and to produce the copy of ledger account, original bills and vouchers. Whereas the assessee could not substantiate with proper evidences in respect of claims. The A.O considering the facts of cash payments has estimated the adhoc addition @10% of the claim which worked out to Rs.36,82,500/-. 4 (ii) The disputed issue is with respect to unexplained purchases, were the A.O. has issued notice u/s 142(1) of the Act dated 12.02.2015 to furnish the details of purchases amounting to Rs.3,40,68,693/- along with month wise summary and also to submit the details of sundry creditors of Rs. 1,57,78,792/- along with the confirmation and ledger account of the parties. In response to the requisite information, the assessee has filed the details containing the list of parties. The A.O based on the books of accounts seized on 23.05.2012 from the office premises of M/s Mukesh Brothers,(Proprietary concern of the Assessees father) found the name and address of some parties. Whereas, the A.O. has issued notice u/s 133(6) of the Act on 18.02.2015 to do independent verification on the 14 parties and there was no response. Therefore the A.O has issued a show cause ....
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....hers submitted during the remand proceedings before the A.O. Finally, the CIT(A) was not satisfied with the explanations and relied on the remand report and confirmed the action of A.O. and dismissed this ground of appeal. 5(ii) Whereas, the CIT(A) on the second disputed issue with respect of bogus purchases and sundry creditors dealt on the transactions and the nature of the bogus purchases and called for report of the A.O under Rule 46A of I T Rules for admitting the additional evidence. The CIT(A) considered the submissions made by the assessee's father and brother before the Honble settlement commission. Further, the CIT(A) has considered the facts, nature of business, and time of purchase, statement U/sec132(4) of the Act and the history of the transactions and finally has restricted the bogus purchases u/sec69C of the Act to the extent of 30% as against 100% by the A.O. In respect of outstanding sundry creditors balance as on 31.03.2008 of Rs.1,57,78,772/-, the assessee has submitted the details of sundry creditors and the CIT(A) has observed that the total purchases made during the year are more than the respective vendors and once the total purchases have been considered....
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....isallowance though it was demonstrated that the assessee is engaged in the business of road construction and construction of small bridges and other projects. In the assessment proceedings, the assessee has submitted the details duly supported with evidences but the A.O was not satisfied with the information and made a adhoc disallowance of labour charges @ 10%. The assessee is engaged in execution of projects as a contractor of BMC and engages laboures /workers and the payments are made in cash and in few cases by cheques .When the payments are made in cash, generally there are self made vouchers and signed by the labourer on revenue stamp affixed on cash vouchers and the cheque payments are identified in the bank account statements. The A.O has made 10% adhoc disallowance without considering the facts and not appreciating the nature of execution of contract works with daily labourers who are in the unorganized sector and not educated and does not have bank account and payments are made on daily basis/ weekly and was incurred in the normal course of business operations. The Ld. DR submitted that the assessee should have maintained proper records in respect of the labour charges an....
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....he persons and not to the firms and for various reasons the assessee could not produce certain details due to non collection of information and non availability of concerned persons. Therefore, the A.O has not doubted the labour charges but considering the fact that there is discrepancy in respect of the maintaining of the records and the labour charges are paid without any proper verification and made an adhoc addition @ 10%. The A.O has made addition without any proper verification or enquiry. We are of the opinion that the addition @ 10% on the adhoc basis is without primary evidence and cannot be sustained but the fact remains that the assessee should fallow the minimum necessary norms and maintain such records necessary for authentication of the claims before the appropriate authorities and the assessee shall be bound to maintain the records at least in future. Accordingly, we modify the order of the CIT(A) on this disputed issue and restrict the disallowance to the extent @ 3% instead of @10% and partly allow this ground of appeal of the assessee. 8. On the second disputed issue with respect to addition of 30% alleged bogus purchases sustained by the CIT(A). The assessee i....
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....@ 7.22% and net profit(NP) rate@ 6.28% which is higher than the bench mark of industry standards. The contentions raised by the Ld.AR that the total purchases cannot be disbelieved and also considering the fact that the assessee is offering GP of 7.22% which is more than the 4.59% and 7% offered by the assessee's father and brother before the Honble Settlement Commission which the CIT(A) has relied. We are of the opinion that the submissions of the Ld. AR are realistic and the statements u/sec132(4) of the Act was retracted by the assessee's father and brother and the same was not considered by the CIT(A). We find the coordinate Bench of the Honble Tribunal on similar isssues in the case of M/s. Ramesh Kumar and Co. Vs ACIT in ITA No. 2959/Mum/2014 dated 28.11.2014 has dealt and observed at page 5 Para 8 to 9 read as under: 8. We have carefully perused the orders of the lower authorities and the relevant documentary evidences brought before us. We find that the AO has made the addition as some of the suppliers of the assessee were declared Hawala dealer by the Sales tax Department. This may be a good reason for making further investigation but the AO did not make any furth....
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....eing profit element embedded in such purchases. 8. The assessee is in further appeal before us against the addition of Rs.13,86,035/- as upheld by the CIT(A). From the record, we found that with regard to these purchases, what is to be seen is utilisation of goods purchased which has been proved by assessee by providing all the details. From the record we found that the during year under consideration, assessee had sales of Rs.1,01,88,39,392/- on which assessee has declared gross profit of Rs.17,79,05,770/- . Thus, assessee has declared gross profit rate of 17.46%. However, in the assessment year 2009-2010 and 2010-2011, the gross profit rate so declared by assessee was 8.60% and 10.64% respectfully. Thus, it is very much clear that during the year consideration, assessee has declared much better gross profit rate of 17.46% as compared to the earlier years, therefore, making further addition of 15% on such purchase appear to be very unreasonable. Thus, keeping in view the gross profit rate so declared by the assessee during the year under consideration, we upheld the addition of 2% on such purchases in place of 15% as upheld by CIT(A). We direct accordingly. 9. In....
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....me of hearing, the Ld DR submitted that the CIT(A) has granted the relief irrespective of the fact that the assessee has failed to discharge his obligation on submitting proper details and also the notice u/s 133(6) of the Act from the parties are returned un served by the postal authorities. The CIT(A) erred in restricting 30% addition as non genuine purchases instead of confirming the order of the A.O and relied on the order of the A.O. 13. Contra, the Ld. AR submitted that the assessee has filed cross appeal in respect of the addition sustained by the CIT(A) as the GP rate/the profit element is very much less than the partial adhoc addition sustained by the CIT(A) and supported the order of the CIT(A) on this disputed issue of ground of appeal. 14. We heard the rival submissions and perused the material available on record. Prima-facie the Ld. DR contended that the CIT(A) has erred in granting the relief by sustaining only partial percentage to adhoc addition as bogus purchases instead of total addition. The Ld.DR emphasized that the genuineness has been not verified and the action of the CIT(A) is not tenable.At this juncture we considered it appropriate to refer to the o....
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....gus purchases of Rs. 26,45,88,621/- have been admitted in the statement u/s 132(4), which is approximately 30%. Similarly, in the case of Rajesh Trivedi of the total purchases of Rs. 24,78,09,165/- not genuine bills of Hawala Dealers of Rs. 7,54,08,326/- has been admitted in the statement, which is again approximately 30%. Drawing parallel in the case of the appellant, it is held that 30% of the purchases of the appellant are not genuine and therefore out of the total purchases of Rs. 3,40,76,674/-, 30% of the same i.e. Rs. 1,02,23,002/- is determined as the non-genuine purchases or Hawala purchases by the appellant during the year and the same are added to the total income of the assessee. The addition made by the AO on account of bogus purchases for A.Y. 2008-09, is therefore restricted to Rs. 1,02,23,002/-. We on perusal of the facts find that the CIT(A) was methodical in making the observations and relied on elaborate material information. The Ld. DR could not controvert the findings of the CIT(A) with any cogent evidence or information and relied only on the assessment order. Accordingly, we do not find any infirmity in the decision of the CIT(A) on this particular disputed....
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.... Hon'ble CIT(A) erred in upholding the addition of Rs. 15,25,000/- made by the Ld. AO on account of outstanding current liability without appreciating that the said outstanding liability is genuine and fully verifiable and the reason assigned for doing so are wrong and contrary to the provision of Income Tax Act and rules made there under:. 3. Your appellant craves leave to add to, amend alter or delete any of the above grounds of appeal on or before the date of hearing." 20. In respect of ground of appeal No.1 on disputed issue of labour charges quantification, the issue is identical to ITA No. 224/Mum/2020 for A.Y.2008-09 except the variance in figures. Therefore, the decision rendered in paragraph no 7 would apply mutatis mutandis for this issue also. Accordingly, this ground of appeal of the assessee is partly allowed. 21. As far as ground of appeal No.2, we find in assessment proceedings A.O has called for the details in respect of the outstanding current liabilities being labour charges payable in respect of two parties and the assessee has complied with the directions but the AO was not satisfied with the documentary evidences and made addition of Rs 15,25,000....