V/S.trans Conduct (India v. Vishwashakticonstruction[1

Digitally signedby PURTIPURTIPRASADPRASADPARABDate:PARAB2024.02.1312:11:17+0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1149 OF 2018 The Principal Commissionerof Income Tax – 25 V/s.Trans Conduct (India) ….Appellant …Respondent ---- Ms. Sushma Nagaraj a/w Ms. Sakshi Kapadia for Appellant. ---- CORAM : K.R. SHRIRAM & DR. NEELA GOKHALE, JJ. DATED : 7[th] FEBRUARY 2024 P.C. : 1.Revenue is impugning an order pronounced on 14[th] July 2017dismissing Revenue’s appeal for the Assessment Year 2011-12. Even if it istaken to be a case of bogus purchases as alleged by the Assessing Officer(A.O.), the A.O. not having disputed that the materials stated to have beenpurchased from several suppliers have been used in executing the contracts,as held by the various courts not the entire purchases but only profitelement embedded in such purchases can be added to the income ofassessee. It will be apposite to reproduce Paragraph Nos. 6 to 10 of thejudgment in Pr. Commissioner of Income Tax – 19 vs VishwashaktiConstruction[1.] xxxxxxxxx 6. An appeal was preferred before the CIT(A) by the assessee,who concurred with the A.O. that purchases from the tenparties in question were bogus but held that the entireamount of such purchases could not be added to the totalincome and that only the profit element embedded andsuppressed in the disputed purchases be assessed to income,which he estimated at 12.5%. The CIT(A) accordinglyretained the addition to the extent of 12.5% while deletingthe rest. 7. An appeal was preferred before the ITAT both by theassessee as also the revenue, which was finally decided byvirtue of the order impugned dated 20[th] January, 2017, whichis impugned in the present appeal. The Tribunal upheld theview of the CIT(A) to treat the purchases from ten parties asbogus and also upheld the view expressed by the CIT(A) tosustain the addition to the extent of 12.5% of the amount ofthe disputed purchases relying upon the decision of GujaratHigh Court in the case of CIT v. Bholanath Poly Fab Pvt. Ltd.(2013) 355 ITR 290 (Guj). 8. In a case involving a similar issue, even this Court inIncome Tax Appeal No. 398 of 2018 decided on 18[th] July,2022, had dismissed the appeal flied by the revenue on theground that if the entire amount of purchases were to be heldas non-genuine purchases, then it would not be possible tojustify as to how the works allotted to the assessee forexecution by the semi Government Agencies, could becompleted. 9. Even in the present case the Appellant is a contractor, whohad been allotted a subcontract for carrying out civil works ofroad and buildings repairs for which various types of buildingmaterials are stated to have been purchased from severalsuppliers including the ten suppliers, who are alleged to havebeen providing accommodation entries. It is not denied thatthe works allotted had been completed for the concernedagency, which would have been otherwise impossible, if theentire purchases made by the Appellant were to be held asnon-genuine. 10. In our opinion the order passed by the Tribunal warrantsno interference. No substantial questions of law arise in thepresent appeal. xxxxxxxxxx Paragraph Nos.4 and 8 of an order in Principal Commissioner of Income Tax vs. Hiren C. Parekh[2] also reads as under : xxxxxxxxxx 10. In our opinion the order passed by the Tribunal warrantsno interference. No substantial questions of law arise in thepresent appeal. xxxxxxxxxx Paragraph Nos.4 and 8 of an order in Principal Commissioner of Income Tax vs. Hiren C. Parekh[2] also reads as under : xxxxxxxxxx 4. We have considered the order of the AO. The AO does notdispute that purchases have been actually made but what isdisputed is whether purchases have been made from the said4 parties. The fact that payments were made to these partiesby way of account payee cheques is also not questioned byAO. The AO has not given any finding as to whether he haseven approached the bank or made any enquiries with thebank to find out genuineness of those payments. It is ofcourse recorded that the notices sent to those persons cameback undelivered and assessee was unable to provide anyactual delivery challans. What is material to note is that thepurchases themselves were not being disputed and what isdisputed is genuineness of the sellers. Therefore, in view ofthese factors, CIT(A), relying on a judgment of the GujaratHigh Court in CIT Vs. Simit Sheth [2013] 38 taxmann.com385/219 Taxman 85 (Mag)/356 ITR 451, came to aconclusion that not the entire purchases, but only profitelement embedded in such purchases can be added to theincome of the assessee. CIT(A) while deciding what isappropriate profit element percentage has very correctlystated that though there is no uniform yardstick adopted,while looking at the norms in the market and considering thetrade of the assessee, 12% gross profit on the impugnedcomponent of purchases is appropriate and directed the sameto be added to the profit of the assessee for that year. xxxxxxxxxx 8. Moreover, what would be actual profit margin in thebusiness that the assessee was carrying on and the matter ofcalculation before the concerned authority, whether thepurchases were bogus and the parties from whom suchpurchases were allegedly made were bogus are essentiallyquestions of fact for which evidence will have to be led.Therefore, in view of this, no substantial question of lawarises. xxxxxxxxxx 2. Even in the case at hand it is not disputed that assessee was a contractor who has executed the contracts. The A.O. also has not deniedthat the works have been completed which would not have been possiblewithout using the materials allegedly purchased. 3.In the circumstances, in our view, the order of the Income TaxAppellate Tribunal (ITAT) requires no interference. No substantial questionsof law arise. 4.Appeal dismissed. (DR. NEELA GOKHALE, J.) (K.R. SHRIRAM, J.)