ITO WD 3(1), THANE v. OMKAR HEAVY ENGINEERING LTD, THANE

ITA 5063/MUM/2015 | 2009-2010
Pronouncement Date: 22-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 506319914 RSA 2015
Assessee PAN AAACO4100E
Bench Mumbai
Appeal Number ITA 5063/MUM/2015
Duration Of Justice 2 year(s) 1 month(s) 6 day(s)
Appellant ITO WD 3(1), THANE
Respondent OMKAR HEAVY ENGINEERING LTD, THANE
Appeal Type Income Tax Appeal
Pronouncement Date 22-11-2017
Appeal Filed By Department
Tags No record found
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 22-11-2017
Assessment Year 2009-2010
Appeal Filed On 16-10-2015
Judgment Text
1 M/S OMKAR HEAVY ENGINEERING LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C MUMBAI BEFORE SHRI SAKTIJIT DEY(JUDICIAL MEMBER) AND SHRI G MANJUNATHA (ACCOUNTANT MEMBER) I.T.A NOS.6968 /MUM/2015) (ASSESSMENT YEAR: 2009-10) M/S OMKAR HEAVY ENGINEERING LTD PLOT NO.B-9 ROAD NO.15 WAGALE INDUSTRIAL ESTATE THANE PAN : AAACO4100E VS ITO WD.3(2) THANE APPELLANT RESPONDEDNT I.T.A NOS.5063/MUM/2015) (ASSESSMENT YEAR: 2009-10) ITO WD.3(1) THANE VS M/S OMKAR HEAVY ENGINEERING LTD PLOT NO.B-9 ROAD NO.15 WAGALE INDUSTRIAL ESTATE THANE APPELLANT RESPONDEDNT APPELLANT BY SHRI DR P DANIEL RESPONDENT BY SHRI RAJAT MITTAL DATE OF HEARING 08-11-2017 DATE OF PRONOUNCEMENT 22-11-2017 O R D E R PER G MANJUNATHA AM : THESE CROSS APPEALS FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-2 THANE DATED 29-0 7-2015 AND IT PERTAINS TO AY 2 M/S OMKAR HEAVY ENGINEERING LTD 2009-10. SINCE FACTS ARE IDENTICAL AND ISSUES ARE COMMON THESE APPEALS WERE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON O RDER FOR THE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF ENGINEERING GOODS FIL ED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2009-10 ON 29-09-2009 DECLARING TOTAL INCOME AT NIL. SUBSEQUENTLY THE CASE HAS BEEN REOPENED U/S 147 OF THE IT ACT 1961 BY ISSUING NOTICE U/S 148 ON 28-03-2013. THE CASE WAS REOPENED ON THE BASIS OF INFORMATION RECEIVED FROM THE DGIT(INV) WHICH STATE S THAT THE ASSESSEE IS ONE OF THE BENEFICIARIES OF BOGUS BILLS ISSUED BY HAWAL A OPERATORS AS PER THE LIST OF SALES-TAX DEPARTMENT. IT WAS FURTHER OBSERVED THAT THE ASSESSEE IS THE BENEFICIARY OF BOGUS PURCHASES FROM M/S SIDDHI VINA YAKA STEELS TO THE EXTENT OF RS.19 06 352. THEREFORE THE AO OPINED THAT IN COME CHARGEABLE TO TAX HAD BEEN ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTI ON 147 OF THE ACT. IN RESPONSE TO NOTICE ISSUED U/S 148 THE ASSESSEE VID E ITS LETTER DATED 09-04- 2013 SUBMITTED THAT THE ORIGINAL RETURN FILED U/S 1 39(1) MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 148 OF THE A CT. SUBSEQUENTLY THE CASE HAS BEEN SELECTED FOR SCRUTINY AND NOTICE U/S 143(2 ) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO NOTICES THE AUTHORIZED REP RESENTATIVE OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FURNISHED THE DETAIL S AS CALLED FOR. DURING THE 3 M/S OMKAR HEAVY ENGINEERING LTD COURSE OF ASSESSMENT PROCEEDINGS THE AO CALLED UPO N THE ASSESSEE TO JUSTIFY PURCHASES FROM M/S SIDDHI VINAYAKA STEELS IN THE BA CKDROP OF ALLEGATION OF SALES-TAX DEPARTMENT THAT M/S SIDDHI VINAYAKA STEEL S IS A SUSPICIOUS DEALER INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. IN RE SPONSE TO SHOW CAUSE NOTICE THE ASSESSEE HAS SUBMITTED THAT PURCHASES F ROM M/S M/S SIDDHI VINAYAKA STEELS ARE GENUINE WHICH ARE SUPPORTED BY PURCHASE BILLS AND ALSO EXCISE INVOICES ISSUED BY THE SUPPLIER M/S LLOYD M ETALS AND ENGNEERS AND M/S MAHARASHTRA SEAMLESS LTD AND THE ASSESSEE HAS AVAIL ED CENVAT CREDIT. THE ASSESSEE FURTHER SUBMITTED THAT THE RELEVANT RG-23A WHEREVER EXCISE CREDIT AVAILED WERE ALSO FURNISHED TO THE AO. THE ASSESSE E FURTHER SUBMITTED THAT THE CENTRAL EXCISE DEPARTMENT HAD CONDUCTED EXCISE AUDI T WITHOUT THERE BEING ANY COMMENT ON INPUT TAX CREDIT DEDUCTION FROM M/S LLOY D METALS AND ENGNEERS AND M/S MAHARASHTRA SEAMLESS LTD THEREFORE ONLY O N THE BASIS OF SALES-TAX DEPARTMENT LIST OF HAWALA DEALERS ADDITION CANNOT BE MADE DESPITE FURNISHING OF EVIDENCES. THE ASSESSEE FURTHER SUBMITTED THAT THE MATERIALS WERE PURCHASED AND THE SAME WERE LYING IN WORK-IN-PROGRE SS DURING THE END OF THE FINANCIAL YEAR AND IN THE SUBSEQUENT FINANCIAL YEAR THE FABRICATION WORK WAS DONE FOR CHILLING PLANT AND THE SAME WAS SOLD TO VO LTAS LTD. THEREFORE THE PURCHASES FROM M/S SIDDHI VINAYAKA STEELS CANNOT BE CONSIDERED AS BOGUS PURCHASES. THE AO AFTER CONSIDERING RELEVANT SUBM ISSIONS OF THE ASSESSEE AND 4 M/S OMKAR HEAVY ENGINEERING LTD ALSO TAKING INTO ACCOUNT THE INFORMATION RECEIVED F ROM SALES-TAX DEPARTMENT OBSERVED THAT THE ASSESSEE HAS FAILED TO JUSTIFY PU RCHASES FROM M/S SIDDHI VINAYAKA STEELS. THE AO FURTHER OBSERVED THAT MERE PRODUCTION OF PURCHASE BILLS AND PAYMENT PROOF BY CHEQUE IS NOT SUFFICIENT COMPLIANCE OF DISCHARGING THE GENUINENESS OF PURCHASES THAT TOO WHEN INFORMA TION RECEIVED FROM SALES- TAX DEPARTMENT CLEARLY INDICATES THAT THE PARTIES H AVE ACCEPTED BEFORE THE SALES-TAX AUTHORITIES THAT THEY WERE HAWALA OPERATO RS. THE AO ACCORDINGLY MADE ADDITION OF RS.19 06 352 AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEEE. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN ORD ER TO VERIFY GENUINENESS OF PURCHASES AND EXPENSES DEBITED TO TH E P&L ACCOUNT THE BILLS AND VOUCHERS ALONGWITH BOOKS OF ACCOUNT AND BANK ST ATEMENT DULY REFLECTING THE TRANSACTIONS WERE ALSO CALLED FOR. THE AO OBSE RVED THAT THE ASSESSEE FAILED TO PRODUCE NECESSARY SUPPORTING EVIDENCES FOR PURCH ASES AND EXPENSES. THEREFORE A SHOWCAUSE NOTICE DATED 03-03-2014 WAS ISSUED TO THE ASSESSEE ASKING IT TO EXPLAIN AS TO WHY 20% PURCHASES AND EX PENSES OTHER THAN HAWALA PURCHASES SHOULD NOT BE DISALLOWED. HOWEVER THE A SSESSEE FAILED TO FURNISHED ANY EXPLANATION THEREFORE TO COVER UP THE DISCREP ANCIES IN REMAINING PURCHASES AN ADHOC DISALLOWANCE OF 20% IN REMAININ G PURCHASES INCLUDING EXPENSES O RS.7 69 41 517 WHICH CAME TO RS.1 53 88 303 HAS BEEN ADDED TO 5 M/S OMKAR HEAVY ENGINEERING LTD THE TOTAL INCOME. AGGRIEVED BY THE ASSESSMENT ORDE R THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A). 4. BEFORE THE CIT(A) THE ASSESSEE HAS REITERATED ITS SUBMISSIONS MADE BEFORE THE AO. THE ASSESSEE FURTHER SUBMITTED THAT THE AO WAS ERRED IN TREATING PURCHASES FROM M/S SIDDHI VINAYAK STEELS A S BOGUS DESPITE FURNISHING ALL EVIDENCES INCLUDING TAX INVOICES ISSUED BY SOUR CE SUPPLIER OF MATERIALS M/S LLOYD METALS AND ENGNEERS AND M/S MAHARASHTRA SEAML ESS LTD. THE ASSESSEE FURTHER SUBMITTED THAT THE AO HAS NOT POINTED OUT A NY ERROR OR DISCREPANCY IN THE BOOKS OF ACCOUNT IN ORDER TO MAKE OUT ANY CASE OF SALES OUTSIDE THE BOOKS OF ACCOUNT. THE PURCHASES FROM M/S SIDDHI VINAYAK STEELS IS LYING IN WIP AT THE END OF THE FINANCIAL YEAR AND THE SAME MATERIAL HAS BEEN USED FOR CHILLING PLANT TO BE SOLD TO VOLTAS LTD. ALL THESE FACTS WERE FIL ED BEFORE THE AO. THE AO IGNORED ALL EVIDENCES AND MADE ADDITION TOWARDS PUR CHASES ONLY ON THE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT W HICH IS INCORRECT. AS REGARDS DISALLOWANCE OF 20% OF EXPENSES INCLUDING P URCHASES THE ASSESSEE HAS FILED ALL EVIDENCES INCLUDING PURCHASE BILLS AND SU BMITTED THAT THE AO HAS MADE AHOC DISALLOWANCE WITHOUT ANY BASIS DESPITE FURNISH ING OF EVIDENCES TO JUSTIFY PURCHASES. THE ASSESSEE ALSO CHALLENGED REOPENING OF ASSESSMENT ON THE GROUND THAT THE AO HAS REOPENED THE ASSESSMENT ON T HE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT WITHOUT THERE BE ING ANY INDEPENDENT 6 M/S OMKAR HEAVY ENGINEERING LTD APPLICATION OF MIND. 5. THE LD.CIT(A) AFTER CONSIDERING RELEVANT SUBMISSIO NS OF THE ASSESSEE AND ALSO RELYING UPON VARIOUS DECISIONS OBSERVED THAT T HE ASSESSEE HAS FAILED TO FILE ANY EVIDENCE INCLUDING PRESENT COMMUNICABLE ADDRESS CONFIRMATION LETTER AND PRODUCTION OF THE PARTY M/S SIDDHI VINAYAK STE ELS FOR EXAMINATION AND VERIFICATION DESPITE PROVIDING NUMBER OF OPPORTUNIT IES TO COMPLY WITH VARIOUS REQUIREMENTS DURING THE COURSE OF APPELLATE PROCEED INGS. THE LD.AR SHOWN HIS INABILITY TO COMPLY WITH THE REQUIREMENTS WITH THE PLEA THAT THE SAME ARE NOT AVAILABLE AND THE SUPPLIER IS ALSO NOT TRACEABLE. THE LD.AR VIDE ORDER SHEET NOTING DATED 27-07-2015 STATED THAT IT IS NOT POSSI BLE TO LINK UP THE PURCHASE OF MATERIALS TO CONSUMPTION AND SALE THEREBY WITH REFE RENCE TO HAWALA PURCHASES THEREFORE HE INFORMED THAT HE DID NOT W ANT TO PRESS THIS GROUND OF APPEAL. IN VIEW OF THIS THE CIT(A) REJECTED GROUN D RAISED BY THE ASSESSEE CHALLENGING REOPENING OF ASSESSMENT AND ALSO UPHELD ADDITION MADE BY THE AO TOWARDS DISALLOWANCE OF BOGUS PURCHASES FROM M/S SI DDHI VINAYAK STEELS FOR RS.19 06 352. INSOFAR AS ADHOC DISALLOWANCE OF 20% OUT OF TOTAL EXPENSES DEBITED TO P&L ACCOUNT INCLUDING PURCHASES THE CIT (A) OBSERVED THAT THE AO HAS NOT POINTED OUT ANY DEFECTS IN EXPENSES DEBITED TO P&L ACCOUNT INCLUDING PURCHASES. THE ASSESSEE HAS MAINTAINED ALL RELEVAN T DETAILS SUCH AS BILLS AND OTHER RELATED DOCUMENTS AND ALSO SEEN THAT PAYMENTS ARE MADE THROUGH 7 M/S OMKAR HEAVY ENGINEERING LTD BANKING CHANNELS. THE RAW MATERIALS PURCHASES WERE DULY RECORDED IN THE BOOKS AND SALES HAVE BEEN REFLECTED AGAINST SUCH PU RCHASES. IN VIEW OF ALL THESE FACTS REGULAR PURCHASES CANNOT BE DOUBTED. I N THE ABSENCE OF ANY SPECIFIC DEFECT DISALLOWANCE OF 20% OUT OF REGULAR PURCHASES IS HEREBY DELETED. AS REGARDS CLAIMS OF EXPENSES THE ASSESSEE HAS NOT MAINTAINED PROPER VOUCHERS IN RESPECT OF PETTY EXPENSES. IT WAS FURT HER OBSERVED THAT IN SOME CASES PERSONAL EXPENSES / EXPENSES NOT RELATED TO BUSINESS ALSO BEEN CLAIMED. THE LD.AR VIDE ORDER SHEET NOTING DATED 27-07-2015 SUBMITTED THAT PURCHASES FROM OTHER REGULAR PARTIES ARE GENUINE AND AT THE M OST 20% OUT OF ADMINISTRATIVE EXPENSES OF RS.60 26 584 MAY BE DISA LLOWED. THEREFORE CONSIDERING THE FACTS AND ALSO IN VIEW OF ADMISSION OF THE AR OF THE ASSESSEE THE CIT(A) RESTRICTED DISALLOWANCE OF EXPENSES AT 2 0% TO ADMINISTRATIVE EXPENSES OF RS.60 26 584 AND ACCORDINGLY ALLOWED RE LIEF OF RS.1 41 82 983 OUT OF TOTAL DISALLOWANCES WORKED OUT BY THE AO OF RS.1 53 88 303. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE AS WELL AS THE RE VENUE ARE IN APPEAL BEFORE US. 6. THE FIRST ISSUE THAT CAME UP FOR OUR CONSIDERATION FROM ASSESSEES APPEAL IS DISALLOWANCE OF PURCHASES FROM M/S SIDDHI VINAYA K STEELS. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE LD.CIT(A) ERRED IN CONF IRMING ADDITION MADE BY THE AO TOWARDS DISALLOWANCE OF PURCHASES FROM M/S S IDDHI VINAYAK STEELS ONLY ON THE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT DESPITE 8 M/S OMKAR HEAVY ENGINEERING LTD FURNISHING ALL DETAILS INCLUDING TAX INVOICES ISSUE D BY SOURCE SUPPLIER OF MATERIALS M/S LLOYD METALS AND ENGNEERS AND M/S MA HARASHTRA SEAMLESS LTD. THE ASSESSEE HAS PURCHASED MS STEEL PIPES FROM M/S SIDDHI VINAYAK STEELS WHICH IN TURN PURCHASED THE SAME FROM M/S LLOYD ME TALS AND ENGNEERS AND M/S MAHARASHTRA SEAMLESS LTD BY VALID TAX INVOICE A ND THE ASSESSEE HAS AVAILED CENVAT CREDIT AND THE RELEVANT RG-23A WERE FURNISHED BEFORE THE AO. THE LD.AR FURTHER SUBMITTED THAT THE PURCHASED GOOD S WERE LYING IN WIP AT THE END OF THE FINANCIAL YEAR AND IN THE SUBSEQUENT FIN ANCIAL YEAR THE SAME MATERIAL HAS BEEN USED FOR CHILLING PLANT TO BE SOL D TO VOLTAS LTD. WHEN ALL THESE EVIDENCES WERE FURNISHED THE AO WAS INCORREC T IN DISALLOWING PURCHASES ONLY ON THE BASIS OF INFORMATION RECEIVED FROM THIR D PARTY. 7. ON THE OTHER HAND THE LD.DR STRONGLY SUPPORTED THE ORDER OF THE CIT(A). 8. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATERIA LS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. IT IS AN UNDISPUTED FACT THAT M/S SIDDHI VINAYAK STEELS WAS APPEARING IN THE LIST PREPARED BY SALES-TAX DEPARTMENT OF SUSPICIOUS / HA WALA DEALERS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES. THE AO MADE ADDIT ION ON THE BASIS OF INFORMATION RECEIVED FROM SALES-TAX DEPARTMENT COUP LED WITH FURTHER ENQUIRIES CONDUCTED DURING THE COURSE OF ASSESSMENT PROCEEDINGS WHICH CLEARLY ESTABLISHES THE FACT THAT PURCHASES FROM M/ S SIDDHI VINAYAK STEELS IS 9 M/S OMKAR HEAVY ENGINEERING LTD BOGUS IN NATURE. NOTICE ISSUED U/S 133(6) WERE RET URNED UNSERVED AND THE ASSESSEE FAILED TO PRODUCE THE SUPPLIER IN PERSON B EFORE THE AO. THEREFORE THE AO OPINED THAT THE ASSESSEE HAS FAILED TO JUSTI FY PURCHASES WITH NECESSARY EVIDENCES AND HENCE MADE ADDITION TO TOTAL PURCHASE S FROM M/S SIDDHI VINAYAK STEELS. IT IS THE CONTENTION OF THE ASSESS EE THAT PURCHASES FROM M/S SIDDHI VINAYAK STEELS IS GENUINE WHICH IS SUPPORTED BY PROPER EVIDENCE INCLUDING TAX INVOICE OF SOURCE SUPPLIER. ALL THES E EVIDENCES HAVE BEEN FURNISHED BEFORE THE AO. THE ASSESSEE FURTHER CONT ENDED THAT PURCHASES ARE SUPPORTED BY TAX INVOICES AND THE ASSSESSEE HAS AVA ILED CENVAT CREDIT. THE BOOKS OF ACCOUNT WERE SUBJECTED TO CENTRAL EXCISE A UDIT AND THE CENTRAL EXCISE DEPARTMENT HAS CONDUCTED EXCISE AUDIT IN THE YEAR U NDER CONSIDERATION WITHOUT ANY ADVERSE COMMENT ON INPUT CREDIT AVAILED FROM THE ABOVE DEALERS. THE ASSESSEE FURTHER CONTENDED THAT MATERIALS PURCH ASED WERE LYING IN WIP AT THE END OF THE FINANCIAL YEAR AND THE SAME WERE USE D FOR CHILLING PLANT TO BE SUPPLIED TO VOLTAS LTD THEREFORE THERE IS NO REAS ON FOR THE AO TO SUSPECT PURCHASES FROM SIDDHI VINAYAK STEELS. 9. HAVING HEARD BOTH THE SIDES AND CONSIDERED MATERIAL S ON RECORD WE FIND THE FACT THAT THE SUPPLIER IS APPEARING IN THE LIST OF HAWALA / SUSPICIOUS DEALERS PREPARED BY SALES-TAX DEPARTMENT IS NOT DISPUTED BY THE ASSESSEE WITH ANY EVIDENCES. AT THE SAME TIME IT IS ALSO AN ADMITTE D FACT THAT THE ASSESSEE HAS 10 M/S OMKAR HEAVY ENGINEERING LTD FILED ENORMOUS EVIDENCES TO JUSTIFY PURCHASES FROM SIDDHI VINAYAK STEELS IS GENUINE IN NATURE. THE ASSESSEE HAS FILED VARIOUS DETAILS INCLUDING TAX INVOICE ISSUED BY SOURCE SUPPLIER ON WHICH THE ASSESSEE HAS AVAILED CENVAT CREDIT. ALL THESE FACTS CANNOT BE IGNORED IN TOTO ONLY FOR THE REASON THAT THE SUPPLIER IS APPEARING IN THE LIST OF SUSPICIOUS / HAWALA OPERAT ORS ISSUED BY THE SALES-TAX DEPARTMENT. HOWEVER THE FACT REMAINS THAT NOTICE ISSUED U/S 133(6) TO THE DEALER HAS BEEN RETURNED UNSERVED WITH REMARK PART Y IS NOT AVAILABLE AT THE ADDRESS. THE ASSESSEE ALSO FAILED TO PRODUCE THE PARTY IN PERSON BEFORE THE AO. UNDER THESE CIRCUMSTANCES A REASONABLE INFERE NCE CAN BE DRAWN THAT THE ASSESSEE HAS PURCHASED MATERIALS FROM GREY MARKET A ND OBTAINED BILLS FROM THE HAWALA OPERATORS TO ADJUST THE PURCHASES. IN THIS PROCESS THE ASSESSEE MIGHT HAVE SAVED THE VAT APPLICABLE ON THE GOODS AND ALSO A REASONABLE PERCENTAGE ON SAVING IN PRICE PAID FOR PURCHASE OF MATERIALS. THEREFORE WHAT NEEDS TO BE TAXED IS PROFIT EARNED BY THE ASSESSEE FROM THESE T RANSACTIONS. VARIOUS COURTS AND TRIBUNALS HAVE TAKEN A CONSISTENT VIEW IN THE C ASE OF BOGUS PURCHASES AND AFTER CONSIDERING VARIOUS FACTORS HAS UPHELD ESTIMA TION OF PROFIT RANGING FROM 12.5% TO 25% DEPENDING UPON THE NATURE OF BUSINESS. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS SIMIT P SHETH 356 ITR 451 (GUJ) OBSERVED THAT NO UNIFORM YARDSTICK CAN BE APPLIED FOR ESTIMATION OF NET PROFIT WHICH DEPENDS UPON NATURE OF BUSINESS OF THE ASSESSEE. THE HONB LE GUJARAT HIGH COURT IN THE 11 M/S OMKAR HEAVY ENGINEERING LTD CASE OF VIJAY PROTEINS LTD VS CIT INCOME TAX REFERE NCE NO. 139 OF 1996 ORDER DATED 21-07-2014 HELD THAT ONLY PROFIT ELEMENT EMBE DDED IN BOGUS PURCHASE NEED TO BE ADDED BUTNOT TOTAL PURCHASES FROM THE B OGUS PARTIES. THE CO- ORDINATE BENCH OF ITAT MUMBAI IN NUMBER OF CASES H AS TAKEN A CONSISTENT VIEW AND DIRECTED THE AO TO ESTIMATE NET PROFIT A T 12.5% ON BOGUS PURCHASES. THEREFORE CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE AND ALSO CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH OF ITAT MUMBAI WE DEEM IT APPROPRIATE TO DIRECT THE AO TO ESTIMATE NE T PROFIT OF 12.5% ON THE ALLEGED BOGUS PURCHASES. ACCORDINGLY GROUND RAISE D BY THE ASSESSEE IS PARTLY ALLOWED. 10. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION F ROM ASSESSEE AND REVENUES APPEAL IS ADHOC DISALLOWANCE OF 20% TOWAR DS EXPENSES INCLUDING PURCHASES DEBITED TO THE P&L ACCOUNT. THE AO HAS D ISALLOWED 20% IN REMAINING PURCHASES INCLUDING EXPENSES OF RS.7 69 4 2 527 WHICH CAME TORS.1 53 88 303. ACCORDING TO THE AO THE ASSESSE E FAILED TO JUSTIFY EXPENSES AND OTHER PURCHASES WITH NECESSARY EVIDENCES. IT I S THE CONTENTION OF THE ASSESSEE THAT OTHER PURCHASES ARE FULLY SUPPORTED B Y BILLS AND THE SAME ARE HAVING NEXUS WITH THE SALES DECLARED FOR THE RELEVA NT FINANCIAL YEAR. THE ASSESSEE FURTHER CONTENDED THAT PURCHASES AND SALES ARE HAVING ONE TO ONE CO- RELATION AND THE AO HAS NOT MADE OUT ANY CASE OF IN CORRECTNESS IN BOOKS OF 12 M/S OMKAR HEAVY ENGINEERING LTD ACCOUNT OR STOCK REGISTER. INSOFAR AS EXPENSES TH OUGH THE EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS MAJOR EXPENSES ARE SUPPORTED BY PROPER BILLS AND VOUCHERS AND THE PAYMENTS WERE MADE BY CH EQUES. THE ASSESSEE FURTHER CONTENDED THAT THE ADMINISTRATIVE EXPENSES CONSISTS OF SALARY ESIC EPF TELEPHONE EXPENSES MUNICIPAL TAX PROFESSIONA L TAX RENT AUDIT FEES PROFESSIONAL FEES ETC. ARE FULLY COVERED BY BILLS AND PAYMENTS HAVE BEEN MADE BY CHEQUES. MAJORITY OF THE EXPENSES HAVE BEEN PAI D TO THIRD PARTIES AND GOVERNMENT AGENCIES. THE ASSESSEE FURTHER CONTENDE D THAT IT HAS SUO MOTO DISALLOWED DONATION AND SERVICE TAX PENALTY WHICH IS INCLUDED IN ADMINISTRATIVE EXPENSES AND FURTHER DISALLOWANCE WO ULD AMOUNT TO DOUBLE DISALLOWANCES. 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE AO MADE ADHOC DISALLOWANCE OF 20% OUT OF ADMINISTRATIVE EXPENSES AND OTHER PURCHASES WITHOUT THERE BEING ANY OBSERVATIONS WITH REGARD TO CORRECTNESS OF BOOKS OF ACCOUNT OR BILLS AND VOUCHERS. THE ASSESSEE HAS FI LED COMPLETE DETAILS INCLUDING BILLS AND VOUCHERS AND THIS FACT HAS BEEN ACCEPTED BY THE CIT(A). THE CIT(A) AFTER CONSIDERING THE DETAILS FURNISHED BY THE ASSESSEE HAS ACCEPTED OTHER PURCHASES AS GENUINE AND DIRECTED THE AO TO D ELETE ADHOC DISALLOWANCE MADE TOWARDS OTHER PURCHASES OTHER THAN HAWALA PURC HASES. . THE REVENUE 13 M/S OMKAR HEAVY ENGINEERING LTD HAS FAILED TO BRING ON RECORD ANY EVIDENCE TO DISPR OVE THE FINDINGS OF FACTS RECORDED BY THE CIT(A). THEREFORE WE ARE OF THE V IEW THAT THE CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE TOWARDS DISALLOWANCE MADE BY THE AO TOWARDS OTHER PURCHASES. AS REGARDS ADMINISTRATIVE EXPENSE S THOUGH THE ASSESSEE HAS FURNISHED BILLS AND VOUCHERS FOR VARIOUS EXPENDITUR E PETTY EXPENSES ARE SUPPORTED BY SELF MADE VOUCHERS. THE CIT(A) FURTHE R OBSERVED THAT IN SOME CASES PERSONAL EXPENSES / EXPENSES NOT RELATED TO BUSINESS HAVE ALSO BE CLAIMED. THE CIT(A) FURTHER OBSERVED THAT THE ASSE SSEES AUTHORIZED REPRESENTATIVE HAS AGREED FOR 20% DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES BECAUSE HE COULD NOT SUBSTANTIATE EXPENSES WITH VE RIFIABLE BILLS AND VOUCHERS INSOFAR AS ADMINISTRATIVE EXPENSES THE ASSESSEE CL AIMS TO HAVE SUO MOTO DISALLOWED DONATION AND SERVICE TAX AND PENALTY IN THE COMPUTATION OF TOTAL INCOME. ONCE EXPENSES HAVE ALREADY BEEN DISALLOWED FURTHER DISALLOWANCE TOWARDS SAME EXPENSES AMOUNTS TO DOUBLE DISALLOWANC E. WE FURTHER OBSERVE THAT OUT OF THE TOTAL EXPENSES MAJORITY EXPENSES I NCURRED IN RELATION TO SALARY ESI EPF TELEPHONE EXPENSES MUNICIPAL TAXES ETC. WHICH ARE FULLY INCURRED BY CHEQUES AND ARE SUPPORTED BY PROPER BILLS AND VOUCH ERS. THE TOTAL EXPENSES INCURRED UNDER THESE HEADS COME TO RS.29 LAKHS WHER E NO DISALLOWED IS REQUIRED ON ADHOC BASIS. THEREFORE WE DIRECT THE AO TO EXCLUDE EXPENSES INCURRED TOWARDS SALARY ESIC EPF TELEPHONE EXPEN SES MUNICIPAL TAXES ETC. 14 M/S OMKAR HEAVY ENGINEERING LTD WHICH COMES TO RS.29 LAKHS OUT OF TOTAL ADMINISTRAT IVE EXPENSES INCURRED BY THE ASSESSEE FOR RS.60 26 584 FOR THE PURPOSE OF AD HOC DISALLOWANCES. AS REGARDS THE DONATION SERVICE TAX PENALTY THE ASSE SSEE HAS ALREADY SUO MOTO DISALLOWED THESE EXPENSES IN ITS COMPUTATION OF INC OME. THEREFORE NO FURTHER DISALLOWANCE IS REQUIRED. HENCE WE DIRECT THE AO TO EXCLUDE THESE TWO ITEMS ALSO FOR THE PURPOSE OF DISALLOWANCES. FOR THE REM AINING EXPENSES THE ASSESSEE HAS FAILED TO JUSTIFY EXPENSES WITH NECESS ARY EVIDENCES. THE ASSESSEE ALSO AGREED FOR DISALLOWANCE BEFORE THE CIT(A) BECA USE OF ITS INABILITY TO FURNISH SUPPORTING EVIDENCES. THEREFORE WE ARE OF THE VIE W THAT THE AO WAS RIGHT IN DISALLOWING 20% EXPENSES TOWARDS OTHER EXPENSES EXC LUDING SALARY AND OTHER EXPENSES AS DISCUSSED ABOVE. HENCE WE DIRECT THE AO TO RESTRICT DISALLOWANCE @20% OUT OF ADMINISTRATIVE EXPENSES EXCLUDING SALAR Y & RELATED EXPENSES AND ALSO DONATION AND SERVICE TAX PENALTY DISALLOWED BY THE ASSESSEE. WE ORDER ACCORDINGLY. 12. THE NEXT ISSUE THAT CAME UP FOR OUR CONSIDERATION F ROM ASSESSEES APPEAL IS VALIDITY OF REOPENING OF ASSESSMENT. THE LD.AR FOR THE ASSESSEE AT THE TIME OF HEARING SUBMITTED THAT HE DID NOT WANT TO PRESS THE GROUND CHALLENGING REOPENING OF ASSESSMENT. HENCE THE GROUND RAISED BY THE ASSESSEE CHALLENGING REOPENING OF ASSESSMENT IS DISMISSED A S NOT PRESSED. 13. IN THE RESULT APPEAL FILED BY THE ASSESSEE AND THE APPEAL FILED BY THE 15 M/S OMKAR HEAVY ENGINEERING LTD REVENUE ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER 2017. SD/- SD/- (SAKTIJIT DEY) (G MANJUNATHA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DT : 22 ND NOVEMBER 2017 PK/- COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR /TRUE COPY/ BY ORDER ASSTT. REGISTRAR ITAT MUMBAI