9911796707
TMI Blog2015 (7) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 as the lead case. Facts of the case, in brief, are that the assessee is a Private Limited Company engaged in Furniture Interior works for leading corporates. The assessee's job contains execution of Civil, Interior, Gypsum, Flooring, Painting, Carpentry, A/c. Electrical and other allied works. The assessee filed its return of income on 29-10-2007 declaring total income of Rs. 1,48,08,038/-. Subsequently, the assessee filed a revised return on 06-02-2008 declaring total income of Rs. 2,17,73,862/-. 3. During the course of assessment proceedings the Assessing Officer observed that a survey u/s.133A of the I.T. Act was conducted in the premises of the assessee at B1, Paragon, Condomonium, P.B. Marg, Worli, Mumbai on 28-12-2007 by the DDIT (Investigation) Unit-IV (2), Mumbai. During the said survey it was found that the assessee company has shown purchases of material from the below mentioned concerns of Shri Tushar Ruparel. The Assessing Officer further noted that as per the details furnished during post survey investigation and the details produced during the assessment proceedings the purchases made from various parties are as under : Sr. No. Name of the assessee F.Y. 06 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is followed before placing any order for purchase. The same procedure was followed in respect of parties in question too. (c) The material brought from parties in question have been used at six locations and the assessee company has received confirmation letter from four parties stating that materials have been received at respective site locations. (d) The actual sales have taken place and payments against all sale bills have been received through cheques. Payments to purchase parties have been made through cheques. (e) The quantitative tally of sales with consumption chart, GRN etc. confirm the purchased quantity with minor wastage." 5. The Assessing Officer thus observed from the report of ADIT that the assessee not only failed to produce the parties in question before the survey party but also its contention does not have much force. He observed that the assessee has not submitted any quantitative reconciliation between material purchased and its consumption. He has only submitted confirmations from 4 customers stating that certain amount of goods have been received at certain work site. The Assessing Officer noted that the assessee company is executing both kinds of co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nager. (ii) Further, the GRNs in respect of parties in question generally do not have any entry of against the column 'time in' i.e. such GRNs generally do not show when the goods were receive. On several occasions, even inward number, P.O. No. and date are not mentioned on such GRNs. Whereas, the GRNs for the goods received from other parties have such details written on them. He accordingly held that the GRNs submitted by the assessee cannot be relied upon. The AO further noted that the assessee could not produce any evidence in the form of delivery challan, transportation details etc. The assessee also did not produce any delivery note issued by Shri Tushar Ruparel or his concerns. He further noted that in the case of the assessee he has followed the practice which is reverse of the general practice in the trade. Assessee itself is making Goods Receipt Note and puts its employee's signature thereon without giving duplicate copy of such note to seller. 8. As regards the submission of the assessee that it has followed vendor registration procedure to enquire into the genuineness of vendor including the parties in question, the AO noted that the parties in question did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus : Sr.No. Name of the assessee F.Y. 06-07 1. M/s. Apple India Marketing 82,98,924 2. V.S.K. Enterprises 71,70,625 3. M/s. Khushi Enterprises 1,92,56,857 4. M/s. Samarth Trading Co. 78,15,429 5. M/s, Sun Enterprises 1,00,40,207 6. M/s. M.R. Corporation 1,38,49,532 7. M/s. Neelam Enterprises 47,24,390 Total 7,11,55,964 11. During the course of assessment proceedings the assessee submitted that purchases could normally be disallowed if the same are bogus or shown as paper transaction and in other cases it cannot be disallowed. It was argued that in the case of the assessee the purchases effected from various parties referred to in the statement of Shri Tushar Ruparel cannot be treated as bogus or paper transaction as the same were supported by proper invoices and the payment of the same were made by account payee cheques. Further, the purchase of goods are established with corresponding sales made to various reputed limited companies who are regularly assessed to tax and who have also confirmed the same. It was argued that all the purchases are duly supported by proper invoice giving particulars such as name, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and returned the cash to the assessee for a commission which was stated by Shri Tushar Ruparel. Distinguishing the various decisions cited before him and rejecting the submissions the AO made addition of Rs. 7,11,55,964/- to the total income of the assessee being the purchases made from the 7 parties treating the same as bogus. 13. Before CIT(A) the assessee more or less reiterated the same arguments as made before the AO. It was submitted that the AO mainly and largely relied upon the findings of survey tem and the statement of Mr. Tushar Ruparel. It was stated that Mr. Tushar Ruparel is proprietor of only one concern, i.e. M/s. VSK Enterprises whereas other persons are proprietors of other 6 concerns. Although Mr. Tushar Ruparel has stated that he is the controlling person of all 6 other parties but that does not take away the fact that he is not the proprietor and therefore their arrangement has nothing to do with the assessee. The assessee submitted that the other 6 concerns are owned by 6 different individuals and therefore merely based on the statement of Mr. Tushar Ruparel that he is the controlling person cannot be the basis of the addition in the hands of the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arious details such as vendor registration form, PAN card copies of the partners/ proprietors, sales tax registration number, Account confirmation statements etc. to substantiate the sales made by them to the assessee. Even the survey party had also impounded the invoices of the above parties. Further, they have responded to the notice issued to them u/s.133(6). The assessee reiterated the submissions as made before the AO stating that assessee had produced documentary evidence about actual supply of material by the above parties by furnishing the confirmation from the customers regarding the receipt of goods at the site and consumption thereof. It was submitted that the contracts with the 5 customers were lumpsum contract including material and the purchase from the aforesaid parties was all for the above 5 customers. It was submitted that goods costing about Rs. 1,03,50,725/- were purchased and were stored in Vikroli Godown. The closing stock as on 31-03-2007 as per balance sheet was Rs. 3,76,96,589/- which included the stock at Vikroli Godown of Rs. 92,04,200/-. The said materials were purchased from M/s. Neelam Enterpise, Apple India Marketing, Sun Enterprise and Samarth Tradin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oncerns of Mr. Tushar Ruparel. 20. However, he also observed that when the evidences gathered at the end of the assessee during the course of follow up survey conducted subsequently is looked into it is also not difficult to see that not much of adverse complimentary evidence could be found when the survey was conducted at the premises of the assessee on 28-12-2007. It is possible that in the intervening period of 20 days the assessee has taken care of all the adverse evidences but still the DDIT(Investigation) and the AO had the responsibility to establish the complexity of the assessee to the affairs accepted by Mr. Tushar Ruparel to the extent possible. According to Ld.CIT(A) it should have been demonstrated that all admissions were made to reach to the bottom and due process was followed. What was found were only indicating weaknesses in the maintenance of records in respect of purchases made from the above referred impugned purchasers. By not taking the investigations to the logical end at the relevant point of time on the leads found at the premises of Mr. Tushar Ruparel, for the reasons which is not expressly mentioned anywhere, a situation has reached wherein it has become ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision (Chuharmal Vs. CIT reported in 172 ITR 250 (SC). 22. Considering the totality of the facts of the case the Ld.CIT(A) further observed that there are strengths and weaknesses in the evidences and the arguments of both the sides and it is not possible to hold either the AO or the assessee as fully correct in their claims. He observed that although the evidences forwarded by the AO was overwhelmingly against the assessee but the entire disallowance cannot be sustained as no answer could be found by the AO to the arguments made that the contracts cannot be executed without the purchases which are being disallowed by the AO. He observed that even if the site wise purchases and consumption prepared and submitted by the assessee is not considered to be reliable for determination the allowability of purchases in view of certain evidences found, making books of the assessee unreliable but the over all sales and purchases will have to be considered to determine the reasonable amount of purchases which must have gone into the execution of the contract of this assessment year. 23. The Ld.CIT(A) considered the profit disclosed by the assessee against the sales and observed that under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Your appellant submits that if the purchases from the parties or part thereof are treated as bogus, the closing stock representing the said so called bogus purchases ought to be reduced from the total purchases and only the net purchases after reducing the closing stock ought to be considered for disallowance. 3. The learned CIT(A) erred in not appreciating the evidences produced by the appellant and making various observations without substantiating the same. Your appellant submits that the observations of the learned CIT(A) are not supported by any evidences and are made in disregard of the principles of natural justice. Your appellant submits that the entire addition of Rs. 7,11,55,964 ought to be deleted as against 50% thereof as held by CIT(A). 4. Your appellant craves leaves to add to, alter, amend or vary all or any of the aforesaid ground of appeal as they/their representative may deem fit." Grounds by Revenue : "1. On the facts and in the circumstances of the case, the Learned CIT(A)-I, Pune has erred in directing to allow 50% of purchases made from seven parties which were treated as bogus parties by the A.O. & DDIT (Inv). 2. On the facts and in the circ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pages the Ld. Counsel for the assessee submitted that when the goods have come to the place of third party such as Birla Cotsyn (India) Ltd., Kumar Housing Corporation Ltd., Zenith Birla India Ltd., Birla Power Solutions Ltd., Rohan Builders Ltd. etc., which have been authenticated by these companies, therefore, the same should not have been disbelieved. He filed the following details and explained the purchases from the 7 parties and their destination. Customer where goods consumed /delivered......... Purchase from...... Kumar Housing Ltd. Zenith Birla (I) Limited Rohan Builders Birla Cotsyn Limited Vikroli Godown (Inventory) Birla Power Solutions Ltd. Summary of Firm Wise Purchase ... Samarth Trading Company -- 381,294.00 2,651,848.00 545,669.00 2,559,776.00 1,676,842.00 7,815,429.00 MR Corporation 2,618,382.00 3,370,051.00 1,545,971.00 3,450,936.00 -- 2,864,192.00 13,849,532.00 Sun Enterprises 617,203.00 1,702,508.00 533,871.00 594,011.25 1,252,224.00 5,340,390.00 10,040,207.25 Apple India Marketing -- -- -- -- 1,818,336.00 6,480,588.00 8,298,924.00 Neelam Enterprises -- -- -- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sp;A.Y.2008-09 A.Y.2007-08 A.Y.2008-09 Sales & Other Receipt 3278.36 2409.69 6530.18 8140.46 Net Profit Before Tax 150.34 124.68 479.07 420.99 Net Profit % 4.59% 5.17% 7.34% 5.17% Ensemble Net profit % 16.88% 5.49% 16.88% 5.49% 28. Referring to the above chart where two other competitors engaged in similar line of business, the Ld. Counsel for the assessee submitted that in the case of Archdeep Interior Pvt. Ltd. the net profit for A.Y. 2007-08 is shown at 4.59% and for A.Y. 2008-09 at 5.17%. Similarly, in the case of Cherry Hill Interior Ltd. the net profit is shown at 7.34% for A.Y. 2007-08 and 5.17% for A.Y. 2008-09. He accordingly submitted that the net profit shown by the assessee for A.Y.2007-08 at 16.88% and for 2008-09 at 5.49% being higher than that of the net profit declared by his competitors, the same should not have been doubted. 29. Referring to the chart showing the customer wise work done where the goods purchased from the 6 parties are utilised, the Ld. Counsel for the assessee submitted that if the additions so made by the AO is sustained then the project-wise profit will be more than 90% and in some cases above 99% ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Pvt. Ltd., Vs. ACIT reported in 68 ITD 65 (TM) he submitted that the Tribunal in the said decision has held that purchase of materials from an unidentified suppliers cannot be treated as bogus when it is established from day to day records that the said quantity went into production and the production and sales have been accepted by the department. Referring to the decision of the Mumbai Bench of the Tribunal in the case of Balaji Textile Industries Pvt. Ltd. VS. ITO reported in 49 ITD 177 he submitted that the Tribunal in the said decision has deleted the addition made by the AO and upheld by the CIT(A) on account of purchases from untraceable parties treating same as bogus on the ground that when the same are recorded in books of both the parties, purchases have to be believed. He also relied on the following decisions : 1. ITO Vs. Chaudhari Iftekhar Ahmad Ramzanali - ITA Nos. 1056 and 1190/PN/2011 order dated 18-09-2013 2. Mrs. Nurma Rukmangad Bawane Vs. ITO - ITA No.637/PN/2010 order dated 20-06-2012 3. CIT Vs. M/s. Nangalia Fabrics Private Ltd. - Tax Appeal No.689 of 2010 order dated 22-04-2013 4. ACIT Vs. Shri Ramila Pravin Shah - ITA No.5246/Mum/2013 order da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ey before the Investigation Wing. It is also the case of the AO that despite purchases made throughout the year the payments were made only in the month of February and March of the Financial Year. Further, there was absence of third party transport bills either with the assessee or with the supplier and there were defects in the maintenance of challans. 34. We find when the matter travelled to the CIT(A) he deleted 50% of the addition and sustained 50% for the reasons given by him in the appellate order and which has been summarised in the preceding paragraphs. It is the case of the assessee that there was no adverse finding during survey in the premises of the assessee. No unaccounted cash or evidence for bogus bills were found. The assessee was not given any opportunity to cross examine Mr. Tushar Ruparel. The assessee has produced the details of PAN Nos. Sales Tax Registration No. VAT etc. of all the suppliers. Vendor Registration Process maintained at the end of the assessee and Goods Received Notes were prepared at the site. The assessee has submitted the reconciliation of materials before the AO for receipt of goods, consumption and closing balance for each site. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce to nail the assessee that it had received only accommodation entries and the purchases to the tune of Rs. 7,11,55,964/- are in fact bogus especially when the assessee has disputed such allegation by producing other materials to substantiate the purchases. The finding given by the Ld.CIT(A) that the statement of the proprietors of M/s. Sun Enterprise, M/s. M.R. Corporation and M/s. Neelam Enterprises have not been recorded could not be controverted by the Ld. Departmental Representative. Under these circumstances disbelieving the entire purchases merely on the statement of Mr. Tushar Ruparel and 3 other persons is not justified especially when the assessee has carried out the contract work for which assessee has to bear the cost of material and nothing has been brought on record by the AO that no work was carried out by the assessee for these parties and they have also made payments to the assessee for no work done. Further we also find some force in the argument of the Ld. Counsel for the assessee that when the contract is with cost of material to be borne by the assessee, carrying out the contract work without purchase of material is just not possible. 36. Under the aforementi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Birla Cotsyn Birla Power Kumar Housin Rohan Buil Zenith Birla Reliance Industries As Filed As Filed As Filed As Filed As Filed As Filed Sales 9,581,143.00 33,579,895.00 10,630,648.00 21,214,699.00 20,837,143.00 55,935,793.00 Purchase material 5,544,551.00 21,099,394.00 6,252,711.00 10,715,059.00 10,433,837.00 24,821,768.00 Direct Expenses 69,548.00 2,490,236.00 221,699.00 137,472.00 1,452,143.00 2,745,887.00 Gross Profit 3,967,044.00 9,990,265.00 4,156,238.00 10,362,168.00 8,951,163.00 28,368,138.00 Gross Profit % 41.40% 29.75% 39.10% 48.84% 42.96% 50.72% As determined by Assessing Officer As per AO As per AO As per AO As per AO As per AO As per AO Sales 9,581,143.00 33,579,895.00 10,630,648.00 21,214,699.00 20,83 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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