TMI Blog2015 (7) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... AO, both from the banker and the sales tax authorities. Under the circumstances we have to uphold the contentions of the assessee, that the finding of the AO, that the assessee has not furnished full details, is factually in correct. Coming to the identity of the parties we find that all the parties are registered with sales tax department and have charged VAT in each of the bills. All these parties have bank accounts and payments were made through account payee cheques. Evidence of material having been received by the assessee, has been filed. As regards the fact that the assessee was not able to produce the parties, we agree with the contentions of the assessee that non production of the parties cannot be a ground of disallowance of all the purchases as the persons from whom purchases are made could not always be in the control of the assessee, specifically when they are unrelated parties and volume and quality of evidence produced by the assessee is such that non production of the party from whom the assessee purchased cannot lead to a conclusion that the purchases are not genuine. Thus we uphold the finding of the Ld.CIT(A) on the deletion of the disallowance which was tre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h Developers Pvt.Ltd. In response, the assesses filed a return of income on 12.10.2009 declaring income of ₹ 61,79,070/-. M/s Varsa Buildwell India P.Ltd. filed return of income on 17.3.2010 declaring income of ₹ 50,84,390/-. 3.3. In the case of M/s Piyush Developers Pvt.Ltd. the AO completed assessment u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 (the Act) on 29.12.2009 determining the total taxable income at ₹ 3,51,14,490/-. He made addition of ₹ 2,89,34,711/-. The purchases from three parties i.e. a) M/s Jai Ambey Trading Co. b) M/s Shri Ganpati Enterprises c) M/s Niranjan Parshad Jai Gopal were held as bogus and non-genuine. The reasons for disallowing this purchase expenditure are given at page 4 of the assessment order which is extracted for ready reference. The assessee has not furnished any details except bills/vouchers of purchases and details of payment made. The assessee has not furnished confirmed copy of account, income tax particulars of the parties, correct addresses of the parties and also failed to produce the above parties during the course of assessment proceedings. The enquiry made also reveals that the said firm M/s Jai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld.CIT(A) has erred both in law and on facts of the case in deleting the said addition of ₹ 2,89,34,711/- made on account of bogus purchases despite the fact that the CIT(A) himself, in the course of appellate proceedings gave the assessee an opportunity to produce the parties and to file confirmations before the AO, for which the assessee expressed his inability to do so on the grounds of gap of such a long time , a contention which appears untenable in view of the huge quantum involved in the purchases. 3. The Ld.CIT(A) has erred both in law and on facts of the case in deleting the said addition of ₹ 2,89,34,711/- made on account of bogus purchases despite the fact that the CIT(A) himself held that books of account of the assessee cannot be said to be reflecting a true and fair view of its financial and business affairs and the same are liable to be rejected. 4. The Ld.CIT(A) has erred both in law and on facts of the case in directing the AO to compute gross profit @ 27% instead of 16% shown by the assessee, whereas the AO had rightly disallowed the bogus purchases amounting to ₹ 2,89,34,711/-. 5. The appellant craves leave to add, amend t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dentity of the parties from whom purchases were made was beyond doubt because they were registered with the sales tax department and had paid VAT. He argued that payments were made through banking channels and the evidences such as copies of bills, purchase invoices, material weighment proofs, material receipt notes along with bill numbers and truck numbers, were produced as well as entries in stock registers and the consumption of material to prove the genuineness of the transaction. He strongly disputed the claim of spot enquiry by the Revenue and submitted that there is no basis for coming to such a conclusion and no effort was made to reach the parties through the postal authorities. He relied on number of case laws and submitted that there is a violation of principle of natural justice as the record of spot enquiries was not put to the assessee. He argued that all possible documentary evidences were furnished, and hence the assessee has discharged the burden of proof that lay on it and the onus shifted to the Revenue. He pointed out that the value of the work and value of closing stock were accepted by the AO and no defects were found in the books of accounts and there is no r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee before the A.O. we have to come to a conclusion that the First Appellate Authority was justified in deleting the addition. The assessee in this case has furnished all possible evidences in support of the factum of purchases from these three parties. The evidences include, copies of the bills wherein detailed notings had been made in respect of the material which had been purchased by the appellant, purchase vouchers prepared by the assessee in the normal course of business, evidences by way of the material weighment proofs, copies of the GRs or material receipt notes showing the delivery of the goods to the assessee where the bill number and truck number has been mentioned. Evidence of payments having been made by account payee cheques had also been filed. Such payments have also been cleared from the account of the assessee and no payment is outstanding as on 31st March, 2008. These evidences in our view cannot be ignored unless contrary material is found by the revenue. No such material is available with the revenue even after search. 14. The First Appellate Authority at para 19 of his order has held as follows:- Perusal of profit and loss account of the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udited books of accounts maintained by the assessee. Despite search and seizure no adverse material was found to substantiate the disallowance made by the A.O. The so called spot enquiry done by the Inspector has no credence as no details have been filed before us, nor was the assessee confronted with the manner in which spot enquiry was conducted, the persons who conducted the spot enquiry or the material gathered by the Revenue in the spot enquiry. Thus the Revenue cannot place reliance on this enquiry. The purchases which are disallowed relate to cement and steel which are essential for the purpose of construction. No enquiries are made with the banks, other statutory authorities on the identity of the parties. Details such as whether sales tax authorities have accepted the quantum of purchases made by the assessee have not been obtained Identity could be ascertained by the AO, both from the banker and the sales tax authorities. Under the circumstances we have to uphold the contentions of the assessee, that the finding of the AO, that the assessee has not furnished full details, is factually in correct. 14.2. Coming to the identity of the parties we find that all the partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s observed that sufficient pieces of evidence of transactions of the purchases made from various parties have been produced by the appellant which have not been denied by the Assessing Officer and have not been found to be false. Therefore, in such circumstances there was heavy onus on the Assessing Officer to prove otherwise which has not been discharged by him and on the other hand initial onus on the assessee has been discharged. The Hon'ble Apex Court in Daulat Ram's case 87 ITR 349 has held that the onus to prove that the apparent was not real was on the party who claimed it to be so. Thus the onus was. heavily on the Assessing Officer in this case. The Assessing Officer has also mentioned the fact of making certain SP9t. enquires which according to him have revealed that parties M/s Jai Ambe Trading Company and M/s Shree Ganpati Enterprises did not exist at their given addresses for 6-7 years. AR stated and assessment order also does not show that such facts or the enquiries have been confronted to the appellant. Assessing Officer has thus disallowed purchases in violation of principles of natural justice in such circumstances I am in agreement with the contentions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reversing the finding arrived at by the CIT(A) accepting the said transaction as a genuine transaction. (Emphasis ours). 14.4. In view of the above discussion we uphold the finding of the Ld.CIT(A) on the deletion of the disallowance of ₹ 2,89,34,711/-, which was treated as bogus purchases by the A.O. These grounds of Revenue are dismissed. 15. In the result Revenue s appeal is dismissed. 16. We now take up assessee s appeal. The First Appellate Authority has sought to reject the books of accounts on two grounds. (a) the assessee failed to file confirmations and produce the parties from whom purchases were made. (b) the gross profit rate of the assessee is less than the gross profit rate of other concerns in the group. 17. As far as the first issue is concerned we refer to our detailed discussion in the Revenue s appeal and hold that the First Appellate Authority has taken a contradictory stand. The Ld.CIT(A) held that the non production of parties etc. on the facts and circumstances of the case, does not justify disallowance of the claim of expenditure on account of purchases. On the other hand he cites the same reason for holding that the book ..... X X X X Extracts X X X X X X X X Extracts X X X X
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