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2015 (7) TMI 528 - ITAT DELHI

2015 (7) TMI 528 - ITAT DELHI - TMI - Addition on account of bogus purchases - CIT(A)deleted the addition - Held that:- No defects have been found in the stock register nor any defects have been pointed out by the A.O. in the audited 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 .....

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e 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.

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 .....

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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 treated as bogus purchases by the A.O - Decided in favour of assessee.

G.P. addition - Rejection of books - Held that:- As no defects have been pointed out in the books .....

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Sudhir K Sehgal, Adv. For the Respondent : Sh. Syed Nasir Ali, CIT, D.R. ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER These are Cross Appeals belonging to different assesses directed against separate orders of the Ld.CIT(A) dated 29.9.2010 pertaining to the A.Y. 2008-09 in the case of M/s Piyush Developers Pvt.Ltd; and order dt. 29.9.2010 for the A.Y. 2008-09 in the case of M/s Varsa Buildwell India Pvt.Ltd. Admittedly as the issues are identical, and the orders of the A.O. as well as the Firs .....

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and construction activity. It does not own land. It carries out construction activity and development activity, in the capacity of a contractor, on the land owned by its clients. The assessee neither purchased land nor sells the same. 3.1. A search and seizure operation was conducted on Piyush group of companies on 16.1.2008 both at the office premises as well as at the residential premises of the Directors. Certain documents were seized and impounded, certain cash and jewellery was also found. .....

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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 ha .....

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abad, during the last 6-7 years and 981/2, Gali No.2, Bhoor colony, Faridabad during the last 5-6 years respectively. In view of the above, the genuineness, identity and credit worthiness of the parties from whom purchases are shown remained unverified. 3.4. Aggrieved, the assessee carried the matter in appeal. The First Appellate Authority deleted the addition by holding that the assessee has furnished copies of bills, purchase vouchers, material receipt notes, copies of GRs along with evidence .....

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with Sales Tax dept. and VAT has been charged. He granted relief by deleting the disallowance on account of bogus purchases. At the same time the First Appellate Authority rejected the books of the assessee on the ground that the assessee had failed to file confirmation from the parties and the gross profit rate disclosed by the assessee is less than the gross profit disclosed by the other concerns of the group and there after went on to estimate the gross profit of the assessee at 27% as again .....

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d creditworthiness of the parties from whom the alleged purchases were made, the onus for which had squarely shifted on the assessee after the relevant parties were not found to exist at the addresses furnished by the assessee to the AO. 2. 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, in the course of appellate proceedings gave the assessee an opport .....

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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 the grounds of appeal on or before the appeal is heard and disposed of. 6. It i .....

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e assesses are liable to be rejected. 3. The CIT(A)-I, Ludhiana has erred in directing the AO to recompute the total income of appellant by taking gross profit @ 27% to instead of 16% shown by the appellant. 4. That the action of the CIT(A)-I, Ludhiana in actual gross profit at 16% shown in directing the AO to recompute the total income of appellant by taking gross profit @ 27% to instead of 16% shown by the appellant is based on imagination and guess work and without any material on record and .....

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the Revenue. 7. The Ld.CIT,D.R. relied on the order of the A.O. and submitted that the assessee could not produce these three parties before the A.O. and enquiries made by the A.O. demonstrate that these particular firms were not existing at the addresses given for the last six to seven years. He argued that the assessee had not furnished confirmation copies of accounts, income tax return etc. of these firms and under those circumstances purchases made by them were rightly held as non genuine b .....

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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 .....

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nted out that certain material was found and seized during the course of search, no adverse view was taken by the A.O. and that the material seized does not disclose any bogus purchases, inflation of expenses etc. 9. On the assessee s appeal, the Ld.Counsel for the assessee submitted that the First Appellate Authority held that the books of accounts of the assessee are liable to be rejected, though the A.O. had not rejected the books of accounts, for two reasons - (a) confirmations were not file .....

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diction to his own action, takes a view that the books of accounts of the assessee should be rejected. On the second issue he submitted that the rejection of books cannot be made on the basis of the fact that the gross profit rate of the assessee is less than that of the other concerns. Thus he submitted that the rejection of books of accounts by the Ld.CIT(A) is bad in law and this action is to be vacated and consequently the estimates of Net Profit is also to be held as bad in law. 10. The Ld. .....

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As already noted the assessee is a real estate contractor. Purchases from three parties have been disallowed, on the ground that the assessee failed to produce those parties and has not furnished certain details such as confirmation of copy of accounts, income tax particulars etc. When we see the quality of evidence produced by 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 fur .....

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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 l .....

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r has not cited any comparable case to justify such a high GP of 68.20%. Thus the whole trading results would present a distorted picture if the Assessing Officer's version is accepted which in my opinion is practically impossible. This view is duly supported by the two judgments of Hon'ble Chandigarh Bench of ITAT in the case of J.R. Solvent Industries (P) Ltd. Vs. ACIT (1999) 68 ITD 65 (Chd) (TM) and in the case of M/s Raj & San Deeps Ltd. Vs. ACIT, Ludhiana in ITA No. 1853/Chandi/ .....

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shown work certified of ₹ 5,54,30,587/- which in my opinion is practically not possible unless of course proved by the AO which the AO has not done. These factual finding could not be controvered by the Ld.D.R. 14.1. No defects have been found in the stock register nor any defects have been pointed out by the A.O. in the audited 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 ca .....

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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 w .....

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the following reasons. (i) The persons from whom purchases are made could not always be in the control of the assessee, specifically when they are unrelated parties. (ii) The 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. The Ld.CIT(A) at para 4.4 held as follows. 4.4. It is also seen that during the course of assessment proceedings the assessee had f .....

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ct that the invoices issued by the various parties are bearing the truck number of the vehicle used for delivery of goods and VAT has also been charged by the parties in their bills. The goods mentioned in the bills are mainly cement and steel (TMT bars) which are the basic component required for construction of any building or complex. The evidence of receipt of such goods by assessee 'in the form of purchase voucher/material receipt note is also there. Most importantly as stated by the AR .....

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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 t .....

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olation of principles of natural justice in such circumstances I am in agreement with the contentions of Id. AR that the action of the Assessing Officer in simply brushing aside the evidences before him was highly unjustified in the facts and circumstances of the case. These findings of the Ld.CIT(A) could not be controverted by the Ld.D.R. We find no infirmity in the same. (iii) The other aspects are that the value of work certified, the value of closing stock have been accepted by the A.O. Bot .....

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taxmann.com 692 (Cal.) at paras 9 and 10 held as follows. 9. However, as regards the payments made to M/s Selvas Photographics are concerned amounting to ₹ 3,12,302/- we find that those have been made by account payee cheques and those have been encashed through the bankers of M/s Selvas Photographcis. It appears that according to the appellant, at the time of assessment, the appellant had no business transaction with M/s Selvas Photographics and consequently, the said party did not cooper .....

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ess, the claim of the assessee on that account cannot be discarded as non existent. In the case before us, the Revenue has not put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as if there was no such transaction. 10. The transaction having taken place through payment by account payee cheques, such plea is not tenable and in such circumstances, the Tribunal below erred in law in reversing the finding arrived .....

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he 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 jus .....

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