TMI Blog2017 (2) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... e additions relating to purchases made in all the three years under consideration. - Decided in favour of assessee - I.T.A. No. 3015/Mum/2015, I.T.A. No. 3016/Mum/2015, I.T.A. No. 3502/Mum/2015, I.T.A. No. 3503/Mum/2015, I.T.A. No. 909/Mum/2015, C.O. No. 129/Mum/2016 - - - Dated:- 15-2-2017 - Shri B.R. Baskaran (AM) Shri Amit Shukla (JM) For The Assessee : Shri D.B. Sanghvi For The Department : Shri Sauravh Deshpande ORDER Per Bench :- The cross appeals filed by the parties and cross objection filed by the assessee are directed against separate orders passed by the learned CIT(A)- 33, Mumbai and they relate to A.Y. 2009-10 to 2011-12. Since the issues urged in these appeals are identical in nature, they were heard together and are being disposed of by this common order, for the sake of convenience. 2. The Assessing Officer made addition in all the three years by disallowing a portion of purchases treating them as bogus purchases. The learned CIT(A) restricted the addition to 12.5% of the value of alleged bogus purchases. The Revenue has filed these appeals challenging the relief granted by the learned CIT(A). The assessee has filed these appeals an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 was 4% but the same has risen to 9% in A.Y. 2009-10. Accordingly, he submitted that the net profit could not have gone up, had he accounted for bogus bills. Accordingly, the assessee contended that the purchases are all genuine. 5. The Assessing Officer, however, was not convinced with the explanations given by the assessee. The Assessing Officer noticed that the suppliers have confessed before the sales tax authorities that they have issued only accommodation bills without actually supplying any material. The AO also noticed that the assessee has failed to furnish transportation receipts or octroi receipts. Since the assessee has consumed the materials, the Assessing Officer took the view that the assessee could not prove the purchase of material beyond doubt. The Assessing Officer also placed reliance on the decision rendered by Hon'ble Gujarat High Court in the case of CIT Vs. Chandra Vilas Hotel (164 ITR 102) and also certain other decisions to reiterate that the onus lies on the assessee to prove the claim of deduction for expenditure. The Assessing Officer also observed that the assessee has failed to produce the suppliers before him. 6. The Department had con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. The learned CIT(A) observed that in the case of bogus purchases, payments would normally be made at one go or it may be shown as outstanding at the end of the year. With regard to the admission made by the dealers before sales tax authorities, the learned CIT(A) took the view that the Assessing Officer cannot place reliance on them without corroborating the same with any other material to prove the authenticity of the statement. The learned CIT(A) also noticed that the Assessing Officer has summarily rejected the evidence furnished by the assessee with regard to the payments, invoice, delivery challan without making further investigation in the matter. The learned CIT(A) also placed reliance on the decision rendered by the coordinate bench of in the case of ITO Vs. Premanand (2007) 107 TTJ (Jd) 395 and also decision rendered in the case of DCIT Vs. Rajeev G. Kalathil (ITA No. 6727/Mum/2012). The learned CIT(A) came to the conclusion that entire purchases cannot be treated as bogus, since gross profit rate and net profit rate declared by the assessee has gone up during the year. Further the Ld CIT(A) observed that the assessee has purchased goods at prevailing market rates. Henc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oject engineer who has sole responsibility for making purchases as and when, required at Various sites; vi) Purchases are made through brokers also; vii) Precaution taken while making purchase of material at various sites is that the vendors are registered with VAT authorities, proper Tax Invoices is raised by them and most importantly, required quality material is received from them. Beyond these, a prudent businessman cannot be asked to gather any other information for carrying out transaction; viii) All the contracts executed are of Government / Semigovernment authorities and their supervisor regularly inspect and keep check upon the construction activity carried out and the material used is also checked and only after thorough investigation and verification, the running bill of the appellant' is passed for payment, else appellant would not receive payment: ix) AO not stated as to what stand department has taken in all the 8 parties income tax proceedings. x) The Appellant submits that from the chart of GP submitted, it would be observed that that there are 15 contracts (other than sub-contracts) executed by the appellant during the year and c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ties. n) The MVAT department, has categorized certain parties who have failed to pay sales tax as 'suspicious dealer' and hence, the AO could not make disallowance of entire purchases made from these parties without bringing on record any further material or evidence to prove that these parties have not carried out actual purchase and sale business. The appellant submits that merely on the basis of some list and that too of so called 'suspicious dealer' by the sales tax department will not make genuine purchase made b y the appellant as non-genuine. In this regard, the appellant relies upon the decision of Mumbai ITAT in the case of DCIT v. Rajeev Kalathi, ITA No.6727/Mum/2012, AY 2009-10, Bench 'D', order dated 20.08.2014 wherein it is held in para 2.4 as under : We find that AO had made the addition as one of the supplier was declared a hawala dealer by .the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end But he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that - 'When the assessee have filed letter of confirmations of the suppliers, Bank statements highlighting the payment entries through account payee cheque, copies of invoices, stock reconciliation statements before the AO; and merely because the suppliers did not appear before the AO, one cannot conclude that the purchases were not made by the assessee. The AO cannot disallow the purchases on the basis of suspicion because the suppliers were not produced before them. (s). The appellant submits that in the present case also, the AO has made disallowance of entire purchases made from 8 parties only on The basis of suspicion and non-production of supplier that too after more than 5 years from last business transaction and hence, the ratio of the aforesaid decision of Bombay High Court squarely applies to the facts of the present case and the disallowance thus made is unjustified and liable to be deleted. (t) The appellant also relies upon the Bombay High Court decision in Babulal C. Borana v. ITO [2006] 282 1TR 251 (Born) and the finding given on page 258 para 20 are reproduced hereunder- Moreover, it is not the case of the Revenue that the investments made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... man 248/254 CTR 228 (SC) CIT Vs. Dhingra Metal Works 328 ITR 384 (Del) Unitex Products Ltd. v. ITO [2008] 22 SOT 429 (Mum) DClT v. Premsons (2010) 130 TTJ 159 (Mum) (w) The appellant further submits in this regard that the CBDT nas issued instruction dated 10/03/2003 wherein it is categorically stated that no confessional statement be recorded and the emphasis in course of search and survey proceedings must be to collect and gather material or evidences and only rely upon such evidences for making additions. (x) The appellant further submits that the AO has relied upon the statement without affording any opportunity to the appellant to cross examine the said person. The appellant relies upon the following decisions for the proposition that no addition could be made on the basis of the statement given by the third party if the appellant is not given opportunity to cross examine :- a) CIT Vs. SMC Share Brokers Ltd. [2007] 288 ITR 345 (Del) - wherein it was held that rejection of request to cross examine person searched and on whose statement reliance is placed, the same would vitiate assessment/additions being made in violation of principles of nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uments, i.e., third party documents. Further, they have also not stated that the materials were not received or consumed. 12. We notice that the assessee has made detailed submissions before the Ld CIT(A), a part of which was extracted earlier. The assessee has stated that the entire responsibility for purchasing goods including preparation of documents. Hence the flaw, if any, in the availability of internal documents would not render the external evidences such as, invoices, delivery challans etc. invalid or bogus. We have also noticed that the AO had placed full reliance on the statement given by the suspicious dealers to the Sales tax department. We notice that the assessing officer did not make any independent enquiry with those dealers not did he show that the suspicious dealers have specifically stated that the transactions entered with the assessee were bogus. According to the assessee, those dealers have merely disowned the transactions to serve their own purpose, since they have committed default under VAT Act. Accordingly it was contended that the AO should not have relied upon those statements blindly without making his own investigations. The assessee has also conte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal was justified in deleting the addition made towards alleged bogus purchases, when the AO did not allow the assessee to cross examine the suspicious dealer. 15. The co-ordinate bench of ITAT has also considered an identical issue in the case of ACIT Vs. Shri Mahesh K Shah (ITA No.5194/Mum/2014 dated 31.01.2017) and has held that mere reliance by the AO on information obtained from the Sales tax department or on Statement/affidavits of the 12 parties before the Sales tax department or that these parties did not respond to notices issued under section 133(6) of the Act, would not by itself suffice to treat the purchases as bogus and make the addition under section 69C of the Act. It was further observed that, if the AO doubted the genuineness of the said purchases, it was incumbent upon him to cause further inquiries in the matter in order to ascertain the genuineness or otherwise of these transactions. Without causing any further enquiries to be made in respect of the said purchases, the AO cannot make the addition under section 69C of the Act by merely relying on information obtained from the Sales tax Department, the statements/affidavits of third parties, without the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n only on the reasoning that the purchase price shown in the bills may not be at arms length, while the assessee has contended that the goods were purchased by them at market rates. In paragraph 39 of the order, the Ld CIT(A) accepts the contentions of the assessee that the AO has not made any attempt to prove the bills/invoices produced by the assessee to be bogus. The assessee has stated that he has purchased construction materials from the suspicious dealers at prevailing market rates and it was not established that the purchases were made at a rate higher than the then prevailing market rates. The Ld A.R submitted that the quality of work executed by the assessee is subjected to stringent verification by the Government authorities and hence he could not have compromised on the quality of the materials. Accordingly he submitted that the question of making any profit on purchases would arise only if there is a possibility for the assessee to purchase inferior quality material from the grey market and obtaine accommodation bills from the dealers. He submitted that the work executed by the assessee has not been rejected by the Government authorities and he continues to get work fro ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
