TMI Blog2018 (8) TMI 2009X X X X Extracts X X X X X X X X Extracts X X X X ..... y, set aside the findings of the CIT(A) and direct the AO to delete the entire addition. - Decided in favour of assessee. - ITA No. 4907/DEL/2014, ITA No. 6102/DEL/2014 - - - Dated:- 13-8-2018 - Shri N.K. Billaiya, Accountant Member And Smt Beena A. Pillai, Judicial Member Assessee by: Shri Ashwani Taneja, Adv Shri Kamal Piyush, CA Shri Saurabh Goel, CA Revenue by: Shri Sanjeet Singh, CIT- DR ORDER N.K. Billaiya, These two cross appeals filed by the assessee and revenue are preferred against the order of the Commissioner of Income Tax(A)-III, Delhi 7, New Delhi dated 08.08.2014 pertaining to assessment year 2010-11. 2. The bone of contention is the purchases made from the following four parties; S.No. Name of the parties Amount of purchase 1. Mohan Ram Trading Co. ₹ 1,25,40,049 2. Shyamji Traders ₹ 25,79,978 3. Ganga Trading Co. ₹ 85,01,193 4. U-Tek Sales Corporation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng in the matter, undisputed facts already on record are briefed as under: (a) The payment to these parties for purchases was made through account payee cheque drawn on disclosed bank account, duly reflected in accounts and audited statements. (b) It is matter of fact that even during course of search no cash equivalent was or anything on the contrary was found. (c) Alternatively considering that as per nature of business activity involved and the income accrued is subjected to mandatory guidelines as per accounting standard - 7, according to which the income and claim of cost thereof is in proportion to % of completion of projects. Thus under the circumstances the claim (if any) is only to the extent of completion % thereof (d) The supplies received are duly supported by following records maintained: (e) (1) Each supply have been duly recorded in inwards register after physically verifying the same. (2) The supplies are received through transporters having valid GR Nos. (3) The supplies are duly recorded in stock records duly maintained in due course. (4) The supplies are duly recorded in stock records duly maintained in due course and supported by respe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of employees and other persons to ensure un interrupted works or face administrative action ,therefore under the circumstances supplies, there may be situation where such delegated persons are constrained to arrange supplies through grey market, middle men or persons operating in unorganized sector, but payment in lieu thereof made and bills in this respect arranged from parties other than actual suppliers so as to ensure payments in lieu services/supplies be made. The merits of out contentions are automatic from records being maintained by us wherein the supplies made have been duly received and form part of our inventory as at 31.03.2010. Thus in view of explanation above, it is evident that no adverse inference in the matter is called for. We hope that the explanation given shall be accepted and in case your good self is of different view, please provide us the basis of such view with an opportunity to rebut and cross examine. 8. The AO was not satisfied with the submissions made by the assessee. The AO was of the opinion that the alleged suppliers of materials were neither found existing at the given address nor they could be located. Summons u/s 131 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me Tax Act, 1961 were sent to the above parties. However, summons under section 131 of the Income Tax Act, 1961 were received back unserved from the postal authorities. Further the assessee through order sheet entries was categorically asked to produce the above parties so that the genuineness of the purchases made from these parties could be ascertained, however, despite affording several opportunities, the assessee failed to produce the parties for verification of alleged purchases of material made from them. 3.1 In view of the aforesaid facts, the genuineness of expenditure claimed by way of alleged purchase from the above mentioned parties was not proved and therefore, purchases made from them aggregating to ₹ 7,86,21,320 was treated as non genuine and therefore disallowed. 4. During the course of appellate proceedings, one of the ground taken by the assessee is that the addition has been made on account of fact that summons sent by the Assessing Officer during the course of assessment proceedings have been received back, however, on inspection of the records by the assessee, no such evidence was available on file in respect of the summons having received back as un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arties under section 133(6) of the I.T. Act, 1961. The Inspector has collected the bank statements of all parties except Bank of Baroda, Ghaziabad and submitted the same through his report. Information from Bank of Baroda has been received though speed post. All information have been placed on records. 4.7 On analysis of the bank accounts of the aforesaid parties, it is noticed that after deposit of cheques there is immediate withdrawal, in cash, either on the same date or on subsequent date, in most of the instances showing that these parties are bogus and alleged transactions of purchases are just entries and there is no actual purchases made by the assessee company. 4.8 In view of the aforesaid facts, it is evident the parties from whom the assessee claimed alleged purchases did not appear in the assessment proceedings as well in course of remand proceedings for the purpose of verification of alleged purchases/examination. Therefore, the genuineness of expenditure claimed by way of alleged purchase from the above mentioned parties does not get proved at all and consequently, purchases made from them aggregating to ₹ 7,86,21,320 was rightly treated as non genuine and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sustained by the CIT(A) only on the ground that the assessee could not produce the four parties. The ld. Counsel strongly stated that merely because the persons could not be produced, would not mean that the purchases are bogus and the parties are non-est. The ld. AR relied upon his detailed submissions made before the first appellate authority. 13. Per contra, the ld. DR supported the findings of the AO. It is the say of the ld. DR that the onus was on the assessee to produce all the four parties to establish the genuineness of the purchases and since the assessee has failed to discharge the onus cast upon it, the action of the AO is fully justified and the CIT(A) grossly erred in restricting the addition to ₹ 1,96,55,330/-. The entire addition deserves to be sustained. 14. We have given thoughtful consideration to the orders of the authorities below. The facts on record show that a search and seizure operation was carried out in the appellant s group on 11.3.2011. It is pertinent to mention here that no incriminating material was found during the course of search proceedings. The AO chose four parties from whom building construction materials were purchased. It would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ments were made by account payee cheque and the seller also confirmed the transaction and there was no evidence to show that the amount was recycled back to the assessee and, accordingly, held that addition was not called for. In that case also, the AO had disallowed some expenditure treating the purchases as bogus and made the addition. 18. The ld. DR has strongly relied upon the judgment of the Hon'ble Gujarat High Court in the case of N.K. Proteins Ltd 2016-TIOL-3165AHM-IT wherein the facts show that during the course of search proceedings at the office premises of NKPL, blank signed cheque books and vouchers of number of concerns were found. Further, endorsed blank cheques of NKPL by these concerns were also found wherein the endorsement was on the back of the cheques. Accordingly, the purchases made from these concerns were treated as bogus purchases by the AO. 19. The facts of the case in hand are clearly distinguishable from the facts of this case in as much as there was nothing of such documents, as referred, were found from the possession of the assessee even during the course of search and seizure operation. The ld. DR has also placed reliance on some other judi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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