TMI Blog2021 (2) TMI 606X X X X Extracts X X X X X X X X Extracts X X X X ..... ooks. In the case of M/s Suman Enterprises, the statement of Amit Vashisht indicates that the firm has been registered and run by Shri Deepak, no further enquiries have been conducted. Inspector report cannot be given credence as the party was found to be genuine on enquiry. The better way for the AO could be to enquire about the amounts received from the assessee and from such amounts, if any, purchases of material have been made which in turn supplied to the assessee. The non- purchase of material/ non- utilization of the amounts for purchase of material by the suppliers would be an appropriate evidence to disallow this purchases but the same has been wanting. Reliance is placed on the order of Hon ble High Court of Bombay in the case of CIT Vs Nikunj Eximp Pvt. Ltd. [ 2013 (1) TMI 88 - BOMBAY HIGH COURT ] wherein it was held that no addition is warranted based on the fact that the suppliers have not appeared before the AO - we decline to interfere with the order of the ld. CIT (A) in deleting the addition. - Decided in favour of assessee. - ITA No. 3982/Del/2015 - - - Dated:- 8-2-2021 - Sh. Amit Shukla, Judicial Member And Dr. B. R. R. Kumar, Accountant Member F ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional Bank, Nehru Nagar. Ghaziabad in the name of M/s Meet Enterprises A/c No. 116002100028811 was also scrutinized by the Investigation Wing, Dehradun. It has been informed that the account opening form obtain from the PNB reveals that proprietor of M/ s Meet Enterprises is Sh. Sunil Kumar s/o Sh. Lata Ram r/o 621/11 Mimlana Road, Muzaffar Nagar with business address at Meerut Road. Surju Chungi, Muzaffar Nagar. The statement of Sh. Sunil Kurnar was also recorded by the investigation Wing wherein be stated that he is a driver and that earlier he used to be a driver of Sh. Pushkar Tyagi r/o Shaibabad, Ghaziabad. It was stated by Sh. Sunil Kumar that on being asked by Sh. Pushkar Tyagi, he opened an account in the name of M/ s Meet Enterprises signed bank cheque book at the behest of Tyagi. Further, Sh. Sunil Kumar submitted that apart from this he has no knowledge of M/s Meet Enterprises and its transaction. ii. Further, the trade tax registration No. given at the time of opening of bank account was also got verified from tax department, Muzaffar Nagar and it was found that the registration No. mentioned in the registration certificate submitted to the bank at the time of openin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tiated the veracity of their claim of purchases made from M/s Meet Enterprises. From the facts discussed above, it is prima facie proved that the name of M/s Meet enterprises and the two bank accounts opened in its name have been used to facilitate / route accommodation entries to the assessee in lieu of cash. The cheques received from the assessee as well as from other parties have been deposited in accounts of M/s Meet Enterprises and further M/s Meet Enterprises have issued cheques to other parties. These cheques have been deposited in the respective bank accounts of the other parties / entities (20 parties), which are detailed in the information received from Investigation Win,. Dehradun. All these transactions in the banks reveal that before the issuance of cheque to these parties, different larger amount of cheques have been deposited in the respective bank accounts and substantial cash has also been withdrawn from this account which prima facie proved that these are also accommodation entries arranged through inter party transfer. In the bank accounts of these entities, a lot of cash have been deposited and corresponding cheques have been issued. On enquiry made by Investiga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessee has failed to produce any of party including M/s Meet enterprise. However, the assessee has again furnished copy of cheques issued to M/s Meet Enterprises, copy of purchase bills and weightage of M/s Meet Enterprises. I have examined the bills given by the assessee, on these bills address Ramdham Colony, Shivalik Nagar, Haridwar is mentioned. As reported by the Inspector and intensive enquiry made by the Investigation Wing Dehradun, the purchases claimed to be made from M/s Meet Enterprises appears to be bogus claim of the assessee as no entity in this name is found to be in existence at this address. In view of the above facts and circumstances, it is crystal clear that the claim of the assessee in respect of purchases from this party is not genuine, hence held as bogus expenditure claimed by the assessee. II. M/s Suman Enterprises, BH-80, Poorvi Shalimar Bagh, New Delhi: i. During the year, the assessee has claimed to have made purchases from M/s Suman Enterprises amounting to Rs, 1,50,26,303A. The assessee was asked to produce this party with the complete books of accounts and bills of transportation etc., which it has failed to do so. ii. The Inspecto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that proprietor of M/s Suman Enterprises is Shri Amit Vashisht Son of Sh. Ravindra Kumar Vashisht residence of 1BH-80, Poorvi Shalimar Bagh, Delhi 110088. Summon u/s 131 of the Act. dated 29/11 /2011 was issued to Sh. Amit Vashisht. In response, Shri Amit Vashisht attended the office on 21/12 /201 land his Statement on oath was recorded. In his statement he has stated that he is only 5th class passed and residing with his father Sh. Ravindra Kumar Vashisht, mother Smt. Kama Vashisht and his elder brother Sh. Yogesh Vashisht and his wife Smt. Sapna Vashisht at the aforesaid address. Further he stated that he is employed with Sh. M.A. Khan (property dealer) for a monthly salary of ₹ 5,000/- for the last three months. Further he stated that earlier, he was not used to do any work and all expenses were born by his father who is retired from St. Stephens College. When he was asked about M/ s Suman Enterprises and the business run in the name of M/ s Suman Enterprises, he replied that a concern namely, M/ s Suman Enterprises was registered at his residential address which was being run by a person namely, Sh. Deepak who is residing at somewhere in Shahdara, Delhi. Further, he sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for many years around in locality of this village who also confirmed that such entity under the name and style was not around any time, neither at present nor in the past. iii. In this regard, letter dated 29 /1 1/2011 was sent to the assessee which factual position reported by the Inspector in respect of M/s Durga Enterprises was informed. It was also informed that in view of the facts as discussed in the report of Inspector; the claim of purchases made from this party is not proven to be genuine. Further, the assessee was asked to produce this party alongwith complete books of accounts, income tax records, bills of purchases and sales, bills of transportation of goods and challans. iv. In response, the assessee furnished only confirmed copy of account from someone Sh. Yoginder, showing the person as proprietor of M/s Durga Enterprises. v. I have examined the confirmation furnished by the assessee in this regard. No other requisite details have been furnished by the assessee. The assesses has failed to produce the party concerned with the requisite complete books of accounts, income tax records, bills of purchases and sales, bills of transportation of goods and challans. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bills, it appears that each hill is for the purchases of Steel from M/ s Bharat Trading Company. The address of this party on these bills is 338, West Amber Talab, Roorkee . One thing is necessary to point out here that the address of this party is the some for which Inspector has reported that no such party was in existence at this given address. Further, the assessee has failed to produce the party concerned with requisite complete books of accounts, income tax records, bills of purchases and sales, bills of transportation of goods and challans. Therefore, the genuineness of claim of the assessee in respect of purchases from this party could not be verified as no entity in this name is found to be in existence at this address. v. In view of the above facts and circumstance, it is crystal clear that the claim of the assessee in respect of purchases from this party is not genuine, hence held as bogus expenditure claimed by the assessee. 4. Further, vide letter dated 26.12. 2.011. the assessee has also furnished a certificate dated 22.12.2011 from Architect confirming the use of iron/ steel for construction of the building at project site at GTM Forest Hills Dehradun an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccordingly, purchases from these parties arc held as bogus claim of purchases for which the assessee company has no justification and explanation. Therefore, the amount of purchases claimed to made from these parties is disallowed and added back by applying the provisions of Section 69C of the Act, out of total purchases claimed to be made by the assessee company, and considered as undisclosed income in the hands of the assessee company for the year under consideration. 5. During the course of appellate proceedings, the appellant gave detailed arguments vide written submissions dated 30.01.2013. The same is reproduced hereunder: BACKGROUND The appellant company is engaged in the business of building construction and real estate development. It filed its return of income on 30.09.2009 declaring income of ₹ 30,81,872./-. The Assessing Officer has completed the assessment u/s 143 (3 ) of the IT Act on a total income of ₹ 3,66,68,990/-. In this assessment order the Ld. Assessing Officer has made an addition of ₹ 3,35,87,118/- by alleging the purchase of building material made from various parties as bogus. SUBMISSIONS The only ground of appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. Further, the AO during the course of assessment proceedings required the appellant to produce the party for verification of genuineness of transaction but the party was not produced. The AO however noted in the assessment order that the appellant has furnished copy of cheques issued to Meet Enterprises, copy of purchase bills and weightage bills of Meet Enterprises. It is submitted that the first allegation of the AO is that Investigation Wing of the Department has information that the appellant has received accommodation entries. The appellant is not aware of any such information as it has not been confronted with it. Therefore, no value can be attached to the report of the Investigation report as the same has not been confronted with the appellant. Reliance in this regard is placed on the following decisions: Opportunity to cross examine the witness of revenue We respectfully state that it is illegal and gross violation of principle of natural justice. It would not be out of place to refer to the decision of Hon ble Jurisdictional High Court of Delhi Hon ble Apex Court of India to contend that this is gross violation of principal of natural justice and the onus is o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t existent. At the same time, the AO states that cheques were deposited in its account and withdrawals were made. How can the Bank open account if the party is not existent. The AO has also stated in the assessment order that Investigation Wing has informed that the appellant received accommodation entries of ₹ 98,56,480 in FY 2008 -09 in the form of purchases claimed from M/ s. Meet Enterprises. According to Investigation Wing : i) the bank account shows that one Sh. Sunil Kumar is the proprietor of Meet Enterprises; ii) Sh Sushil Kumar is a driver and he has no knowledge of Meet Enterprises Hi) trade tax registration No. given in the bank account pertained to M/s. Kumar Traders iv) The cheques received from the appellant were deposited in two bank accounts and after a few days or on the same day, cash of aimost the same amount was withdrawn or cheques issued to different parties v) one Mr. Vikas stated that he used to run the business of Meet Enterprises and that he had only one transaction in which he sold goods to National Trading Co. On the basis of these facts the Investigation Wing concluded that the name of Meet Enterprises has been used to facilitate/route accommo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le or it was not produced, the AO has disallowed the claim. As stated above, the appellant has not been confronted with the findings of the Investigation Wing by allowing opportunity to it for cross examining the persons whose statement the Investigation Wing has used against the appellant In view of this very fact, the findings of the Investigation Wing cannot be made use of against the appellant. As regards the genuineness of the purchases made from Meet Enterprises, the appellant has filed before the AO copy of cheques issued to it towards settlement of bills, copy of bills and other documents in support. It is quite amazing as to how the cheques issued by the appellant have been encashed by Meet Enterprises if it was a non-existent entity or if it was not traceable at the relevant point of time. It is quite possible that by the time the AO made enquiries the party must have shifted/closed down its business. But that cannot be a reason for treating the purchases made by the appellant from the said party as bogus when supporting documents have duly been furnished by the appellant. Further, it is submitted that the appellant has approached the party for supply of constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprises is one Sh Amit Vashist who was issued summons u/s 131 and his statement was recorded. In his statement he admitted that Suman Enterprises was registered at his residential address which was run by one Deepak and that Amit signed some documents including cheques as Deepak assured him some good job. Sh Amit further stated that he did not know the appellant company. It will be seen that here also first the lady Smt. Rama categorically denied to have any knowledge of Suman Enterprises. Subsequently her son Amit admitted that the said concern was registered at the said address. Therefore, the report of the Inspector that no such firm existed at the address is incorrect as the report was not based on proper enquiry. In order to escape from the clutches of the Departmental enquiry, Amit gave some vague reply like signing blank cheques on instructions of someone with an assurance to get a job etc. which is unbelievable. The admission of Sh Amit that it did know the appellant company supported the fact that no collusive arrangement could have been made with the said person/firm. The AO has been swayed away by the Investigation Report in the case of Meet Enterprises though no such r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No enquiries have been conducted by the AO from the bank etc. as has been done in the case of Suman Enterprises to come to his conclusion that it is crystal clear that the claim of the assessee in respect of purchases from this party is not genuine despite the fact that the appellant filed confirmation from the party in question. The AO has been carried away by the investigation report in the case of Meet Enterprises and without making any effort by sending summons to the party or calling information u/ s 133 (6), he has jumped to the conclusion on the basis of Inspector s report that the party is not existent at the address and also ignoring the various documents filed before him. As stated earlier, it is quite possible that by the time the AO made enquiries the party must have shifted/closed down its business. But that cannot be a reason for treating the purchases made by the appellant from the said party as bogus when supporting documents have duly been furnished by the appellant. 4. M/ s Bharat Trading Company ₹ 37,91,821/- Here also there is no adverse report of Investigation Wing. The Ld. Assessing Officer has made the disallowance of expenditure on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uced/furnished all the necessary documents available with it in support of its claim. The very crucial evidence that was furnished by the appellant in support of the use of the so-called materials purchased from the above parties has been brushed aside on flimsy grounds. Further, the confirmations from the contractors have also been ignored. If the AO doubted about its veracity, he could have summoned the said contractors/architect for examination and then come to a conclusion that they are not reliable. That not having done, the conclusion arrived at by the AO is without appreciating proper evidence on record and just only clinching on the report of the Investigation Wing without confronting it to the appellant. The AO chooses to record statement of some persons and without confronting it with the appellant uses against the appellant and at the same time he does not record the statement of the architect/ contractors which would have tilted the case in favour of the appellant. The AO has been swayed away by the report of the Investigation Wing of the Department, which as stated above, is not a reliable one as it was based on some statements recorded behind the back of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 12.71 lakhs on account of alleged bogus purchase of the assessee. It was held by the Hon ble Tribunal that: Having heard the submissions of both sides, we have been informed that the malpractice of bogus purchase is mainly to save 10 % sales tax etc. It has also been informed that in this industry 2.5 % is the profit margin. Therefore, respectfully following the decisions of the coordinate bench pronounced on identical circumstances, we hereby direct that the disallowance is required to be sustained at 12.5 % of the purchase from those parties. 6. During appellate proceedings the appellant has further submitted that: The AO while making the disallowances out of the purchases of construction material purchased (Debit side) by the assessee by treating some of the parties as bogus, the AO should have also deleted the corresponding amount accounted as work-in- progress/closing inventories as well as stocks and consequently the assessable income of the assessee, particularly when the assessee is regularly recognizing revenue by adopting construction linked percentage completion method as per Accounting Standard-7. The action of the Assessing Officer in no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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