TMI Blog2021 (6) TMI 946X X X X Extracts X X X X X X X X Extracts X X X X ..... es of those alleged suppliers were found in the business premises of the assessee and assessee was unable to satisfactorily explain reasons for keeping those bills and invoices. The other facts brought out by the AO were also not controverted by the assessee with any evidences - we are of the considered view that there is no error in the findings recorded by the ld.CIT(A) to confirm additions made by the AO towards alleged bogus purchases from five parties and hence, we are inclined to uphold the findings of the ld.CIT(A) and reject ground taken by the assessee for assessment years 2011-12 to 2013-14. Disallowance of warranty obligation - AO has disallowed provision for warranty on the ground that it is unascertained liability and contingent in nature and hence, cannot be allowed u/s.37 - HELD THAT:- The assessee in the present case is a contractor for power installations. Although, the assessee suppliers several power related equipments but such equipments were sourced from various manufacturers and it is obvious that said manufacturers and suppliers will provide warranty obligation. Since, the assessee is not a manufacturer of any equipment and assessee is only a contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hases made from five parties in the hands of M/s. BGR Energy Systems Ltd . - HELD THAT:- We are of the considered view that once addition was made towards alleged bogus purchases in the hands of M/s. BGR Energy Systems Ltd., no additions can be made to similar amounts in the hands of the assessee because it amounts to double addition. The ld.CIT(A) after considering relevant facts has rightly deleted additions made by the AO and hence, we are inclined to uphold findings of the ld.CIT(A) and reject ground taken by the Revenue for all Assessment years. Addition towards cash found during the course of search - HELD THAT:- CIT(A) after considering the fact that said amount was subjected to tax in the hands of Smt. Sasikala Raghupathy has rejected additions made by the AO in the hands of the assessee. Therefore, we are of the considered view that there is no error in the findings recorded by the ld.CIT(A) to delete additions made towards cash found in the bank locker of Shri Mahadeven and offered to tax in the hands of Smt. Sasikala Raghupathy and hence, we are inclined to uphold findings of ld.CIT(A) and reject ground taken by the Revenue. - ITA Nos.: 23, 24, 25 & 116/CHNY/2018, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uring the search proceedings amounting to ₹ 30,00,00,000/- which relates to alleged bogus Purchases. Such, non-consideration has resulted in double taxation of ₹ 30,00,00,000/- which already forms part of the addition made during the AY 2011-12 amounting to ₹ 71,97,83,480/- Disallowance of Warranty obligation: 3.1 The Learned CIT(A) erred in upholding the disallowance of ₹ 5,65,92,452/-, that represents provision made by the appellant towards warranty for the relevant previous years without considering the facts and appellant s contention. 3.2 The Learned CIT(A) erred in contending that the appellant is only a contractor who executes the projects and therefore, a minimal warranty provision will be sufficient without considering the fact that the warranty obligations are applicable irrespective of whether the appellant is manufacturer or not. 3.3 The learned CIT(A) has erred in contesting that the minimal requirement of provisions for warranty obligations is well taken care of by the retention monies and has not appreciated the fact that the Retention monies are different from Provisions for Warranty Obligations. 3.4 The Learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /BGR-Office/B D/S-2 a. M/s. Sonal Steel Trading Pvt. Ltd. b. M/s. Megha Enterprises c . M/s. Satyam Enterprises d. M/s. United Brothers e. M/s. Meenakshi Enterprises During the course of search Shri P.R. Easwer Kumar, CFO of the assessee company was available. He was requested to furnish details regarding the manner in which financial operations of the company was being managed. As informed by him, the company has deployed SAP software solutions for managing operations. The modus deployed include HR, Materials Management and Finance Control. This application software imposed certain level of discipline on the user. During the course of search, assessee was asked to explain the purchases made from five concerns including evidences like purchase bills, delivery notes, transport bills, goods receipt notes, etc. In response, the assessee could not furnish necessary supporting evidences in respect of purchases from above five parties. Therefore, actual purchases from said parties were verified with reference to internal control system followed for regular purchases and found that purchase from above five parties were always made by making advance payment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also not able to produce the parties in person. The AO on the basis of information furnished by the assessee has issued summons to the so called five suppliers. In response, they appeared before the AO and filed necessary details. The AO had also recorded statement from them. During the course of assessment proceedings, they have reiterated their statement given during the course of search and confirmed that except issuing bills they does not supplied any goods to the assessee. They further clarified that after receipt of payment through RTGS, cash was withdrawn from bank and returned to the assessee. The AO had also given opportunity of cross examination of the parties to the assessee. During the course of assessment proceedings, Shri P.R. Easwer Kumar, CFO of the assessee company was allowed to cross examine Shri Tilok Chand Parmar in presence of the AO. Thereafter, the AO has questioned Shri H. Venugopal of CPSG about this specific purchase from bogus bill traders for which, he could not establish the purchase with necessary proof. Therefore, the AO on the basis of information collected during the course of search and post search investigation came to the conclusi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnai. He further noted that materials purchased from big traders like SAIL, Tata Steel, etc., do have delivery challans to their purchase invoices whereas, purchase invoices of these five parties are without delivery challans. From the above, it is very clear that purchases from above five parties are bogus in nature and nothing but accommodation entries. Accordingly, purchases from five parties to the extent of ₹ 113,48,73,346/- for assessment years 2011-12 to 2013-14 has been treated as bogus purchases and added to total income of the assessee. The relevant findings of the AO are as under:- Issues springing subsequent to initiation of Sec.153A proceedings 2.4 During the course of search action u/s 132 on 18.02.2014 at the business premises of M/s. BGRESL, Bill book/purchases invoices belonging to the following five concerns were found seized as exhibit i. ANN/VV/BGR-Office/B D/S-1 ii.ANN/VV/BGR-Office/B D/S-2 a. M/s. Sonal Steel Trading Pvt. Ltd. b. M/s. Megha Enterprises c . M/s. Satyam Enterprises d. M/s. United Brothers e. M/s. Meenakshi Enterprises 2.5 Notices u/s 142(1) along with specific questionnaire were issued. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction out of sheer necessity of money. Further he has stated that he is not aware of the transactions carried in this account sinice he had signed on the blank cheque leaves at the behest of Mr. Bebru Singh. Shri Ganapathy submitted that he got a commission of ₹ 15,000/- for the trouble he took in opening this bank account for Behru Sing and signing blank cheque leaves. Shri Ganapathy submitted that the signatures on the purchase invoices of M/s. Megha Enterprises were not his. Further when he was shown the purchases invoices in the name of M/s. United Brothers found and seized from the premises of M/s.BGR Energy Systems Pvt. Ltd. on 21.02.2014 vide ANN/VV/BGR-office/B D/S-2, Shri Ganapathy submitted that the signatures on these invoices were not his. The copy of statement recorded from Shri Ganapathy was forwarded to M/sBGR Energy Systems Pvt. Ltd. iii) Shri M. Govind Prop: M/s.United Brothers was examined on oath on 25.02.2016. He deposed that he was doing the business of sale of utensils and vessels till 2013. He has stated that he was not aware of the existence of the concern M/sBGR Energy Systems Pvt. Ltd. nor did he do any business with M/s.BGR Energy Systems P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s BGRESL without referring to the corresponding transfer of material? And why did Shri. P. R. Easwar Kumar ask Tilok Chand parmar to furnish copies of Bills and purchase orders instead of asking him (Tilok Chand Parmar as to when he has delivered the goods, if at all there was a genuine transfer of the material from M/s. Sonal Trading Co. Pvt. Ltd. to M/s. BGRESL? 4) Shri J. Ganapathy Prop: M/s. Megha Enterprises Shri P.R. Easwar Kumar that he has not done any business with the concern which Shri P.R. Easwar Kumar represents and that one Mr. Behru Singh did that Bank Operations. Further, Shri J. Ganapathy submitted to Shri P.R. Easwar Kumar that he has signed on blank cheque leaves of the instance of one Mr. Behru Singh for the lure of some quick money and that he has nothing to do with M/s. Megha Enterprises. 5) Shri Easwar Kumar was not in position to further probe Shri J. Ganapathy. 2.7 It is crystal clear from the preceding paragraphs that the assessee company M/s.BGR Energy Systems Pvt. Ltd has indulged in bill trading transactions with the concerns M/s. Sonal Steel Trading Co. Pvt. Ltd.., M/s Megha Enterprises and M/s. United Brothers. In the ease of M/s. Sonal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nakshi Enterprises 22,15,82,638 6,68,83,182 28,84,65,820 M/s. SonalSteel Trading Pvt. Ltd. 20,35,50,872 9,67,60,019 30,03,10,891 M/s. United Brothers 19,99,18,084 7,46,42,598 27,45,60,683 M/s. Satyam Enterprises 4,33,50,494 11,09,15,289 1,30,20,120 16,72,85,902 M/s. Megha Enterprises 5,13,81,392 5,28,68,658 10,42,50,049 71,97,83,480 40,20,69,745 1,30,20,120 113,48,73,346 Since the above amounts are held to be bogus purchases, the same are disallowed during the respective assessment years. 3.2 During the course of search while deposing u/s.132(4) at the premises of M/s.BGRESL on 16.04.2013, Smt. Swarnamughi Karthik Di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es were made at work place as per requirement of work and hence, merely for non-production of certain evidences including delivery challans, purchases cannot be treated as bogus in nature. The assessee has made attempt to negate observations of the AO in light of statement of certain parties and argued that sworn statement cannot be conclusive evidences and what is required to be seen is whether purchases are supported by evidences or not. The assessee has also made an attempt to negate observation of the AO on non-production of parties and submitted that despite our failed attempt to trace parties, Department has summoned the parties thereby, existence of parties were proved beyond any doubt. Therefore, when the purchases were supported by purchase bills, GRN and further payment through proper banking channel and further these purchases which find place in books of accounts maintained by the assessee, statement from the same party alone cannot be determinative of confirming the purchase as non-genuine. 8. The ld.CIT (A) after considering relevant submissions of the assessee and also taken note of various facts brought out by the AO held that the assessee was not able to produ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vilas Hotel (Guj) 164 ITR 102 CIT Vs. Modi Stone Ltd (Del.) 203 Taxman 123 c. The broad proposition that once there is tax audit u/s.44AB, the ITO should not insist upon production of records or vouchers or details cannot be laid down Goodyear India Ltd Vs. CIT(Del.) 246 ITR 116. d. Onus does not get discharged by mere filing of confirmation letters. United Commercial Industrial Co. (P.) Ltd (187 ITR 596) (Cal) e.. Payments made by account payee cheques do not make the transactions sacrosanct- Onus not discharged. Precision Finance (P.) Ltd (208 ITR 465) (Cal.) f. Furnishing of IT assessment and PAN etc., is not sufficient to discharge onus. Korlay Trading o. Ud. (232 ITR 820)(Cal.) 13. Considering the facts of the case as well as the judicial precedents as above, the additions of ₹ 71,97,83,480 for the Assessment Year.2011-12, ₹ 40,20,69,745 for the Assessment Year.2012-13 and ₹ 1,30,20,120 for the Assessment Year.2013-14 made by the Assessing Officer are sustained. The grounds of appeal are dismissed on this issue. 9. The ld.AR for the assessee submitted that the ld.CIT(A) has erred in not appreciating the fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those parties has voluntarily offered an additional income of ₹ 30 crores and has also disclosed said additional income in the return of income filed u/s.153A of the Act. The AO ignoring all these evidences has made further addition towards alleged bogus purchases only on suspicious grounds. Therefore, he submitted that additions made by the AO towards alleged bogus purchases needs to be deleted. In this regard, he has relied upon certain judicial precedents including decision of Hon ble Supreme Court in the case of Pullangode Rubber Produce Co. Ltd., v. State of Kerala, (1973) 91 ITR 18. The cases laws relied upon by the assessee are as under:- i) ITAT, Pune in the case Anil NandkishoreGoyal, Jalna v. assessee, ITA No.1256/PN/2012 ii) ITAT, Kolkata in the case of Acchyalal Shaw vs. Income Tax Officer, ITA No.1977/Kol/2008 iii) Hon ble Supreme Court in the case of Umacharan Shaw Bros. vs. CIT, (1959) 37 ITR 271 iv) Hon ble Bombay High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt. LTd, 5604 of 2010 v) Hon ble Kerala High Court in the case of CIT vs. M/s. Interseas, ITA No.77 of 2009 vi) ITAT, Mumbai in the case of Vipin Bhimraj Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the ld.CIT(A) have brought out various reasons to hold purchases are not genuine and hence there is no reason to take a different view on the issue. 12. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have carefully considered case laws relied upon by the assessee as well as the revenue. The AO has made additions towards purchases from certain alleged bogus suppliers on the ground that the assessee could not substantiate purchase from those parties with necessary evidences. The triggering point towards addition for bogus purchase is search conducted in the premises of the assessee. During the course of search, certain bill books/purchase invoices belonging to the following five concerns were found and seized as exhibit i. ANN/VV/BGR-Office/B D/S-1 ii.ANN/VV/BGR-Office/B D/S-2 a. M/s. Sonal Steel Trading Pvt. Ltd. b. M/s. Megha Enterprises c . M/s. Satyam Enterprises d. M/s. United Brothers e. M/s. Meenakshi Enterprises The AO was of the opinion that the assessee was indulged in obtaining accommodation entries of bogus purchase bills from nonexistence supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvoices belonging to those five concerns in its premises. We, further, noted that during the course of search and post-search investigation, the assessee could not file necessary supporting evidences including delivery challans, lorry receipts and goods receipt notes regarding those purchases except filing purchase bills from those parties and claiming that payment against such purchases are made through proper banking channel. It is an admitted fact that payment by cheque itself is not a sufficient evidence to prove the alleged bogus purchases when all other evidences goes to prove a fact that purchases are bogus in nature. The assessee needs to bring on record supporting evidences to dispel the doubt and suspicion on those purchases. In this case, except filing bills and payment by cheque, the assessee could not produce other supporting evidences like delivery challans, lorry receipts and goods receipt notes whereas, these documents are very much available with regard to purchases from other parties. We, further noted that the assessee company, a listed public limited company has followed standard operating procedures for purchases, as per which purchases are made through various ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of search and post-search investigation which clearly shows a point that purchases from alleged five parties have never had been purchased but only an accommodation entries of bill trading was obtained. No doubt, it is a well settled principle of law that sworn statement is not conclusive evidence in order to make any additions. The AO has to bring on record corroborative evidences to support the confession statement taken during the course of search. In this case, additions made by the AO is not only on the basis of sworn statement but also on the basis other evidences collected during the course of search including discrepancies in books of accounts regarding accounting of those purchases. As per fact brought out by the AO, the assessee has followed meticulous SOP for purchases whereas, for the purchases from these five parties said SOP is missing. Further, during the course of search Smt. Swarnamughi Karthik, Director of assessee company in her sworn statement recorded u/s.132(4) of the Act on 16.04.2013 has offered additional income of ₹ 30 crores to cover up various discrepancies including inability of the company to furnish proper supporting evidences for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed during the course of proceedings clearly proves that those purchases are bogus. Further, in this case, the so called suppliers of goods have themselves stated in their statements that they have issued only bills against payments and returned cash to the assessee after deducting their commission. They have further stated that they never supplied any goods. Moreover, the AO has called for various details and analyzed their books of accounts and find that their business activity was trading in something else and sales made to the assessee were something else. From the above, it is clear that so called alleged bogus suppliers were never dealt in those goods and hence, question of supplying those materials to the assessee does not arise. Therefore, we are of the considered view that there is no merit in arguments taken by the ld.AR for the assessee that the AO has made additions without bringing on record any evidences to support his findings. 16. Coming back to various case laws relied upon by the assessee. The assessee has relied upon plethora of judicial precedents including decision of Hon ble High Court of Rajasthan in the case of CIT vs. Pratap Singh Amrosingh Rajendra Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee was indulged in obtaining accommodation entries of bogus purchases and during the course of survey bills and invoices of alleged suppliers were found in business premises of the assessee. The AO has made 100% additions towards alleged purchases on the basis of evidences gathered during the course of search and post-search investigation. The Tribunal has accepted the findings recorded by the AO to treat the purchases as bogus however, restricted additions to the extent of 25% of such bogus purchases. Under those facts, Hon ble Supreme Court came to the conclusion that once the purchases from certain parties are treated as bogus then question of making estimation of profit on those purchases does not arise. In this case, facts borne out from record clearly indicate that during the course of search, bills and invoices of those alleged suppliers were found in the business premises of the assessee and assessee was unable to satisfactorily explain reasons for keeping those bills and invoices. The other facts brought out by the AO were also not controverted by the assessee with any evidences. Therefore, we are considered view that facts of the present case was squarely covered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing warranty after sales service, however such provision is required to be made on the basis of past experience and future obligation and further such estimation should be scientific and not adhoc. In this case, on the basis of evidences filed by the assessee, the ld.CIT(A) has recorded categorical finding that provision made for warranty obligation is neither based on past experience or scientific but adhoc, because the assessee has reversed provision made in the subsequent year without utilizing hardly any amount for the purpose of providing warranty. Further, warranty provision is normal in the cases of equipment suppliers and product manufacturers. The assessee in the present case is a contractor for power installations. Although, the assessee suppliers several power related equipments but such equipments were sourced from various manufacturers and it is obvious that said manufacturers and suppliers will provide warranty obligation. Since, the assessee is not a manufacturer of any equipment and assessee is only a contractor who executes civil, electrical and mechanical works, requirement for making provision for warranty is very minimal and this fact is strengthened by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee has diverted interest bearing funds to subsidiaries for non-business purposes and hence, worked out interest at the rate of 11% pa on outstanding balance of loans and advances and made addition u/s.40A(2)(a) of the Act. It was the contention of the assessee before the AO that it has given loans and advances to subsidiaries out of its own funds and no interest bearing funds has been used and hence, question of disallowance of interest does not arise. The assessee further contented that it has given loans and advances to subsidiaries out of commercial expediency and hence, no interest could be disallowed u/s.40A(2)(a) of the Act. In this regard, relied upon decision of the Hon ble Supreme Court in the case of S.A. Builders Ltd., vs. CIT, (2007) 158 Taxman 74 (SC). 22. We have heard both the parties, perused materials available on record and gone through orders of the authorities below. We have carefully considered case laws relied upon by the assessee. We find that the ld.CIT(A) had recorded finding of fact that the issue has been covered against the assessee by the decision of the ITAT in assessee s own case for earlier year, where the Tribunal has confirmed additions mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus purchases. 3. For these grounds and any other ground including amendment of grounds that may be raised during the course of the appeal proceedings, the order of learned CIT(Appeals) may be set aside and that of the Assessing Officer be restored. 25. The brief facts of the case are that the assessee was founder of M/s. BGR Energy Systems Ltd. He demised on July, 2013. The assessee has filed his return of income for the assessment years 2011-12, 2012-13 and 2013-14 declaring total income of ₹ 1,03,62,07,245/, ₹ 60,31,87,417/- and ₹ 35,88,29,310/-. A search was conducted u/s.132 of the Act, in the case of M/s. BGR Energy Systems Ltd on 18.02.2014. The assessee being Director of M/s. BGR Energy Systems Ltd., the residential premises of the assessee was also covered. During the course of search, it was noticed that M/s. BGR Energy Systems Ltd., was indulged in obtaining bogus purchase bills from various bill traders. The assessment in the case of M/s. BGRESL was completed u/s.143(3) r.w.s. 153A of the Act, and made additions to bogus purchases made from five alleged bill traders. The AO has made additions towards similar amounts in the hands of the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or all Assessment years. 29. The next issue that came up for our consideration from assessment year 2013-14 is addition of ₹ 1,88,65,900/- towards cash found during the course of search. We find that the AO has made addition towards unaccounted cash of ₹ 1,88,65,900/- found during the course of search in the hands of Smt. Sasikala Raghupathy and at the same time, a similar addition has been made in the hands of the assessee. The ld.CIT(A) after considering relevant facts has rightly held that once addition was made in hands of Smt. Sasikala Raghupathy, no addition can be made in hands of the assessee for cash found during the course of search because it amounts to double addition. The Revenue has failed to controvert the finding of fact recorded by the ld.CIT(A) is neither erroneous nor incorrect. Therefore, we are of the considered view that there is no error in the findings recorded by the ld.CIT(A) to delete addition made towards unaccounted cash found during the course of search in the hands of the assessee and hence, we are inclined to uphold the findings of the ld.CIT(A) and reject ground taken by the assessee. 30. The next issue that came up for our con ..... X X X X Extracts X X X X X X X X Extracts X X X X
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