C.C. Engineers Pvt. Ltd., Pune V. Deputy Commissioner of Income-tax,

CO 106/PUN/2014

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 2389 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 12-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-08-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P L KUREEL
• Keywords: Depreciation; Additional evidence; Corroborative evidences; Tax effect; Sham transactions
• Section: 40A(3); 143(3); 133(6); 37(1); 131

Judgement Text

] ]] ] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE , !', $ % BEFORE SHRI VIKAS AWASTHY, JM AND SHRI PRADIP KUMAR KEDIA, AM ITA NO.243/PN/2014 ASSESSMENT YEAR : 2009-10 THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE. . APPELLANT VS. CC ENGINEERING PVT. LTD., 1087/B, HAREKRISHNA MANDIR ROAD, MODEL COLONY, SHIVAJI NAGAR 411 016. PAN : AAACC7557P . RESPONDENT CO NO.106/PN/2014 (ARISING OUT OF ITA NO.243/PN/2014) ASSESSMENT YEAR: 2009-10 CC ENGINEERING PVT. LTD., 1087/B, HAREKRISHNA MANDIR ROAD, MODEL COLONY, SHIVAJI NAGAR 411 016. PAN : AAACC7557P . APPELLANT VS. THE DY. COMMISSIONER OF INCOME TAX, CIRCLE 1(1), PUNE. . RESPONDENT DEPARTMENT BY : SHRI P. L. KUREEL ASSESSEE BY : WRITTEN SUBMISSION / DATE OF HEARING : 10.08.2016 / DATE OF PRONOUNCEMENT: 12.08.2016 & / ORDER PER PRADIP KUMAR KEDIA, AM : THE CAPTIONED APPEAL FILED BY THE REVENUE IS AGAINS T THE ORDER OF CIT(A)-I, PUNE DATED 30.09.2013 RELATING TO ASSESSM ENT YEAR 2009-10 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT). THE 2 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 ASSESSEE HAS ALSO FILED A MEMORANDUM OF CROSS OBJE CTION IN THE APPEAL FILED BY REVENUE. 2. BOTH THE APPEAL AND CROSS OBJECTION ARE BEING DI SPOSED OF BY THIS CONSOLIDATED ORDER. ITA NO.243/PN/2014 (BY REVENUE) : 3. UNDISPUTEDLY, THE TAX EFFECT IN THE CAPTIONED AP PEAL OF THE REVENUE IS LESS THAN RS.10 LAKHS. THE CBDT VIDE CIRCULAR NO.2 1/2015, DATED 10.12.2015 HAS RAISED THE MONETARY LIMIT OF TAX EFFECT FOR FIL ING OF APPEALS BY THE DEPARTMENT BEFORE THE TRIBUNAL TO RS.10 LAKHS. THE CIRCULAR APPLIES TO THE APPEALS TO BE FILED BY THE DEPARTMENT IN FUTURE, AS WELL AS THE APPEALS PENDING BEFORE THE TRIBUNAL. THUS, IN VIEW OF THE CBDT CIR CULAR, THE PRESENT CAPTIONED APPEAL OF THE REVENUE IS LIABLE TO BE DIS MISSED ON ACCOUNT OF LOW TAX EFFECT. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO.243/PN/2014 IS DISMISSED. CO NO.106/PN/2014 (BY ASSESSEE) : 5. THE GROUNDS RAISED IN THE CROSS OBJECTION OF THE ASSESSEE READ AS UNDER :- 1. CROSS OBJECTOR PRAYS TO CONFIRM THE HONOURABLE CIT(A) ORDER IN ALLOWING RS. 16,31,306/- AS AMOUNT DEDUCTIBLE FOR THE YEAR. 2. FOR ANY REASON, CROSS OBJECTOR FAILS, THE CLAIM OF DEPRECIATION MAY PLEASE BE ALLOWED. 3. CROSS OBJECTOR PRAYS FOR DELETING ADDITION OF RS . 33,35,625/- 'DISALLOWANCE OF PURCHASE OF EQUIPMENT FROM KANAK ENGINEERS.' 4. CROSS OBJECTOR PRAYS FOR CANCELLATION/REDUCTION OF INTEREST CHARGED U/S 234B. 5. CROSS OBJECTOR PRAYS FOR JUST AND EQUITABLE RELI EF. 3 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 6. CROSS OBJECTOR PRAYS TO BE ALLOWED TO ADD, ALTER , MODIFY TAKE ADDITIONAL OBJECTION AND/OR WITHDRAW ANY GROUND OF CROSS OBJEC TION DURING THE PROCEEDINGS. 6. THE ASSESSEE IN ITS CROSS OBJECTION HAS RAISED MULTIPLE GROUNDS BUT HAS ASSAILED ONLY GROUND NO.3 WHICH RELATES TO DISA LLOWANCE OF EXPENSES TOWARDS PURCHASE OF EQUIPMENT FROM M/S KANAK ENTERP RISES OF RS.33,35,625/- SUSTAINED BY THE CIT(A). THE LD. AUTHORIZED REPRES ENTATIVE (AR) FOR THE ASSESSEE IN ITS DEFENCE STATED IN THE EARLIER OCCAS ION THAT HE DOES NOT PROPOSE TO ADVANCE ORAL ARGUMENTS BUT SEEKS TO RELY ON WRITTEN SUBMISSIONS ALONE AS PLACED BEFORE US. THE WRITTEN SUBMISSIONS ARE THUS REPRODUCED AS UNDER :- SUBMISSION ON CROSS OBJECTION 106/ PN/2014 FOR ASSESSMENT YEAR 2009-10 THE ONLY GROUND IS DISALLOWANCE OF PURCHASES FROM M /S KANAK ENTERPRISES PROP. ANIL PARDESHI. RS. 33,35,625=00. ASSESSING OFFICER HAS DISCUSSED THE ISSUE IN PARA 5 OF HIS ORDER ON PAGES 3 TO 11. CIT(A) HAS CONFIRMED DISALLOWANCE IN PARA 4 OF HIS ORDER ON PAGES 5 TO 17. FACTS OF THE CASE ARE: APPELLANT COMPANY IS IN BUSINESS OF MANUFACTURING A ND SUPPLY EDUCATIONAL AND TRAINING E-LEARNING SOFTWARE AND EQUIPMENTS ETC TO RAILWAYS. MR. ANIL PARDESHI PROP. KANAK ENTERPRISES WAS EMPLO YER OF THE COMPANY FROM 1992 TO 2005 AND HAS GAINED EXPERIENCE IN MANUFACTU RE, SUPPLY OF SUCH EQUIPMENT. TILL 2008, HE WAS WORKING WITH COMPANY AS CONSULTAN T, SUPERVISOR, ETC IN FINANCIAL YEAR 2008-09 ASSESSMENT YEAR 2009-10 H E UNDERTOOK TO MANUFACTURE, ASSEMBLE AND SUPPLY SOME OF THE EQUIPM ENTS FOR WHICH COMPANY HAS RECEIVED PURCHASE ORDER. AND HE SUPPLIED TO THE COMPANY EQUIPMENT WORTH RS. 33,35,625/- VIDE BILLS 12.02.2009 AND 15.03.2009. MR. ANIL PARDESHI WAS CARRYING OUT THIS JOB IN COMP ANIES WORKSHOP ONLY. THIS BILLS WERE OUTSTANDING AS ON 31.03.2009 IN SUN DRY CREDITORS LIST. ASSESSING OFFICER ASKED FOR DETAILS AND WHY AMOUNT IS OUTSTANDING COMPANY SUBMITTED HIS BILLS, ALSO SUBMITTED THAT DURING FIN ANCIAL YEAR 2009-10 HE IS PAID RS. 21,34,000/- AND RS. 12,00,775/- IS OUTSTAN DING EVEN ON DATE OF ASSESSMENT. 4 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 ASSESSING OFFICER CONDUCTED ENQUIRIES; ALSO STATEME NT OF MR. ANIL PARDESHI HAS BEEN RECORDED BY ASSESSING OFFICER. MR. ANIL PARDESHI HAS CONFIRMED HAVING SUPPLIED EQU IPMENT ALSO PAYMENT RECEIVED AND OUTSTANDING IN HIS STATEMENT. ASSESSING OFFICER AND CIT(A) HAS DOUBTED TRANSACTIO N ON FOLLOWING GROUNDS AND MADE DISALLOWANCE U/S 37. 1) 'KANAK' HAS BROUGHT THE MATERIAL AND ASSEMBLED M ANUFACTURED EQUIPMENTS AT COMPANIES WORKSHOP, IS NOT EVIDENCED BY PROOF IN RECORD OF THE COMPANY. SINCE THIS MATERIAL WAS BOUGHT / BROUGHT BY MR. ANI L PARDESHI (KANAK), THERE IS NO QUESTION OF ANY EVIDENCE TO BE MAINTAINED BY COMPANY. ASSESSING OFFICER AND CIT HAS ALSO STATED THAT AS P ER STATEMENT RECORDED OF MR. ANIL PROP. KANAK, ADMITTING THAT HE HAS NO PROO F / BILLS FOR PURCHASES, AS HE HAS MADE CASH PURCHASES. IT IS MR. ANIL WHO HAS PURCHASED MATERIAL IN CASH F OR HIS ASSEMBLING AND SUPPLY OF EQUIPMENT. ACCORDING LOWER AUTHORITIES ANIL COULD NOT PROVE TH E SOURCE OF PURCHASES HE MADE. IN FACT, ANIL IN HIS STATEMENT HAS GIVEN THE NAMES OF THE PARTIES FROM WHOM HE HAS PURCHASED THE MATERIAL. APPELLANTS SUBMISSION IS, WHEN MR. ANIL HAS ADMITTE D ON OATH HAVING SUPPLIED EQUIPMENTS, MANUFACTURE AND ASSEMBLING AT COMPANIES WORKSHOP AT HIS OWN COST AND EXPENSES AND HAS RAISED THE BILLS TO COMPA NY. THERE IS NO QUESTION OF DISALLOWANCE IN THE ASSESSMENT OF COMPANY. MR. ANIL HAS HIS PAN, VAT REGISTRATION ETC. IF MR. ANIL (KANAK) HAS NOT FILED THE RETURNS, THE TRANSACTION WITH COMPANY CANNOT BE DOUBTED AND MADE DISALLOWANCE OF EXPENSES. RIGHTFULLY, DEPARTMENT SHOULD HAVE INITIATED ACTION AND MADE MR. ANIL TO FILE HIS RETURN AND ASSESS HIM, IF HE IS UNABLE TO EXPLA IN THE SOURCE OF HIS PURCHASES ETC? DEPARTMENT, ALSO HAS NOT BROUGHT ANYTHING ON RECORD , BY ENQUIRY WITH CONCERNS FROM WHOM ANIL HAS MADE PURCHASES - AS STA TED BY HIM IN HIS STATEMENT ON OATH, THAT ANIL HAS NOT MADE PURCHASES , ETC ? COMPANY CANNOT BE HELD RESPONSIBLE FOR THE SAME. MOREOVER, THE ASSESSING OFFICER HAS NOT REJECTED TH E BOOKS OF ACCOUNTS OF THE COMPANY. COMPANY, BY WAY OF ADDITIONAL EVIDENCE SUBMITTED ON 09.11.2015, WOULD SUBSTANTIATE THAT EQUIPMENT PURCHASED SUPPLIED BY M /S KANAK ENTERPRISES PROP. ANIL, ARE FURTHER SUPPLIED TO ITS CUSTOMER AN D ENGINEERING PROJECT (INDIA) LTD. (MINISTRY OF GOVERNMENT OF INDIA) AND INDIA RA ILWAY INSTITUTE AND ESTABLISHING NEXUS OF PURCHASE AND SALE. 5 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 APPELLANT RELIES ON PUNE ITAT DECISION IN THE CASE OF SIDDHARTH ENGINEERING CORPORATION ITA NO. 1502/ PN/2013 DATED 29/12/2015 ON SIMILAR FACTS PARA 12 & 13 OF THE ORDER. THOUGH IN THAT CASE, PAYMENT WAS MADE BY CHEQUE, AN D IN THIS CASE PAYMENT THOUGH MADE IN CASH IS ACCEPTED AND ACKNOWLEDGED BY THE SUPPLIER MR.ANIL PARDESHI. DISALLOWANCE MADE IS ONLY ON THE SUSPICION, WHEN SU PPLY, PAYMENT, OUTSTANDING DUES ARE ADMITTED BY CREDITOR FOR SUPPL IES, AND EXPENDITURE CANNOT BE LABELED AS NOT GENUINE. APPELLANT PRAYS FOR ALLOWING THE EXPENDITURE ON PUR CHASES. IT COMPANY HAS STILL NOT PAID THE BALANCE AMOUNT; C OMPANY WILL OFFER THE SAME TO TAX IN THIS YEAR. APPELLANT REQUEST TO DECIDE THE CASE ON THE BASIS O F WRITTEN SUBMISSION. THANKING YOU. YOURS FAITHFULLY, SD/- (FOR C.C. ENGINEERS PVT. LTD. DIRECTOR) 7. THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE, ON THE OTHER HAND, RELIED UPON THE FINDINGS OF THE CIT(A) IN THIS REGARD. 8. BEFORE WE PROCEED TO DEAL WITH THE CROSS OBJECTI ON OF THE ASSESSEE ON THE ISSUE INVOLVED, IT WILL BE APPROPRIATE TO EXTRA CT THE RELEVANT FACTS AS NOTED BY THE CIT(A) AND THE FINDINGS THEREON. THE RELEVA NT PARAS OF THE ORDER OF THE CIT(A) DEALING WITH THE ISSUE ARE REPRODUCED HEREUN DER FOR READY REFERENCE :- DISALLOWANCE OF PURCHASES OF EQUIPMENT FROM M/S KA NAK ENTERPRISES (KE), PROP. ANIL K. PARDESHI (RS. 33,35,625/-): THE NEXT GROUND OF APPEAL RELATES TO DISALLOWANCE O F EXPENDITURE OF RS. 33,35,625/-, CLAIMED TO HAVE BEEN INCURRED BY THE A PPELLANT FOR SUPPLY OF EQUIPMENT BY ONE M/S KANAK ENTERPRISES. 4.1 DURING THE ASSESSMENT PROCEEDINGS, THE APPELLAN T WAS CALLED UPON BY THE ASSESSING OFFICER TO PRODUCE PARTY-WISE DETAILS OF PURCHASES MADE BY THE APPELLANT DURING THE YEAR. FROM THE DETAILS SUBMITT ED, IT WAS FOUND BY THE ASSESSING OFFICER THAT ONE PARTY NAMELY M/S KANAK E NTERPRISES (HEREINAFTER REFERRED TO AS KE), PROPRIETOR SHRI ANIL PARDESHI H AS RAISED SEVEN BILLS ON THE APPELLANT AMOUNTING TO RS.33,35,625/- FOR SUPPLY OF DIFFERENT EQUIPMENTS. ALL THESE BILLS WERE RAISED ON TWO DAYS I.E. 12.02.2009 AND 15.03.2009 AND THE APPELLANT HAS NOT PAID ANY AMOUNT TO THIS PARTY DUR ING THE YEAR AND THE ENTIRE AMOUNT WAS SHOWN AS OUTSTANDING AS ON 31.03.2009. F URTHER SCRUTINY BY THE ASSESSING OFFICER ALSO REVEALED THAT THE APPELLANT HAS MADE PAYMENT OF 6 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 RS.21,34,850/- TO THIS PARTY IN CASH THROUGH SELF M ADE VOUCHERS IN THE NEXT YEAR FROM 01.08.2009 TO 03.03.2010 ALMOST ON DAILY BASIS AND ALL THE PAYMENT VOUCHERS ARE SERIALLY NUMBERED FROM 12 TO 157 THOUG H THE TIME SPAN IS OF SIX MONTHS. IT WAS FURTHER NOTICED BY THE ASSESSING OFF ICER THAT THE ABOVE BILLS DO NOT BEAR THE STAMP OF RECEIPT OF GOODS BY THE APPEL LANT NOR DO THEY BEAR ANY MARK SUGGESTING THAT THE GOODS SOUGHT TO BE SUPPLIE D THROUGH THESE BILLS WERE ACTUALLY RECEIVED BY THE APPELLANT, WHICH IS IN CON TRAST TO THE BILLS RAISED BY OTHER SUPPLIERS LIKE JOSH ENTERPRISES, SIVAM ELECTR ICALS ETC. IN VIEW OF THESE STRANGE FEATURES NOTICED BY THE ASSESSING OFFICER I N THE BILLS, PAYMENTS AND IN ORDER TO EXAMINE THE GENUINENESS OF THE TRANSACTION S, NOTICE U/S 133(6) OF THE ACT WAS ISSUED TO SHRI ANIL PARDESHI, PROPRIETOR OF KE TO FURNISH CERTAIN DETAILS INCLUDING ACCOUNT EXTRACT OF THE APPELLANT IN HIS B OOKS, HIS BANK STATEMENTS AND NATURE OF SERVICES OR GOODS SUPPLIED BY HIM TO THE APPELLANT. IT WOULD APPEAR THAT THERE WAS NO RESPONSE BY SHRI ANIL PARDESHI TO THIS NOTICE. SUBSEQUENTLY, SUMMONS U/S 131 OF THE ACT WAS ISSUED TO THE PARTY AND IT APPEARS THAT THERE WAS NO RESPONSE FROM SHRI ANIL PARDESHI EVEN TO THE SUMMONS. THE INCOME TAX INSPECTOR, DEPUTED TO FIND OUT WHEREABOUTS OF KE HA S REPORTED THAT THE PREMISES IS A RESIDENTIAL ONE AND NO ACTIVITIES OR BUSINESS WHATSOEVER WERE BEING CARRIED OUT AT THE ADDRESS OF KE. IN THESE CI RCUMSTANCES, APPELLANT WAS GIVEN AN OPPORTUNITY TO PRODUCE SHRI ANIL PARDESHI FOR VE RIFICATION AND SHRI ANIL PARDESHI WAS PRODUCED BY THE APPELLANT FOR EXAMINATION ON 17 .11.2011. STATEMENT ON OATH U/S 131 OF THE ACT OF SHRI ANIL PARDESHI WAS RECORD ED BY THE ASSESSING OFFICER IN THE PRESENCE OF AR OF THE APPE LLANT AND THE KEY QUESTIONS AND RESPONSES AS REPRODUCED IN THE ASSESSMENT ORDER ARE AS FOLLOWS: Q.4 DID YOU RENDER THESE SERVICES FOR ALL THE YEARS AFTER YOU QUIT M/S C. C. ENGINEERS PVT. LTD.? ANS. YES TILL JUNE 2009. Q.6 ON AN AVERAGE WHAT AMOUNT OF MONEY YOU HAVE REC EIVED IN A YEAR FROM C. C. ENGINEERS PVT. LTD. TILL TODAY? ANS. AFTER F.Y. 2005 TO 2008 I HAVE RECEIVED APPROX IMATELY RS.7.8 LACS FROM C. C. ENGINEERS PVT. LTD. Q.13 AFTER SUPPLYING THESE EQUIPMENTS OR BEFORE SUP PLYING THESE EQUIPMENTS DID YOU SUPPLY ANY EQUIPMENT TO C. C. EN GINEERS PVT. LTD. ANS. NO. Q.14 DID YOU COLLECT VAT / SERVICE TAX FROM C. C. E NGINEERS PVT. LTD. FOR YOUR SERVICES AND DEPOSITED TO THE GOVERNMENT? ANS. NO TILL DATE. THE ASSIGNED WORK BY C.C. ENGINE ERS IS NOT COMPLETED BY ME AND STILL IN PROGRESS. Q.15 WHAT IS THIS ASSIGNED WORK WHICH IS STILL IN P ROGRESS? ANS. INSTALLATION/ COMMISSIONING OF THE MANUFACTURE ITEM AT C. C. ENGINEERS PVT. LTD. CONSIGNEE PREMISES OF THE SAME EQUIPMENTS PURCHASED BY C. C. ENGINEERS FROM ME. Q.16 WHAT WAS THE VALUE OF THE EQUIPMENTS SOLD BY Y OU TO C. C. ENGINEERS PVT. LTD.? 7 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 ANS. IT IS APPROXIMATE RS.22.84 LACS. Q.17 WHAT IS THE AMOUNT OF WHICH BILLS HAVE BEEN RA ISED BY YOU TO C. C. ENGINEERS PVT. LTD. ANS. I HAVE RAISED TOTAL BILL AMOUNT APPROXIMATE RS .22.84 LACS AS MENTIONED ABOVE. Q.18 DID YOU MAINTAIN BOOKS OF ACCOUNT OR DOCUMENTS IN CONNECTION WITH SUPPLY OF THESE EQUIPMENTS OR THE WORKS DONE / SUPP LIES MADE TO C. C. ENGINEERS PVT. LTD.? ANS. NO I HAVE NOT MAINTAINED ANY BOOKS OF ACCOUNT OR DOCUMENTS. Q.19 WAS THERE ANY AGREEMENT SIGNED WITH C. C. ENGI NEERS PVT. LTD. OR ANY OF ITS CUSTOMERS? ANS. NO. IT'S A MUTUAL AGREEMENT WITH THE COMPANIES ' DIRECTOR SINCE I WORK UNDER HIM AND HE HAS GIVEN ME OPPORTUNITY TO WORK W ITH HIM FOR LAST TEN YEARS AND OUR MUTUAL FAITH ARE TAKEN THE WORK F ROM THEM AND THEY HAVE GIVEN WITH A SAME. Q.21 WHEN WAS THE PURCHASE ORDER GIVEN TO YOU BY C. C. ENGINEERS PVT. LTD. AND HOW LONG DID THIS WORK TAKE TO MANUFACTURE THESE EQUIPMENTS? ANS. IT WAS DISCUSSED FROM TIME TO TIME REQUIREMENT AND THE TIME REQUIRED FOR MANUFACTURING EQUIPMENT, DEPENDING UPON THE COM PLEXITY, INPUTS AND TECHNICALITY RECEIVED FROM C. C. ENGINEERS PVT. LTD. AND THEIR RESPECTIVE CLIENTS AND SITE CONDITIONS ALSO APPROXI MATE 6 TO 8 MONTHS. Q.22 THIS ANSWER IMPLIES THAT YOU HAVE PURCHASED YO UR RAW MATERIAL WITHIN THE TIME OF 6 TO 8 MONTHS BEFORE THEY WERE S UPPLIED TO C.C. ENGINEERS PVT. LTD. PLEASE CONFIRM. ANS. NO. SINCE BOUGHT OUT ITEMS WERE PURCHASED AND ASSEMBLED AFTER THAT THEY ARE TRIALS FOR THE RESULT AND MODIFICATIONS RE QUIRED AFTER TRIAL IS REQUIRED THAT'S WHY THE TOTAL TIME IS 6 TO 8 MONTHS APPROX. Q.23 DO YOU HAVE ANY BILLS FOR PURCHASE OF THE MATE RIAL BY YOU? ANS. NO. Q.24 HOW DID YOU PAY FOR PURCHASING THE MATERIAL? I N CASH OR IN CHEQUE? ANS. IN CASH. Q.25 HOW MUCH MONEY HAS BEEN PAID BY YOU FOR PURCHA SING THESE MATERIALS? ANS. APPROXIMATE AROUND 13 LACS. Q.26 WHAT IS THE SOURCE OF THIS MONEY PAID BY YOU F OR PURCHASE OF MATERIALS? ANS. SOME CREDITORS AND FUNDS BORROWED FROM MY FATH ER-IN-LAW. 8 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 Q.27 PLEASE MENTIONED NAMES, ADDRESSES, AMOUNTS OF THE MONEY BORROWED BY YOU? WHETHER IT WAS BORROWED IN CASH OR CHEQUE? ANS. HARISH RAJAT, KANCHANPUR, JABALPUR RS. 4.52 1ACS CASH. Q.28 DID YOU PAY SOME MONEY TO M/S C. C. ENGINEERS PVT. LTD.? ANS. YES, I HAVE APROX RS.5.5 LACS AS A SECURITY TO THE WORK ASSIGNED BY THEM. Q.30 THE BANK STATEMENTS AS ABOVE DO NOT SHOW SIZAB LE WITHDRAWAL OF CASH SUPPLEMENTING YOUR CONTENTION THAT YOU HAD PAID TO THE SUPPLIER OF RAW MATERIALS THROUGH CASH. PLEASE EXPLAIN. ANS. I HAVE TAKEN MONEY FROM C. C. ENGINEERS ON TIM E TO TIME ON ACCRUAL BASIS AND SAME HAS BEEN UTILIZED FOR PURCHASE. Q.31 I AM SHOWING YOU THE LEDGER OF M/ S KANAK ENTE RPRISES THAT IS YOU IN THE BOOKS OF C.C. ENGINEERS PVT. LTD. FOR F. Y. 200 8-09 AND 2009-10. IT SHOWS NO MONEY WAS PAID TO YOU IN F.Y. 2008-09 A ND AMOUNT OF RS.21,34,850/- WAS PAID TO YOU ALMOST ON DAILY BASI S FOR ALL THE DAYS FROM 01.04.2009 TO 03.03.2010. PLEASE EXAMINE AND C ONFIRM THE FINDINGS. ANS. I HAVE EXAMINED THE SAID LEDGER AND VOUCHERS A ND CONFIRMED THAT FINDINGS IN ABOVE QUESTION ARE CORRECT. Q.32 CONSIDERING YOUR REPLY TO THE ABOVE QUESTION, PLEASE EXPLAIN HOW DID YOU PAY MONEY TO YOUR CREDITORS? ANS. AFTER GETTING MONEY FROM C. C. ENGINEERS PVT. LTD TIME TO TIME I HAVE MANAGED THE LABOUR AND SUPPLIERS. 4.1.1 REFERRING TO THE ABOVE STATEMENT OF MR. PARDE SHI, THE ASSESSING OFFICER OBSERVED THAT THE CLAIM OF PARDESHI THAT HE HAS TAK EN MONEY FROM APPELLANT FROM TIME TO TIME TO MAKE THE PAYMENTS FOR HIS EXPE NSES FOR MANUFACTURING EQUIPMENT IS CONTRARY TO THE MATERIAL AVAILABLE ON RECORD BECAUSE APPELLANT HAS NOT PAID ANY MONEY TO HIM BEFORE THE CASH PAYMENTS STARTING FROM 01.08.2009. THE ASSESSING OFFICER ALSO NOTED THAT THERE ARE MAN Y OTHER INCONSISTENCIES IN THE STATEMENT OF SHRI ANIL K. PARDESHI, WHICH SHOWS THAT THE PURCHASES MADE FROM KE ARE NOT GENUINE. DURING THE ASSESSMENT PROC EEDINGS, A COPY OF ABOVE STATEMENT OF SHRI ANIL K. PARDESHI WAS MADE AVAILAB LE TO THE APPELLANT. IT WAS BROUGHT TO THE NOTICE OF THE APPELLANT THAT THERE I S NO DOCUMENTARY EVIDENCE PRODUCED BY SHRI ANIL K. PARDESHI TO CLAIM THAT HE HAS SUPPLIED THE MATERIAL TO THE APPELLANT. 4.1.2 IN RESPONSE TO VARIOUS OBSERVATIONS MADE BY T HE ASSESSING OFFICER IN THE SHOW CAUSE NOTICE DATED 08.11.2011, IT WAS SUBMITTE D BY THE APPELLANT BY THEIR LETTER DATED 17.11.2011 THAT MR. PARDESHI WAS THEIR EX-EMPLOYEE AND HAD A SOUND TECHNICAL KNOWLEDGE OF THE MANUFACTURING PROC ESS OF THE E-LEARNING TRAINING EQUIPMENT REQUIRED FOR THEIR BUSINESS AND THE INVOICES WERE ISSUED BY HIM IN CONSIDERATION OF EQUIPMENTS BOUGHT FROM HIM AND THIS PURCHASE WAS LIKE PURCHASES FROM ANY OTHER VENDOR. THE APPELLANT ASSE RTED THAT IN THE STATEMENT GIVEN BY MR. PARDESHI HE HAS CONFIRMED THAT HE HAD SUPPLIED THE EQUIPMENTS TO THE APPELLANT AND RECEIVED PAYMENT IN CASH AND THE BALA NCE AMOUNT OF RS.12,00,775/- TOWARDS PURCHASES IS STILL PAYABLE T O THE PARTY UPON SUCCESSFUL 9 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 INSTALLATION OF THE EQUIPMENT AT CLIENT'S PLACE. WH ILE FINALIZING THE OFFER WITH KE IT WAS AGREED THAT THIS PARTY HAD TO DEPOSIT 10% OF TH E PROPOSED CONTRACT VALUE TO THE APPELLANT TOWARDS SECURITY DEPOSIT AND THIS PAR TY IS RESPONSIBLE FOR THE PRODUCTS SUPPLIED BY HIM TILL FINAL NOC OR APPROVAL IS RECEIVED FROM RAILWAYS. IT IS STATED THAT MR. PARDESHI PAID A SECURITY DEPOSIT OF RS.5,19,000/- CONSIDERING THE PROPOSED ORDER TO BE GIVEN WAS AT RS.51,90,000/ -. HOWEVER, THE FINAL ORDER WAS PLACED FOR ONLY ITEMS WORTH RS.29,65,000/- PLUS TAXES.VLT IS SUBMITTED THAT AS THERE WERE SOME FAULTS IN THE ITEMS SUPPLIED BY THI S PARTY AND COULD NOT BE ACCEPTED BY RAILWAYS, THE APPELLANT HAS NOT PAID THE SECURIT Y DEPOSIT BACK TO THIS PARTY TILL DATE. IT IS CLAIMED THAT HOWEVER THE APP ELLANT HAS BEEN MAKING PAYMENTS TO THE PARTY IN CASH AT REGULAR INTERVALS TOTALING TO RS.21,34,850/- TILL DATE TOWARDS SUPPLY OF EQUIPMENT. AS REGARDS NON EX ISTENCE OF ANY STAMP, MARKING ETC. ON THE BILLS FOR RECEIPT OF EQUIPMENT, IT WAS SUBMITTED THAT APPELLANT HAD ASKED THE PARTY TO BRING PARTS AT ITS PREMISES AND TO ASSEMBLE THE SAME UNDER THEIR SUPERVISION. IT IS EMPHASIZED BY T HE APPELLANT THAT THE PURCHASE OF EQUIPMENTS FROM KE IS GENUINE. IT IS AR GUED THAT NON MAINTENANCE OF BOOKS OF ACCOUNT AND UNSATISFACTORY EXPLANATION OF WORKING CAPITAL RESOURCES BY THE SAID SUPPLIER CANNOT MAKE APPELLANT COMPANY LIABLE FOR ANY DISALLOWANCE U/S 37(1) OF THE ACT AND THE EXPENDITURE IS LAID OU T WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND THE SAME SHOULD BE ALLO WED. 4.2 HOWEVER, THE VARIOUS SUBMISSIONS OF THE APPELLA NT FAILED TO CONVINCE THE ASSESSING OFFICER. THE ASSESSING OFFICER OBSERVED T HAT THE INVOICES RAISED BY OTHER PARTIES BEAR THE STAMP AND MARKINGS FROM THE APPELLANT FOR GOODS RECEIVED, APPROVAL FROM AUTHORITY WHO HAS APPROVED THE PAYMENT, STAMP OF INWARD, GOODS RECEIVED ETC. ON COMPARISON OF THE IN VOICES, THE ASSESSING OFFICER FOUND THAT OTHER THAN THE INVOICES OF KE, ALL OTHER INVOICES UNDERGO A STANDARDIZED PROCEDURE WHEREIN RECORDS ARE MAINTAIN ED FOR PURCHASE AND RECEIPT OF MATERIAL FOR ASSEMBLY AND PRODUCTION. AS REGARDS THE CLAIM OF THE APPELLANT THAT KE WAS REQUIRED TO BRING SUB PARTS T O THE PREMISES OF APPELLANT COMPANY AND ASSEMBLE THE SAME, THE ASSESSING OFFICE R FOUND THAT THERE ARE NO INSTRUCTIONS GIVEN TO ANYBODY NOR IS ANY KIND OF SU CH MARKINGS NOTED ON THE BILLS. IT IS FURTHER OBSERVED THAT THE MATERIAL NEE DED FOR MANUFACTURING OF EQUIPMENTS BY KE WAS SUPPOSED TO BE BROUGHT TO THE PREMISES OF THE APPELLANT WHERE THE EQUIPMENTS ARE CLAIMED TO BE GETTING ASSE MBLED/MANUFACTURED, BUT IN THE STATEMENT RECORDED, SHRI PARDESHI HAS ADMITT ED THAT THERE WAS NO EVIDENCE OF PURCHASE OF MATERIALS NEEDED TO MANUFAC TURE/ASSEMBLE EQUIPMENTS AT THE PREMISES OF THE APPELLANT OR THE CLIENT. REF ERRING TO THE RESPONSES IN THE STATEMENT OF THE PROPRIETOR OF KE, THE ASSESSING OF FICER EMPHASIZED THAT THE SAID PARTY IS NOT IN POSSESSION OF ANY OF THE DOCUM ENTS CONCERNING PURCHASE OF RAW MATERIALS NEEDED FOR MANUFACTURE AND SUPPLY OF EQUI PMENTS LIKE AIR CONDITIONING TRAINER, RAILWAY COACH AIR CONDITIONING TRAINER, RE FRIGERATION CYCLE TRAINER, CUT SECTION COMPONENT OF REFRIGERATION ITE MS, CHARTS, TRANSPARENT HYDRAULIC COMPONENTS, E-LEARNING MULTIMEDIA SOFTWAR E TO THE APPELLANT. THE ASSESSING OFFICER POINTED OUT THAT EXCEPT STATING T HAT RAW MATERIAL OF AROUND RS. 13 LACS WAS PURCHASED IN CASH, MR. PARDESHI HAS NOT PRODUCED ANY EVIDENCE TO SUPPORT HIS CLAIM OF PURCHASING THE MATERIAL IN CAS H. IT IS ALSO OBSERVED BY THE ASSESSING OFFICER THAT BANK STATEMENTS PRODUCED BY SHRI PARDESHI DO NOT REVEAL ANY SIZEABLE WITHDRAWAL IN CASH FOR PURCHASE OF SUC H MATERIAL DURING THAT PERIOD. THE ASSESSING OFFICER FURTHER NOTED THAT KE HAS NOT FILED ANY SUPPORTING EVIDENCE TO PROVE THE GENUINENESS OF THE LOAN OF RS . 4.52 LACS, CLAIMED TO HAVE BEEN TAKEN FROM SHRI HARISH RAJAT, JABALPUR. BASED ON THESE FINDINGS, THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT NO PU RCHASES OF RAW MATERIAL WERE MADE BY THE SUPPLIER FOR MANUFACTURE/ASSEMBLING OF THE ALLEGED EQUIPMENT FOR THE APPELLANT. 10 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 4.2.1 WITH REGARD TO THE CLAIM OF THE APPELLANT THA T PAYMENT OF RS.21,34,850/- WAS MADE TO KE IN CASH, THE ASSESSING OFFICER OBSER VED THAT PAYMENTS WERE MADE IN CASH THROUGH SELF MADE VOUCHERS FROM 01.08. 2009 TO 03.03.2010 ALMOST ON DAILY BASIS AND ALL THE PAYMENT VOUCHERS ARE SERIALLY NUMBERED FROM 12 TO 157 THOUGH THE TIME SPAN IS OF SIX MONTHS. IT IS ALSO NOTICED THAT THE PAYMENT RECEIVED IN CASH HAS NOT BEEN DEPOSITED BY SHRI ANIL PARDESHI IN HIS BANK ACCOUNTS AND HE HAS ALSO NOT EXPLAINED THE UTI LIZATION OF SUCH PAYMENT RECEIVED WITH NECESSARY EVIDENCE. ANOTHER ASPECT PO INTED OUT BY THE ASSESSING OFFICER IS THAT THE BILLS RAISED BY KE IS FOR AN AM OUNT OF RS. 33,35,625/- AND THE PAYMENT MADE BY THE APPELLANT IN THE NEXT YEAR TO K E AGAINST IT IN CASH IS SHOWN AT RS. 21,34,850/-. FOR THE REMAINING AMOUNT, IT WAS EXPLAINED BY THE APPELLANT THAT SOME OF THE GOODS SUPPLIED BY KE WER E DEFECTIVE AND COULD NOT BE INSTALLED AT THE PREMISES OF CLIENT OF THE APPEL LANT AND THEREFORE THE BALANCE PAYMENT WAS NOT MADE TO KE TILL DATE. THE EXPLANATI ON FURNISHED BY THE APPELLANT THAT GOODS ARE DEFECTIVE IS ALSO FOUND TO BE STRANGE BY THE ASSESSING OFFICER FOR THE REASON THAT THE APPELLANT HAS STATE D THAT THE EQUIPMENTS WERE MANUFACTURED AT THE PREMISES OF THE APPELLANT UNDER ITS DIRECT SUPERVISION. FROM THESE FINDINGS, THE ASSESSING OFFICER CONCLUDED THA T APPELLANT HAS NOT MADE ANY PAYMENT TO KK BUT ONLY CREATED THE VOUCHERS WHICH A RE SERIALLY NUMBERED IN ITS BOOKS OF ACCOUNT AND WHICH ARE PATE NTLY NON GENUINE. 4.2.2 IN THE LIGHT OF THE ABOVE DISCUSSION, THE ASS ESSING OFFICER HELD THAT THE PURCHASES FROM KE OF RS.33,35,625/- ARE NOT GENUINE AND IT IS MERELY PAPER WORK CREATED SO AS TO GIVE A COLOR OF GENUINENESS T O A FICTITIOUS TRANSACTION. ACCORDINGLY, THE EXPENDITURE CLAIMED OF RS.33,35,62 5/- IS DISALLOWED AND ADDED BACK TO THE RETURNED INCOME OF THE APPELLANT, WHICH IS ONE OF THE ISSUES CONTESTED IN THE PRESENT APPEAL. 4.3 DURING THE APPELLATE PROCEEDINGS, LD. COUNSEL, WHILE REITERATING THE SUBMISSIONS MADE BEFORE THE ASSESSING OFFICER, VEHE MENTLY CONTENDED THAT THE ASSESSING OFFICER HAS DOUBTED GENUINENESS OF TRANSA CTION IN SPITE OF THE FACT THAT MR. PARDESHI HAS ACCEPTED THE TRANSACTION OF SUPPLY OF THE SAID EQUIPMENT IN THE STATEMENT RECORDED. IT IS POINTED OUT THAT THE STAT EMENT RECORDED U/S 131 HAS EVIDENTIARY VALUE AND ONLY IF MR. PARDESHI HAD DENI ED THE TRANSACTIONS THEN ONUS WOULD HAVE BEEN HEAVY ON THE APPELLANT. IT IS ARGUE D THAT IF KE HAS NOT MAINTAINED PROPER RECORD ETC., ONLY A DOUBT CAN BE RAISED AND NO ADVERSE INFERENCE CAN BE DRAWN AGAINST THE APPELLANT COMPAN Y ON MERE SUSPICION. IT IS PLEADED THAT IN VIEW OF THE STATEMENT OF KE CONFIRM ING THE TRANSACTION, THE EXPENDITURE IN QUESTION MAY BE ALLOWED AS CLAIMED B Y THE APPELLANT. 4.4 THE PROPOSITIONS CANVASSED BY THE LD. COUNSEL A RE CAREFULLY EXAMINED WITH REFERENCE TO THE FACTS OF THE CASE, MATERIAL P LACED ON RECORD AND THE FINDINGS RECORDED IN THE ASSESSMENT ORDER. THE STAN D OF THE ASSESSING OFFICER IS THAT THE TRANSACTIONS WITH KE ARE SHAM TRANSACTIONS AND THE EXPENDITURE CLAIMED ON ACCOUNT OF THESE TRANSACTIONS WITH KE IS NOT GEN UINE. ON THE OTHER HAND, THE CASE OF THE APPELLANT IS THAT THAT THE TRANSACTIONS OF PURCHASE OF EQUIPMENT FROM KE ARE DULY SUPPORTED BY PURCHASE INVOICES, STATEMENT OF PROPRIETOR OF KE AND HENCE THE ASSESSING OFFICER OUGHT TO HAVE ACCEPTED THE APPELLANT'S CLAIM OF PURCHASES FROM KE. THEREFORE, THE POINT FOR DETERMI NATION IS THAT WHETHER TRANSACTIONS IN QUESTION CLAIMED BY THE APPELLANT A RE GENUINE OR IT WAS ONLY SHAM TRANSACTIONS TO BOOK FICTITIOUS EXPENDITURE. 4.4.1 GENUINENESS OF TRANSACTIONS: (A) PURCHASE INVOICES: 11 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 THE FIRST CONTENTION OF THE APPELLANT IS THAT THE T RANSACTIONS WITH KE ARE DULY SUPPORTED BY PURCHASE INVOICES AND THEREFORE T HE ASSESSING OFFICER IS NOT JUSTIFIED IN TREATING THE TRANSACTIONS AS NOT GENUI NE. IN THE PRESENT PROCEEDINGS, THE APPELLANT FURNISHED COPIES OF INVOICES FOR THE PURCHASES SHOWN TO HAVE BEEN MADE FROM KE. ON PERUSAL OF THESE INVOICES, IT IS N OTICED THAT THE INVOICES DO NOT BEAR THE STAMP OF RECEIPT OF GOODS BY THE APPELLANT NOR DO THEY BEAR ANY MARK SUGGESTING THAT THE GOODS SOUGHT TO BE SUPPLIE D THROUGH THESE BILLS WERE ACTUALLY RECEIVED BY THE APPELLANT. THIS IS IN TOTA L CONTRAST TO THE BILLS RAISED BY OTHER SUPPLIERS LIKE JOSH ENTERPRISES, SIVAM ELECTR ICALS ETC FOR PURCHASES MADE BY THE APPELLANT FROM THEM. FURTHER, THOUGH THE TRA NSACTIONS OF ALLEGED PURCHASES ARE RECORDED IN THE BOOKS OF ACCOUNT OF T HE APPELLANT, THERE WAS NO DOCUMENTARY PROOF LIKE DISPATCH NOTES, FREIGHT RECE IPTS, DELIVERY CHALLANS ETC. FOR TRANSPORTATION, DELIVERY OF GOODS BY KE TO THE APPE LLANT OR TO THE CLIENTS OF THE APPELLANT. EVEN DURING THE PRESENT PROCEEDINGS, THE APPELLANT FAILED TO FURNISH ANY EVIDENCE TO SHOW THAT THERE WAS MOVEMENT OF GOO DS FROM ONE END TO THE OTHER END EVEN FOR A SINGLE CONSIGNMENT. IT IS ALSO INTERESTING TO NOTE THAT ALL THE BILLS WERE RAISED BY KE ON TWO DAYS I.E. 12.02. 2009 AND 15.03.2009 AND THE APPELLANT HAS NOT PAID ANY AMOUNT TO THIS PARTY DUR ING THE YEAR AND THE ENTIRE AMOUNT WAS SHOWN AS OUTSTANDING AS ON 31.03.2009. A COPY OF THE LEDGER A/C EXTRACT OF KE IN THE BOOKS OF THE APPELLANT IS APPE NDED TO THE ORDER AS ANNEXURE A FOR IMMEDIATE REFERENCE. IT IS ALSO STRA NGE THAT THE APPELLANT HAS SHOWN PAYMENT OF RS.21,34,850/- TO THIS PARTY IN CA SH THROUGH SELF MADE VOUCHERS IN THE NEXT YEAR FROM 01.08.2009 TO 03.03. 2010 ALMOST ON DAILY BASIS AND ALL THE PAYMENT VOUCHERS ARE SERIALLY NUMBERED FROM 12 TO 157 THOUGH THE TIME SPAN IS OF SIX MONTHS. THEREFORE, MERELY BECAU SE PURCHASE INVOICES WERE RAISED BY KE, IT CANNOT BE SAID THERE WAS ACTUAL SU PPLY OF THE EQUIPMENT TO THE APPELLANT AS SHOWN IN THE INVOICES AND THE TRANSACT IONS ARE GENUINE. (B) STATEMENT OF THE PROPRIETOR OF KE: THE SECOND CONTENTION OF THE APPELLANT IS THAT MR. PARDESHI, PROPRIETOR OF KE HAS ACCEPTED THE TRANSACTION OF SUPPLY OF THE SA ID EQUIPMENT TO THE APPELLANT IN THE STATEMENT RECORDED AND THE STATEME NT RECORDED U/S 131 HAS EVIDENTIARY VALUE AND IT CANNOT BE SIMPLY BRUSHED A SIDE BY THE ASSESSING OFFICER. BUT, ON CAREFUL PERUSAL OF THE STATEMENT A S EXTRACTED HEREINABOVE, THERE ARE SEVERAL INCONSISTENCIES IN THE RESPONSES GIVEN BY MR. PARDESHI. FOR INSTANCE, MR. PARDESHI STATED THAT HE HAS TAKEN MONEY FROM AP PELLANT FROM TIME TO TIME TO MAKE THE PAYMENTS FOR HIS EXPENSES FOR MANUFACTURIN G EQUIPMENT, WHICH IS CONTRARY TO THE MATERIAL AVAILABLE ON RECORD AS THE APPELLAN T HAS NOT PAID ANY MONEY TO HIM BEFORE THE CASH PAYMENTS COMMENCING FR OM 01.08.2009. FURTHER, NEITHER THE APPELLANT NOR MR. ANIL K. PARD ESHI, OTHER THAN FURNISHING THE PURCHASE INVOICES AS DISCUSSED HEREINBEFORE, COULD PRODUCE ANY OTHER EVIDENCE TO SUBSTANTIATE THE CLAIM THAT HE HAS ACTUALLY SUPP LIED THE MATERIAL/EQUIPMENT TO THE APPELLANT DURING THE YEAR. ADMITTEDLY, KE HA S NOT MAINTAINED ANY BOOKS OF ACCOUNT OR DOCUMENTS AND THERE WAS NO AGREEMENT BETWEEN THE APPELLANT AND KE FOR SUPPLY OF THE ALLEGED EQUIPMENT. KE DOES NOT POSSESS ANY BILLS FOR PURCHASE OF RAW MATERIAL BY THEM TO MANUFACTURE /AS SEMBLE THE EQUIPMENT FOR THE APPELLANT AND ALL ITS PURCHASES ARE CLAIMED TO HAVE BEEN MADE IN CASH AND EVEN THE SOURCES OF THIS CASH WERE NOT PROPERLY EXP LAINED EXCEPT STATING THAT IT WAS OUT OF FUNDS BORROWED FROM HIS FATHER-IN-LAW. I N SUCH A SITUATION, NO CREDENCE CAN BE GIVEN TO SUCH SELF-SERVING STATEMENT MADE BY AN INTERESTED PARTY TO THE TRANSACTIONS IN QUESTION. (C) PAYMENTS MADE FOR PURCHASES: 12 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 THE NEXT CONTENTION OF THE LD. COUNSEL IS THAT SUBS TANTIAL PAYMENTS WERE MADE TO KE IN THE SUBSEQUENT YEAR TOWARDS SUPPLY OF EQUIPMENT AND THEREFORE THE GENUINENESS OF THE TRANSACTIONS CANNOT BE DOUBT ED. BUT, AS ALREADY MENTIONED, PAYMENTS WERE MADE IN CASH THROUGH SELF MADE VOUCHERS FROM 01.08.2009 TO 03.03.2010 ALMOST ON DAILY BASIS AND ALL THE PAYMENT VOUCHERS ARE SERIALLY NUMBERED FROM 12 TO 157 THOUGH THE TIM E SPAN IS OF SIX MONTHS. IT IS ALSO IMPORTANT TO NOTE THAT SHRI ANIL PARDESHI H AS ALSO NOT EXPLAINED THE UTILIZATION OF SUCH PAYMENT CLAIMED TO HAVE BEEN RE CEIVED IN CASH WITH NECESSARY EVIDENCE. FURTHER, AS POINTED OUT BY ASSE SSING OFFICER, THE BILLS RAISED BY KE ARE FOR AN AMOUNT OF RS. 33,35,625/- A ND THE PAYMENT TO KE SHOWN BY THE APPELLANT IN THE NEXT YEAR IS RS. 21,3 4,850/-. FOR THE REMAINING AMOUNT, IT WAS EXPLAINED BY THE APPELLANT THAT SOME OF THE GOODS SUPPLIED BY KE WERE DEFECTIVE AND COULD NOT BE INSTALLED AT THE PREMISES OF CLIENT OF THE APPELLANT AND THEREFORE THE BALANCE PAYMENT WAS NOT MADE TO KE TILL DATE. THE EXPLANATION FURNISHED BY THE APPELLANT IN THIS REGA RD THAT GOODS ARE DEFECTIVE IS TOO VAGUE AND SPECIFIC DETAILS OF DEFECTIVE EQUIPME NT ARE NOT FURNISHED BY THE APPELLANT. THE CLAIM ALSO DOES NOT STAND TO REASON WHEN THE APPELLANT HAS STATED THAT THE EQUIPMENTS WERE MANUFACTURED/ ASSEMBLED AT THE PREMISES OF THE APPELLANT UNDER ITS DIRECT SUPERVISION. THUS, THE CLAIM OF PA YMENT TO KE FOR ALLEGED SUPPLY OF EQUIPMENT IS ONLY MAKE-BELIEVE AR RANGEMENT AND SHOWN AS AN AFTERTHOUGHT IN THE BOOKS OF A/C OF THE APPELLANT I N THE NEXT YEAR BY WAY OF SELF- MADE CASH VOUCHERS. IN SUCH CIRCUMSTANCES, MERE PAY MENTS FOR ALLEGED PURCHASES MORE SO IN CASH WITH SELF-MADE VOUCHERS C ANNOT MAKE OTHERWISE A NON-GENUINE TRANSACTION GENUINE. (D) ENQUIRIES CONDUCTED DURING THE ASSESSMENT PROCE EDINGS: TO FIND OUT THE VERACITY AND CORRECTNESS OF THE CLA IMS MADE BY THE APPELLANT AND ALSO TO ASCERTAIN AS TO WHETHER THE K E HAD THE CAPACITY AND THE MEANS TO SUPPLY THE ALLEGED EQUIPMENT TO THE APPELL ANT, THE ASSESSING OFFICER ALSO CARRIED OUT ENQUIRIES THROUGH INSPECTOR WORKING IN HIS OFFICE. THE ENQUIRIES REVEALED THAT THAT THE PREMISES OF KE IS A RESIDENT IAL ONE AND NO ACTIVITIES OR BUSINESS WHATSOEVER WERE BEING CARRIED OUT AT THE A DDRESS OF KE AT THE TIME OF VISIT OF THE INSPECTOR. THE APPELLANT ON ITS PART F AILED TO ESTABLISH THAT THE KE HAD NECESSARY LOGISTICS, INFRASTRUCTURE, EXPERIENCE AND THE FINANCES TO MANUFACTURE AND SUPPLY THE ALLEGED EQUIPMENT. WHEN SUBSTANTIAL EXPENDITURE WAS CLAIMED FROM THE ALLEGED TRANSACTIONS AND CERTA IN STRANGE FEATURES IN BILLS, PAYMENTS IN CASH AND VARIOUS INCONSISTENCIES IN THE CLAIMS WERE NOTICED, IT IS ALL THE MORE NECESSARY FOR THE APPELLANT TO PRODUCE COG ENT EVIDENCE TO DISPEL THE SUSPICION OF THE ASSESSING OFFICER AND SHOW THAT TH E IMPUGNED TRANSACTIONS WITH KE ARE GENUINE. THE ONLY EVIDENCE PRODUCED BY THE A PPELLANT IS INVOICES, WHICH AS DISCUSSED HEREINABOVE DO NOT ESTABLISH CONCLUSIV ELY THAT THE TRANSACTIONS ARE GENUINE AND KE HAS ACTUALLY CARRIED OUT SUCH ACTIVI TY AND SUPPLIED THE EQUIPMENT AS ORDERED BY THE APPELLANT. WHAT IS REQU IRED IS PRODUCING CREDIBLE EVIDENCE TO SHOW THAT THERE WAS ACTUAL PHYSICAL MOV EMENT OF GOODS FROM KE TO THE APPELLANT OR FROM KE TO THE CLIENTS OF THE APPE LLANT DIRECTLY AND THERE WAS DELIVERY OF EQUIPMENT. BUT, AS ALREADY MENTIONED, A PPELLANT FAILED TO PROVE THE ACTUAL DELIVERY OR PHYSICAL MOVEMENT OF EQUIPMENT I N RESPECT OF ALLEGED PURCHASES AND SUPPLY EVEN FOR ONE CONSIGNMENT. 4.4.2 IN VIEW OF THE ABOVE, I AM OF THE CONSIDERED OPINION THAT THE TRANSACTIONS WITH KE DURING THE YEAR ARE ONLY ACCOMMODATION ENTR IES AND SHAM TRANSACTIONS ENTERED INTO BY THE APPELLANT IN COLLUSION WITH THE SAID PARTY FOR THE PURPOSE OF CREATING AND BOOKING FICTITIOUS EXPENDITURE ON THE BASIS OF FABRICATED DOCUMENTS IN THE FORM OF PURCHASE INVOICES, CASH PAYMENT VOUCHER S ETC. THE CONCLUSIONS/ 13 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 OBSERVATIONS DRAWN BY THE ASSESSING OFFICER REGARDI NG GENUINENESS OF IMPUGNED TRANSACTIONS ARE NOT BASED ON SUSPICION, C ONJECTURES AND SURMISES. THE CONCLUSIONS ARE BASED ON THE DETAILED EXAMINATION O F THE CLAIM MADE BY THE ASSESSING OFFICER. 4.4.3 TO SUM UP, ON A CAREFUL CONSIDERATION OF ALL THE EVIDENCES PLACED ON RECORD CUMULATIVELY AND SUBMISSIONS OF THE APPELLAN T, IT IS AMPLY CLEAR THAT THE ENTIRE TRANSACTIONS WITH KE DURING THE YEAR ARE SH AM AND THE EVIDENCE FURNISHED THEREOF WAS SELF-SERVING AND THE EXPENDITURE CLAIME D IS FICTITIOUS EXPENDITURE. IT IS ONLY COLLUSIVE DEVICE OR ARRANGEMENT FOR CREATING A ND BOOKING FICTITIOUS EXPENDITURE IN THE BOOKS OF ACCOUNT OF THE APPELLAN T IN CONNIVANCE WITH SAID PARTY. IN SUCH CIRCUMSTANCES, THE DISALLOWANCE OF A LLEGED EXPENDITURE OF RS. 33,35,625/- MADE BY THE ASSESSING OFFICER DOES NOT WARRANT ANY INTERFERENCE AND THE SAME IS UPHELD. GROUND OF APPE AL. NO. 4 FAILS. 9. WE HAVE CAREFULLY CONSIDERED THE WRITTEN SUBMISS IONS MADE BY THE ASSESSEE AND THE ORDERS OF THE AUTHORITIES BELOW. WE FIND OURSELVES IN COMPLETE AGREEMENT WITH THE ORDER OF THE CIT(A) ON THE ISSUE. WE FIND THAT THE CIT(A) HAS MADE A THREADBARE ANALYSIS OF FACTS GOVERNING THE ISSUE AND HAS DEALT WITH VARIOUS FACET OF THE TRANSACTIONS OBJECT IVELY. THEREFORE, WE DO NOT INTEND TO REPEAT AND RE-STATE THE REASONS NOTED BY THE CIT(A) WHILE ARRIVING AT THE ADVERSE FINDING. THE CIT(A) HAS INTER-ALIA OBSERVED THAT EXCEPT FOR INVOICES FOR PURCHASE OF EQUIPMENT FROM M/S KANAK E NTERPRISES FOR A WHOPPING AMOUNT OF RS.33,35,625/-, NO OTHER SUBSTAN TIVE EVIDENCES ARE AVAILABLE ON RECORD TO CORROBORATE THE TRUTHFULNESS OF PURCHASE. THE PAYMENT FOR SUCH PURCHASE HAS BEEN SHOWN TO BE IN CASH ON A DAY TO DAY BASIS THROUGH SELF MADE VOUCHERS OVER A PERIOD OF EIGHT MONTHS WH ICH IS QUITE STRANGE AND ABNORMAL. THE LAW ABSTAINS THE ASSESSEE FROM MAKIN G CASH PAYMENTS IN THE ORDINARY COURSE OF BUSINESS. THE SELF MADE VOUCHER S WERE STRANGELY FOUND TO BE SERIALLY NUMBERED OVER A LONG SPAN OF EIGHT MONT HS. THIS IS ALSO A CLEAR ACT OF CIRCUMVENTION OF PROVISION OF SECTION 40A(3) OF THE ACT. THE PURPORTED EXPENDITURE IS STATED TO BE INCURRED TOWARDS IMPUGN ED MACHINERY FROM ONE M/S KANAK ENTERPRISES, PROPRIETOR MR. ANIL PARDESHI . ON ENQUIRY, THE PROPRIETOR INITIALLY DID NOT RESPOND TO THE NOTICES UNDER SECTION 133(6) AND 131 OF THE ACT. HOWEVER, HE RELUCTANTLY APPEARED BEFOR E THE REVENUE AT A LATER STAGE. AS NOTED BY CIT(A), THE PURPORTED SUPPLIER MISERABLY FAILED TO EXPLAIN THE TRANSACTIONS BEFORE THE ASSESSING OFFICER. THE ENQUIRY CONDUCTED AT THE 14 ITA NO.243/PN/2014 C.O. NO.106/PN/2014 SITE OF THE SUPPLIER OF EQUIPMENT ALSO REVEALED THA T NO SUCH ACTIVITY WAS BEING EXECUTED TO ENABLE IT TO SUPPLY THE MACHINERY. THE CIT(A) FURTHER OBSERVED THAT THE SUPPLIER COULD NOT EXPLAIN THE MEANS AND C APACITY TO PRODUCE AND SUPPLY THE MACHINERY. IN THE TOTALITY OF THE CIRCU MSTANCES, THE CIT(A) HAS COME TO A CONCLUSION THAT THE EXPENDITURE STATED TO HAVE BEEN INCURRED BY THE ASSESSEE IS MAKE BELIEVE AND FICTITIOUS ON THE BASI S OF FABRICATED DOCUMENTS WITH WHICH WE ARE INCLINED TO AGREE. THUS, WE DECL INE TO INTERFERE WITH THE ORDER OF THE CIT(A) IN THIS REGARD. 9.1 IN THE RESULT, THE CROSS OBJECTION OF THE ASSES SEE IS DISMISSED. 10. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMI SSED AND CROSS OBJECTION OF THE ASSESSEE IS ALSO DISMISSED. ORDER PRONOUNCED ON THIS 12 TH DAY OF AUGUST, 2016. SD/- SD/- ( VIKAS AWASTHY ) ( PRADIP KUMAR KEDIA ) / JUDICIAL MEMBER $ / ACCOUNTANT MEMBER PUNE ; DATED : 12 TH AUGUST, 2016. & ' () *+( / COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)-I, PUNE; 4) THE CIT-I, PUNE; 5) THE DR B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. &, / BY ORDER , //TRUE COPY// ! '# / SR. PRIVATE SECRETARY $ %& %'' , / ITAT, PUNE