ADDL CIT 24(3), MUMBAI V. INDERVADAN H JAIN, MUMBAI

ITA 103/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3849 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2016
• Appeal Filed By: Department
• Bench Allotted: I
• Next Hearing Date: 09-02-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 03-01-2013
• Court: TRIBUNAL
• Department Lawyers: BHANWAR SINGH RATNOO
• Assessee Lawyers: PRIYA BALDEV BHALWAL
• Keywords: Bogus purchase; Loose papers; Corroborative evidences; Accommodation entries; Block assessment; Retraction
• Section: 133A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL I , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ./ ITA NO. 103 / MUM/20 1 3 ( / ASSESSMENT YEAR : 20 09 - 1 0 ) A D CIT - 2 4( 3 ), BANDRA, MUMBAI - 51 VS. SHRI INDERVADAN H. JAIN, 26, VIJAY VILLA, 23, JAWAHAR NAGAR, GOREGAON(W), MUMBAI - 400062 ./ ./ PAN/GIR NO. : A A APJ 9737 B ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI BHANWAR SINGH RATNOO /ASSESSEE BY : SHRI PRAMOD KUMAR PARIDA & PRIYA BALDEV BHALWAL / DATE OF HEARING : 21 / 0 3 /201 6 / DATE OF PRONOUNCEMENT 27/04 /201 6 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - MUMBAI, DATED 22 - 10 - 2012 , FOR THE ASSESSMENT YEAR 20 09 - 1 0 , IN THE MATTER OF ORDER PASS ED U/S. 143 ( 3 ) OF THE I.T.ACT. 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS A GOVERNMENT CONTRACTOR. DURING THE COURSE OF SCRUTINY ASSESSMENT, VARIOUS DISALLOWANCE/ADDITIONS WERE MADE BY THE AO. ASSESSEE FILED APPEAL BEFORE THE CIT(A). IN RESPECT OF RELIEF GIVEN BY THE CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 3. 1 ST GRIEVANCE OF THE REVENUE RELATES TO DELETING DISALLOWANCE MADE BY THE AO U/S.14A. ITA NO. 103 /1 3 2 4. THE ASSESSEE HAS COMPUTED DISALLOWANCE UNDER RULE 8D(2) BY EXCLUDING THE INVESTMENT WHICH ARE IN THE NATURE OF STRATEGIC INVESTMENT BEING MADE IN THE JOINT VENTURE BUSINESS PROJECTS. HOWEVER, THE AO DID NOT ACCEPT ASSESSEES CONTENTION AND AFTER DISCUSSING THE ISSUE IN PARA 5 - 6 MADE DISALLOWANCE OF RS.3, 54,957/ - . 5. BY THE IMPUGNED ORDER, CIT(A) DELETED DISALLOWANCE AFTER OBSERVING AS UNDER : - I HAVE CONSIDERED THE ABOVE SUBMISSIONS. THE APPELLANT OBJECTED TO THE AVERAGE INVESTMENT ARRIVED AT BY THE ASSESSING OFFICER AS PER THE FORMULA PROVIDED IN RULE 8 D (II). THE ASSESSING OFFICER ADOPTED THE VALUE OF INVESTMENT AS RS .1,19, 57 ,766/ - AS ON 3 1.3.2009. IT IS THE SUBMISSION OF THE APPELLANT THAT RS .59,43,220/ - WAS THE ACTUAL IN VESTMENT IN SHARES AND THE BALANCE WAS THE INVESTMENT INTO THE JOINT VENTURE BUSINE SS P ROJECTS WHICH IS NOT THE ASSETS OF THE APPELLANT AND SHOULD NOT BE TAKEN INTO CONSIDERATION. AS PER THE FORMULA IN RULE 8D (II) I.E. 'A' X 'B' / 'C', 'B' REPRESENTS THE A VERAGE VALUE OF THE INVESTMENT, INCOME FROM WHICH DOES NOT OR SHALL NOT FORM PART OF T HE TOTAL INCOME AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE ON THE FIRST DAY AND THE LAST DAY OF THE PREVIOUS YEAR. 'C' REPRESENTS THE AVERAGE OF TOTAL ASSETS AS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE ON THE FIRST DAY AND LAST DAY OF THE PRE VIOUS YEAR. AS PER RULE ABOVE IN 'B' ARE VERY CLEAR THAT THE ASSESSING OFFICER HAD TO TAKE INTO ACCOUNT THE AVERAGE VALUE OF INVESTMENT WHICH YIELDS ONLY THE EXEMPTED INCOME. HENCE WHILE CONSIDERING THE AVERAGE VALUE OF INVESTMENT, THE ASSESSING OFFICER HA S TO CONSIDER THE ACTUAL INVESTMENTS MADE BY THE APPELLANT WHICH GENERATES THE EXEMPTED INCOME. HENCE TO THIS EXTENT, THE ASSESSING OFFICER HAS ERRED IN TAKING THE ENTIRE INVESTMENTS IN COMPUTING THE DISALLOWANCE UNDER RULE 8D (II). IN VIEW OF THIS, THE ASS ESSING OFFICER IS DIRECTED TO ADOPT THE VALUE OF INVESTMENTS MADE ONLY IN SHARES RS .59,43,220/ - AS AGAINST RS.1, 19,87,766/ - ADOPTED IN THE ABOVE FORMUL A. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ISSUE UNDER CONSIDERATION IS SQUARELY COVER ED BY THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ORIENTAL STRUCTURAL ENGINEERS (P) LTD. AND ALSO BY THE COORDINATE BENCH OF THE MUMBAI TRIBUNAL IN THE CASE OF M/S SMART CHIP LTD., ITA NOS.1923, 5196, 5367/MUM/2012, ORDER DATED 28 - 11 - 2014, GARW ARE WALL ROPES LTD., ITA NOS.5408, 4957/MUM/2012, 65 SOT 86 ITA NO. 103 /1 3 3 AND M/S JM FINANCIAL LIMITED, ITA NO.4521/MUM/2012, ORDER DATED 26 - 3 - 2014. 7. RESPECTFULLY FOLLOWING THE ABOVE ORDER, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR EXCLUDING THE STRATEG IC INVESTMENT MADE IN THE JOINT VENTURE BUSINESS PROJECTS WHILE COMPUTING DISALLOWANCE UNDER RULE 8D(II). 8 . THE REVENUE IS ALSO AGGRIEVED FOR DELETING DISALLOWANCE OF RS.4,18,000/ - U/S.37(2B) OF THE I.T.ACT. THE AO HAD DISCUSSED THIS ISSUE IN PARA 7 OF T HE ASSESSMENT ORDER. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAD INCURRED EXPENDITURE TOWARDS ADVERTISEMENT IN SOUVENIR, BROUCHERS, TRACT, PAMPHLET ETC. PUBLISHED BY THE POLITICAL PARTY AND HENCE DISALLOWED THE SAME. 9 . BY THE IMPUGNED ORDER THE CIT(A) D ELETED THE DISALLOWANCE AFTER OBSERVING AS UNDER : - 5.3 I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS. THE APPELLANT HAD GIVEN ONLY DONATION TO BHARATIYA JANATA PARTY AND SUCH DONATION PAID ARE NOT COVERED AS PER THE PROVISIONS OF SECTION 37(2B). IN V IEW OF THIS, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. TH IS GROUND OF APPEAL IS ALLOWED 10 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT THE ASSESSEE HAS NOT GIVEN ANY ADVERTISEMENT IN SOUVENIR OF THE POLITICAL PARTY THEREFORE NOT HIT BY THE PROVISION S OF SECTION 37(28). SINCE THE EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND WAS NOT IN PERSONAL NATURE, THERE WAS NO JUSTIFICATION FOR DISALLOWING THE SAME. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT (A) ON THIS ISSUE. 1 1 . THE REVENUE IS ALSO AGGRIEVED FOR DELETING D ISALLOWANCE OF INTEREST OF RS .4,61 ,376/ - . T HE ASSESSING OFFICER HAD DISCUSSED THIS ISSUE IN PARA 8 OF THE ASSESSMENT ORDER, WHEREIN HE OBSERVED THAT THE ASSESSEE HAD MA DE ADVANCES TO SOM E PARTIES FROM WHOM NO INTEREST HAS BEEN ITA NO. 103 /1 3 4 CHARGED. THE ASSESSEE HAS BEEN PAYING INTEREST ON THE LOANS TAKEN AND HENCE ASSESSING OFFICER WAS OF THE VIEW THAT INTEREST ATTRIBUTABLE TO INTEREST FREE ADVANCES HAS TO BE DISALLOWED AT 12% PER ANNUM AND ACCORDINGL Y RS.4,61 ,376/ - WAS DISALLOW ED. 1 2 . BY THE IMPUGNED ORDER THE CIT(A) DELETED DISALLOWANCE OF INTEREST AFTER OBSERVING AS UNDER : - 6.3. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS. THE OPENING CAPITAL AS PER THE BALANCE SHEET AS ON 31 3.2008 WAS RS.8. 4 CR AND THE CLOSING BALANCE RS.5.37 CRORES. WHICH SHOWS THAT THE APPELLANT HAD GOT HUGE SURPLUS FUNDS AVAILABLE IN THE FORM OF CAPITAL. HENCE THE CONTENTION OF THE APPELLANT THAT THE LOANS ARE ADVANCED OUT OF PERSONAL CAPITAL IS FOUND TO BE ACCEPTABLE SIN CE THE BORROWED MONEY HAVE NOT BEEN USED FOR THE PURPOSE OF ADVANCING INTEREST FREE LOANS, NO DISALLOWANCE OF INTEREST CAN BE MADE. I WOULD LIKE RELY ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES LTD. REPORTED IN 313 ITR 34 IN THIS REGARD. THE HEAD NOTE IS AS UNDER: - INTEREST ON BORROWED CAPITAL -- INVESTMENTS BY ASSESSEE -- FINDING THAT INVESTMENTS WERE FROM INTEREST - FREE FUNDS AVAILABLE WITH ASSESSEE - - BORROWED CAPITAL USED FOR PURPOSES OF BUSINESS -- INTEREST DEDUCTIBLE - - INC OME - TAX ACT, 1961, S. 36(1 )(III). THE ASSESSEE CLAIMED DEDUCTION OF INTEREST ON BORROWED CAPITAL. THE ASSESSING OFFICER RECORDED A FINDING THAT THE SUM OF RS. 213 CRORES WAS INVESTED OUT OF ITS OWN FUNDS AND RS. 147 CRORES WAS INVESTMENT OUT OF BORROWED FUNDS. ACCORDINGLY HE DISALLOWED INTEREST AMOUNTING TO RS.4.40 CRORES CALCULATED AT 12 PER CENT. PER ANNUM FOR THREE MONTHS FROM JANUARY, 2000 TO MARCH, 2000. THE COMMISSIONER (APPEALS) FOUND THAT THE ASSESSEE HAD ENOUGH INTEREST - FREE FUNDS AT ITS DISPOSA L FOR INVESTMENT AND ACCORDINGLY DELETED THE ADDITION OF RS. 4.40 CORES MADE BY THE ASSESSING OFFICER AND DIRECTED HIM TO ALLOW THE DEDUCTION UNDER SECTION 36(1 )(III). THE ORDER OF THE COMMISSIONER (APPEALS) WAS UPHELD BY THE TRIBUNAL. ON APPEAL TO THE HI GH COURT: HELD, DISMISSING THE APPEAL, THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST- FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST - FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPAN Y, IF THE INTEREST - FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION WAS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. THE INTEREST WAS DEDUCTIBLE.' ITA NO. 103 /1 3 5 IN VIEW OF THE ABOVE D ISCUSSION, THE DISALLOWANCE OF INTEREST RS .4,61 ,376/ - IS HEREBY DELETED. THI S GROUND OF APPEAL IS ALLOWED. 1 3 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE DOCUMENTS PLACED ON RECORD AND FOUND THAT NONE OF THE BORROWED FUNDS HAVE BEEN UTILIZED FOR GIVING INTEREST FREE LOANS TO EITHER BLOOD RELATIVE OR FRIENDS. WHATEVER ADVANCES HAVE BEEN GIVEN WERE OUT OF OWN CAPITAL. THIS FACT IS VERIFIABLE FROM THE ENCLOSED BALANCE SHEET OF THE ASSESSEE. THE FINDING OF FACT RECORDED BY CIT(A) ARE AS PER MATERIAL ON RECORD, THEREFORE, DOES NOT REQUIRE ANY INTERFERENCE ON OUR PART. ACCORDINGLY, WE CONFIRM THE ACTION OF THE CIT(A) FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES LTD., 313 ITR 34. 1 4 . THE REVENUE I S ALSO AGGRIEVED FOR DELETING ADHOC DISALLOWANCE OF RS.1,00,000/ - ON TELEPHONE EXPENSES, VEHICLE EXPENSES ETC. THE AO WAS OF THE VIEW THAT THE ELEMENT O F PERSONAL IN NATURE IN RESPECT OF THE ABOVE EXPENDITURE CANNOT BE RULED OUT AND HENCE MADE AN ADHOC DIS ALLOWANCE OF RS.1 ,00,000/ - . 1 5 . BY THE IMPUGNED ORDER, CIT(A) DELETED THE SAME AFTER OBSERVING AS UNDER : - 7.3. I HAVE CONSIDERED THE ABOVE SUBMISSIONS OF THE APPELLANT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF THE APPELLANT HAD FURNISHED EVIDENC ES IN THE FORM OF VOUCHERS PERTAINED TO EACH AND EVERY HEADS OF EXPENDITURE. THE ASSESSING OFFICER HAD NOT FOUND OUT ANY DISCREPANCY. THE ASSESSING OFFICER HAD NO MATERIAL IN HIS POSSESSION TO SHOW THAT PERSONAL ELEMENT IS INVOLVED IN RESPECT OF THE ABOVE EXPENDITURE. IN VIEW OF THE ABOVE, THE ADHOC ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED . 16 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT PERSONAL ELEMENT IN SUCH EXPENSES CANNOT BE RULED OUT. THEREFORE, KEEPING IN VIEW THE TOTALITY O F FACTS AND CIRCUMSTANCES OF THE CASE, WE RESTRICT THE ITA NO. 103 /1 3 6 DISALLOWANCE TO THE EXTENT OF 10% OF SUCH EXPENSES. THIS GROUND OF THE REVENUE IS ALLOWED IN PART. 1 7 . THE LAST GRIEVANCE OF THE REVENUE RELATES TO DELETING ADDITION OF RS.3,50,19,655/ - ON ACCOUNT OF A LLEGED NON - GENUINE PURCHASES OF THE ASSESSEE. FROM THE RECORD WE FOUND THAT T HE ASSESSING OFFICER HAD OBTAINED THE INFORMATION ABOUT THE LIST OF SUSPICIOUS DEALERS ALLEGED TO HAVE BEEN ISSUED FALSE BILLS WITHOUT DELIVERY OF THE GOODS FROM THE INTERNET ON T HE WEBSITE OF SALES TAX DEPARTMENT, MAHAVAT.ORG. THE ASSESSING OFFICER HAD IDENTIFIED ABOUT 12 PARTIES WHO ARE APPEARING IN THE ABOVE LIST OF SALES TAX DEPARTMENT AND ASKED THE APPELLANT TO ESTABLISH THE GENUINENESS OF THE PURCHASES BY PRODUCING THE PARTIE S ALONG WITH SUPPORTING DOCUMENTS. OUT OF 12 PARTIES, THE ASSESSING OFFICER ISSUED NOTICES U/S.133(6) OF THE INCOME TAX ACT ONLY TO M/S. DEEP ENTERPRISES AND M/ S FORUM TRADERS. NO REPLY WAS RECEIVED FROM M/S.FORUM TRADERS AND THE NOTICE ISSUED TO M/S. DEEP ENTERPRISES RETURNED UNSERVED. SINCE THE APPELLANT WAS NOT ABLE TO PRODUCE THE PARTIES, THE ASSESSING OFFICER HAD ADDED THE ENTIRE PURCHASES MADE FROM THE ABOV E 12 PARTIES AS NON GENUINE ONE. 1 8 . BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION AFTE R OBSERVING AS UNDER : - 8 .3. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS MADE BY THE APPELLAN T LAND THE IMPUGNED ASSESSMENT ORDER ON THIS ISSUE. THE APPELLANT AS A CIVIL CONTRACTOR HAD CARRIED OUT 14 CONTRACTS TO MCGM DURING THE ASSESSMENT YEAR. THE APPELLANT WAS ASKED TO FILE THE DETAILS CONNECTED TO THE CONTRACT SUCH AS THE NATURE AND SCOPE OF WORK, DATE OF COMMENCEMENT AND DATE OF COMPLETION OF THE CONTRACT ETC,. DURING THE COURSE OF HEA RING. THE DETAILS FURNISHED INDICATES THAT MOST OF THE WORK IS RELATED TO NALLAHS, DRAINS, ITA NO. 103 /1 3 7 MISCELLANEOUS REPAIR WORK ETC.. THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT WAS ASKED TO PRODUCE ONE SAMPLE TENDER DOCUMENTS AND THE SAME WAS FILED IN RESPECT OF STORM WATER DRAIN WORKS , CHEMBUR S.W.D. WORK. AND THE APPELLA NT HAD COMMENCED THE WORK ON 15.4.2009. THE ENTIRE CONTRACTS SPREAD OVER 2009 - 10 TO 2011 - 12. THE APPELLANT RECEIVED 55% OF THE CONTRACT RECEIPTS DURING THE ASSESSMENT YEAR. 8.3.1. THE APPELLANT WAS ALSO DIRECTED TO FURNISH THE SCOPE OF WORK IN RESPECT OF THE ENTIRE 14 CONTRACTS. ONE SUCH SCOPE OF WORK WITH REGARD TO AKHIL NALLA IS REPRODUCED BELOW TO UNDERSTAND THE NATURE OF CONSTRUCTION CARRIED OUT BY THE APPELLANT' - SCOPE OF WORK: - 1. CONSTRUCTION OF BOX TYPE DRAIN FROM CHARKOP ROAD AKHIL HOTEL TO K ADSIDDESHWAR ROADTO MANORI CREEK RIC WARD, KANDIVALI(W). 2. M25 RCC WALL WITH M 25 RCC SLAB AT TOP TO COVER THE SAME 3. CONSTRUCTION OF S.W DRAIN AT OTHER SIDE IN C.C. AT 28 THD 4. RAISING AND CONSTRUCTION OF ROAD FROM STARTING POINT TO END. THE SCOPE OF WORK IN RESPECT OF ALL THE CONTRACTS ARE ALMOST IDENTICAL WHICH INVOLVES CONSTRUCTION OF THE DRAIN AND SLAB TO COVER THE TOP ALONG WITH RAISING AND CONSTRUCTION OF ROAD FROM THE STARTING POINT TO END. THIS SCOPE ALSO GIVES THE CONSTRUCTION PROGRAMME. T HE APPELLANT WAS GIVEN THE TIME TO COMPLETE THE WORK WITHIN 12 MONTHS. HENCE TO CARRY O UT THE ABOVE CIVIL CONSTRUCTION WORK THE APPELLANT HAD TO NECESSARILY PURCHASE THE BUILDING MATERIALS SUCH AS CEMENT, STEEL ETC. WITHOUT WHICH IT IS NOT POSSIBLE TO COMP LETE HE CONTRACT AWARDED. 8.3.2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF IT IS THE CONTENTION OF THE APPELLANT THAT MATERIALS HAVE BEEN RECEIVED AT SITE AND ISSUED FOR THE WORK. THE PAYMENTS WERE MADE ONLY BY WAY OF ACCOUNT PAYEE CHEQUES AND HE NCE THE PURCHASES ARE GENUINE. IT IS T O BE POINTED OUT HERE THAT OUT OF 12 PARTIES, NOTICES U/S.133(6) WAS ISSUED ONLY IN RESPECT OF 2 PARTIES. IN THE ASSESSMENT ORDER ITSELF THE ASSESSING OFFICER HAD MENTIONED THAT NO NOTICE WAS ISSUED TO THE REMAINING 10 PARTIES. 8.3.3. THE SALES TAX DEPARTMENT HAD ONLY PUT UP A LIST OF SUSPICIOUS DEALERS WHICH DOES NOT MEAN THAT THE SUPPLY OF MATERIALS BY THE PARTIES ARE BOGUS. THE ASSESSING OFFICER HAD NOT BROUGHT ANY MATERIAL ON RECORD TO SHOW THAT NO MATERIAL HAS BE EN SUPPLIED BY THE ABOVE 12 PARTIES. THE MERE NON PRODUCTION OF THE PARTIES SHOULD NOT LEAD TO THE CONCLUSION THAT THE PURCHASE ARE NOT GENUINE WHEN THERE ARE SUPPORTING EVIDENCES IN THE FORM OF INVOICES, ACCOUNT PAYEE CHEQUES ETC. 8.3.4. WHEN THE WORK W AS BEING EXECUTED, THE SITE HAS BEEN VISITED BY THE ENGINEERS OF BMC TO CHECK THE PROGRESS AND THE QUALITY OF THE WORK. MCGM IS ALSO HAVING ITS OWN IN HOUSE VIGILANCE ITA NO. 103 /1 3 8 DEPARTMENT TO CHECK THE QUALITY AND QUANTITY OF THE WORK CARRIED OUT. REGULAR REPORTS ARE BEING SENT TO THE DY.CHIEF ENGINEERS. 8.3.5. THE APPELLANT APPOINTS PROJECT MANAGER FOR EACH SITE. SIMILARLY MCGM ALSO DEPUTES ONE SUB - ENGINEER ON THE SITE FOR EACH WORK WHO IS RESPONSIBLE FOR EXECUTION OF THE WORK AT SITE. AS PER THE TERMS OF THE CONTR ACT, THE CONTRACTOR HAS TO ERECT A SITE LABORATORY FOR TESTING MATERIALS ON SITE FOR WHICH A QUALITY CONTROL ENGINEER HAS TO BE APPOINTED. THE CONTRACTOR HAS ALSO TO SEND SAMPLES OF ALL THE MATERIALS RECEIVED ON SITE TO MUNICIPAL TESTING LABORATORY UNDER T HE SUB ENGINEER'S SIGNATURE. THE TESTING CHARGE ARE PAID BY THE CONTRACTOR. AS MENTIONED ALREADY, THE APPELLANT HAD FILED ONE FULL SET OF TENDER DOCUMENTS IN RESPECT OF STORN WATER DRAIN WORKS CARRIED OUT AT CHEDDA NAGAR. CHEMBUR, PHASE - I!. SECTION 2 OF TH E TENDER DOCUMENTS DE ALS WITH THE SCOPE OF WORK. SECTION 3 DEALS WITH INSTRUCTIONS TO TENDERS. AS PER CLAUSE 3.8, THE CONTRACTOR HAS TO ERRECT A READY M ADE SITE OFFICE FOR MCGM STAFF BEFORE COMMENCING OF THE WORK. CLAUSE 3.9 TALKS ABOUT THE SITE LABORATORY. THE CONTRACTOR SHALL SET UP A LABORATORY BEFORE COMMENCEMENT OF THE WORK AND MAINTAIN ALL THE TESTS RECORDS AT THE SITE OFFICE. FAILURE TO ESTABLISH THE LABORAT ORY WITHIN 15 DAYS FROM THE RECEIPT OF THE WORK ORDER WOULD RESULT IN LEVY OF PENALTY OF RS .500 / - PER DAY. SIMILARLY A PENALTY OF RS .500/ - PER DAY WILL BE IMPOSED IF Q UALITY CONTROL ENGINEERS IS NOT FOUND APPOINTED/DEPLOYED ON THE WORK. SECTION 6 TALKS ABOUT TECHNICAL SPECIFICATIONS. CLAUSE 6.2.2 & 6.2.3. DEALS WITH THE MATERIAL USED IN THE CONTRACT AND SAMPLES AND TEST OF MATERIALS. AS PER SUB CLAUSE 6 OF 6.2.3, THE CONTRACT SHALL NOT USE ANY MATERIAL WITHOUT PRIOR TESTING AND CLEARANCE BY ENGINEER IN CHARGE. IN CASES WHERE THE MATERIAL IS USE WITHOUT TESTING IS LIABLE FOR REJECTION EITHER PARTLY OR FULLY. SIMILAR CLAUSE IS APPEARING IN GENERAL SPECIFICATIONS IN CLAUSE 6.4.3. ALL THE ABOVE CLAUSES CLEARLY INDICATES THAT THE MATERIAL USED AT SITE UNDERGOES A STRINGENT QUALITY CONTROL AND THE ENTIRE WORK IS BEING MONITORED BY THE SITE ENGINEER APPOINTE D BY THE MCGM. 8.3.6. AS AND WHEN THE WORK IS GOING ON THE APPELLANT RAISES A RUNNING BILL WHICH WOULD BE THEN CHECKED AND VERIFIED BY THE SUB - ENGINEER WHICH IS THEN CHECKED AND VERIFIED BY THE ASSISTANT ENGINEER BEFORE THE SAME GOT FORWARDED TO THE EXEC UTIVE ENGINEER. AFTER FINAL CHECKING BY THE EXECUTIVE ENGINEER, THE BILLS ARE FURNISHED TO THE ACCOUNTS DEPARTMENT. THUS DEPENDS UPON THE STAGE OF CONTRACT, RUNNING BILLS ARE RAISED AND AFTER DULY CERTIFIED BY THE MCGM AUTHORITIES, PAYMENTS ARE SANCTIONED TO THE APPELLANT. 8.3.7. THE CONTRACT WORK CARRIED OUT IS SUBJECTED TO CHECKING BY THE VIGILANCE DEPARTMENT OF MCGM FOR THE QUALITY AND QUANTITY OF THE WORK CARRIED OUT. FURTHER MCGM ALSO APPOINTS THIRD PARTY QUALITY AUDITORS WHO ROUTINELY CHECKS THE QUA LITY AND QUANTITY OF THE WORK CARRIED OUT. THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT HAD ALSO FIELD THE QUANTITATIVE MATERIAL USED IN THE FORM OF CEMENT, SAND, STEEL ETC. IN RESPECT OF ANNA INDIRA NAGAR NALLA ALONG WITH THE WORK - WISE SUMMARY. DETAILS OF PAYMENT CERTIFICATE BY THE MCGM WAS ITA NO. 103 /1 3 9 ALSO FURNISHED FOR THIS WORK. THE SCRUTINY OF THE ABOVE PAYMENT CERTIFICATE INDICATES THAT PAYMENTS ARE MADE AT EACH STAGE OF THE CONTRACT. FOR EACH WORK THE PAYMENT CERTIFICATE HAS GOT A UNIQUE ID AND FOR THIS PARTIC ULAR WORK, THE PAYMENT CERTIFICATE ID IS 1000146827. FOR EXAMPLE, SR.NO.8 OF THE PAYMENT CERTIFICATE, ART PAYMENT MADE IS AS UNDER: - 1 DESCRIPTION LEAVING SHORING IN TRENCHES NEW OR OLD INCLUDING DOG SPIKES 2 ACTIVITY NO. FMSWD 45 3 RATE 264.00 4 CURR . INR 5 UNIT SQM 6 EST. QTY. 3,320.000 7 EST. AMOUNT 876,480.00 8 EXECUTED QTY 1,160.00 9 UPTO LAST BILL QTY 0.000 10 UPTO LAST BILL AMOUNT 0.00 11 CURRENT BILL QTY 1,160.000 12 CURRENT BILL AMOUNT 306.2490.00 THE ENTIRE BUNCH OF PAYMENT CERTIFIC ATE SHOWS THAT THERE WERE ABOUT 81 ACTIVITY NOS. FOR WHICH THE TOTAL PAYMENT MADE WAS RS .4525575/ - . THE ABOVE CLEARLY SHOWS THAT THE MCGM MAKES PAYMENT FOR EACH ACTIVITY OF THE CONTRACT AND AFTER PROPERLY CERTIFIED BY THE SUB - ENGINEERS. SIMILAR DETAILS WER E ALSO FURNISHED IN RESPECT OF PROJECT BY NAME I.B.PATEL I.E. DETAILS OF MATERIAL USED AND PAYMENT CERTIFICATE ISSUED BY MCGM. 8.3.8 THE APPELLANT HAD ALSO FILED THE EVIDENCE IN RESPECT OF TESTING THE MATERIALS USED IN THE CONTRACT. FEW SUCH COPIES ISSUE D BY MATERIAL TESTING LABORATORY, MCGM ARE AVAILABLE IN THE SUBMISSIONS MADE. THE PERUSAL IN REFERENCE NO.AESM/BRK/2009 - 09 - 31 AND AESM/BRKL2009 - 09 - 32 BOTH DATED 24.2.2008 INDICATES THAT THE QUALITY OF THE BRICK USED BY THE APPELLANT HAD BEEN TESTED BY THE ASSTT.ENGINEER(SOIL MECH.) OF MCGM. SIMILARLY CERTIFICATE ISSUED BY THE MCGM FOR TESTING THE CEMENT BY MATERIAL TESTING LABORATORY FOR THE PERIOD OCTOBER, 2006 TO JAN. 2009 FOR THE WORK CARRIED OUT IN THE CASE OF I.B.PATEL WAS ALSO FURNISHED. 8.3.9. ALL THE ABOVE CLEARLY INDICATES THAT MATERIAL FOR THE ABOVE CONTRACTS REACHED THE RESPECTIVE SITE WHICH GOT TESTED FOR ITS QUALITY. DEPENDING UPON THE STAGE OF WORK, RUNNING BILLS WERE PREPARED AND PAYMENTS RECEIVED AFTER CERTIFICATION BY THE SITE ENGINEERS. A LL THESE CLEARLY PROVE THAT THE CONTRACT WORK HAS BEEN EXECUTED TO THE SATISFACTION OF THE MCGM AUTHORITIES A ND DUE PAYMENTS WERE RECEIVED AGA INST THE EXE CUTED CONTRACTS. THE ASSESSING OFFICER WITHOUT EXAMINING THE FACTS DISCUSSED ABOVE HAD COME TO THE CON CLUSION BASED ONLY ON THE PRESUMPTION THAT BECAUSE THE NAMES OF E SUPPLIERS WERE PUT IN THE INTERNET AS 'SUSPICIOUS DEALERS', THE PURCHASES WERE BOGUS WI THOUT PURCHASE OF MATERIAL SUCH AS CEMENT, STEEL, BRICK ETC, THE APPELLANT COULD NOT H AVE COMPLETED THE ITA NO. 103 /1 3 10 CONTRACT ASSIGNED TO IT. THE ASSESSING OFFICER HAD NO MATERIAL ON RECORD TO SHOW THAT HOW THE CONTRACTS HAVE BEEN COMPLETED BY THE APPELLANT WITHOUT PURCHASE OF MATERIAL FROM THE ABOVE SUPPLIERS. THE BOOKS OF ACCOUNTS OF THE APPELLANT HAD BEEN DULY AUDITE D BY THE C.A AND NO DISCREPANCY WHAT SO EVER HAS BEEN BROUGHT OUT IN THE AUDIT REPORT. IN VIEW OF THE ABOVE, THE PRESUMPTION OF THE ASSESSING OFFICER THAT THE ABOVE 12 SUPPLIERS HAD ISSUED ONLY BOGUS BILLS WITHOUT SUPPLYING THE MATERIALS AND HENCE THEY ARE NON GENUINE PURCHASES CANNOT BE ACCEPTED. AS ALREADY MENTIONED, PAYMENTS TO THE ABOVE SUPPLIERS WERE MADE BY WAY OF ACCOUNT PAYEE CHEQUES. 8.3 .10. ONCE THE WORK IS COMPLETED MEASUREMENTS ARE TAKEN INTO MEASUREMENT BOOK AND PAYMENTS ARE MADE ACCORDING TO THE WORK COMPLETED. THE CONTENTION OF THE, ASSESSING OFFICER THAT IF THE ENTIRE MATERIALS PURCHASED IS BOGUS. THEN HOW THE APPELLANT IS AB L E TO COMPLETE THE WORK AND RECEIVE THE PAYMENT FROM BMC. 8.3.11 THE AO VIDE HIS LETTER DATED 10.10.2012 FILED A SU BMISSION MENTIONING THAT THERE WAS A SURVEY U/S.133A CARRIED OUT IN THIS CASE ON 4.01.2012 BY THE ADIT(LNV.) UNIT 4(2), MUMBAI. HE HAD ENCLOSED THE COPY OF SWORN STATEMENT RECORDED DURING THE COURSE OF SURVEY ALONG WITH THE COPY OF ANOTHER STATEMENT RECORD ED BY THE ADIT(LNV.) UNIT 4(2) ON 2.5.2012 FROM SHRI ARVIND JAIN, PROPRIETOR OF M/S. LNDRA CONSTRUCTION CO. WHICH WAS CONFIRMED BY THE APPELLANT SHRI INDERVADAN H JAIN. THE AO WAS OF THE OPINION THAT THE STATEMENTS RECORDED DURING THE COURSE OF SURVEY AND POST SURVEY HAD RELEVANCE TO THE ADDITION MADE FOR AY.2009 - 1 O. THE COPIES OF THE STATEMENT RECORDED WERE HANDED OVER TO THE AR OF THE APPELLANT AND HE WAS DIRECTED TO FILE THE SUBMISSIONS. THE SUBMISSIONS MADE BY THE A R. OF THE APPELLANT ON 19.10.2012 IS REPRODUCED AS UNDER: - 'IN CONTINUATION TO SUBMISSION ALREADY MADE AND AS ASKED FOR ABOUT THE CONFESSION/SURRENDER MADE DURING THE COURSE OF SURVEY ACTION U/S. 133A WE HAVE BEEN PROVIDED THE COPY OF STATEMENT RECORD ON 04/01/2012 AND 02/05/2012 BY YOUR H ONOUR. IN THIS RESPECT WE HAVE BEEN INSTRUCTED TO SUBMIT AS UNDER: 1. AS REGARDS STATEMENT RECORDED ON 04101/2012 WE ARE NOT DISCUSSING ALL THE QUESTIONS AND ANSWERS OF THE STATEMENT RECORDED ON 04/01/2012. RATHER THE RELEVANT QUESTION AND ANSWER RELAT ING TO DISCLOSURE MADE THERETO ARE DISCUSSED HEREUNDER: A. IN REPLY TO QUESTION NO 11 THE APPELLANT SUBMITTED AS UNDER WHICH IS REPRODUCED HEREUNDER: 'AS FAR AS I AM CONCERNED, WE HAVE ACTUALLY PURCHASED THE MATERIAL AND ALL THESE PURCHASES ARE BONAFID E PURCHASES USED FOR EXECUTION OF OUR CONTRACTS. I AGREE THAT I AM NOT IN A POSITION TO GIVE THE SUPPORTING DOCUMENTS TO SOME OF THESE BILLS SUCH AS THE DELIVERY ITA NO. 103 /1 3 11 CHALLANS, LORRY RECEIPTS, OCTROI RECEIPTS ETC TO YOU RIGHT NOW IN ALL THE CASES. I WILL BE IN A POSITION TO GET THEM FROM THE SITES AND SUBMIT TO YOU IN DUE COURSE.' A PERUSAL OF THE ABOVE ANSWER IT IS CRYSTAL CLEAR THAT THE ASSESSEE ACTUALLY PURCHASED THE MATERIAL AND ALL THESE PURCHASES ARE BONAFIDE PURCHASES. HE FURTHER STATED THAT HE IS NOT I N POSITION TO GIVE SOME OF THE SUPPORTING OF SOME OF THE BILLS RIGHT NOW. HOWEVER THE SAME CAN BE PRODUCED AND FOR WHICH WE GAVE THE DETAILS IN TABULAR FORM. THIS FACT IS MENTIONED IN ANSWER TO QUESTION 8 OF STATEMENT DATED 02/05/2012. B. IN REPLY TO QUE STION NO 15 THE APPELLANT HAS CLEARLY STATED THAT THERE MAY BE SOME INFLATION OF BILLS AND IF IT IS THERE MONEY HAS BEEN PLOUGHED BACK INTO THE BUSINESS OF THE COMPANY IN ONE WAY OR OTHER WAY. THEREBY IT HAS NOT SUFFERED INCOME TAX IT IS PERTINENT TO MENTI ON THAT THE ASSESSEE HAS MERELY STATED THAT THERE MAY BE SOME INFLATION BUT NOT WITH 100% CERTAINTY. HENCE THE DISCLOSURE MADE WITHOUT ANY CORROBORATIVE EVIDENCE BEING FOUND DURING THE SURVEY ACTION CANNOT BE MADE BASIS FOR ADDITION. 2. STATEMENT DATED 0 2/05/2012 A) IN REPLY TO QUESTION NO 7 THE APPELLANT HEREIN STATED THAT THE RECORDS ARE BEING MAINTAINED BY THEM WHICH GIVES DETAILS OF THE MATERIAL LIKELY TO BE USED AND ACTUAL USAGE. B) IN REPLY TO QUESTION NO 8 THE APPELLANT HEREIN SUBMITTED ALL THE NECESSARY DETAILS A PERUSAL OF THE CHART YOUR HONOUR WILL APPRECIATE AND ADMIT THAT WHEN ALL THE DETAILS LIKE ORDER COPY/REQUISITION SLIP/DELIVERY CHALLAN/ENTRY OF MATERIAL RECEIVED AND PAYMENT MADE HAS BEEN GIVEN BY ASSESSEE THERE DOES NOT REMAIN AN IOTA OF DOUBT ABOUT GENUINENESS OF PURCHASES MADE. THESE DETAILS ITSELF ARE SUFFICIENT THAT GOODS HAVE BEEN DELIVERED AND UTILIZED IN THE EXECUTION OF PROJECT AND AGAINST PURCHASES PAYMENT HAS BEEN MADE BY A/C PAYEE CHEQUE. THEREFORE THE QUESTION OF DOUBTING THESE GENUINE PURCHASES AS NON - GENUINE DOES NOT ARISE. HERE IT IS PERTINENT TO MENTION THAT WE HAVE PROVIDED THE DETAILS PERTAINING TO FY 2008 - 09, FY 2009 - 10, FY 2010 - 11 AND FY 2011 - 12. C) IN REPLY TO QUESTION NO 10 THE APPELLANT SUBMITTED AS UNDER WHIC H IS REPRODUCED AS UNDER: 'AS FAR AS I AM CONCERNED WE HAVE ACTUALLY PURCHASED MATERIAL AND ALL THESE PURCHASES ARE BONAFIDE PURCHASES USED FOR EXECUTION OF OUR CONTRACTS. I AGREE THAT I AM NOT IN A POSITION TO GIVE THE SUPPORTING DOCUMENTS TO SOME OF TH ESE BILLS SUCH AS THE DELIVERY CHALLANS, LORRY RECEIPTS OCTROI RECEIPTS ETC TO YOU RIGHT NOW IN ALL THE CASE.' ITA NO. 103 /1 3 12 A PERUSAL OF THE ABOVE REPLY YOUR HONOUR WILL APPRECIATE THAT THE APPELLANT HAS STATED THAT THEY HAVE MADE BONAFIDE PURCHASES AND THE SUPPORTIN G OF WHICH HAS BEEN SUBMITTED IN TABULAR FORM WHILE REPLYING TO QUESTION NO 8. A PERUSAL OF THE CHART YOUR HONOUR WILL APPRECIATE AND ADMIT THAT ALL THE DETAILS L IKE ORDER COPY/REQUISITION SLIP/DELIVERY CHALLAN/ENTRY OF MATERIAL RECORD AND PAYMENT HAS BEEN GIVEN BY ASSESSEE THERE DOES NOT REMAIN AN IOTA OF DOUBT ABOUT PURCHASE AND UTILIZATION THEREOF. D) IN REPLY TO QUESTION NO 11 THE ASSESSEE HAS RE - ITERATED THAT WE HAVE ACTUALLY PURCHASED THE MATERIAL AND ALL THESE PURCHASES ARE BONAFIDE. HE FURTHER STA TED THAT HE IS NOT IN POSITION TO GIVE SUPPORTING OF SOME OF THE BILLS AND NOT ALL THE BILLS RIGHT NOW. HOWEVER WE GAVE ALL THE DETAILS VIDE REPLYING TO QUESTION NO 8. THEREFORE THE QUESTION OF TREATING GENUINE PURCHASES AS BOGUS DOES NOT ARISE. AFTER CO NSIDERATION OF THE QUESTION RAISED AND REPLIES GIVEN BY THE APPELLANT THE FOLLOWING FACTS EMERGES. I) FIRSTLY THE APPELLANT GAVE THE DISCLOSURE FOR AY 2010 - 11! 2011 - 12 AND AY 2012 - 13 WHICH HAS NO RELEVANCE WITH THE IMPUGNED ASSESSMENT YEAR FOR WHICH WE A RE IN APPEAL BEFORE YOUR HONOUR. II) SECONDLY THE DEPARTMENT DID NOT FIND ANY EVIDENCES OF INFLATION OF EXPENSES OR HAVING FOUND IN POSSESSION OF CASH BEING RECEIVED BACK OR ANY UNDISCLOSED INVESTMENT DURING THE COURSE OF SURVEY ACTION TO PROVE THAT APPE LLANTS PURCHASES FOR THE IMPUGNED AY I.E. AY 2009 - 10 ARE BOGUS. III) THIRDLY THE STATEMENT GIVEN PURSUANT TO SURVEY ACTION ON 04/01/2012 AND 02/05/2012 HAVE NO RELEVANCE WITH THE AFFAIRS OF THE AY 2009 - 10. IV) FOURTHLY THE STATEMENT RECORDED U/S. 133A IS NOT A SWORN STATEMENT AS THE OFFICER IS NOT EMPOWERED TO EXAMINE ANY PERSON ON OATH U/S. 133A. HENCE STATEMENT RECORDED U/S. 133A HAS NO EVIDENTIARY VALUE AND ANY ADMISSION MADE DURING SUCH STATEMENT CANNOT BE MADE BASIS OF ADDITION UNLESS SUPPORTED BY ANY EVIDENCE AS HELD BY THE HON'BLE APEX COURT IN THE FOLLOWING DECISION: CIT VS KHADER KAHN SONS (2012) 25 TAXRNAN. CORN 413 (SC) THE COPY OF THE HON'BLE APEX COURT ENCLOSED HERETO FOR YOUR HONOUR'S PERUSAL AND CONSIDERATION. V) LASTLY WE WOULD LIKE TO BRING TO YOUR HONOURS NOTICE HON'BLE CBDT'S INSTRUCTION F NO 286/2/200311TC (INV) AND FURTHER THE DECISION OF HON'BLE MURNBAI TRIBUNAL IN THE CASE OF ACIT CIRCLE 5 (7) V LA PANDYA IN ITA NO.4417 TO 4420/M/97 WHERE IN IT HAS BEEN HELD THAT THE BASIS FOR MAKING ASSESSMENT SHOULD BE SOLELY ON THE ITA NO. 103 /1 3 13 BASIS OF THE CORROBORATIVE MATERIAL FOUND AT THE TIME OF SURVEY AND NOT ON THE BASIS OF THE STATEMENT RECORDED U/S. 131. CONSIDERING THE ABOVE CITED DECISION YOUR HONOUR WILL APPRECIATE AND ADMIT THAT THIS CANNOT BE THE BASIS FOR TREATING GENUINE PURCHASES AS BOGUS. MOREOVER IN THE STATEMENT DISCLOSURE IS GIVEN FOR AY 2010 - 11 ONWARDS AND NOT FOR THE IMPUGNED ASSESSMENT YEAR. HENCE BY ANY IMAGINATION THE CONTENTS OF THE STATEMENTS ARE NOT APPLICABLE TO THE IMPUGNED ASSESSMENT YEAR. IN VIEW OF THE ABOVE YOUR HONOUR WILL FIND THE ABOVE IN ORDER AND SHALL DELETE THE UNWARRANTED ADDITION MADE AND OBLIGE.' 8.3.12 FURTHER THE AO HAD ALSO FORWARDED A COPY OF THE SURVEY REPORT PREPARED BY THE DDIT(LNV.) UNIT 4(4) DATED ?6.2012 IN THE CASE OF CHIRAG INFRA PROJECT PVT.LTD. (BMC CONTRACTOR) ALONG WITH THE COVERING LETTER WHICH WAS RECEIVED BY THIS OFFICE ON 18.10.2012 AND IT WAS CONVEYED THAT THE ADDITION IN THIS CASE WAS CORRECTLY MADE. THE ABOVE SURVEY REPORT INDICATES TH AT SHRI KISHORE G SHAH WHO MANAGES THE AFFAIRS OF M/S.CHIRAG INFRA PROJECT P.LTD. HAD ADMITTED THAT THERE IS SOME ELEMENT OF INFLATION OF BILLS BY SITE IN CHARGE PERTAINING TO THE PURCHASE OF MATERIALS PARTICULARLY SAND, TILES AND OTHER MATERIALS, (ANSWER TO QUESTION NO.19). THE ADIT HAD QUESTIONED MR.KISHORE G SHAH SPECIFICALLY ABOUT THE PURCHASE OF MATERIALS FROM THE CONCERNS OPERATED BY ONE SHRI MAFATLAL V SHAH (QUESTION NO.?). MR.KISHORE G SHAH WAS CATEGORICAL THAT THE PAYMENTS RELATES TO THE CONTROVERS IAL PARTIES MENTIONED IN QUESTION NO.? ARE GENUINE. HOWEVER I FIND THAT THIS SURVEY REPORT HAS NO DIRECT BEARING TO THE FACTS OF THIS CASE. AGAIN THE AO HAD FORWARDED COPY OF THE SURVEY REPORT OF DDIT(LNV.) UNIT 4(2) DATED 14.5.2012 WHICH WAS RECEIVED IN THIS OFFICE ON 19.10.2012. I HAVE PERUSED THE SURVEY REPORT WHICH CONTAINS ONLY THE RELEVANT PORTIONS OF THE STATEMENT RECORDED FROM SHRI ARVIND JAINJN PARA 6 AND THE SUGGESTIONS GIVEN TO THE AO BY THE ADIT IS AVAILABLE IN PARA 8 WHICH IS REPRODUCED AS UN DER, FOR THE SAKE OF CONVENIENCE: - 'SUGGESTIONS TO ASSESSIN G OFFICER T HIS REPORT IS ONLY INDICATIVE AND NOT EXHAUSTIVE OR ALL INCLUSIVE IN NATURE. THE ASSESSING OFFICER IS REQUESTED TO CARRY OUT IN DEPTH INVESTIGATION AND EXAMINE THE IMPOUNDED BOOKS OF ACCOUNTS/COMPUTED HARD DISKS, STATEMENTS RECORDED ETC. TO ARRIV E AT HIS/HER OWN CONCL USION. THE TRIAL BALANCE AND PROFIT & LOSS ACCOUNT OF THE ABOVE SURVEY FOLDERS' OF THE RESPECTIVE ENTITIES. NEVERTHELESS, WHILE FRAMING THE ASSESSMENT ORDERS, DUE CONSIDE RATION MAY BE GIVEN TO THE POINTS DISCUSSED IN THIS RESPECT. THE FINAL FINDING OF THE ADIT IS AVAILABLE IN PARA 6.4 OF THE SURVEY REPORT WHICH IS REPRODUCED AS UNDER: - ITA NO. 103 /1 3 14 '6.4. FROM THE EVIDENCES GATHERED AND THE STATEMENTS MADE BY THE ASSESSEE THEREAFTER , IT IS EVIDENT THAT THE ASSESSEE HAS INDULGED IN BOGUS INFLATION OF PURCHASES. THE SURVEY HAS RESULTED A DECLARATION OF RS .22 CRORES AS ADDITIONAL INCOME WHOSE BREAK UP IS AS UNDER: - FINANCIAL YEAR IN THE HANDS OF API CONSTRUCTI ON (PROP. INERVADAN JAIN) (IN.R S) INDRA CONSTRUCTION CO. (PROP.ARVIND JAIN(IND.RS.) 2009 - 10 3,00,00,000/ - 1,00,00,000/ - 2010 - 11 1,30,00,000/ - (WHICH HAS ALREADY BEEN DECLARED DURING THE COURSE OF SURVEY U/S.133A ON 1.3.2011) 70,00,000/ - (WHICH HAS ALREADY BEEN DECLARED DURING THE COURSE OF SURVEY U/S.133A ON 1.3.2011) 4 2011 - 12 12,00,00,000 4,00,00,000/ - TOTAL 16,30,00,000 5,70,00,000/ - 8.3.13. THE ASSESSING OFFICER FOR REASONS BEST KNOWN TO HIM HAD KEPT THE SURVEY REPORT AND STATEMENTS RECORDED FOR MORE THAN 5 MONTHS WI THOUT FORWARDING THE SAME ME. THOUGH IT IS WITHIN HIS KNOWLEDGE THAT APPEAL HAD BEEN FIELD FOR F.Y.2009 - 10. HE IS NOW SENDING SUBMISSIONS AND COPY OF SURVEY REPORT, STATEMENTS RECORDED AFTER THE CASE WAS HEARD. THIS ATTITUDE OF THE ASSESSING OFFICER IS NOT APPRECIATED. FURTHER THE SUBMISSIONS AND OTHER MATERIALS WERE SENT MECHANICALLY, WITHOUT APPLICATION OF MIND AND WITHOUT ANALYZING THE STATEMENTS. 8.3.14. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE AO AS WELL AS BY THE A.R. OF THE APPELLANT IN THIS R EGARD. IN ANSWER TO QUESTION NO.?, DURING THE COURSE OF SURVEY, BEFORE IT WAS TEMPORARILY CONCLUDED AT 10.30 P.M. ON 14.1.2012, SHRI ARVIND JAIN HAD STATED THAT MATERIALS ARE PURCHASED NOT ONLY FROM ENTITIES RUN BY SHRI MAFATLAL V SHAH BUT ALSO FROM OTHER CONCERNS. HE HAD ALSO MENTIONED THAT THE PURCHASE ORDERS ARE PLACED BY T H E STAFF WHO ARE IN CHARGE OF VARIOUS SITES DIRECTLY AND HE HAS NO DIRECT CONTACT WITH MR. MAFATLAL SHAH. THE SWORN STATEMENT WAS RESUMED NEXT DAY MORNING I.E. 15.1.2012 AT 7.00 A.M. I N RESPECT OF ANSWER TO QUESTION NO.11, SHRI ARVIND JOSHI HAD CATEGORICAILY STATED THAT ALL THE MATERIALS PURCHASED FOR EXECUTION OF THE CONTRACTS ARE BONA FIDE. HOWEVER, HE WAS NOT IN A POSITION TO GIVE SUPPORTING DOCUMENTS SUCH AS DELIVERY CHALLAN. LORRY NO DATE OF RECEIPT ETC. HE HAD ALSO MENTIONED THAT THE DETAILS WOULD BE SUBMITTED IN DUE COURSE. FINALLY IN ANSWER TO QUESTION NO.16 HE HAD AGREED THAT THERE IS SOME ELEMENT OF INFLATION OF EXPENDITURE ON PURCHASE OF MATERIALS ON ACCOUNT OF WHICH RS .5.7 C RORES WAS ADMITTED AS ADDITIONAL INCOME IN THE HANDS OF M/S.LNDRA CONSTRUCTION CO. AND RS. 16.3 CRORES IN THE CASE OF M/S.API CONSTRUCTION CO., PROP. SHRI INDERVADAN JAIN FOR F.YS.2009 - 10 TO 2011 - 12. 8.3.15. IT IS WORTH MENTIONING HERE THAT IN THE POST SU RVEY STATEMENT RECORDED BY THE D D LT ON 2.5.2012 SHRI ARVIND JAIN HAD GIVEN AN EVASIVE ANSWERS IN RESPECT OF BOGUS PURCHASE OF MATERIALS BY ITA NO. 103 /1 3 15 TAKING ACCOMMODATION BILLS. THE ANSWERS TO QUESTION NO.6 & 9 ARE REPRODUCED AS UNDER: - 'Q.6. YOUR STATEMENT WAS REC ORDED DURING THE COURSE OF SURVEY PROCEEDINGS UNDER SECTION 133A OF THE ACT ON 4TH/5TH JANUARY, 2012 VIDE ANSWERS TO QUESTION NO.6 & 7 YOU HAD STATED THAT YOU KNOW MR.MAFATLAL SHAH AND YOU HAD ALSO STATED THAT YOU MIGHT HAVE TAKEN ACCOMMODATION ENTRIES FRO M THE CONCERNS OF MR.MAFATLAL SHAH AND ALSO FROM THE SOME OTHER CONCERNS IN OUR STATEMENT. PLEASE COMMENT. ANS. AGAIN REITERATE THAT INDRA CONSTRUCTION COMPANY AND API CONSTRUCTION MIGHT HAVE TAKEN ACCOMMODATION ENTRIES FROM THE CONCERNS OF MR.MAFATLAL S HAH AND ALSO FROM SOME OTHER CONCERNS FOR GENERATION OF CASH FOR BUSINESS NEEDS. Q.9. . DO YOU KNOW 21 ABOUT THESE FICTITIOUS CONCE RNS, SOME OF WHICH ARE BEING RUN BY MR.MAFATLAL SHAH(SERIAL NO.1 TO 19). S. NO NAME OF THE CONCERN SL.NO. NAME OF THE CONC ERN 1 AJAY STONE 20 SIMPLEX ENTERPRISE 2 ATMASSENTERPRISES 21 CARBON ENTERPRISES 3 BHARAT TRADERS 22 SANDEEP STEELS 4 GEETA ENTERPRISES 23 SAM ENTERPRISES 5 JAI TRADING CO. 24 VSK ENTERPRISES 6 JINAL ENTERPRISES 25 SHREE ENTERPRISES 7 KK ENTERPRISES 26 MAKWELL TRADERS 8 KRISH ENTERPRISES 27 FORAM TRADERS 9 NEELAM ENTERPRISES 28 JAIN TRADING CORPORATION 10 NIDHI IMPEA INDIA 29 GEETA SALES CORPORATION 11 RAJ GURU CORPORATION 30 DEEP ENTERPRISES 12 RIMA ENTERPRISES 31 K.K.TRADERSKARAN ENTERPRISES 13 SAJ ENTERPRISES 32 KARAN ENTERPRISES 14 SAMBHAV TRADERS 33 PROMAN AGENCIES PVT. LTD. 15 SHREE SAI ENTERPRISES 34 SHREE ENTERPRISES 16 SUNDESHA ENTERPRISE 35 SIMPLEX CORPORATION 17 VARDHMAN TRADERS 36 PADMAVATI ENTERPRISES 18 VATSA ENTERPRISES 37 MO DERN SPUN PIPE 19 VRUKSHA ENTERPRISES 38 SAPNA TRADERS 39 HERMITAGE TRADING COMPANY PRIVATE LIMITED. YOU HAVE NOW ALSO SUBMITTED TO ME THE NAME OF THE PARTIES FROM WHOM YOU HAVE MADE PURCHASES DURING THE F.Y.2008 - 09, 2009 - 10, 2010 - 11 & THE CURRENT YE AR IN THE FORMAT STATED IN Q .8 ABOVE. FROM THE SAME, IT IS AGAIN SEEN THAT YOU ARE NOT IN. A POSITION TO EXPLAIN AND GIVE REQUIRED SUPPORTING OF SOME OF THE BILLS, IN SPITE OF THE FACT THAT CONSIDERABLE TIME HAS ALREADY LAPSED. PLEASE JUSTIFY YOUR ACTION O F RELEASING THE PAYMENTS BASED ON ORAL CONFIRMATIONS WITHOUT HAVING ANY SUPPORTING. PLEASE COMMENT. ITA NO. 103 /1 3 16 ANS. I AGAIN STATE THAT INDRA CONSTRUCTION COMPANY AND API CONSTRUCTION MIGHT HAVE TAKEN ACCOMMODATION ENTRIES FROM THE CONCERNS OF MR.MAFATLAL SHAH AND A LSO FROM SOME OTHER CONCERNS FOR GENERATION OF CASH FOR BUSINESS NEEDS.' THE ABOVE CLEARLY SHOWS THAT THE APPELLANT HAD STATED THAT ACCOMMODATION ENTRIES MIGHT HAVE BEEN TAKEN FROM CONCERNS OF SHRI MAFATLAL V SHAH. TO A SPECIFIC QUESTION WITH REGARD TO T HE LOOSE PAPERS FOUND AND IMPOUNDED IN ANNEXURE A - 1 TO A - 5 AND B - 1 & B - 2, HE HAS MENTIONED THAT ALL THE PURCHASES OF MATERIALS ARE BONAFIDE BUT HE IS NOT IN A POSITION TO FILE THE SUPPORTING DOCUMENTS LIKE LORRY RECEIPTS, DELIVERY CHALLANS ETC. ONLY TO SOM E OF THE BILLS. IN THE CONCLUDING PART OF THE STATEMENT AGAIN EVASIVE ANSWERS HAVE BEEN GIVEN BY STATING THAT IT IS POSSIBLE THAT THERE MAY BE SOME DISCREPANCY AND THERE IS INFLATION OF BILLS PERTAINING TO PURCHASE OF BILLS. HOWEVER IT IS MENTIONED THAT IT IS VERY DIFFICULT TO QUANTIFY THE AMOUNT OF ACTUAL EXPENDITURE INCURRED AND FINALLY HE ADMITTED UNDISCLOSED INCOME OF RS.22 CRORES IN BOTH THE HANDS. 8.3.16. THERE WERE 39 FICTITIOUS CONCERNS AS PER THE SALES TAX DEPARTMENT OUT OF WHICH MR.MAFATLAL V SH AH WAS RUNNING ABOUT 19 FICTITIOUS CONCERNS( THE NAMES OF WHICH WERE ENUMERATED IN QUESTION NO.9). AS MENTIONED ALREADY THE AO HAD ISSUED NOTICE U/S.133(6) TO ONLY TWO PARTIES BY NAME M/S.DEEP ENTERPRISES AND M/S.FORUM TRADERS OUT OF 12 PARTIES. FOR THE RE ASONS BEST KNOWN TO THE AO. NO NOTICE WAS SENT TO THE REMAINING 10 PARTIES. I T IS NOT CLEAR AS TO WHY THE AO WHO IS AT THE RANK OF ADDL. C OMMISSIONER OF INCOME TAX CHOSE NOT TO ISSUE NOTICE TO THE REMAINING PARTIES TO ASCE RTAIN AS TO WHETHER SUCH PARTIES A RE IN EXISTENCE OR NOT. WITHOUT EVEN DOING THE BASIC ENQUIRIES, HE HAD JUMPED INTO THE CONCLUSION THAT THE ENTIRE PURCHASES ARE BOGUS. 8.3.17. THE ANALYSIS DONE BY ME SHOWS THAT OUT OF 12 PARTIES ALLEGED TO HAVE ISSUED BOGUS BILLS,' ONLY 4 CONCERNS ARE F IGURING IN THE LIST OF ABOVE 39 ALLEGED FICTITIOUS CONCERNS WHICH ARE AS UNDER: - I) M/S.SAM ENTERPRISES II) M/S. FORUM TRADERS LII) M/S.SHREE SAI ENTERPRISES IV) M/S.SHREE ENTERPRISES THE CLAIM OF THE APPELLANT EVEN AT THE ASSESSMENT STAGE WAS THAT THE PAYMENTS TO ALL T H E 12 PARTIES WERE MADE BY WAY OF ACCOUNT PAYEE CHEQUES WHICH THE AO WAS VERY MUCH AWARE. HOWEVER I AM UNABLE TO UNDERSTAND WHY THE AO ( ADDL.COMMISSIONER) FAILED TO TRACE HOW THE CHEQUES HAVE BEEN CLEARED. HE DID NOT OBTAIN THE COPIES OF THE BANK ACCOUNTS WHERE THE CHEQUES GOT CLEARED AND TRY TO ANALYSE WHETHER IMMEDIATELY AFTER CLEARING, CASH WAS WITHDRAWN ONLY TO PAY IT BACK TO THE APPELLANT. I WONDER WHAT PREVENTED THE AO TO CARRY OUT SUCH ENQUIRIES. THUS THE ADDL.COMMISSIONER HAD M ISERABLY FAILED TO CARRY OUT THE BASIC ,NECESSARY INVESTIGATIONS BEFORE COMING TO SUCH A CONCLUSION. ITA NO. 103 /1 3 17 8.3.18 I ALSO FAILED TO UNDERSTAND WHY THE AO WAS KEEPING THE SURVEY REPORT WHICH WA S SENT BY THE D C LT ON 14.5.2012 I.E FOR ALMOST 5 MONTHS WITH HIM WHEN HE KNEW THAT APPELLANT HAD FILED AN APPEAL BEFORE THE CIT(A) AND THE CASE WAS POSTED FOR HEARING. COPIES OF SWORN STATEMENT .SURVEY REPORT ETC WERE RECEIVED BY ME AFTER THE CASE WAS HEARD AND THE MATERIALS WERE FORWARDED TO ME IN BITS AND PIECES ON 3 OCCA SIONS. THE WHOLE LOT COULD HAVE BEEN FILED AT ONCE. THE AO DID NOT EVEN APPLY HIS MIND BEFORE GIVING A SUBMISSION. HE DID NOT VERIFY WHETHER THE 12 PARTIES ON WHOM THE ADDITION W A S MADE WERE OUT OF 39 PARTIES SUPPOSED TO HAVE ISSUED BOGUS BILLS. THE AO HAD CONVENIENTLY OMITTED THE PORTION OF THE STATEMENT WHERE THE APPELLANT ADMITTED THAT THE MATERIAL PURCHASES WERE GENUINE AND HIGHLIGHTED ONLY THE PORTION OF THE STATEMENT WHEREIN WHICH THE APPELLANT ADMITTED THAT THERE IS SOME AMOUNT OF INFLATION IN PURCHA SE OF MATERIALS. 8.3. 19. NOW I DEAL WITH THE ISSUE OF VALIDITY OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY U/S.133A. THE APPELLANT HAD QUESTIONED THE VALIDITY OF THE STATEMENT RECORDED DURING THE COURSE OF SURVEY. VARIOUS COURTS HAVE CONSISTENTL Y HELD THAT STATEMENT RECORDED U/S.133A DURING THE COURSE OF SURVEY DO NOT HAVE EVIDENTIARY VALUE WHICH IS BEING DISCUSSED BY ME IN THE FOLLOWING PARA. 1. THE HON BLE SC HAD HELD THAT THOUGH ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CA NNOT BE SAID THAT IT IS CONCLUSIVE IN THE CASE OF PULLAMCODE RUBBER INDUSTRIES REPORTED IN 91 ITR '18 (SC). THE STATEMENT RECORDED HAVE TO BE CORROBORATED WITH OTHER MATERIALS. 2. CIT VS.KADARKHAN 300 ITR 157(MADRAS} INCOME - TAX SURVEY -- SCOPE OF SECTION 133A -- DIFFERENCE BETWEEN SECTIONS 133A AND 132(4) -- STATEMENT IN SURVEY OPERATIONS -- NOT CONCLUSIVE PIECE OF EVIDENCE -- STATEMENT BY PARTNER IN SURVEY OPERATIONS REGARDING UNDISCLOSED INCOME OF FIRM -- SUBSEQUENT RETRACTION OF STATEMENT BY FIRM -- AMOUNT DISCLOS ED BY PARTNER NOT ASSESSABLE AS INCOME OF FIRM -- INCOME - TAX ACT, 1961, SS. 132, 133A. THE PRINCIPLES RELATING TO SECTION 133A OF THE INCOME - TAX ACT, 1961, ARE AS FOLLOWS: (I) AN ADMISSION IS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE BUT IT CANNOT BE SAID THAT IT IS CONCLUSIVE AND IT IS OPEN TO THE PERSON WHO MADE THE ADMISSION TO SHOW THAT IT IS INCORRECT AND THAT THE ASSESSEE SHOULD BE GIVEN A PROPER OPPORTUNITY TO SHOW THAT THE BOOKS OF ACCOUNT DO NOT CORRECTLY DISCLOSE THE CORRECT STATE OF FACTS; (II) I N CONTRADISTINCTION TO THE POWER UNDER SECTION 133A, SECTION 132(4) ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE ACT. ON THE OTHER HAND, WHAT EVER STATEMENT IS RECORDED UNDER SECTION 133A IS ITA NO. 103 /1 3 18 NOT GIVEN ANY EVIDENTIARY VALUE OBVIOUSLY FOR THE REASON THAT THE OFFICER IS NOT AUTHORISED TO ADMINISTER OATH AND TO TAKE AN Y SWORN STATEMENT WHICH ALONE HAS EVIDENTIARY VALUE AS CONTEMPLATED UNDER LAW ; (II I) THE EXPRESSION 'SUCH OTHER MATERIALS OR INFORMATION AS ARE AVAILABLE WITH THE ASSESSING OFFICER' CONTAINED IN SECTION 158BB WOULD INCLUDE THE MATERIALS GATHERED DURING THE SURVEY OPERATION UNDER SECTION 133A ; (IV) THE MATERIAL OR INFORMATION FOUND IN T HE COURSE OF SURVEY PROCEEDING COULD NOT BE A BASIS FOR MAKING ANY ADDITION IN THE BLOCK ASSESSMENT; AND (V) THE WORD 'MAY' USED IN SECTION 133A(3)(III) OF THE ACT, VIZ., 'RECORD THE STATEMENT OF' ANY PERSON WHICH MAY BE USEFUL FOR, OR RELEVANT TO, ANY PRO CEEDING UNDER THIS ACT' MAKES IT CLEAR THAT THE MATERIALS COLLECTED AND THE STATEMENT RECORDED DURING THE SURVEY UNDER SECTION 133A ARE NOT CONCLUSIVE PIECE OF EVIDENCE BY ITSELF. 3. THIS DECISION OF HON.MADRAS HIGH COURT GOT AFFIRMED BY HON.SUPREME COUR T IN APPEAL NOS.13224 OF 2008 & 6747 OF 2012 DT.20.09.2012. THIS IS REPORTED IN 25 TAXMAN.COM 413(SC). HE HEAD NOTE IS AS UNDER: - HELD DISMISSING THE APPEAL, THAT IN VIEW OF THE SCOPE AND AMBIT OF THE MATERIALS COLLECTED DURING THE COURSE OF SURVEY ACTIO N UNDER SECTION 133A SHALL NOT HAVE ANY EVIDENTIARY VALUE. IT COULD NOT BE SAID SOLELY ON THE BASIS OF THE STATEMENT GIVEN BY ONE OF THE PARTNERS OF THE ASSESSEE - FIRM THAT THE DISCLOSED INCOME WAS ASSESSABLE AS LAWFUL INCOME OF THE ASSESSEE. 4 PAUL MATHE W VS. CIT 263 ITR 101 (KERALA) A POWER TO EXAMINE A PERSON ON OATH IS SPECIFICALLY CONFERRED ON THE AUTHORISED OFFICE ONLY UNDER SECTION 132(4) IN THE COURSE OF ANY SEARCH OR SEIZURE. THUS, THE INCOME - TAX ACT, WHENEVER IT THOUGHT FIT AND NECESSARY TO CON FER SUCH POWER TO EXAMINE A PERSON ON OATH, HAS EXPRESSLY PROVIDED FOR IT, WHEREAS SECTION 133A DOES NOT EMPOWER ANY INCOME - TAX OFFICER TO EXAMINE ANY PERSON ON OATH. THUS IN CONTRADISTINCTION TO THE POWER UNDER SECTION 133A, SECTION 132(4) OF THE INCOME - T AX ACT ENABLES THE AUTHORISED OFFICER TO EXAMINE A PERSON ON OATH AND ANY STATEMENT MADE BY SUCH PERSON DURING SUCH EXAMINATION CAN ALSO BE USED IN EVIDENCE UNDER THE INCOME - TAX ACT. ON THE OTHER HAND, WHATEVER STATEMENT RECORDED UNDER SECTION 133A OF THE INCOME - TAX ACT IS NOT GIVEN AN EVIDENTIARY VALUE. A SURVEY UNDER SECTION 133A OF THE INCOME - TAX ACT, 1961 WAS CONDUCTED AT THE BUSINESS PREMISES OF THE ASSESSEE. DURING THE COURSE OF SURVEY, THE TAX OFFICIALS NOTICED SOME DISCREPANCIES IN STOCK AND CASH IN HAND. DURING THE SURVEY, THE ASSESSEE SURRENDERED AN AMOUNT OF RS. 99,50,000 AND OFFERED IT FOR THE PURPOSES OF TAXATION. THE ADDITIONAL INCOME OFFERED INCLUDED A SUM OF RS.45, 00 , 000 ON ACCOUNT OF EXCESS STOCK FOUND DURING THE COURSE OF SURVEY AND OFFER ED BY ONE OF THE PARTNERS OF THE ASSESSEE AS ADDITIONAL INCOME. THE ANSWER BY ONE OF THE PARTNERS OF THE ITA NO. 103 /1 3 19 ASSESSEE WAS HE COULD NOT EXPLAIN THE DIFFERENCE AND TO BUY PEACE OF MIND OFFERING ADDITIONAL INCOME OF RS. 43 LAKHS FOR THE CURRENT FINANCIAL YEAR, I. E., ASSESSMENT YEAR - 2005 - 06. HOWEVER, SUBSEQUENTLY, THE ASSESSEE BY LETTER WITHDREW THE OFFER OF ADDITIONAL INCOME FOR TAXATION ON ACCOUNT OF EXCESS STOCK STATING THAT THE STATEMENT ABOUT STOCK WAS INCORRECT AND THAT THE DISCREPANCY HAD BEEN RECONCILED A S IT WAS ONLY A MISTAKE. THE ASSESSING OFFICER DID NOT ACCEPT THE PLEA OF THE ASSESSEE THAT EXCESS STOCK DURING THE COURSE OF SURVEY HAD BEEN RECONCILED. HE RELIED UPON THE STATEMENT GIVEN DURING THE COURSE OF SURVEY UNDER SECTION 133A OF THE ACT AND CONCL UDED THAT THE EXPLANATION/RETRACTION BY THE ASSESSEE WAS AN AFTERTHOUGHT AND HAD NO ELEMENT OF TRUTH. THE COMMISSIONER (APPEALS) DELETED THE ADDITION HOLDING THAT THE ASSESSING OFFICER DID NOT MAKE ANY INDEPENDENT ENQUIRY AND FURTHER THAT THE ASSESSING OFF ICER HAD NOT MADE OUT A CASE THAT THE AMOUNT SURRENDERED DURING THE SURVEY OPERATION HAD NOT BEEN INCLUDED IN THE FINAL BOOKS OF ACCOUNT. THE APPEAL FILED AGAINST THIS ORDER BY THE REVENUE BEFORE THE TRIBUNAL WAS DISMISSED. ON FURTHER APPEAL: HELD DISMIS SING THE APPEAL, THAT FOR A STATEMENT TO HAVE EVIDENTIARY VALUE, THE SURVEY OFFICER SHOULD HAVE BEEN AUTHORISED TO ADMINISTER AN OATH AND TO RECORD A SWORN STATEMENT. WHILE SECTION 132(4) OF THE ACT SPECIFIC ALLY AUTHORIZES AN OFFICER TO EXAMINE A PERSON ON OATH, SECTION 133A DID NOT PERMIT THE SAME. MOREOVER, THE WORD 'MAY' USED IN SECTION 133A(3)(III) OF THE ACT CLARIFIES BEYOND DOUBT THAT THE MATERIAL COLLECTED AND THE STATEMENT RECORDED DURING THE SURVEY WAS NOT A CONCLUSIVE PIECE OF EVIDENCE BY ITSELF. IT WAS SETTLED LAW THAT THOUGH AN ADMISSION WAS AN EXTREMELY IMPORTANT PIECE OF EVIDENCE, IT COULD NOT BE SAID TO BE CONCLUSIVE AND IT WAS OPEN TO THE PERSON WHO HAD MADE THE ADMISSION TO SHOW THAT IT WAS INCORRECT. SINCE THE ASSESSEE HAD BEEN ABLE TO EXPL AIN THE DISCREPANCY IN THE STOCK FOUND DURING THE COURSE OF SURVEY BY PRODUCTION OF RELEVANT RECORD INCLUDING THE EXCISE REGISTER OF ITS ASSOCIATE COMPANY, THE ASSESSING OFFICER COULD NOT HAVE MADE THE ADDITION SOLELY ON THE BASIS OF THE STATEMENT MADE ON BEHALF OF THE ASSESSEE DURING THE COURSE OF SURVEY. 6. CIT VS. VIJAYKUMAR KESAR 327 ITR 497 : THE CONFESSION MADE BY THE ASSESSEE DURING SURVEY PROCEEDINGS IS NOT CONCLUSIVE AND IT IS OPEN TO THE ASSESSEE TO ESTABLISH BY FILING COGENT EVIDENCE THAT THE SA ME WAS NOT TRUE AND CORRECT. IN ADDITION TO THE ABOVE I FURTHER RELY ON THE FOLLOWING DECISIONS TO SUPPORT THAT THE STATEMENT RECORDED DURING THE COURSE OF SURVEY U/S.133A HAD NO EVIDENTIARY VALUE. 7. 33 SOT 251 8. 6 ITR (TRIBUNAL) 37 (DELHI) 9. 127 IT R 327 10. 23 DTR 171 ITA NO. 103 /1 3 20 8.3.20 THERE WERE NO MATERIALS GATHERED EVEN BY THE ADIT(LNV.) EITHER DURING THE COURSE OF SURVEYOR AFTER THE SURVEY TO SHOW THAT THE MATERIAL PURCHASED WERE BOGUS AND THE APPELLANT HAD INFLATED THE PURCHASES. THE ADIT ALSO DID NOT MA KE ENQUIRIES WITH ANY OF THE ALLEGED SUSPICIOUS SUPPLIERS. AS MENTIONED IN THE SURVEY REPORT THE APPELLANT HAD MADE SPECIFIC DISCLOSURE FOR THE F.Y.2009 - 10 TO 2011 - 12 AND HENCE THE STATEMENTS RECORDED HAS RELEVANCE ONLY TO ASSESSMENTS FOR A.Y.201 0 - 11 TO 2 012 - 13. 8.3.21. AS MENTIONED IN THE ABOVE PARAS, THE ASSESSING OFFICER ALSO DID NOT GATHER ANY MATERIAL DURING THE ASSESSMENT PROCEEDINGS. HE HAD RELIED SOLELY ON THE STATEMENT RECORDED DURING THE COURSE OF SURVEY & POST SURVEY WHICH DO NOT HAVE ANY EVID ENTIARY VALUE IN THE ABSENCE OF ANY EVIDENCE TO CORROBORATE THE SAME. THERE WERE NO CONCRETE EVIDENCE AVAILABLE BEFORE THE ASSESSING OFFICER TO SHOW THAT THERE IS INFLATION OF MATERIALS PURCHASE D BY OBTAINING BOGUS BILLS. FURTHER THE APPELLANT HAD COMPLE TED THE CONTRACTS UNDERTAKEN WHICH WERE DULY ACKNOWLEDGED BY THE MUNICIPAL AUTHORITIES AND PAYMENTS WERE MADE AFTER DUE VERIFICATION. HENCE IN THE ABSENCE OF ANY MATERIAL TO SHOW THAT THE PURCHASES FROM THE 12 PARTIES ARE BOGUS NO ADVERSE INFERENCE CAN BE DRAWN PURELY ON THE BASIS OF STATEMENT ALONE RECORDED DURING THE COURSE OF SURVEY. 8.3.23. THE APPELLANT RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS CONTENTION THAT THE PURCHASES ARE GENUINE: - (I) HON'BLE GUJARAT HIGH COURT DECISION IN THE CASE OF CIT VS. PRESIDENT INDUSTRIES REPORTED IN (2002) 124 TAXMAN 654(GUJ) (II) ELAND INTERNATIONAL (P)LTD. VS. DCIT ITA NO.3423/0E1/2007 , ITAT DELHI 'C' BENCH. ( III ) HON'BLE SUPREME COURT DECISION IN THE CASE OF PARIMISETTI SEETHARAMAMMA VS. CIT REPORTE D IN 57 ITR 532(SC) (IV) HON'BE SUPREME COURT DECISION IN THE CASE OF CIT VS. CHARI N CHARI REPORTED IN 57 ITR 400(SC) (V) COMMISSIONER OF INCOME TAX VS LEADER VALVES P LTD (VI) BALAJI TEXTILE INDUSTRIES (P) VS THIRD INCOME TAX OFFICER (VII) DIAGNO STICS VIS. CIT REPORTED IN 334 ITR 111 CULCUTTA (VIII) GUJARAT SANJAY OILCAKE INDUSTRIES VS CIT REPORTED IN 316 ITR 274 (IX) GUJARAT DCIT VS ADINATH INDUSTRIES REPORTED IN 252 ITR 476 (X) CTT VS M K BRAS REPORTED IN 163 ITR 249 (GUJ) ITA NO. 103 /1 3 21 (XI) 134 TT J 167 DELHI CTR VOLUME 50 PART VI PAGE 39 I HAVE GONE THROUGH THE ABOVE DECISION WHICH SUPPORTS THE CASE OF THE APPELLANT. IN VIEW OF THE ABOVE, THE ADDITION MADE BY THE ASSESSING OFFICER IS HEREBY DELETED. THIS GROUND OF APPEAL IS ALLOWED. 1 9 . AGAINST THE ABOVE ORDER OF CIT(A), REVENUE IS IN APPEAL BEFORE US. 20 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT ASSESSEE IS ENGAGED IN THE EXECUTION OF CONTRACTS AWARDED BY THE GOVERNMENT DEPARTMENT FOR WHICH HE USE TO PURCHASE MATERIAL FROM THE MARKET. PROPER RECORDS WERE MAINTAINED FOR SUCH PURCHASES AND SAME WERE PLACED IN THE REGULAR BOOKS OF ACCOUNTS. UTILISATION OF THE GOODS WERE DULY SUPPORTED BY RECORDS AND RESPECTIVE CERTIFICATION BY BMC AUTHORIZED PERSONAL. A CLEAR FINDING HAS BEEN RECORDED BY THE CIT(A) WITH RESPECT TO THESE PURCHASES AND UTILIZATION WITH CORROBORATIVE EVIDENCE AND CERTIFICATION BY THE GOVERNMENT AUTHORITIES. QUANTITATIVE MATERIALS DATA WERE FILED WITH WORKWISE SUMMARY. THE CIT(A) ALSO OBSERVED THAT NO ADVERSE MATERIAL WAS BROU GHT ON RECORD TO THE EFFECT THAT ASSESSEE HAS RECEIVED CASH BACK AGAINST PAYMENT SO MADE. ALL THE MATERIALS WERE SUPPLIED AT THE SITE OF THE EXECUTION OF WORK, PAYMENT OF WHICH WERE MADE BY ACCOUNT PAYEE CHEQUE. WE ALSO FOUND THAT WHEN THE WORK WAS BEING E XECUTED THE SITE HAS BEEN VISITED BY THE ENGINEERS OF BMC TO CHECK THE PROGRESS AND VALIDITY OF THE WORK. THE MCGM IS ALSO HAVING ITS OWN INHOUSE VIGILANCE DEPARTMENT TO CHECK THE QUANTITY AND QUALITY OF THE WORK DONE. ONLY AFTER SATISFYING WITH THE QUANTI TY AND QUALITY OF WORK DONE, THE PAYMENT WAS MADE BY THE ASSESSEE, THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS NOT ITA NO. 103 /1 3 22 PURCHASED THE GOODS, BECAUSE WITHOUT PURCHASE, IT WAS NOT POSSIBLE TO EXECUTE WORK ALLOTTED. FROM THE RECORD WE ALSO FOUND THAT ASSESSEE H AS APPOINTED PROJECT MANGER FOR EACH SITE. AS PER THE TERMS OF THE CONTRACT, ASSESSEE HAS TO ERECT A READYMADE SITE OFFICE OF FOR MCGM STAFF BEFORE COMMENCING OF THE WORK AND THE HAS TO SET UP A LABORATORY BEFORE COMMENCING OF WORK, FOR WHICH QUALITY CONTR OL ENGINEER HAS TO BE APPOINTED. THE ASSESSEE HAD ALSO SENT SAMPLES OF ALL THE MATERIALS RECEIVED AT SITE TO MUNICIPAL STAFF LABORATORY UNDER SUB ENGINEERS SIGNATURE. THE CIT(A) HAS DEALT WITH GREAT DETAIL OF THE STATEMENT DATED 2 - 5 - 2012 AS RECORDED BY THE AO AND REPLY FILED BY THE CONCERNED PARTIES. AFTER RECORDING DETAILED FINDING THE CIT(A) HAS APPLIED THE PROPOSITION OF LAW LAID DOWN BY VARIOUS HIGH COURTS AND CAME TO THE CONCLUSION THAT ASSESSEES ACTUAL PURCHASE OF MATERIAL BY THE ASSESSEE AND DISALL OWING THE SAME WAS NOT JUSTIFIED. THE DETAILED FINDING RECORDED BY CIT(A) ARE AS PER MATERIAL ON RECORD, WHICH HAS NOT BEEN CONTROVERTED BY LD. DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDI NG RECORDED BY CIT(A) RESULTING INTO DELETION OF ADDITION ON ACCOUNT OF PURCHASES. 2 1 . IN THE RESULT, APPEAL OF REVENUE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27/04 / 201 6 . SD/ - ( PAWAN SINGH ) SD/ - ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 27/04 /201 6 . . /PKM , . / PS ITA NO. 103 /1 3 23 / COPY OF THE ORDER FORWARDED TO : / BY ORDE R, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESP ONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//