Narendra Kumar Gupta, Chandigarh V. ACIT, Chandigarh

ITA 1135/CHANDI/2012

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6730 (ITAT-CHANDIGARH)
• Duration Of Justice: 4 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 20-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 05-11-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Bogus purchase; Unexplained expenditure; Question of law
• Section: 44AD; 69C; 40A(3); 143(3); 194C; 2

Judgement Text

PIN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH B, CHANDIGARH BEFORE MS.DIVA SINGH, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 1135/CHD/2012 (ASSESSMENT YEAR : 2009-10) NARENDRA KUMAR GUPTA, VS. THE A.C.I.T., H.NO.38, SECTOR 27-A, CIRCLE 5(1), CHANDIGARH. CHANDIGARH. PAN: AAVPG8691E (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GOEL, CA RESPONDENT BY : SHRI MANJIT SINGH, DR DATE OF HEARING : 01.08.2017 DATE OF PRONOUNCEMENT : 31.10.2017 ORDER PER ANNAPURNA GUPTA, A.M. : THIS APPEAL FILED BY THE ASSESSEE HAS BEEN PREFERRE D AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME-TAX (APPEALS), CHANDIGARH (HEREINAFTER REFER RED TO AS LD.CIT(APPEALS) DATED 12.09.2012 RELATING TO ASSES SMENT YEAR 2009-10. 2. BRIEFLY STATED, THE ASSESSEE IS A CONTRACTOR ENG AGED IN THE WORK OF CONSTRUCTION OF ROADS IN THE NAME OF M/ S HARSORIA CONSTRUCTION COMPANY. DURING THE IMPUGNED ASSESSMENT YEAR RETURN SHOWING INCOME OF RS.44,89,0 30/- WAS FILED BY THE ASSESSEE. THEREAFTER ASSESSMENT U /S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE A CT) WAS FRAMED MAKING AN ADDITION TO THE INCOME OF THE ASSE SSEE ON ACCOUNT OF FOLLOWING: 2 A) U/S 40(A)(IA) FOR NON DEDUCTION OF TAX AT SOURCE ON FREIGHT AND CARTAGE EXPENSES - RS.3,59,424/- B) ADDITION OF PURCHASES MADE ON ACCOUNT OF THE FOLLOWING: I)U/S 40A(3) ON ACCOUNT OF CASH PAYMENT MADE EXCEEDING RS.20,000/- - RS.6,88,326/- II)ON ACCOUNT OF DISCREPANCIES IN BILLS -RS.15,87,181/- III)BOGUS AND NON-EXISTENT PARTIES OF PURCHASES -RS.18,12,777/- C) 50% OF MACHINERY REPAIR AND MAINTENANCE EXPENSES BEING UNSUBSTANTIATED - RS.1,98,900/- D) UNEXPLAINED EXPENDITURE ON HIRING OF MACHINES U/S 69C - RS.5,00,000/- TOTAL -RS.35,59,427/- 3. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LD.CIT(APPEALS) WHO DELETED THE ADDITION MADE U/S 4 0A(3) OF THE ACT TO THE EXTENT OF RS.1,63,752/- AND U/S 6 9C OF THE ACT OF RS.5 LACS WHILE CONFIRMED THE REST OF THE AD DITIONS. AN APPEAL AGAINST THE ORDER OF THE LD.CIT(APPEALS) WAS FILED BY THE ASSESSEE BEFORE THE I.T.A.T. WHO VIDE THEIR ORDER DATED 23.1.2013 DELETED ALL THE ADDITIONS MADE DIR ECTING IN TURN APPLICATION OF NET PROFIT RATE OF 6% TO THE T URNOVER OF THE ASSESSEE TO DETERMINE THE TAXABLE INCOME. AGAI NST THE SAID ORDER OF THE I.T.A.T., THE REVENUE FILED APPEA L BEFORE THE HON'BLE HIGH COURT RAISING SUBSTANTIAL QUESTION OF LAW VIS--VIS THE ITAT NOT DECIDING THE ISSUE OF BOGUS PURCHASES AND UNSUBSTANTIATED EXPENSES, DISALLOWANCE U/S 40(A )(IA) AND DISALLOWANCE OF MACHINERY REPAIR & MAINTENANCE ON MERITS, BUT RATHER DIRECTING THE ASSESSING OFFICER TO DETERMINE THE NET PROFIT RATE AT 6%. THE HON'BLE H IGH COURT 3 HELD THAT THE TRIBUNAL HAD IGNORED RELEVANT FACTS W HILE PASSING ITS ORDER. IT WAS POINTED OUT THAT THE EVI DENCE RELIED UPON BY THE ASSESSING OFFICER PARTICULARLY W ITH REFERENCE TO DISCREPANCIES IN THE VOUCHERS AND BILL S OF PARTIES FROM WHOM PURCHASES HAD BEEN MADE AND WITH RESPECT TO NON EXISTENCE OF THE PARTIES AND ABSENCE OF THEIR SALES-TAX REGISTRATION NUMBER ETC. HAD NOT BEEN DEA LT WITH BY THE I.T.A.T., NOR ANY OPINION RECORDED ON THE SA ME BUT THAT IT HAD ABRUPTLY DIRECTED THE ASSESSING OFFICER TO APPLY A NET PROFIT RATE OF 6% WITHOUT ASSIGNING ANY OSTEN SIBLE REASON. THE HON'BLE HIGH COURT, THEREFORE HELD THA T THE TRIBUNAL HAD ERRED IN APPLYING A NET PROFIT RATE WI THOUT CONSIDERING THE MATERIAL COLLECTED BY THE ASSESSING OFFICER AND IGNORING THE RELEVANT FACTS AND FACTORS REFERRE D TO BY THE ASSESSING OFFICER AND, THEREFORE, SET ASIDE THE ORDER AND RESTORED THE APPEAL OF THE TRIBUNAL FOR ADJUDICATIO N AFRESH IN ACCORDANCE WITH LAW. IN PURSUANCE TO THE AFORES AID DIRECTION OF THE HIGH COURT THE PRESENT APPEAL CAME UP FOR HEARING BEFORE US. 4. THE GROUNDS OF APPEAL RELEVANT FOR ADJUDICATION AS PER THE DIRECTION ARE AS UNDER: 1. THAT THE ORDER OF THE LEARNED CIT(A) IS BAD, AG AINST THE FACTS & LAW. 2. THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING TH E ADDITION MADE BY INVOKING THE PROVISIONS OF SECTION 194C ON FREIGHT & CARTAGE RS.3,59,424/. 3. THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING THE DISALLOWED RS.3,59,424/- U/S 40(A)(IA) FOR THE EXPE NSE WHICH HAS ALREADY BEEN PAID WITHOUT APPRECIATING THE FACT THAT NO PAYMENT IS DUE AS ON 31 ST MARCH 2009. 4 4. THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING ADDITION RS.5,24,574/- MADE ON THE BASIS OF PAYMENT EXCEEDIN G RS.20,000/- TO ONE PARTY IN A SINGLE DAY AND WITHOU T APPRECIATING THE FACT THAT NO PAYMENT OF RS. 20,000 /- HAS BEEN MADE ON A SINGLE DAY TO A SINGLE PARTY. 5. THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING ADDI TION OF RS.15,87,181/- FOR NON PRODUCTION OF BILLS WHEREAS THE APPELLANT HAD PRODUCED COMPLETE BOOKS OF ACCOUNTS A ND BILLS. 6. THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING ADDITION OF RS.18,12,777/- BY DECLARING THESE AGGREGATE PURCHASES AS BOGUS AND WITHOUT ANY MATERIAL EVIDENCE ON RECORD. 7. THAT THE LEARNED CIT(A) HAS ERRED IN SUSTAINING ADDITION OF 50% OF MACHINERY REPAIR AND MAINTENANCE AMOUNTING TO RS.1,98,900/- WHEREAS ALL THE RECORDS AND BOOKS WERE PRODUCED BEFORE THE LEARNED ASSESSING OFFICER. 8. THAT THE APPELLANT CREAVES LEAVE TO ADD, ALTER, A MEND OR WITHDRAW ANY GROUNDS OF APPEAL BEFORE THE FINAL HEAR ING. 5. GROUND NOS.2 AND 3 RAISED BY THE ASSESSEE ARE WI TH REGARD TO THE DISALLOWANCE MADE OF FREIGHT AND CART AGE EXPENSES ON ACCOUNT OF NON DEDUCTION OF TAX AT SOUR CE ON THE SAME AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 6. BRIEFLY STATED, THE ASSESSEE HAD MADE PAYMENT OF RS.3,59,424/- ON ACCOUNT OF FREIGHT AND CARTAGE TO M/S V.R. ENTERPRISES ON VARIOUS DATES ON WHICH THE ASSESSING OFFICER FOUND THAT NO TAX HAD BEEN DEDUCTED AT SOURCE AND, THEREFORE, HE DISALLOWED THE ENTIRE AMOUNT BY APPLY ING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. 7. THE LD.CIT(APPEALS) UPHELD THE DISALLOWANCE MADE . BEFORE THE LD.CIT(APPEALS) THE ASSESSEE CONTENDED T HAT THE GOODS TRANSPORT AGENCY HAD ISSUED GRS AND PAYMENTS HAD BEEN MADE TO DIFFERENT TRUCK OWNERS WITH WHOM THERE WAS 5 NO WRITTEN OR ORAL AGREEMENT AND SINCE THE PAYMENT MADE TO THE INDIVIDUAL OWNER DID NOT EXCEED THE LIMIT PRESC RIBED U/S 194C OF THE ACT, NO TAX WAS REQUIRED TO BE DEDUCTED ON THE SAME. IT WAS ALSO CONTENDED THAT SINCE NO AMOUNT W AS PAYABLE AS ON 31.3.2009, THEREFORE, ALSO THE PROVIS IONS OF SECTION 40(A)(IA) OF THE ACT WERE NOT APPLICABLE. T HE LD.CIT(APPEALS) FORWARDED COPY OF EXPLANATION OF TH E ASSESSEE TO THE ASSESSING OFFICER WHO STATED THAT THE PAYMENT IN QUESTION HAD BEEN MADE TO M/S V.R. ENTER PRISES ONLY AND NOT THE INDIVIDUAL TRUCK OWNER. THE LD.CIT(APPEALS) AFTER CONSIDERING THE CONTENTIONS O F BOTH THE ASSESSEE AND THE REPORT OF THE ASSESSING OFFICE R UPHELD THE DISALLOWANCE SO MADE REJECTING BOTH THE CONTENT IONS OF THE ASSESSEE. 8. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERAT ED THE CONTENTIONS MADE BEFORE THE LD.CIT(APPEALS) WHILE T HE LD. DR RELIED UPON THE ORDER OF THE LD.CIT(APPEALS). 9. HAVING HEARD BOTH THE PARTIES, WE FIND NO INFIRM ITY IN THE ORDER OF THE LD.CIT(APPEALS). AS POINTED OUT B Y THE ASSESSING OFFICER AND RIGHTLY APPRECIATED BY THE LD.CIT(APPEALS) ALSO, ALL THE PAYMENTS IN QUESTION HAD BEEN MADE TO THE GOODS TRANSPORT AGENCY ONLY I.E. M/S V. R. ENTERPRISES. THIS FACT HAS NOT BEEN CONTROVERTED BY THE LD.COUNSEL FOR THE ASSESSEE. THEREFORE, WE ARE AGRE EMENT WITH THE LD.CIT(APPEALS) THAT THERE IS NO MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE THAT NO TDS WAS DEDUCTIBLE SINCE THE PAYMENTS WERE MADE TO INDIVIDU AL 6 TRUCK OWNERS. FURTHER WE ALSO AGREE WITH THE LD.CIT(APPEALS) THAT THE FACT THAT THE AFORESAID AM OUNTS WERE NOT PAYABLE AS AT THE END OF THE YEAR I.E. ON 31.3.2009 MAKE NO DIFFERENCE TO THE APPLICABILITY OF THE PROV ISIONS OF SECTION 40(A)(IA) OF THE ACT ON THE SAME, WHICH POS ITION HAS BEEN UPHELD BY THE HON'BLE APEX COURT IN THE CASE O F PALAM GAS SERVICE VS. CIT IN CIVIL APPEAL NO.5512 OF 2017 DATED 03.05.2017. 10. IN VIEW OF THE ABOVE, WE UPHOLD THE ORDER OF TH E LD.CIT(APPEALS) DISALLOWING FREIGHT AND CARTAGE EXP ENSES AMOUNTING TO RS.3,59,424/- ON ACCOUNT OF NON DEDUCT ION OF TAX AT SOURCE ON THE SAME AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. GROUND NOS.2 AND 3 RAISED BY THE ASSESSEE ARE, THEREFORE, DISMISSED. 11. GROUND NO.5 RAISED BY THE ASSESSEE RELATES TO DISALLOWANCE MADE ON PURCHASES AMOUNTING TO RS.15,87,181/- FOR NON PRODUCTION OF BILLS. 12. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH COMPLETE BILL S OF PURCHASES. THE ASSESSEE SUBMITTED THE SAME, BUT THE ASSESSING OFFICER FOUND THAT THE BILLS WERE NOT COM PLETE AND IN SOME CASES ONLY THE PAYMENT VOUCHER HAD BEEN PRODUCED. THE ASSESSEE HAD NOT FURNISHED BILLS FOR PURCHASES OF RS.15,87,181/- AS PER DETAILS MENTIONE D AT PAGE 4 AND 5 OF THE ASSESSMENT ORDER. THE ASSESSIN G 7 OFFICER GAVE ANOTHER OPPORTUNITY TO THE ASSESSEE TO PRODUCE COPIES OF BILLS AND THE ASSESSEE PRODUCED THE SAME. THEREAFTER THE ASSESSING OFFICER NOTICED THE FOLLOW ING DISCREPANCIES IN THE BILLS: (I) VARIATION IN NAME OF PARTY ON VOUCHER AND ON CORRESPONDING BILL. (II) VARIATION IN DESCRIPTION OF PURCHASE ON VOUCHE R AND CORRESPONDING BILL. (III) VARIATION IN RATE OF SAME ITEM OF PURCHASE IN THE SAME MONTH. (IV) DISCREPANCY IN LOADING AND UNLOADING CHARGES. AFTER ANALYZING AND DISCUSSING THE ABOVE DISCREPANCIES, THE ASSESSING OFFICER DISALLOWED THE ENTIRE AMOUNT OF RS.15,87,181/- PERTAINING TO THESE BILLS BY TREATING THE SAME AS UNVOUCHED PURCHASES. 13. BEFORE THE LD.CIT(APPEALS) THE ASSESSEE FILED D ETAILED REPLY ON THE ISSUE CONTESTING THE AFORESAID ADDITIO N ON VARIOUS GROUNDS WHICH HAVE BEEN SUMMARIZED IN THE CIT(APPEALS)S ORDER AT PARA 6.2. BRIEFLY STATED, T HE ASSESSEE CONTENDED THAT THERE WERE ACTUALLY NO DISCREPANCIES AS SUCH IN THE BILLS, WHICH WAS EVIDE NT FROM THE FACT THAT THE TAX AUDIT REPORT CERTIFIED THE CO RRECTNESS OF THE BOOKS OF ACCOUNT AND FURTHER THAT THE DISCREPAN CY, IF ANY, WERE NOT MATERIAL ENOUGH TO DENY DEDUCTION OF THE SAID EXPENSES. THE LD.CIT(APPEALS) AFTER CONSIDERING ASS ESSEES SUBMISSIONS UPHELD THE ORDER OF THE ASSESSING OFFIC ER CONFIRMING THE ADDITION MADE REJECTING ALL THE CONT ENTIONS RAISED BY THE ASSESSEE AS UNDER: 8 6.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL. AT THE OUTSET, IT MAY BE MENTIONED THAT THOUGH THE APPELLANT HAD CLAIMED THAT BILLS, PRODUCED WERE COMPLETE, THE ASSESSI NG OFFICER ON VERIFICATION FOUND THAT BILLS PERTAINING T O THE TOTAL AMOUNT OF RS.15,87,181/- HAD NOT BEEN FURNISHED. THE APPELLANT HAD SUBSEQUENTLY SUBMITTED COPIES OF BILL S. THE ASSESSING OFFICER HAD NOTICED A NUMBER OF DISCREPAN CIES IN THE FORM OF VARIATION IN NARRATION ON VOUCHERS AND CORR ESPONDING BILLS. THE PLEA OF THE APPELLANT THAT THE DISCREPANCIES WERE NOT CONFRONTED TO HIM CANNOT BE ACCEPTED SINCE THE APPE LLANT HAD INITIALLY NOT SUBMITTED THE PROPER BILLS AND THE BILLS S UBMITTED LATER WERE NOT ACCORDING TO THE NARRATION ON THE VOUCH ERS. 6.3.1 THE PLEA OF THE APPELLANT THAT IT WAS NOT POSSIBLE TO MAINTAIN BILLS, AND VOUCHERS FOR ALL THE PETTY EXPENSE S, BUT THE ASSESSING OFFICER HAS NOT DISALLOWED EACH AND EVERY PETTY EXPENSE AND HAS DISALLOWED ONLY THE AMOUNTS FOR WHIC H BILLS WERE NOT PRODUCED OR THE NARRATION OF THE BILLS PRODUCED WERE NOT AS PER THE VOUCHERS. 6.3.2 THE ARGUMENT OF THE LD. COUNSEL THAT TAX AUDIT REPORT IS A PROOF OF PROPER MAINTENANCE OF BOOKS OF ACCOUNTS IS NOT ACCEPTABLE, AS IT APPEARS THAT THE AUDITORS HAD NOT GONE THROUGH THE BILLS AND VOUCHERS PROPERLY, OTHERWISE THE DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER WOULD HAVE BEEN POINTED OUT BY THE AUDITORS. 6.3.3 THE PLEA OF THE APPELLANT THAT DUE TO PRACTICAL DIFFICULTIES, SECTION 44AD WAS ENACTED, BUT THE CAS E OF THE APPELLANT IS NOT COVERED BY THE PROVISIONS OF SECTION 44AD OF THE ACT. 6.3.4 THE APPELLANT HAS TRIED TO EXPLAIN THE DISCREPANCIES POINTED OUT BY THE ASSESSING OFFICER, BUT THE FACTUAL P OSITION IS THAT THE DISCREPANCIES EXIST AND ALSO THAT THERE IS DIFFERENCE IN NARRATION ON THE VOUCHERS AND ON THE BILLS. 6.3.5 THE ASSESSING OFFICER HAS VERY SPECIFICALLY MENTIONE D ABOUT THE DISCREPANCIES IN HER ORDER, BUT THE APPEL LANT HAS NOT EXPLAINED THE SPECIFIC DISCREPANCIES POINTE D OUT BY THE ASSESSING OFFICER. 6.3.6 THE ASSESSING OFFICER HAD POINTED OUT THAT TRUCK NO . HR- 68-5180 AND CH-034-5180 HAD BEEN USED AS PER THE VOUCHERS, BUT IT WAS HIGHLY UNLIKELY THAT THE SAME REGISTRATION NO. WAS BORNE ON TWO TRUCKS. THE APPELLA NT HAS PRODUCED REGISTRATIONCERTIFICATEOFONLYTRUCKNO.HR-68 -5180 AND NOT OF CH-034-5180. 6.3.7 IN VIEW OF THE ABOVE DISCUSSION AND THE FACT THAT B ILLS PERTAINING TO THE TOTAL AMOUNT OF RS.15,87,181/- HAD NOT BEEN PRODUCED INITIALLY AND THE BILLS PRODUCED SUBSEQUEN TLY WERE NOT IN ACCORDANCE WITH THE VOUCHERS, THE ADDI TION MADE BY THE ASSESSING OFFICER OF RS.15,87,181/- IS CONFI RMED. GROUND OF APPEAL NO. 6 IS DISMISSED. 9 14. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERA TED THE SUBMISSIONS MADE BEFORE THE LD.CIT(APPEALS) REPRODU CED IN THE WRITTEN SUBMISSIONS FILED BEFORE THE LD.CIT(APP EALS) AT PAGE NOS. 11 TO 15 OF THE PAPER BOOK AS UNDER: THE LEARNED ASSESSING OFFICER HAS MADE AN ADDITION OF RS.15,87,181/- ON ACCOUNT OF BILLS NOT PRODUCED. WE HAD SUBMITTED ALL THE BILLS MENTIONED IN ASSESSMENT ORDER TO THE ASSESSING OFFICER. THE ASSESSING OFFICER HAS ALSO NAR RATED VARIOUS REASONS LIKE VARIATION IN NAME OF PARTY ON V OUCHER AND CORRESPONDING BILL, VARIATION IN DESCRIPTION OF PURCHASE ON VOUCHER AND CORRESPONDING BILL ETC BY THE ASSESSIN G OFFICER TO DECLARE THESE BILLS AS BOGUS WERE NEVER POINTED O UT OR DISCUSSED WITH THE COUNSEL & MOREOVER THESE ARE NOT M ATERIAL ENOUGH TO DENY THE DEDUCTION OF DIRECT EXPENSES ACT UALLY INCURRED DURING THE COURSE OF BUSINESS. FURTHER THE ASSESSEE IS CIVIL CONSTRUCTION CONTRACTOR & COMPLET E BOOKS OF ACCOUNTS ALONG WITH VOUCHERS WERE MAINTAINED AND PROD UCED BEFORE YOUR GOODSELF DURING ASSESSMENT PROCEEDINGS. THE ASSESSEE HAS ATTACHED TAX AUDIT REPORT ALONG WITH THE RETURN WHICH CLEARLY SHOWS THAT THE ASSESSEE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS WHICH GIVES TRU E & FAIR VIEW IN RESPECT OF PROFIT AS PER PROFIT & LOSS ACCO UNT. THE NATURE OF BUSINESS CARRIED BY ASSESSEE IS SUCH THAT IT IS NOT POSSIBLE TO GET EACH & EVERY BILL IN RESPECT OF PET TY EXPENSES INCURRED IN ORDINARY COURSE OF BUSINESS. THE SUPPLIE RS OF MATERIAL ARE VERY SMALL RETAIL TRADERS & NORMALLY TR OLLEY & TRACTOR OWNER DELIVERED THE RAITA, BAJRI, SAND ETC & PAYMENTS ARE MADE TO SUCH TRACTOR TROLLEY OWNERS . DUE TO THESE PRACTICAL DIFFICULTIES PROVISIONS OF SECTION 44AD WERE ENACTED. THE LEARNED AO DURING THE COURSE OF ASSESS MENT PROCEEDINGS HAD MADE CERTAIN ADDITIONS AFTER FINDING TECHNICAL FAULTS IN THE BILLS & VOUCHERS WITHOUT AP PRECIATING THE NATURE OF BUSINESS CARRIED ON BY THE APPELLANT. THE LEARNED ASSESSING OFFICER HAS POINTED SOME SPECIFIC VOUCHERS WHEREIN DISCREPANCIES ARE NOTICE. LIKE IN VOUCHER NO 645 & 653 THE BILL STATES THE PURCHASE DESC RIPTION AS 20-40MM THICK STONE AND 20 MM STONE AGGREGATE. BUT IN THE CORRESPONDING VOUCHERS THE DETAIL IS 25MM STONE AND 40MM RESPECTIVELY. ALL THE MATERIAL BETWEEN 20 - 40MM SI ZE ARE PROCURED FOR WET MIX MACADAM AND THE SAME ARE TAKEN ON STOCK AS SUCH AS THERE IS NO DIFFERENCE BETWEEN THE MATER IAL OF SIZE 20 TO 40 MM. THUS THE DISCREPANCY MENTIONED IS INCOR RECT. FURTHER THE LEARNED ASSESSING OFFICER HAS POINTED OUT SOME VARIATIONS IN RATES OF GSB PURCHASED. GSB(GRANUL AR SUB BASE MATERIAL) IS PURCHASED FROM VARIOUS SOURCES IN NATU RAL FORM AND OTHER REQUIRED MATERIALS ARE MIXED IN DESIRED PROPO RTION SO AS TO MEET THE REQUIREMENT OF SPECIFICATION. THE RATE OF GSB DEPENDS ON THE PERCENTAGE OF COURSE AND FINE AGGREG ATE WHICH FURTHER VARIES FROM LOCATION TO LOCATION OF THE QUAR RY. HIGHER 10 THE PERCENTAGE OF THE COURSE AGGREGATE HIGHER IS TH E RATE OF GSB. ALSO THE BILLS IN DATE MENTIONED ARE NOT ONLY FOR GSB BUT ALSO FOR WASHED SAND/ WASHED AGGREGATE AND HENCE RA TE COMPARISON IS INCORRECT. THE DIFFERENCE IN LOADING AND UNLOADING CHARGES IS D UE TO THE REASON THAT MECHANICAL MEANS LIKE LOADER OR JCB HAS TO BE USED TO LOAD/ UNLOAD THE MATERIAL. SOMETIME THES E ARE READILY AVAILABLE AT SITE AND AT OTHER TIMES THEY HA VE TO BE HIRED FROM DISTANT PLACES WHICH LEAD TO HIGHER LOAD ING/ UNLOADING CHARGES. AT TIMES THE MACHINES ARE NOT AVA ILABLE AT ALL THEN DUE TO URGENCY, THE MATERIALS ARE MANUAL LY LOADED IN TRUCKS WHICH FURTHER INCREASE THE CHARGES PAID. THE COPY OF RC'S OF THE TRUCKS USED FOR LOADING/UNLOA DING AS MENTIONED BY THE LEARNED ASSESSING OFFICER ARE ATTA CHED AT ANNEXURE 2. THE LEARNED ASSESSING OFFICER MADE ADDITION ON SUSPICION & SURMISES. SUSPICION HOWSOEVER STRONG CAN NOT TAKE PART OF PROOF 37 ITR 271 (SC) UMA CHARAN SHAW VS CIT 37 ITR 271.MERE DOUBT IS NOT ENOUGH. THE AO MUST BRI NG POSITIVE MATERIAL ON RECORD TO P ROVE THE FALSITY: KA SAT PAPER & PULP LTD. VS ACIT PUNE 74 ITD 455 PUNE, PAGE 466, PA RA 11. IN THE CASE OF CHARAN SINGH VS STATE OF UP ATR 1976 SC 520, THE SC HAS OBSERVED THAT THE COURT MUST GUARD AGAIN ST THE DANGER OF ALLOWING CONJECTURE OR SUSPICION TO TAKE PLACE OF LEGAL PROOF. IF TWO VIEWS ARE POSSIBLE ON ANY EVID ENCE, ON PROVING GUILT, ANOTHER PROVING INNOCENCE, THE VIEW FAVORABLE TO THE ACCUSED BE ADOPTED. HARENDRA NARAI N SINGH VS. STATE F BIHAR, 1991 SC 184 AT PAGE 184. 15. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(APPEALS). 16. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. WE FIND THAT DISALLOWANCE OF PURCHASES AMOUNTING TO RS.15,87,181/- HAS BEEN MADE PRIMARILY ON ACCOUNT O F THE DISCREPANCIES FOUND IN THE BILLS OF PURCHASES AND F OR THE REASON THAT THE BILLS WERE NOT INITIALLY PRODUCED B Y THE ASSESSEE IN THE ASSESSMENT PROCEEDINGS. THE FACT T HAT THE BILLS WERE SUBSEQUENTLY PRODUCED DURING ASSESSMENT PROCEEDINGS IS NOT DENIED. THEREFORE, DISALLOWANCE FOR THE REASON THAT THE BILLS WERE NOT PRODUCED CANNOT BE U PHELD. AS FOR THE DISCREPANCIES POINTED OUT IN THE BILLS, WE FIND 11 THAT THE SAME WERE ADEQUATELY ADDRESSED BY THE ASSE SSEE. THE VARIATION IN THE DISCREPANCY IN THE ITEMS IN TH E BILLS AND CORRESPONDING VOUCHERS WAS POINTED OUT AS BEING IRRELEVANT SINCE THERE WAS NOT MUCH DIFFERENCE BETW EEN 20 TO 40 MM STONES, SUCH ITEMS BEING PROCURED FOR WET MIX MACADAM. SIMILARLY DIFFERENCE IN THE RATE OF GSB O F SAME SIZE WAS EXPLAINED AS BEING ON ACCOUNT OF VARIATION IN THE PERCENTAGE OF COARSE AND FINE AGGREGATE IN THE GSB WHICH VARIED FROM QUARRY TO QUARRY WITH THE HIGHER PERCEN TAGE OF COARSE IN GSB THE HIGHER THE RATE OF GSB. IT WAS A LSO POINTED OUT THAT THE COMPARISON WAS INCORRECT SINCE THE BILLS COMPARED WAS NOT ONLY OF GSB BUT ALSO OF WASH ED SAND/WASHED AGGREGATE. THE DIFFERENCE IN LOADING A ND UNLOADING CHARGES WAS ALSO EXPLAINED DEPENDING UPON AVAILABILITY OF JCB OR LOADER AT SITE OR BEING HIRE D FROM DISTANT PLACES LEADING TO HIGHER CHARGES. THE DISC REPANCY VIS--VIS ALLEGEDLY SAME REGISTRATION NO. OF TWO TR UCKS WAS EXPLAINED BY PRODUCING THEIR RCS. NO INFIRMITY IN THE EXPLANATION OF THE ASSESSEE WITH RESPECT TO EACH DISCREPANCY HAS BEEN POINTED OUT BY THE LD.CIT(APP EALS), NOR BY THE LD.DR BEFORE US. WE, THEREFORE, CANNOT AGREE WITH THE LD.CIT(APPEALS) THAT THE ASSESSEE FAILED T O ADDRESS DISCREPANCY. IN VIEW OF THE ABOVE, WE HOLD THAT SI NCE ALL THE BILLS WERE PRODUCED BY THE ASSESSEE AND DISCREP ANCIES ADEQUATELY EXPLAINED WHICH WERE NOT CONTROVERTED BY THE REVENUE, THE DISALLOWANCE MADE COULD AT BEST BE SAI D TO BE ON THE BASIS OF SURMISES AND CONJECTURES WHICH CANN OT FORM THE BASIS OF ANY DISALLOWANCE. WE THEREFORE DIRECT THAT THE 12 DISALLOWANCE OF PURCHASES TO THE EXTENT OF RS.15,87 ,181/- BE DELETED. 17. GROUND NO.6 RAISED BY THE ASSESSEE IS AGAINST T HE DISALLOWANCE OF PURCHASES AGGREGATING TO RS.18,12,7 77/- UPHOLDING THE SAME TO BE BOGUS. 18. THE FACT RELEVANT TO THE ISSUE ARE THAT THE ASS ESSEE HAD MADE PURCHASE OF MATERIAL OF RS.18,12,777/- FRO M FOLLOWING PARTIES: (I) M/S V.K. CONTRACTORS (II) M/S SHAMSHER SINGH GRIT SUPPLIER (III) M/S SANGAM STONE DUST SUPPLIER (IV) M/S DAHIYA STONE CRUSHER THE ASSESSING OFFICER NOTICED THAT THE BILLS OF AB OVE PARTIES WERE PRIMA-FACIE BOGUS BECAUSE THEY HAD NO SALES TAX REGISTRATION NO., NO SERIAL NUMBER, BILLS WERE ON COMPUTER PRINTOUTS IN THE SAME FORMAT, HAD IDENTICA L HANDWRITING AND SIGNATURES AND THE DATES HAD BEEN MENTIONED INCORRECTLY. THE ASSESSING OFFICER MADE E NQUIRIES FROM HARYANA POLLUTION CONTROL BOARD TO ASCERTAIN A S TO WHETHER THESE STONE CRUSHERS WERE ISSUED POLLUTION CONTROL CERTIFICATES, REQUIRED UNDER THE LAW AND THE REGION AL OFFICER, HARYANA STATE POLLUTION CONTROL BOARD CON VEYED THAT NONE OF THE AFORESAID PARTIES HAD BEEN ISSUED POLLUTION CONTROL CERTIFICATES. THE ASSESSING OFFICER ALSO EN QUIRED FROM THE SALES TAX OFFICE, PANCHKULA, AS TO WHETHER THE AFORESAID PARTIES WERE ISSUED SALES TAX NUMBERS AND THE CONCERNED AUTHORITY CONVEYED THAT NONE OF THESE PA RTIES POSSESSED SALES TAX NUMBER. THE ASSESSING OFFICER A LSO 13 DIRECTED HER INSPECTOR TO MAKE ENQUIRY ABOUT THE AF ORESAID FOUR PARTIES AND THE INSPECTOR MADE ON THE SPOT ENQ UIRIES FROM OWNERS AND EMPLOYEES OF VARIOUS STONE CRUSHERS OF THAT AREA WHO CONVEYED THAT THE NAMES OF THESE PART IES WERE NEVER HEARD OF. THE ASSESSING OFFICER FINALLY ASKED THE ASSESSEE TO PRODUCE THE CONCERNED PERSONS OF THE AB OVE PARTIES AND THE ASSESSEE EXPRESSED HIS INABILITY T O DO SO STATING THAT THE MATERIAL WAS PURCHASED ON CASH B ASIS FROM THE SUPPLIER OPERATING AT THE CONSTRUCTION SIT E AND THUS HIS WHEREABOUTS WERE UNKNOWN TO HIM. IT WAS ALSO SUBMITTED THAT HE HAD NOT PURCHASED MATERIAL FROM T HESE PARTIES SINCE LONG SO HE WAS NOT IN A POSITION TO P ROVIDE THE INFORMATION EXCEPT WHAT WAS GIVEN ON THE BILLS. REG ARDING PAN/VAT OF THESE PARTIES, IT WAS CONVEYED THAT THE SAME WAS NOT READILY AVAILABLE. THE ASSESSING OFFICER AL SO WROTE LETTERS TO THE AFORESAID PARTIES TO FURNISH THE COP Y OF ACCOUNT OF M/S HARSORIA CONSTRUCTION CO. (NAME UNDE R WHICH THE ASSESSEE IS CARRYING ON HIS BUSINESS), BU T THESE LETTERS WERE RECEIVED BACK UNDELIVERED. THE ASSESSI NG OFFICER FINALLY TREATED ENTIRE PURCHASES FROM THE A FORESAID PARTIES OF RS.18,12,777/- AS BOGUS AND ADDED THE SA ME TO THE TOTAL INCOME OF THE ASSESSEE. 19. DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE FILED DETAILED WRITTEN SUBMISSIONS WHICH ARE REPRODUCED I N PARA 7.2 OF THE LD.CIT(APPEALS)S ORDER. THE LD.CIT(APP EALS) AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE U PHELD THE DISALLOWANCE MADE BY REJECTING ALL THE CONTENTI ONS RAISED BY THE ASSESSEE AS UNDER: 14 7.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COU NSEL. THE LD. COUNSEL HAS SUBMITTED THAT TOTAL OF THE DISALLO WANCE U/S 40A(3), PAYMENT FOR WHICH NO BILLS WERE PRODUCED A ND PAYMENT TO BOGUS PARTIES WORKS OUT TO ABOUT 32.10% OF THE TOTAL PURCHASES. IT MAY BE MENTIONED THAT DISALLOWANC E U/S 40A(3) IS MADE FOR PAYMENT IN CASH AND NOT BECAUSE T HE EXPENSES DEBITED ARE BOGUS AND SO THE DISALLOWANCE W ILL BE ABOUT 26% AND NOT 32% AS MENTIONED BY THE APPELLANT 7.3.1 THE CONTENTION OF THE APPELLANT THAT THE MATE RIAL PURCHASED BY THE APPELLANT WAS AS PER REQUIREMENT ON THE BASIS OF WORK DONE IS NOT ACCEPTABLE IN VIEW OF THE SPECIFIC FINDING OF THE ASSESSING OFFICER THAT THE DEBIT OF R S. 18,12,777/- TO THE PURCHASE ACCOUNT WAS BOGUS. 7.3.2 THE COMPARISON OF THE NP RATE AND PERCENTAGE OF PURCHASES TO RECEIPTS WITH THOSE OF EARLIER YEARS IS NOT RELEVANT, SINCE THE APPELLANT MAY HAVE SHOWN BOGUS PURCHASES IN THE EARLIER YEARS ALSO, ASSESSMENTS OF WHICH WERE NOT UNDER SCRUTINY. MOREOVER, THE PERCENTAGE P ROFIT WHICH A CONTRACTOR MAY EARN MAY DIFFER FROM CONTRACT TO CONTRACT AND ONE SHOULD NOT ASSUME THAT THE PROFIT IN EACH CONTRACT WILL BEAR THE SAME RATIO TO THE VALUE OF THE CON TRACT. 7.3.3 THE ASSESSING OFFICER ASKED THE APPELLANT VIDE ORDER SHEET ENTRY DATED 13.12.2011 TO, INTER-ALIA, PRODUCE T HE FOLLOWING PERSONS/INFORMATION: (I) PAN NO.; (II) SOLES TAX NO.; (III) POLLUTION C ONTROL CERTIFICATE NO. OF SUPPLIERS, MAINLY, M/S V.K. CONTRACTORS, M/S DDHIYA STONE CRUSHER, M/S SANGAM STONE DUST SUPPLIER AND M/S SHAMSHER SINGH GRIT SUPPLIER. IN THE ABSENCE OF PROOF OF THE ABOVE, PLEASE EXPLAIN WHY PURCHASES MADE FROM THESE PARTIES BE NOT TREATED AS UNEXPLAINED/ BOGUS PURCHASES AND BE NOT DISAVOWED TO THE AMOUNT OF RS.18,12,777/- 7.3.4 IN RESPONSE TO THE ABOVE QUERY, THE APPELLANT HAD SUBMITTED AS UNDER: 'KINDLY REFER TO YOUR QUERY FOR PAN/SALES TAX NO/POLLUTION CONTROL CERTIFICATES IN RESPECT OF THE VARIOUS SUPPLIERS OF THE MATERIAL WE RESPECTFULLY SUBMIT THAT THE ASSESSEE HAS PURCHASED THE MATERIAL FROM SUPPLIER OPERATING AT THE CONSTRUCTION SITE DURING THE FINAN CIAL YEAR 2008-09-ON THE CASH BASIS. THE COPIES OF THE BILLS HAV E ALREADY BEEN PRODUCED MATERIAL SINCE LONG FROM THESE PARTIES. THEREFORE WE ARE NOT IN. POSITION TO PROVI DE THE INFORMATION EXCEPT THAT GIVEN IN THE BILLS VOUCHERS . 7.3.5 THUS, THE APPELLANT HAD IN A WAY ADMITTED THA T THE AFORESAID FOUR CONCERNS DID NOT POSSESS ANY CER TIFICATE FROM POLLUTION CONTROL BOARD, DID NOT HAVE THE SALE S TAX NO. OR ANY PAN NO./VAT NO. THE CONTENTION OF THE APPELLANT NOW THAT THE RESULTS OF INQUIRES WERE NEVER CONFRONTED TO THE APPELLANT IS NOT CORRECT. THE FACT OF THE MATTER IS TH AT THE VERY EXISTENCE OF THESE PARTIES, FROM WHOM THE PURCHASES ARE CLAIMED TO HAVE BEEN MADE AND PAYMENT IS SUPPO SED TO 15 HAVE BEEN AFFECTED, IS HIGHLY DOUBTFUL. THE ONUS TO P ROVE THAT THESE PARTIES EXISTED WAS ON THE APPELLANT AND H E FAILED TO DISCHARGE THAT ONUS. THE EVIDENCE BROUGHT ON RECOR D BY THE ASSESSING OFFICER IN REGARD TO THERE BEING NO SALES TAX NO., POLLUTION CONTROL CERTIFICATE, BILLS NOT HAVING S ERIAL NUMBER AND HANDWRITING 85 SIGNATURES ON THE BILLS BEIN G IDENTICAL FURTHER STRENGTHENS THE CASE OF NONEXISTENCE OF THESE PARTIES. IT MAY BE PERTINENT TO POINT OUT THA T THE APPELLANT HAS NOT PRODUCED ANY EVIDENCE EVEN IN APPE LLATE PROCEEDINGS TO PROVE HIS CASE. HENCE, IT HAS TO BE C ONCLUDED THAT AFORESAID FOUR PARTIES DO NOT EXIST AND THE CL AIM OF PURCHASES HAVING BEEN MADE FROM THESE PARTIES IS BOG US IPSO-FACTO. THE ADDITION MADE BY THE ASSESSING OFFIC ER IS ACCORDINGLY UPHELD AND GROUND OF APPEAL NO. 7 IS DISMISSED. 20. BEFORE US, THE LD. COUNSEL FOR ASSESSEE RELIED UPON THE WRITTEN SUBMISSIONS FILED BEFORE THE LD.CIT(APPEALS ). THE LD. COUNSEL FOR ASSESSEE IN PARTICULAR DREW OUR ATT ENTION TO THE FACT THAT THE FINDINGS FOR DOUBTING THE GENUINE NESS OF THE PURCHASES MADE HAD BEEN ADEQUATELY ADDRESSED BE FORE THE LD.CIT(APPEALS) AS UNDER: THE LEARNED OFFICER HAS DOUBTED ON THE GENUINENESS OF THE VOUCHERS OF V.K.CONTRACTORS, SHAMSHER SINGH GRI T SUPPLIERS, SANGAM STONE DUST SUPPLIERS, DHAIYA STONE CRUSHER O N THE FOLLOWING FINDINGS: I) THE BILLS HAD NO SALES TAX NO. IT IS SUBMITTED THAT ALL THESE WERE THE SUPPLIERS OF SAND, BAZRI AND ARE UNREGISTERED DEALERS. II) THE BILLS HAD NO SERIAL NUMBER. WE HAVE NO CONTROL ON FIXING SERIAL NUMBERS BY THE SUPPLIERS. III) THE BILLS WERE COMPUTER PRINT OUTS IN THE S AME FORMAT WE CANNOT DICTATE TERMS TO SUPPLIER AS THEY ARE MOS TLY ILLITERATE PERSONS AND COULD HAVE TAKEN HELP FROM S OME COMPUTER OPERATOR FOR PRINT OUT OF BILLS TO AVOID COST OF PRE SS PRINTING. IV) HANDWRITING AND SIGNATURES ON THE BILLS WERE IDENTICAL NO SUCH REPORT WAS MADE AVAILABLE TO US. IT IS ONL Y AN ALLEGATION WHICH IS NOT SUPPORTED BY ANY EVIDENCE. V) DATES ON THE BILLS HAVE BEEN MENTIONED INCO RRECTLY. NO SPECIFIC INSTANCE HAS BEEN QUOTED. 16 VI) ALL STONE CRUSHERS ARE REQUIRED TO HAVE A POLLU TION CONTROL BOARD CERTIFICATE AND HARYANA STATE POLLUTION CONTR OL BOARD HAS INFORMED THAT THESE PARTIES WERE NOT HAVING ANY POLLUTION CONTROL BOARD CERTIFICATE. ALL THESE PARTIES ARE SUPPLIERS AND ARE NOT HAVING THEIR OWN STONE CRUSHER. WE ARE SURE THAT A SUPPLIER OF MATERIAL DOES NOT REQUIRE ANY POLLUTION CONTROL REG ISTRATION. MOREOVOER, THE COPY OF ENQUIRY IF ANY WAS NEVER MADE AVAI LABLE TO US. VII) NON AVAILABILITY OF SALES TAX NUMBER ALL THESE PARTIES ARE SUPPLIERS AND ARE MOSTLY TRUCK AND TROLLEY DRIVERS AND NOT HAVING SALES TAX NUMBER. MORE OVER, THE COPY OF ENQUIRY IF ANY WAS NEVER MADE AVAILABLE TO US . VIII) ON THE SPOT ENQUIRY CONDUCTED BY THE INSPECTO R ANY ENQUIRY CONDUCTED BY INSPECTOR WAS NEVER MADE AVAILABLE. AS GATHERED FROM THE ASSESSMENT ORDER, I T IS NOTICED THAT INSPECTOR HAS MADE THIS ENQUIRY ON 9/12/2011 A ND IT IS RELEVANT TO MENTION THAT 'BURJ KOTIAN STONE CRUSHING ZONE (AROUND GAGGAR RIVER USED TO BE ONE OF THE BIGGEST QUARRY/SOURCE OF MATERIAL IN THE NORTHERN ZONE HAS BEEN MADE DEFUNCT BY THE PUNJAB & HARYANA COURT AND SUPREME COU RT SINCE FEBRUARY 2010. ALL SUCH SUPPLIERS WHICH' USED TO OP ERATE AT SUCH PLACES HAVE ALREADY LEFT THIS PLACE. AS SUCH WHEN INSP ECTOR HAD VISITED SUCH AREA AFTER CLOSURE OF BUSINESS AFT ER 2 YEARS THE SAME COULD NOT BE LOCATED. ' 21. THE LD. COUNSEL FOR ASSESSEE FURTHER DREW OUR ATTENTION TO THE FACT THAT IT WAS POINTED OUT THAT ENTIRE DISALLOWANCE RELATED TO PURCHASE OF SAND, MITTI, GA TKA AD BAZRI. THE REQUIREMENT OF THE SAME HAD BEEN ANALYZ ED ON THE BASIS OF THE WORK DONE DURING THE YEAR AND COMP ARED WITH THE ACTUAL MATERIAL PURCHASED AND IT WAS DEMON STRATED BEFORE THE LD.CIT(APPEALS) THAT WHILE THE REQUIREME NT OF THE AFORESAID MATERIAL WAS 13,33,856.79 CFT., THE ASSES SEE HAD ACTUALLY CONSUMED 13,40,764 CFT OF MATERIAL. THERE FORE, THE CONSUMPTION OF SAND, MITTI, BAZRI AND GATKA COULD N OT BE DOUBTED ON ACCOUNT OF THE WORK CARRIED OUT BY THE A SSESSEE DURING THE YEAR AND THUS THE PURCHASE OF THE SAID M ATERIAL ALSO. THE LD. COUNSEL FOR ASSESSEE FURTHER DREW OU R 17 ATTENTION TO THE FACT THAT THE ASSESSEE HAD SHOWN B ETTER RESULTS IN THE IMPUGNED YEAR SHOWING NET PROFIT OF 5.48% AS AGAINST NET PROFIT OF 5.41% SHOWN IN THE PRECEDING YEAR DESPITE THE FACT THAT THE PRICE OF THE BUILDING MAT ERIAL HAD INCREASED DURING THE YEAR WHICH WAS DEMONSTRATED BE FORE THE LD.CIT(APPEALS) ALSO BY WAY OF SHOWING THE INCR EASE IN THE PRICE OF BITUMEN IN DIFFERENT MONTHS FOR THE IM PUGNED YEAR. IT WAS ALSO POINTED OUT THAT RESTRICTION HA D ALSO BEEN IMPOSED ON MINING OF RIVER BED SAND, BAZRI AND GATK A BECAUSE OF WHICH ALSO THE PRICE HAD INCREASED AND D ESPITE SUCH ODDS, THE ASSESSEE HAD MANAGED TO SHOW BETTER RESULTS IN THE IMPUGNED YEAR. THE LD. COUNSEL FOR ASSESSEE ALSO DREW OUR ATTENTION TO THE CIRCUMSTANCES AND MANNER IN WHICH IT CARRIED ON ITS BUSINESS STATING THAT BITUM EN, SAND, BAZRI AND GATKA WERE THE MAJOR ITEMS PURCHASED FOR THE CONSTRUCTION WORK CARRIED OUT AND ENTIRE BITUMEN WE RE PURCHASED FROM THE GOVERNMENT OWNED CORPORATION TO WHOM PAYMENTS WERE MADE BY CHEQUE AND IT WAS ONLY SAND, BAZRI AND GATKA WHICH WAS PROCURED FROM LOCAL SUPPLIERS W HICH WAS MANAGED BY THE SITE SUPERVISOR/AGENTS/TRUCK/TRO LLEY OWNERS. THE LD. COUNSEL FOR ASSESSEE POINTED OUT T HAT THE SUPPLIERS OF THESE MATERIAL WERE JOINTLY OWNERS OF TRUCKS AND TROLLEYS WHO PROCURED MATERIAL FROM STONE CRUSH ER OR SCREENING PLANTS AND SUPPLIED IT TO VARIOUS SITES W HERE WORK WAS CARRIED OUT BY THE ASSESSEE AND THAT NORMALLY S ITE SUPERVISOR ON RECEIPT OF BILLS FROM THESE VENDORS M ADE PAYMENT OF THE SAME ON THE SITE TO THE DRIVERS. IT WAS POINTED OUT THAT ON ACCOUNT OF PECULIAR CIRCUMSTANC ES IN 18 WHICH THE WORK WAS CARRIED OUT AND SINCE THE CONSTR UCTION LABOUR, SITE SUPERVISOR AND DRIVERS OF THE TRUCKS T O WHOM PAYMENTS WERE MADE WERE NOT LITERATE, IT WAS NOT PO SSIBLE TO MAINTAIN 100% VOUCHERS BUT THE ASSESSEE HAD STIL L MANAGED THE SAME. THE LD. COUNSEL FOR ASSESSEE, TH EREFORE, STATED THAT THERE WAS NO REASON FOR HOLDING THE PUR CHASE MADE FROM THE PARTIES AS BOGUS. 22. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD.CIT(APPEALS). 23. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES. WE FIND THAT THE ASSESSEE HAD ADEQUATELY ADDRESSED ALL THE DISCREPANCIES POINTED OUT BY THE REVENUE BY POINTIN G OUT THAT THE PARTIES FROM WHOM PURCHASES WERE MADE, BEI NG UNREGISTERED DEALERS SALES TAX NUMBER WAS NOT REQU IRED. IT WAS ALSO POINTED OUT THAT THE POLLUTION CERTIFICATE WAS NOT REQUIRED BY THESE PARTIES SINCE THEY WERE NOT MINER S AND THAT THE SAID PARTIES COULD NOT BE LOCATED BY THE I NSPECTOR SINCE THEY HAD LEFT THE PLACE ON ACCOUNT OF THE HIG H COURT DIRECTION. NO INFIRMITY IN THESE EXPLANATIONS HAS B EEN POINTED OUT BY THE REVENUE EXCEPT FOR REPEATING THE CONTENTION OF THE ASSESSING OFFICER THAT THE SAID P ARTIES WERE BOGUS SINCE THEY HAD NO SALES-TAX NUMBER, POLL UTION CERTIFICATE OR COULD NOT BE FOUND BY THE INSPECTOR. MOREOVER WE FIND THAT THE ASSESSEE HAD DEMONSTRATED BEFORE T HE LD.CIT(APPEALS), BY WAY OF A QUANTITATIVE ANALYSIS, THAT THE WORK EXECUTED BY THE ASSESSEE DURING THE YEAR, WHIC H HAS NOT BEEN DISPUTED BY THE REVENUE, COULD NOT HAVE BE EN 19 DONE WITHOUT THE QUANTITY PURCHASED FROM THE IMPUGN ED PARTY. THE ASSESSEE ALSO DEMONSTRATED THAT NO SURP LUS PURCHASE WAS MADE BY IT AS PER THE WORK EXECUTED. THE QUANTITY ANALYSIS SUBMITTED BY THE ASSESSEE HAS NOT BEEN CONTROVERTED BY THE REVENUE. UNDISPUTEDLY ALSO, TH E ASSESSEE HAS SHOWN BETTER PROFITS IN THE IMPUGNED Y EAR AS COMPARED TO THE PREVIOUS YEAR AS BOGUS. CONSIDERIN G THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE WE SEE NO REASON TO HOLD THE IMPUGNED PURCHASE AS BOGUS AND T HUS DIRECT THAT THE SAME BE DELETED. GROUND NO.6 RAISED BY THE ASSESSEE THEREFORE STAND S ALLOWED. 24. GROUND OF APPEAL NO.4 RAISED BY THE ASSESSEE IS VIS-- VIS THE DISALLOWANCE OF PURCHASE MADE ON ACCOUNT OF CASH PAYMENTS MADE WITH RESPECT TO THE SUM EXCEEDING RS.20,000/- IN VIOLATION OF THE PROVISIONS OF SECTI ON 40A(3) OF THE ACT. 25. BRIEF FACTS ARE THAT THE ASSESSING OFFICER FOUN D THAT THE ASSESSEE HAD MADE PAYMENTS IN CASH EXCEEDING RS.20,000/- IN ONE DAY TO ONE PARTY IN CONTRAVENTIO N OF THE PROVISIONS OF SECTION 40A(3) OF THE ACT TO THE EXTE NT OF RS.6,88,326/-. HE FURTHER FOUND THAT THE SAID AMOUN T INCLUDED AN AMOUNT OF RS.5,24,574/- WHICH HAD BEEN PAID TO CONCERNS WHICH DID NOT EXIST AND WHICH WERE DISA LLOWED AS BOGUS IN LATER PART OF THE ASSESSING OFFICERS O RDER. HE, THEREFORE, MADE DISALLOWANCE OF ENTIRE AMOUNT OF RS.6,88,326/- U/S 40A(3) OF THE ACT AND THE AMOUNT OF 20 RS.5,24,574/- WAS ALSO HELD TO BE DISALLOWABLE AS B OGUS PURCHASES. 26. BEFORE THE LD.CIT(APPEALS), THE ASSESSEE CONTEN DED THAT THE PROVISIONS OF SECTION 40A(3) OF THE ACT HA D BEEN VIOLATED ONLY ON ACCOUNT OF PAYMENT MADE TO THE EXT ENT OF RS.1,56,595/- AND SUPPORTED HIS CONTENTION BY FILIN G A CHART SHOWING ALL THE IMPUGNED PAYMENTS REFLECTING DATE OF THE BILLS AND DATE ON WHICH THE PAYMENTS WERE MADE. THE ASSESSEE ALTERNATIVELY CONTENDED THAT SINCE THERE W AS NO BANKING FACILITY AT THE CONSTRUCTION SITES WHERE TH E PAYMENTS WERE MADE, THE SAME WERE PROTECTED BY CLAU SE (G) OF RULE 6DD OF THE INCOME TAX RULE, 1962 AND FURTHE R SINCE THE MATERIAL WAS PROCURED THROUGH AGENTS WHO ARE RE QUIRED TO MAKE PAYMENT IN CASH, THEREFORE, THE PAYMENTS WE RE ALSO PROTECTED BY CLAUSE (K) OF RULE 6DD OF INCOME TAX R ULES. THE LD.CIT(APPEALS) AFTER CONSIDERING SUBMISSIONS O F THE ASSESSEE FOUND THAT THE CHART REFLECTING DATE OF TH E IMPUGNED PAYMENTS HAD NOT BEEN CONTROVERTED BY THE ASSESSING OFFICER IN HIS REMAND REPORT AND SO HE TO OK THEM TO BE CORRECT. THEREAFTER HE HELD THAT THE PAYMENT MADE TO ONE MR.DES RAJ WAS NOT COVERED UNDER SECTION 40A(3) OF THE ACT AND, THEREFORE, DELETED THE DISALLOWANCE MADE O N ACCOUNT OF THE SAME. FOR THE REST, HE FOUND THAT T HE SAME WERE MADE TO PARTIES WHO WERE HELD TO BE NON-EXISTE NT ALSO BY THE ASSESSING OFFICER. HE ALSO REJECTED THE CON TENTION OF THE ASSESSEE THAT IT WAS SAVED FROM THE RIGORS OF S ECTION 40A(3) OF THE ACT BY RULE 6DD (G) & (K) IN THE ABSE NCE OF 21 ANY DETAILS AND PARTICULARS TO SUBSTANTIATE ITS CLA IM HAVING BEEN FILED BEFORE IT. THE LD.CIT(APPEALS), THEREFO RE, HELD THAT THE PAYMENT MADE TO FOUR PARTIES BEING IN ANY CASE DISALLOWABLE ON ACCOUNT OF BOGUS PURCHASES, HE CONF IRMED THE DISALLOWANCE MADE ON ACCOUNT OF THE SAME. 27. BEFORE US, THE LD. COUNSEL FOR ASSESSEE REITERA TED THE CONTENTION MADE BEFORE THE LOWER AUTHORITIES WHILE THE LD. DR RELIED UPON THE ORDER OF THE LD.CIT(APPEALS). 28. WE HAVE HEARD BOTH THE PARTIES. OUT OF THE DISALLOWANCE UPHELD BY THE LD.CIT(APPEALS) AMOUNTIN G TO RS.5,24,574/- WE FIND THAT THE ASSESSEE HIMSELF HAD ADMITTED DISALLOWANCE OF RS.1,56,595/-. DISALLOWANC E TO THIS EXTENT IS, THEREFORE, UPHELD. AS FOR THE BALA NCE AMOUNT THE REVENUE HAS NOT DISPUTED THE FACT THAT THE PAYM ENT MADE IN THESE CASES DID NOT EXCEED RS.20,000/- IN A SINGLE DAY TO A SINGLE PARTY. EVEN THE LD.CIT(APPEALS), W E FIND, HAS UPHELD THE DISALLOWANCE MERELY FOR THE REASON T HAT THE PURCHASES MADE FROM THESE PARTIES WERE FOUND TO BE BOGUS AND NOT ON ACCOUNT OF THE FACT THAT THE PAYMENTS MA DE WERE IN CONTRAVENTION OF THE PROVISIONS OF SECTION 40A(3 ) OF THE ACT. SINCE WE HAVE DELETED THE DISALLOWANCE MADE ON ACCOUNT OF BOGUS PURCHASES FROM THESE PARTIES IN PA RA 23 OF OUR ORDER, WE FIND NO REASON TO UPHOLD THE DISALLOW ANCE OF THE SAME U/S 40A(3) OF THE ACT. IN VIEW OF THE ABO VE, WE HOLD THAT THE DISALLOWANCE MADE U/S 40A(3) OF THE A CT BE RESTRICTED TO RS.1,56,595/- WHILE THE BALANCE OF RS.3,67,979/- IS DIRECTED TO BE DELETED. 22 GROUND OF APPEAL NO.4 IS, THEREFORE, PARTLY ALLOW ED IN THE ABOVE TERMS. 29. GROUND NO.7 RAISED BY THE ASSESSEE IS VIS--VIS DISALLOWANCE OF 50% OF MACHINERY REPAIR AND MAINTEN ANCE EXPENSES AMOUNTING TO RS.1,98,900/- IN THE ABSENCE OF SUPPORTING DOCUMENTS/BILLS WITH REGARD TO THE SAME AND WHICH FOR THE SAME REASON WAS UPHELD BY THE LD.CIT(APPEALS). EVEN BEFORE US, THE SAID EXPENSES REMAINED UNSUBSTANTIATED. WE, THEREFORE, UPHOLD THE DISALLOWANCE MADE. GROUND OF APPEAL NO.7 RAISED BY THE ASSESSEE IS, THEREFORE, DISMISSED. 30. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (DIVA SINGH) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST OCTOBER, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)S 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH