Appeal Details
Counselvise Citation
[2015] 140 COUNSELVISE.COM (IT) 93864 (ITAT-PUNE)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 27 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
26-06-2015
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
03-11-2014
Assessment Year
2008-2009
Appeal Filed On
29-05-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NOS.1760/PN/2012 & 1114/PN/2013 (ASSESSMENT YEARS : 2007-08 & 2008-09) M/S. ENSEMBLE INFRASTRUCTURE INDIA LTD., B-1/2, PARAGON CENTER, P.B. MARG, WORLI, MUMBAI 400 013 PAN NO.AABCE2587L .. APPELLANT VS. DCIT, CIRCLE-1(2), PUNE .. RESPONDENT ITA NOS.1753/PN/2012 & 1201/PN/2013 (ASSESSMENT YEARS : 2007-08 & 2008-09) DCIT, CIRCLE-1(2), PUNE .. APPELLANT VS. M/S. ENSEMBLE INFRASTRUCTURE INDIA LTD., B-1/2, PARAGON CENTER, P.B. MARG, WORLI, MUMBAI 400 013 PAN NO.AABCE2587L .. RESPONDENT APPELLANT BY : SHRI SUNIL PATHAK & SHRI SHARAD SHAH DEPARTMENT BY : SHRI P.S. NAIK DATE OF HEARING : 27-05-2015 DATE OF PRONOUNCEMENT : 26-06-2015 ORDER PER R.K. PANDA, AM : ITA NO. 1760/PN/2012 AND ITA NO.1753/PN/2012 ARE CROS S APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SE COND ONE FILE BY THE REVENUE AND ARE DIRECTED AGAINST THE ORDER D ATED 22-02- 2012 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2007-08. 2 ITA NO. 1114/PN/2013 AND ITA NO.1201/PN/2013 ARE ALSO CROSS APPEALS. THE FIRST ONE IS FILED BY THE ASSESSEE AND THE SECOND ONE FILE BY THE REVENUE AND ARE DIRECTED AGAINST THE ORD ER DATED 04-03-2013 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMEN T YEAR 2008-09. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THE CR OSS APPEALS, THEREFORE, FOR THE SAKE OF CONVENIENCE THESE WER E HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. FIRST WE TAKE UP THE CROSS APPEAL FOR A.Y. 2007-08 AS THE LEAD CASE. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PRIVATE LIMITED COMPANY ENGAGED IN FURNITURE INTERIOR WO RKS FOR LEADING CORPORATES. THE ASSESSEES JOB CONTAINS EXECUT ION OF CIVIL, INTERIOR, GYPSUM, FLOORING, PAINTING, CARPENTRY, A/C. ELECTRICAL AND OTHER ALLIED WORKS. THE ASSESSEE FILED ITS RETURN OF IN COME ON 29-10-2007 DECLARING TOTAL INCOME OF RS.1,48,08,038/-. SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN ON 06- 02-2008 DECLARING TOTAL INCOME OF RS.2,17,73,862/-. 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING OFFICER OBSERVED THAT A SURVEY U/S.133A OF THE I.T. ACT W AS CONDUCTED IN THE PREMISES OF THE ASSESSEE AT B1, PARAGO N, CONDOMONIUM, P.B. MARG, WORLI, MUMBAI ON 28-12-2007 BY THE DDIT (INVESTIGATION) UNIT-IV (2), MUMBAI. DURING THE SAID SURV EY IT WAS FOUND THAT THE ASSESSEE COMPANY HAS SHOWN PURCHA SES OF MATERIAL FROM THE BELOW MENTIONED CONCERNS OF SHRI TUSHAR RUPAREL. THE ASSESSING OFFICER FURTHER NOTED THAT AS PER THE DETAILS FURNISHED DURING POST SURVEY INVESTIGATION AND THE DETAILS PRODUCED DURING THE ASSESSMENT PROCEEDINGS THE PURCHA SES MADE FROM VARIOUS PARTIES ARE AS UNDER : 3 SR. NO. NAME OF THE ASSESSEE F.Y. 06 - 07 F.Y. 07 - 08 1. M/S. FORAM TRADERS 67,59,282 2. M/S. APPLE INDIA MARKETING CO. 82,98,924 47,46,122 3. M/S. V.S.K. STEELS 39,63,133 4. V.S.K. ENTERPRISES 71,70,625 39,16,081 5. M/S. KHUSHI ENTERPRISES 1,92,56,857 6. M/S. SAMARTH TRADING CO. 78,15,429 7. M/S. BALAJI TRADING 8. M/S. SUN ENTERPRISES 1,00,40,207 9. M/S. M.R. CORPORATION 1,38,49,532 19,95,337 10. M/S. NEELAM ENTERPRISES 47,24,390 34,41,811 TOTAL 7,11,55,964 2,48,21,766 4. THE ASSESSING OFFICER FURTHER NOTED THAT DURING THE COU RSE OF THE SAID SURVEY OPERATION, THE ASSESSEE COMPANY WAS CO NFRONTED WITH THE STATEMENT DATED 08-12-2007 OF SHRI TUSHAR RUP AREL. SUBSEQUENTLY, THE ASSESSEE WAS ALSO PROVIDED WITH THE C OPY OF THE STATEMENT OF SHRI TUSHAR RUPAREL RECORDED ON 13-05-200 8 AND THE ASSESSEE WAS ASKED TO PRODUCE THE ABOVE MENTIONED PA RTIES BEFORE THE DDIT. IN RESPECT OF CLAIM OF GENUINENESS OF PURCHASES IN THE LIGHT OF UNEQUIVOCAL STATEMENT OF SHRI TUSHAR RUPAREL, THE ASSESSING OFFICER FURTHER NOTED FROM THE SURVEY REPORT SU BMITTED BY THE ADIT THAT THE ASSESSEE HAD GIVEN THE REPLY WIT H REGARD TO THE COMPLIANCE AND THE OBSERVATIONS MADE BY THE SURVEY PARTY ON THE TWIN POINTS WHICH ARE REPRODUCED AT PARA 4.2.3 OF T HE ORDER AND WHICH READS AS UNDER : (I) THE ASSESSEE COULD NOT PRODUCE THE ABOVE MENTIONE D PARTIES IN ITS SUPPORT ON 14.01.2008 AS PER REQUIREMENT OF SUMMON DATED 08.01.2008. ON ITS REQUEST SEEKING FURTHER TIME, THE A SSESSEE WAS GIVEN ANOTHER OPPORTUNITY TO PRODUCE THE CONCERNED PARTIES ON 21.01.2008 AS PER ORDER SHEET ENTRY DATED 14.01.2008. IN FACT, THE ASSESSEE COULD NEVER PRODUCE THE ABOVE-MENTIONED PARTIE S IN ITS SUPPORT. THE ASSESSEE WAS ALSO PROVIDED THE COPY OF STATEME NT IF SHRI. TUSHAR RUPAREL WITH A VIEW TO GIVE THE FAIR OPPORTUN ITY TO DEFEND ITS CLAIM. (II) IN SUPPORT OF ITS CLAIM OF DELIVERY OF GOODS B Y PARTIES IN QUESTION AND ITS CONSUMMATION AT VARIOUS SITES, VIDE SUBMISSION DATE D 03.03.2008, THE ASSESSEE HAS STATED THAT (A) ALL MATERIAL IS PURCHASED WITH THE RESPONSIBILITY OF THE DELIVERY UP TO SITE WITH THE RESPECTIVE VENDOR. THE GOOD RECEI PT NOTE IS PREPARED BY ASSESSEE COMPANY AND IT IS THE BASIS ON WHICH ALL PURCHASES ARE BOOKED AND SUBSEQUENT PAYMENTS ARE MADE TO VENDOR. 4 (B) A PROPER VENDOR REGISTRATION PROCEDURE IS FOLLOW ED BEFORE PLACING ANY ORDER FOR PURCHASE. THE SAME PROCEDURE WA S FOLLOWED IN RESPECT OF PARTIES IN QUESTION TOO. (C) THE MATERIAL BROUGHT FROM PARTIES IN QUESTION HA VE BEEN USED AT SIX LOCATIONS AND THE ASSESSEE COMPANY HAS RECEIVED CON FIRMATION LETTER FROM FOUR PARTIES STATING THAT MATERIALS HAVE BEEN RECEIVED AT RESPECTIVE SITE LOCATIONS. (D) THE ACTUAL SALES HAVE TAKEN PLACE AND PAYMENTS AGA INST ALL SALE BILLS HAVE BEEN RECEIVED THROUGH CHEQUES. PAYMENTS TO PURCHASE PARTIES HAVE BEEN MADE THROUGH CHEQUES. (E) THE QUANTITATIVE TALLY OF SALES WITH CONSUMPTION C HART, GRN ETC. CONFIRM THE PURCHASED QUANTITY WITH MINOR WASTAGE. 5. THE ASSESSING OFFICER THUS OBSERVED FROM THE REPORT OF ADIT THAT THE ASSESSEE NOT ONLY FAILED TO PRODUCE THE PARTIE S IN QUESTION BEFORE THE SURVEY PARTY BUT ALSO ITS CONTENTION DOES NO T HAVE MUCH FORCE. HE OBSERVED THAT THE ASSESSEE HAS NOT SUBMITTE D ANY QUANTITATIVE RECONCILIATION BETWEEN MATERIAL PURCHASED AND ITS CONSUMPTION. HE HAS ONLY SUBMITTED CONFIRMATIONS FROM 4 CUSTOMERS STATING THAT CERTAIN AMOUNT OF GOODS HAVE B EEN RECEIVED AT CERTAIN WORK SITE. THE ASSESSING OFFICER NOTED THAT T HE ASSESSEE COMPANY IS EXECUTING BOTH KINDS OF CONTRACTS IN THE FIELD O F INTERIOR WORK, I.E. WORK CONTRACT WITHOUT SUPPLY OF MATERIAL BY ASSE SSEE COMPANY AND WORK CONTRACT WITH RESPONSIBILITY OF ASSESSEE COMPANY TO SUPPLY THE MATERIAL. IN THE CONTRACT OF SEC OND TYPE, I.E. CONTRACT WITH MATERIAL, IT IS THE RESPONSIBILITY OF THE ASS ESSEE COMPANY TO SUPPLY THE MATERIAL IN ADDITION TO LABOUR WOR K. THUS IN SUCH KIND OF CONTRACTS THERE IS NO QUESTION OF ANY CON TROL BY CUSTOMERS/CLIENTS OVER SUPPLY OF MATERIAL AT SITE OF THE A SSESSEE COMPANY OR VENDORS. IN SUCH CONTRACTS THE CLIENT HAS NOTHING TO DO WITH THE QUANTUM OF MATERIALS CONSUMED BECAUSE THE V ALUE OF THE CONTRACT IS FIXED AFTER TAKING INTO CONSIDERATION THE COST OF MATERIAL THAT WOULD BE BORNE BY THE CONTRACTOR. 5 6. THE ASSESSING OFFICER NOTED THAT A LARGE PART OF THE TO TAL WORK CONTRACTS EXECUTED BY THE ASSESSEE ARE CONTRAC TS WITH MATERIAL. THEREFORE, FOR SUCH PROJECTS, I.E. WORK CONTRACTS WITH MATERIAL THE SUBMISSION OF THE CONFIRMATION FROM CLIENTS WOULD NOT SERVE ANY PURPOSES AS SUCH CONFIRMATION CANNOT BE CONC ERNED WITH CONSUMPTION OF MATERIAL IN SUCH PROJECTS. THEREFORE, THE A SSESSING OFFICER WAS OF THE OPINION THAT THE ASSESSEE COULD NOT PRO DUCE THE RECONCILIATION OF THE PURCHASES AND THE CONSUMPTION FOR TH E YEARS FOR WHICH THE PURCHASES HAVE BEEN SHOWN FROM THE PARTIE S IN QUESTION. 7. AS REGARDS THE SUBMISSION OF COPIES OF GOODS RECEIPTS CUM INSPECTION NOTE (GRN) TO SUBSTANTIATE ITS CLAIM OF PURCHA SES THE ASSESSING OFFICER NOTED THAT IT IS BASICALLY A DOCUMENT PR OVIDED BY THE ASSESSEE COMPANY ITSELF. IN THE PRESENT CASE, IT IS M ORE IN THE NATURE OF SELF SERVING DOCUMENTS IN PLACE OF INDEPENDENT E VIDENCE AS ASSESSEE HAD FULL LIBERTY TO PREPARE IT EVEN FOR BOGUS PURCHASE TRANSACTIONS. THE GRN HAS THE SIGNATURE OF THE STORE K EEPER WHO IS AN EMPLOYEE OF THE ASSESSEE ITSELF. THEREFORE, HE HELD TH AT THE GRN IS NOT AN INDEPENDENT PIECE OF EVIDENCE. FURTHER, THE ASSESSING OFFICER OBSERVED THAT ON COMPARISON OF GRNS IN R ESPECT OF GOODS RECEIVED IN QUESTION AND GRN FOR GOODS FROM OTHE R PARTIES THE FOLLOWING CRUCIAL DIFFERENCES ARE NOTED BETWEEN THE TWO. (I) IT IS FOUND THAT THE GRNS, PREPARED IN RESPECT OF THE GOODS SHOWN TO HAVE BEEN RECEIVED FROM PARTIES IN QUESTION, HAVE GROSSLY INADEQUATE DETAILS. ON SUCH GRNS, THERE IS NO SIGNATURE OF PROJECT MANAGER WHERE AS THE GRNS PREPARED FOR THE GOODS RECEI VED FROM OTHER PARTIES BEAR THE SIGNATURE OF PROJECT MANAGER. (II) FURTHER, THE GRNS IN RESPECT OF PARTIES IN QUESTI ON GENERALLY DO NOT HAVE ANY ENTRY OF AGAINST THE COLUMN 'TIME IN' I .E. SUCH GRNS GENERALLY DO NOT SHOW WHEN THE GOODS WERE RECEIVE. O N SEVERAL OCCASIONS, EVEN INWARD NUMBER, P.O. NO. AND DATE ARE NOT MENTIONED ON SUCH GRNS. WHEREAS, THE GRNS FOR THE GOODS RECEIVED F ROM OTHER PARTIES HAVE SUCH DETAILS WRITTEN ON THEM. 6 HE ACCORDINGLY HELD THAT THE GRNS SUBMITTED BY THE ASS ESSEE CANNOT BE RELIED UPON. THE AO FURTHER NOTED THAT THE A SSESSEE COULD NOT PRODUCE ANY EVIDENCE IN THE FORM OF DELIVERY CHA LLAN, TRANSPORTATION DETAILS ETC. THE ASSESSEE ALSO DID NOT PR ODUCE ANY DELIVERY NOTE ISSUED BY SHRI TUSHAR RUPAREL OR HIS CONCER NS. HE FURTHER NOTED THAT IN THE CASE OF THE ASSESSEE HE HAS FOLLOWED THE PRACTICE WHICH IS REVERSE OF THE GENERAL PRACTICE IN THE T RADE. ASSESSEE ITSELF IS MAKING GOODS RECEIPT NOTE AND PUTS ITS EMPLOYEES SIGNATURE THEREON WITHOUT GIVING DUPLICATE COPY OF SUCH NOTE TO SELLER. 8. AS REGARDS THE SUBMISSION OF THE ASSESSEE THAT IT HAS FOLLOWED VENDOR REGISTRATION PROCEDURE TO ENQUIRE INTO THE GENUINENESS OF VENDOR INCLUDING THE PARTIES IN QUESTION, THE AO NOTED THAT THE PARTIES IN QUESTION DID NOT HAVE REQUISITE INFRASTRUCTURE SUCH AS GODOWN TO SUPPLY THE GOODS AS EVIDENT FROM THE STATEMENT OF SHRI TUSHAR RUPAREL. EVEN THE OFFICE AD DRESS GIVEN BY VARIOUS CONCERNS OF SHRI TUSHAR RUPAREL IS SAME . THEREFORE, HE ALSO REJECTED THE CLAIM OF THE ASSESSEE. 9. THE AO ALSO COMPARED THE PURCHASE BILLS ISSUED BY PAR TIES IN QUESTION AND PURCHASE BILLS ISSUED BY OTHER PARTIES AND FO UND SOME DIFFERENCE BETWEEN THE TWO. IN VIEW OF THE ABOVE THE AO CAME TO THE CONCLUSION THAT THE PURCHASE BILLS ISSUED BY VARIOU S CONCERNS OF SHRI TUSHAR RUPAREL ARE BASICALLY BOGUS. HE FURTHER NOTED THAT SHRI TUSHAR RUPAREL IN HIS STATEMENT ON OAT H HAD ADMITTED THAT HE IS ENGAGED IN THE ACTIVITY OF PROVIDING ACCOMMODATION ENTRIES ONLY IN THE NAME OF VARIOUS ENTITIES ON THE REQUEST OF THE CUSTOMERS AND HE HAS NEVER MADE ACTUA L PURCHASES OR SALE. HE HAS FURTHER ADMITTED THAT ALL CONCERNS ACTUA LLY BEING 7 RUN FROM ONE OFFICE AND THERE IS NO GODOWN OR WAREHOUSE ETC. IN VIEW OF THE ABOVE, THE AO CONFRONTED THE ASSESSEE TO PR OVE THAT PURCHASES MADE BY IT ARE GENUINE. SINCE THE ASSESSEE FAILED TO DISCHARGE THE ONUS THE AO ASKED THE DIRECTORS OF THE C OMPANY, WHO WERE PRESENT DURING THE HEARING PROCEEDINGS, TO PRO DUCE THE PARTIES FROM WHOM THE PURCHASES WERE MADE AND THE PER SON SHRI TUSHAR RUPAREL WHO HAS CONTROL OVER THE ABOVE FIRMS. TH E AO ISSUED NOTICE U/S.133(6) TO THE VARIOUS PARTIES TO PRODUCE THE FOLLOWING DETAILS. (I) EXTRACT OF LEDGER ACCOUNT MAINTAINED FROM 01-04 -2005 TO 31- 03-2006 AND DETAILS OF BANK ACCOUNTS. (II) INCOME-TAX PAN NO. AND WARD/CIRCLE WHERE ASSES SABLE. (III) MODES OF TRANSACTIONS (IV) CONFIRMATION OF GOODS SUPPLIED WITH VAT NO. AND LOADING, UNLOADING DETAILS. 10. HOWEVER, NONE OF THE PARTIES APPEARED BEFORE TH E AO VOLUNTARILY NOR THE DIRECTORS PRODUCED ANY OF THE P ARTIES FROM WHOM THE PURCHASES HAVE BEEN MADE. THE AO HOWEVER NOTED THAT THE PARTIES IN QUESTION SUBMITTED THE ACCOUNTS EXTR ACTS WITH COVERING LETTER MENTIONING ONLY THE SALES REPORTED TO THE ASSESSEE. THE AO, THEREFORE, WAS OF THE OPINION THAT THE ASSE SSEE COMPANY IS NOT TAKING PAINS TO PRODUCE THE ABOVE PARTIES. SIN CE THE ABOVE PARTIES NEITHER APPEARED BEFORE THE AO NOR GIVEN TH E DETAILS OF BANK ACCOUNTS INDICATING DETAILS OF DEPOSIT OF CHEQ UES AND CASH WITHDRAWAL FROM THE BANKS, THE AO WAS OF THE OPINIO N THAT PURCHASES TO THE TUNE OF RS.7,11,55,964/- FROM THE FOLLOWING PARTIES ARE NOT GENUINE AND BOGUS : 8 SR.NO. NAME OF THE ASSESSEE F.Y. 06-07 1. M/S. APPLE INDIA MARKETING 82,98,924 2. V.S.K. ENTERPRISES 71,70,625 3. M/S. KHUSHI ENTERPRISES 1,92,56,857 4. M/S. SAMARTH TRADING CO. 78,15,429 5. M/S, SUN ENTERPRISES 1,00,40,207 6. M/S. M.R. CORPORATION 1,38,49,532 7. M/S. NEELAM ENTERPRISES 47,24,390 TOTAL 7,11,55,964 11. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE SUBMITTED THAT PURCHASES COULD NORMALLY BE DISALLOW ED IF THE SAME ARE BOGUS OR SHOWN AS PAPER TRANSACTION AND IN OTHE R CASES IT CANNOT BE DISALLOWED. IT WAS ARGUED THAT IN THE CA SE OF THE ASSESSEE THE PURCHASES EFFECTED FROM VARIOUS PARTIE S REFERRED TO IN THE STATEMENT OF SHRI TUSHAR RUPAREL CANNOT BE TREA TED AS BOGUS OR PAPER TRANSACTION AS THE SAME WERE SUPPORTED BY PROPER INVOICES AND THE PAYMENT OF THE SAME WERE MADE BY A CCOUNT PAYEE CHEQUES. FURTHER, THE PURCHASE OF GOODS ARE ESTABLI SHED WITH CORRESPONDING SALES MADE TO VARIOUS REPUTED LIMITED COMPANIES WHO ARE REGULARLY ASSESSED TO TAX AND WHO HAVE ALSO CONFIRMED THE SAME. IT WAS ARGUED THAT ALL THE PURCHASES ARE DUL Y SUPPORTED BY PROPER INVOICE GIVING PARTICULARS SUCH AS NAME, ADD RESS, DESCRIPTION OF MATERIAL ETC. THE PARTIES FROM WHOM THE PURCHASES ARE EFFECTED HAVE MENTIONED THEIR TELEPHONE NUMBERS AND ARE DULY REGISTERED UNDER THE STATE SALES TAX ACT AND THE CE NTRAL SALES TAX ACT. DAY TO DAY QUANTITY ACCOUNT OF THE STOCK IS MA INTAINED AND ALL THE ENTRIES IN THE SAME HAVE BEEN DULY SUBMITTED. THE PAYMENT OF SALES ARE ALSO RECEIVED BY ACCOUNT PAYEE CHEQUES FR OM THE LIMITED COMPANIES WHO ARE DULY REGISTERED WITH VARIOUS AUTH ORITIES LIKE VAT, CENTRAL SALES TAX ACT AND ARE ALSO ASSESSED TO INCOME TAX. FURTHER, THE ASSESSEE IS A DEALER UNDER THE STATE L AW AND FILED THE RETURNS UNDER THE SAID ACT IN WHICH SAID PURCHASES ARE PROPERLY 9 DISCLOSED. FURTHER, THE CUSTOMERS VIZ., M/S. KUMAR HOUSING CORPORATION LTD. M/S. ZENITH BIRLA INDIA LTD., M/S. BIRLA POWER SOLUTIONS LTD., M/S. ROSHAN BUILDERS LTD. AND M/S.B IRLA COTSYN LTD. HAVE CONFIRMED THAT THE GOODS MENTIONED IN THE RESPECTIVE DELIVERY CHALLANS HAVE BEEN RECEIVED AT THEIR PREMI SES FROM TIME TO TIME. IT WAS SUBMITTED THAT THE ASSESSEE MAINTAINS QUANTITATIVE INWARD AND OUTWARD TRANSACTION OF PURCHASE OF MATER IAL CONSUMPTION AND SALES WHICH IS MATCHING WITH THE BO OKS OF ACCOUNTS. IT WAS FURTHER SUBMITTED THAT THE RATE A T WHICH THE ASSESSEE HAS PURCHASED THE GOODS ARE COMPARABLE AND IN LINE WITH THE EXISTING RATES OF SIMILAR COMMODITIES OR PRODUC TS IN THE MARKET. 12. HOWEVER, THE AO WAS NOT CONVINCED WITH THE ABOV E SUBMISSIONS MADE BY THE ASSESSEE. HE RELIED HEAVIL Y ON THE REPORT OF THE ADIT WHO HAD STATED THAT THE ABOVE PARTIES H AVE NOT SUPPLIED THE MATERIAL TO THE ASSESSEE AS ACCEPTED B Y THEIR CONTROLLER SHRI TUSHAR RUPAREL AND THE ASSESSEE HAS NOT DISPROVED THE SAME. THEREFORE, MERE FILING OF SOME DOCUMENTS WHOSE AUTHENTICITY IS ALSO NOT PROVED CANNOT TAKE AWAY TH E CATEGORICAL FINDINGS IN THE SURVEY IN ASSESSEES CASE AND ADMIS SION OF SHRI TUSHAR RUPAREL. THE AO FURTHER NOTED THAT THE STAT EMENT OF ALL THESE PARTIES SHOW THAT THE ASSESSEE HAS MADE PURCH ASES THROUGHOUT THE YEAR BUT HAS MADE PAYMENTS BY CHEQUE ONLY TOWARDS THE FAG END OF THE YEAR WHICH HAS BEEN DEPO SITED BY THESE PARTIES ON THEIR RESPECTIVE BANK ACCOUNTS AND CASH WITHDRAWN AGAINST THEM. ON BEING ASKED BY THE AO TO PRODUCE THE COPY OF THE BANK ACCOUNT OF THESE PARTIES THE ASSESSEE COUL D NOT PRODUCE THE SAME. THE ASSESSEE HAS ALSO NOT DISPROVED THA T CASH HAS BEEN WITHDRAWN BY THESE PARTIES AGAINST THE CHEQUES GIVEN BY 10 ASSESSEE AND RETURNED THE CASH TO THE ASSESSEE FOR A COMMISSION WHICH WAS STATED BY SHRI TUSHAR RUPAREL. DISTINGUI SHING THE VARIOUS DECISIONS CITED BEFORE HIM AND REJECTING TH E SUBMISSIONS THE AO MADE ADDITION OF RS.7,11,55,964/- TO THE TOT AL INCOME OF THE ASSESSEE BEING THE PURCHASES MADE FROM THE 7 PA RTIES TREATING THE SAME AS BOGUS. 13. BEFORE CIT(A) THE ASSESSEE MORE OR LESS REITERA TED THE SAME ARGUMENTS AS MADE BEFORE THE AO. IT WAS SUBMITTED THAT THE AO MAINLY AND LARGELY RELIED UPON THE FINDINGS OF SURV EY TEM AND THE STATEMENT OF MR. TUSHAR RUPAREL. IT WAS STATED THA T MR. TUSHAR RUPAREL IS PROPRIETOR OF ONLY ONE CONCERN, I.E. M/S . VSK ENTERPRISES WHEREAS OTHER PERSONS ARE PROPRIETORS O F OTHER 6 CONCERNS. ALTHOUGH MR. TUSHAR RUPAREL HAS STATED T HAT HE IS THE CONTROLLING PERSON OF ALL 6 OTHER PARTIES BUT THAT DOES NOT TAKE AWAY THE FACT THAT HE IS NOT THE PROPRIETOR AND THE REFORE THEIR ARRANGEMENT HAS NOTHING TO DO WITH THE ASSESSEE. TH E ASSESSEE SUBMITTED THAT THE OTHER 6 CONCERNS ARE OWNED BY 6 DIFFERENT INDIVIDUALS AND THEREFORE MERELY BASED ON THE STATE MENT OF MR. TUSHAR RUPAREL THAT HE IS THE CONTROLLING PERSON CA NNOT BE THE BASIS OF THE ADDITION IN THE HANDS OF THE ASSESSEE. 14. IT WAS SUBMITTED THAT ON THE BASIS OF THE NOTIC E SENT BY THE AO U/S.133(6) OF THE I.T. ACT ALL THE ABOVE 7 PARTI ES HAVE SUBMITTED THE ACCOUNT EXTRACTS MENTIONING THE SALES REPORTED TO THE ASSESSEE. THUS THERE IS CONFIRMATION OF THE TRANSACTIONS FROM ALL 7 PARTIES WHICH IS SUBSEQUENT TO THE DATE OF STATEMENT OF MR. TUSHAR RUPAREL. THUS, IT IS A CASE OF HOSTILE WITNESS AND THEREFORE THE STATEMENT OF MR. TUSHAR RUPAREL CANNOT BE THE BASIS OF THE ADDITION WITHOUT GOING THROUGH THE PROCESS OF CROSS EXAMINATION EITHER BY THE AO OR BY THE ASSESSEE. 11 15. AS REGARDS THE ALLEGATION OF THE AO THAT THE PA RTIES WERE NOT PRODUCED BEFORE HIM IT WAS SUBMITTED THAT THE SURVE Y WAS CARRIED OUT ON MR. TUSHAR RUPAREL ON 08-12-2007 AND ON THE ASSESSEE ON 28-12-2007. THUS, THERE WAS ONLY A GAP OF 20 DAYS. THE SURVEY PARTY CONDUCTING THE SURVEY ON BOTH MR. TUSHAR RUPA REL AS WELL AS THE ASSESSEE WAS THE SAME. ALTHOUGH THERE WAS HARD LY A GAP OF 20 DAYS BETWEEN THE SURVEY CONDUCTED IN THE BUSINESS O F MR. TUSHAR RUPAREL AS WELL AS THE ASSESSEE AND THE STATEMENT O F MR. TUSHAR RUPAREL WAS SHOWN TO THE ASSESSEE, HOWEVER, THE SUR VEY PARTY DID NOT ISSUE SUMMONS TO MR. TUSHAR RUPAREL FOR EXAMINA TION/CROSS EXAMINATION BY THE ASSESSEE OR VICE VERSA. THUS, T HE OPPORTUNITY AVAILABLE WITH THE SURVEY PARTY WAS NOT CARRIED OUT . EVEN DURING SURVEY ACTION AT THE PLACE OF THE ASSESSEE SHRI NIL ESH RATHOD, DIRECTOR OF THE ASSESSEE HAD CATEGORICALLY REFUSED THE CHARGE THAT THE PURCHASES ARE BOGUS AND THAT NO CASH/MONEY HAS FLOWN BACK TO THE COMPANY. 16. IT WAS SUBMITTED THAT DURING THE COURSE OF SURV EY AT THE PREMISES OF THE ASSESSEE NO INCRIMINATING DOCUMENTS WERE FOUND NOR WAS THERE ANY UNACCOUNTED ASSET LIKE CASH. THE CASH FOUND AT THE PREMISES WAS RECONCILED WITH THE CASH AS PER BO OKS OF ACCOUNT AND NO DIFFERENCE WAS FOUND OUT. IT WAS SUBMITTED THAT THE STATEMENT OF MR. TUSHAR RUPAREL RELIED UPON BY THE AO, IS A STATEMENT OF THIRD PARTY WHICH CANNOT BE APPLIED WI THOUT THE SAME BEING EXAMINED AND SCRUTINIZED WITH EVIDENCE. VARI OUS DECISIONS WERE ALSO RELIED UPON TO THE PROPOSITION THAT STATE MENT RECORDED U/S.133A CANNOT BE USED AS EVIDENCE WITHOUT ITS COR ROBORATION BY ANY OTHER EVIDENCE TO PROVE THE CORRECTNESS THERETO . 12 17. AS REGARDS THE CONTENTION OF THE AO THAT THE AS SESSEE HAS NOT PRODUCED THE PARTIES FROM WHOM PURCHASES WERE M ADE IT WAS SUBMITTED THAT ALL THOSE SUPPLIERS HAD SUBMITTED VA RIOUS DETAILS SUCH AS VENDOR REGISTRATION FORM, PAN CARD COPIES O F THE PARTNERS/ PROPRIETORS, SALES TAX REGISTRATION NUMBER, ACCOUNT CONFIRMATION STATEMENTS ETC. TO SUBSTANTIATE THE SALES MADE BY T HEM TO THE ASSESSEE. EVEN THE SURVEY PARTY HAD ALSO IMPOUNDED THE INVOICES OF THE ABOVE PARTIES. FURTHER, THEY HAVE RESPONDED TO THE NOTICE ISSUED TO THEM U/S.133(6). THE ASSESSEE REITERATED THE SUBMISSIONS AS MADE BEFORE THE AO STATING THAT ASSE SSEE HAD PRODUCED DOCUMENTARY EVIDENCE ABOUT ACTUAL SUPPLY O F MATERIAL BY THE ABOVE PARTIES BY FURNISHING THE CONFIRMATION FROM THE CUSTOMERS REGARDING THE RECEIPT OF GOODS AT THE SIT E AND CONSUMPTION THEREOF. IT WAS SUBMITTED THAT THE CON TRACTS WITH THE 5 CUSTOMERS WERE LUMPSUM CONTRACT INCLUDING MATERIA L AND THE PURCHASE FROM THE AFORESAID PARTIES WAS ALL FOR THE ABOVE 5 CUSTOMERS. IT WAS SUBMITTED THAT GOODS COSTING ABO UT RS.1,03,50,725/- WERE PURCHASED AND WERE STORED IN VIKROLI GODOWN. THE CLOSING STOCK AS ON 31-03-2007 AS PER BALANCE SHEET WAS RS.3,76,96,589/- WHICH INCLUDED THE STOCK AT VI KROLI GODOWN OF RS.92,04,200/-. THE SAID MATERIALS WERE PURCHASE D FROM M/S. NEELAM ENTERPISE, APPLE INDIA MARKETING, SUN ENTERP RISE AND SAMARTH TRADING COMPANY. OUT OF THESE PURCHASES, A N AMOUNT OF RS.92,04,200/- BEING THE BASIC VALUE OF PURCHASES W AS INCLUDED IN THE CLOSING STOCK. THE BALANCE AMOUNT OF RS.11,50, 525/- REPRESENT THE VAT FOR WHICH VAT CREDIT WAS AVAILED. IT WAS ARGUED THAT IF THE ABOVE PURCHASES FROM THE AFORESAID PART IES IS TREATED AS BOGUS, THE CLOSING VALUE OF RS.92,04,200/- WAS ALSO NOT EXISTENT AND THEREFORE THE ADDITION SHOULD NOT HAVE BEEN MAD E FOR RS.1,03,54,725/- AS THERE WAS NO PURCHASES AND THER EFORE THERE 13 WAS NO CLOSING STOCK. THE ASSESSEE FURTHER SUBMITT ED THAT THE ADDITION MADE BY THE AO AMOUNTING TO RS.7,11,55,964 /- INCLUDES VAT OF RS.79,06,218/-. AS PER THE ACCOUNTING POLIC Y FOLLOWED BY THE ASSESSEE THE PURCHASES DEBITED TO THE PROFIT AN D LOSS ACCOUNT IS NET OF VAT, I.E. EXCLUSIVE OF VAT. ACCORDINGLY, OUT OF THE ABOVE PURCHASES OF RS.7,11,55,964/- THE ACTUAL DEBIT TO T HE PROFIT AND LOSS ACCOUNT IS RS.6,32,49,746/-. THEREFORE, IN AN ALTERNATE CONTENTION, IT WAS ARGUED THAT ADDITION, IF ANY, CA N BE MADE ONLY TO THE EXTENT OF RS.6,32,49,746/- AND NOT RS.7,11,55,9 64/-. 18. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO WH O REITERATED THAT THE PURCHASES MADE BY THE ASSESSEE ARE BOGUS A ND THE SUBMISSION OF THE ASSESSEE ARE NOT ACCEPTABLE. THE AO ACCORDINGLY REQUESTED THAT THE ASSESSMENT ORDER SHOULD BE UPHE LD. 19. THE LD.CIT(A) FORWARDED A COPY OF THE REMAND RE PORT TO THE ASSESSEE AND CALLED FOR HIS COMMENTS. AFTER CONSIDE RING THE SUBMISSIONS MADE BY THE ASSESSEE, THE COMMENTS OF T HE AO IN THE REMAND REPORT AND THE COMMENTS OF THE ASSESSEE TO S UCH REMAND REPORT THE LD.CIT(A) HELD 50% OF THE PURCHASES OF RS.7,11,55,964/- AS BOGUS AND ALLOWED RELIEF OF RS. 3,55,77,982/-. WHILE DOING SO, HE OBSERVED THAT THE STATEMENTS OF MR. TUSHAR RUPAREL AND 3 OTHER PERSONS SHOW THAT THEY WERE ISS UING BILLS WITHOUT DELIVERY OF GOODS, WERE DEPOSITING CHEQUES AND WITHDRAWING CASH AND RETURN IT TO THE ASSESSEE AFTE R DEDUCTING THEIR COMMISSION FOR SERVICE, HAD NO REGULAR SITE F OR CARRYING ON THE BUSINESS OF GENUINELY SUPPLYING MATERIALS, NON- MAINTENANCE OF BOOKS OF ACCOUNT, AND THEREFORE WHAT WAS BEING ADMI TTED BY HIM AND OTHERS WERE LOOKING TO BE CORRECT ON THE FACE O F IT. THE EVIDENCE GATHERED BY THE INVESTIGATION UNIT AT THE END OF THE 14 SUPPLIER WERE QUITE CLEARLY SHOWING THAT THE ASSESS EE WAS ENGAGED IN TAKING BOGUS BILLS FROM THE CONCERNS OF MR. TUSH AR RUPAREL. 20. HOWEVER, HE ALSO OBSERVED THAT WHEN THE EVIDENC ES GATHERED AT THE END OF THE ASSESSEE DURING THE COURSE OF FOL LOW UP SURVEY CONDUCTED SUBSEQUENTLY IS LOOKED INTO IT IS ALSO NO T DIFFICULT TO SEE THAT NOT MUCH OF ADVERSE COMPLIMENTARY EVIDENCE COU LD BE FOUND WHEN THE SURVEY WAS CONDUCTED AT THE PREMISES OF TH E ASSESSEE ON 28-12-2007. IT IS POSSIBLE THAT IN THE INTERVENING PERIOD OF 20 DAYS THE ASSESSEE HAS TAKEN CARE OF ALL THE ADVERSE EVID ENCES BUT STILL THE DDIT(INVESTIGATION) AND THE AO HAD THE RESPONSI BILITY TO ESTABLISH THE COMPLEXITY OF THE ASSESSEE TO THE AFF AIRS ACCEPTED BY MR. TUSHAR RUPAREL TO THE EXTENT POSSIBLE. ACCORDI NG TO LD.CIT(A) IT SHOULD HAVE BEEN DEMONSTRATED THAT ALL ADMISSION S WERE MADE TO REACH TO THE BOTTOM AND DUE PROCESS WAS FOLLOWED . WHAT WAS FOUND WERE ONLY INDICATING WEAKNESSES IN THE MAINTE NANCE OF RECORDS IN RESPECT OF PURCHASES MADE FROM THE ABOVE REFERRED IMPUGNED PURCHASERS. BY NOT TAKING THE INVESTIGATI ONS TO THE LOGICAL END AT THE RELEVANT POINT OF TIME ON THE LE ADS FOUND AT THE PREMISES OF MR. TUSHAR RUPAREL, FOR THE REASONS WHI CH IS NOT EXPRESSLY MENTIONED ANYWHERE, A SITUATION HAS REACH ED WHEREIN IT HAS BECOME DIFFICULT TO HOLD CONCLUSIVELY THAT THE ENTIRE PURCHASES ARE BOGUS OR ARE GENUINE IN THE FACTS AND CIRCUMSTA NCES OF THE CASE WHICH IS APPARENT FROM THE RIVAL SUBMISSIONS. 21. HE OBSERVED FROM THE PERUSAL OF THE INVESTIGATI ONS CARRIED OUT BY THE DDIT (INVESTIGATION) AND THE AO AND EVEN DURING REMAND PROCEEDINGS THAT IT IS CLEAR THAT THEY PREFE RRED TO FOLLOW THE EASIER PATH OF DEPENDING ON THE LEGAL ONUS CAST ON THE ASSESSEE TO ESTABLISH THE PURCHASES IN THE LIGHT OF THE EVIDENC ES GATHERED WHICH WAS CLEARLY INDICATING THAT THE ASSESSEE WAS INVOLVED IN 15 PURCHASING BOGUS BILLS. SIMILARLY, THE EVIDENTIARY VALUE OF THE ORAL EVIDENCE GATHERED IN THE STATEMENT RECORDED ON OATH U/S.131 OF THE I.T. ACT WAS ALSO COMPROMISED BY NOT PROVIDING THE OPPORTUNITY TO CROSS EXAMINE MR. TUSHAR RUPAREL AND OTHERS FROM WHOM VALUABLE EVIDENCES WERE GATHERED. IT IS ALSO NOT A PPARENT FROM THE RECORD AS TO WHY WAS THIS DONE. IF IT WAS FOR THE FEAR THAT MR. TUSHAR RUPAREL AND OTHERS MAY DILUTE OR REVERT FROM THE EARLIER STATEMENT GIVEN ON OATH, STILL IT WAS REQUIRED BECA USE THE SUPERIOR COURTS HAVE UNEQUIVOCALLY UPHELD IN MANY CASES THAT CROSS EXAMINATION IS A SINE QUA NON OF THE DUE PROCESS OF TAKING EVIDENCE AND NO ADVERSE INTERFERENCE CAN BE DRAWN U NLESS THE PARTY IS PUT ON NOTICE OF THE CASE MADE OUT AGAINST HIM AND OPPORTUNITY TO CROSS EXAMINE IS GRANTED. THE RESPO NSIBILITY OF THE AO IS TO ARRIVE AT THE CORRECT POSITION OF THE ASSE SSMENT BY FOLLOWING THE PROPER PROCESS OF LAW AND THE CANNOT BE IGNORED FOR FEAR OF AN ADVERSE SITUATION. IN VIEW OF THESE DEF ICIENCIES THE ORAL EVIDENCE WHICH IS ONLY PARTLY SUPPORTED BY OTHER CI RCUMSTANTIAL OR DOCUMENTARY EVIDENCE RELIED BY THE AO AND PARTLY DI SPROVED BY CIRCUMSTANTIAL AND OTHER INDIRECT EVIDENCES RELIED UPON BY THE ASSESSEE HAS LOST ITS TRUE POTENTIAL TO STAND UP ON A STAND ALONE BASIS AND LEAD TO A PARTICULAR CONCLUSION. ACCORDI NG TO THE LD.CIT(A) THE STATEMENT ON OATH U/S.131 GIVEN BY MR . TUSHAR RUPAREL AND OTHERS IN ITSELF WERE QUITE STRONG TO S UBSTANTIALLY NAIL THE ASSESSEE HAD THE OPPORTUNITY TO CROSS EXAMINE W AS GRANTED TO THE ASSESSEE. HOWEVER, SINCE THE SAME WAS NOT DONE THE CASE HAS TO BE DECIDED CONSIDERING OTHER EVIDENCES PLACED ON RECORD BY THE RIVAL SIDES. RELYING ON VARIOUS DECISIONS THE LD.C IT(A) OBSERVED THAT UNDER THE INCOME-TAX PROCEEDINGS THE STRICT RU LES OF EVIDENCE ARE NOT APPLICABLE FOR ARRIVING AT THE CORRECT DECI SION (CHUHARMAL VS. CIT REPORTED IN 172 ITR 250 (SC). 16 22. CONSIDERING THE TOTALITY OF THE FACTS OF THE C ASE THE LD.CIT(A) FURTHER OBSERVED THAT THERE ARE STRENGTHS AND WEAKN ESSES IN THE EVIDENCES AND THE ARGUMENTS OF BOTH THE SIDES AND I T IS NOT POSSIBLE TO HOLD EITHER THE AO OR THE ASSESSEE AS F ULLY CORRECT IN THEIR CLAIMS. HE OBSERVED THAT ALTHOUGH THE EVIDE NCES FORWARDED BY THE AO WAS OVERWHELMINGLY AGAINST THE ASSESSEE B UT THE ENTIRE DISALLOWANCE CANNOT BE SUSTAINED AS NO ANSWER COULD BE FOUND BY THE AO TO THE ARGUMENTS MADE THAT THE CONTRACTS CAN NOT BE EXECUTED WITHOUT THE PURCHASES WHICH ARE BEING DISA LLOWED BY THE AO. HE OBSERVED THAT EVEN IF THE SITE WISE PURCHAS ES AND CONSUMPTION PREPARED AND SUBMITTED BY THE ASSESSEE IS NOT CONSIDERED TO BE RELIABLE FOR DETERMINATION THE ALL OWABILITY OF PURCHASES IN VIEW OF CERTAIN EVIDENCES FOUND, MAKIN G BOOKS OF THE ASSESSEE UNRELIABLE BUT THE OVER ALL SALES AND PURC HASES WILL HAVE TO BE CONSIDERED TO DETERMINE THE REASONABLE AMOUNT OF PURCHASES WHICH MUST HAVE GONE INTO THE EXECUTION OF THE CONT RACT OF THIS ASSESSMENT YEAR. 23. THE LD.CIT(A) CONSIDERED THE PROFIT DISCLOSED B Y THE ASSESSEE AGAINST THE SALES AND OBSERVED THAT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE THE DISALLOWANCE OF RS.7, 11,55,964/- CANNOT BE MADE SINCE THE ASSESSEE CANNOT COMPLETE T HE JOB OF RS.35 CRORES WITH MATERIAL CONSUMPTION OF ONLY RS.5 .5 CRORES. HE FURTHER OBSERVED THAT STATEMENT OF BABU SUTAR, PROP . OF SUN ENTERPRISES, MR. GOPAL SUTAR, PROP. OF M.R. CORPORA TION AND SMT. NEELIMA T. RUPAREL, PROP. OF NEELAM ENTERPRISES WER E NOT RECORDED EVEN BY THE INVESTIGATION UNIT OR BY THE AO. THE P URCHASES MADE FROM THESE CONCERNS ARE OF RS.1,00,40,207/-, RS.1,3 8,49,532/- AND RS.47,24,390/- RESPECTIVELY. EVEN THOUGH OTHE R EVIDENCES 17 GATHERED IN RESPECT OF ALL THESE CONCERNS WERE ADVE RSE ENOUGH TO CAST HEAVY ONUS ON THE ASSESSEE BUT THE EVIDENCES I N RESPECT OF THESE CONCERNS ARE DEFINITELY ON A WEAKER FOOTING, THOUGH THE OTHER CONCERNS WHOSE OWNERS WERE ALSO EXAMINED ON OATH U/ S.133(4). CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, THE LD.CIT(A) WAS OF VIEW THAT 50% RELIEF CAN BE GRANTED TO THE ASSES SEE AND THE EXTENT OF BOGUS PURCHASES CAN BE RESTRICTED TO 50% OF THE ADDITIONS. HE FURTHER NOTED THAT AFTER THIS ADDITI ON THE NET PROFIT COMES TO THE VICINITY OF APPROXIMATELY 15% TO 16% W HICH CAN BE CONSIDERED TO BE FAIR AND REASONABLE FOR A CASE WHE RE EVIDENCES FOR ARRANGING BOGUS BILLS WERE FOUND AND THE ASSESSEE F AILED TO DISCHARGE THE HEAVY ONUS CAST ON IT TO REBUT THE AP PARENT SO FOUND AT THE END OF THE IMPUGNED SUPPLIERS. HE ALSO DIRE CTED THE AO TO EXAMINE THE BOOK AND IF THE VAT IS NOT DEBITED IN T HE PROFIT AND LOSS ACCOUNT AS PART OF MATERIALS PURCHASED THEN TH E DISALLOWANCE SHOULD BE RESTRICTED TO THE PURCHASES (-) VAT. THUS , HE DIRECTED THE AO TO DISALLOW 50% OF THE PURCHASES SHOWN FROM THE 7 PARTIES AFTER REDUCING THE VAT AS BOGUS/INFLATED OR UNSUBST ANTIATED PURCHASES. 24. AGGRIEVED WITH SUCH PART RELIEF GIVEN BY THE CI T(A) THE ASSESSEE AS WELL AS THE REVENUE ARE IN APPEAL BEFOR E US WITH THE FOLLOWING GROUNDS : GROUNDS BY ASSESSEE : 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - I, PUNE [CIT(A)] ERRED IN CONFIRMING THE DISALLOWANCE OF 50% OF THE SO CALLED BOGUS PURCHASES OF RS.7,11,55,964 I.E. RS.3,55,77,982. YOUR APPELLANT SUBMITS THAT ENTIRE PURCHASES OF RS.7,11, 55,964 ARE GENUINE PURCHASES AND THE SAME OUGHT TO HAVE BEEN ALLO WED. 2. THE LEARNED CIT(A) ERRED IN NOT EXCLUDING THE AM OUNT OF CLOSING STOCK OF MATERIAL PURCHASED FROM SO CALLED BOGU S PARTIES WHILE COMPUTING THE INCOME. 18 YOUR APPELLANT SUBMITS THAT IF THE PURCHASES FROM THE PARTIES OR PART THEREOF ARE TREATED AS BOGUS, THE CLOSING STOCK REPRESENTING THE SAID SO CALLED BOGUS PURCHASES OUGHT TO BE REDUCED FROM THE TOTAL PURCHASES AND ONLY THE NET PURCHASES AFTER REDUCING THE CLOSING STOCK OUGHT TO BE CONSIDERED FOR DISALLOWANCE. 3. THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE EVIDENCES PRODUCED BY THE APPELLANT AND MAKING VARIOUS OBSERVAT IONS WITHOUT SUBSTANTIATING THE SAME. YOUR APPELLANT SUBMITS THAT THE OBSERVATIONS OF THE LEA RNED CIT(A) ARE NOT SUPPORTED BY ANY EVIDENCES AND ARE MADE IN DISREGA RD OF THE PRINCIPLES OF NATURAL JUSTICE. YOUR APPELLANT SUBMITS THAT THE ENTIRE ADDITION OF RS. 7,11,55,964 OUGHT TO BE DELETED AS AGAINST 50% THEREOF AS HELD BY CIT(A). 4. YOUR APPELLANT CRAVES LEAVES TO ADD TO, ALTER, AME ND OR VARY ALL OR ANY OF THE AFORESAID GROUND OF APPEAL AS THEY/THEI R REPRESENTATIVE MAY DEEM FIT. GROUNDS BY REVENUE : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A)-I, PUNE HAS ERRED IN DIRECTING TO AL LOW 50% OF PURCHASES MADE FROM SEVEN PARTIES WHICH WERE TREATE D AS BOGUS PARTIES BY THE A.O. & DDIT (INV). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED CIT(A)-I, PUNE FAILED TO CONSIDER THAT THE ASSESSEE COULD NOT PRODUCE THE PARTIES IN QUESTION BEFORE THE SURV EY PARTY NOR BEFORE THE A.O. DURING THE SCRUTINY PROCEEDINGS. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD.CIT(A) FAILED TO CONSIDER THAT SHRI TUSHAR RUPAR EL WHO WAS CONTROLLER OF IMPUGNED PARTIES HAS ADMITTED IN HIS STATEMENT ON OATH THAT HE WAS ENGAGED IN THE ACTIVITY OF PROV IDING ACCOMMODATION ENTRIES/ BOGUS BILLS ONLY IN THE NAME OF 7 PARTIES ON THE REQUEST OF CUSTOMERS AND HAD NEVER M ADE ACTUAL PURCHASES OR SALES. 4. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LD. COMMISSIONER OF INCOME- TAX(APPEALS) MAY BE VACATED AND THAT OF THE ASSESSI NG OFFICER BE RESTORED. 5. THE APPELLANT CRAVES TO ADD, AMEND, ALTER OR DEL ETE ANY OF THE ABOVE GROUND OF APPEAL DURING THE COURSE OF APP ELLATE PROCEEDINGS BEFORE THE HON'BLE TRIBUNAL. 25. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY OPPOS ED THE ORDER OF THE CIT(A) SUSTAINING 50% OF THE DISALLOWANCE. REFERRING TO PAGE 6 OF THE ORDER OF THE CIT(A) THE LD. COUNSEL FOR TH E ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE DETAILS OF PURCHA SES MADE FROM THE 7 PARTIES TOTALING TO RS.7,11,55,964/- WHICH WA S DISALLOWED BY THE AO. REFERRING TO PAGES 139 TO 222 OF THE PAPER BOOK THE LD. 19 COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE BEFORE TH E LOWER AUTHORITIES SUBSTANTIATING THE GENUINENESS OF THE P URCHASES. REFERRING TO PAGE 139 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE PURCHASE OF GOODS FROM M/S. M.R. C ORPORATION AMOUNTING TO RS.4,54,140/-. REFERRING TO PAGE 140 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE BILL RAISED BY M/S. M.R. CORPORATION VIDE INVOICE NO.001347 DATED 09-10 -2006. REFERRING TO 141 OF THE PAPER BOOK HE DREW THE ATTE NTION OF THE BENCH TO THE GOODS RECEIVED CUM INSPECTION NOTE VID E RC NO.4 CHALLAN NO.1347 DATED 09-10-2006. REFERRING TO PAG E 142 OF THE PAPER BOOK HE DREW THE ATTENTION OF THE BENCH TO TH E DELIVERY CHALLAN OF M/S. M.R. CORPORATION WHICH HAS GONE TO THE SITE OF BIRLA COTSYN (INDIA) LTD. WHICH ALSO CONTAINS THE S TAMP OF BIRLA COTYSN (INDIA) LTD. REFERRING TO PAGE 143 OF THE P APER BOOK HE DREW THE ATTENTION OF THE BENCH TO THE PURCHASE ORD ER RAISED ON M/S. M.R. CORPORATION. REFERRING TO SUBSEQUENT PAG ES THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN THE GO ODS HAVE COME TO THE PLACE OF THIRD PARTY SUCH AS BIRLA COTS YN (INDIA) LTD., KUMAR HOUSING CORPORATION LTD., ZENITH BIRLA INDIA LTD., BIRLA POWER SOLUTIONS LTD., ROHAN BUILDERS LTD. ETC., WHI CH HAVE BEEN AUTHENTICATED BY THESE COMPANIES, THEREFORE, THE SA ME SHOULD NOT HAVE BEEN DISBELIEVED. HE FILED THE FOLLOWING DETA ILS AND EXPLAINED THE PURCHASES FROM THE 7 PARTIES AND THEIR DESTINAT ION. CUSTOMER WHERE GOODS CONSUMED /DELIVERED........ . PURCHASE FROM...... KUMAR HOUSING LTD. ZENITH BIRLA (I) LIMITED ROHAN BUILDERS BIRLA COTSYN LIMITED VIKROLI GODOWN (INVENTORY) BIRLA POWER SOLUTIONS LTD. SUMMARY OF FIRM WISE PURCHASE SAMARTH TRADING COMPANY -- 381,294.00 2,651,848.00 545,669.00 2,559,776.00 1,676,842.00 7,815,429.00 MR CORPORATION 2,618,382.00 3,370,051.00 1,545,971.00 3,450,936.00 -- 2,864,192.00 13,849,532.00 20 SUN ENTERPRISES 617,203.00 1,702,508.00 533,871.00 594,011.25 1,252 ,224.00 5,340,390.00 10,040,207.25 APPLE INDIA MARKETING -- -- -- -- 1,818,336.00 6,480,588.00 8,298,924.00 NEELAM ENTERPRISES -- -- -- -- 4,724,390.00 -- 4,724,390.00 VSK ENTERPRISES -- 6,284,208.00 886,417.00 -- -- -- 7,170,625.00 KUSHI ENTERPRISES 3,798,716.00 -- 6,436,332.00 1,647,004.00 -- 7,374,805.00 19,256,857.00 CUSTOMER WISE PURCHASES. 7,034,301.00 11,738,061.00 12,054,439.00 6,237,620.25 10,354,726.00 23,736,817.00 71,155,964.25 26. AS REGARDS THE ALLEGATION OF THE LD.CIT(A) THAT THE GOODS RECEIVED NOTE ARE MADE BY THE ASSESSEE HE SUBMITTED THAT THE GOODS ARE RECEIVED ON MY BEHALF BY THESE CONCERNS. ALTHOUGH IT MAY NOT HAVE BEEN SIGNED BY THE PROJECT MANAGER, WH ICH MAY BE DUE TO HIS ABSENCE, HOWEVER, THE SAME CANNOT BE A GROUND TO REJECT THE CLAIM OF THE ASSESSEE SINCE THE SECURITY PERSONNEL OF THE COMPANIES WHERE THE WORK WAS GOING ON HAVE AUTHENTI CATED THE RECEIPTS OF SUCH GOODS IN THEIR PREMISES. FURTHER, THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES. THERE IS NO EVIDENCE THAT THE MONEY HAS COME BACK TO THE ASSESSEE. REFE RRING TO PAGES 17 TO 32 OF THE PAPER BOOK THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE CONFIRMATIONS GIV EN BY THE ASSESSEE TO THE VARIOUS SUPPLIERS AND THOSE PARTIES HAVE ACCEPTED THE SAME AND SIGNED AS A TOKEN OF THEIR ACCEPTANCE WITH THEIR PAN NOS. REFERRING TO PAGES 107 TO 128 OF THE PAPER TH E LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE SALES TAX REGISTRATION NO. VAT NO. PAN NO. ETC. OF THE SUPPLI ERS. HE SUBMITTED THAT THE ASSESSEE HAS EXECUTED THE WORK F OR REPUTED COMPANIES AND THOSE PARTIES HAVE CERTIFIED THAT THE GOODS HAVE BEEN RECEIVED IN THEIR PREMISES. FURTHER, ALL THOS E PARTIES ARE NOT RELATED TO THE ASSESSEE. THE LD. COUNSEL FOR THE A SSESSEE 21 SUBMITTED THAT FOR THE ASSESSMENT YEAR THE ASSESSEE HAS EARNED GP OF 36.93% AND NET PROFIT OF 17.18%. IF THE ADDI TION AS MADE BY THE AO IS CONFIRMED, THEN THE GROSS PROFIT COMES TO 57.21% AND THE NET PROFIT COMES TO 37.41% FOR A.Y.2007-08. SI MILARLY, AS AGAINST GP OF 36.87% AND NET PROFIT OF 2.93% FOR A. Y. 2008-09 THE ADDITION SO MADE BY THE AO GIVES THE G.P. OF 47.81% AND NET PROFIT OF 13.86%. 27. THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTEN TION OF THE BENCH TO THE FOLLOWING CHART GIVING COMPARABLE PRO FITABILITY OF THE ASSESSEE AND OTHER PERSONS ENGAGED IN SIMILAR LINE OF BUSINESS : (RS. IN LACS) PARTICULARS ARCHDEEP INTERIOR PVT. LTD. CHERRY HILL INTERIOR LTD., A.Y.2007-08 A.Y.2008-09 A.Y.2007-08 A.Y.2008-09 SALES & OTHER RECEIPT 3278.36 2409.69 6530.18 8140.46 NET PROFIT BEFORE TAX 150.34 124.68 479.07 420.99 NET PROFIT % 4.59% 5.17% 7.34% 5.17% ENSEMBLE NET PROFIT % 16.88% 5.49% 16.88% 5.49% 28. REFERRING TO THE ABOVE CHART WHERE TWO OTHER CO MPETITORS ENGAGED IN SIMILAR LINE OF BUSINESS, THE LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT IN THE CASE OF ARCHDEEP INT ERIOR PVT. LTD. THE NET PROFIT FOR A.Y. 2007-08 IS SHOWN AT 4.59% A ND FOR A.Y. 2008-09 AT 5.17%. SIMILARLY, IN THE CASE OF CHERRY HILL INTERIOR LTD. THE NET PROFIT IS SHOWN AT 7.34% FOR A.Y. 2007 -08 AND 5.17% FOR A.Y. 2008-09. HE ACCORDINGLY SUBMITTED THAT TH E NET PROFIT SHOWN BY THE ASSESSEE FOR A.Y.2007-08 AT 16.88% AND FOR 2008-09 AT 5.49% BEING HIGHER THAN THAT OF THE NET PROFIT D ECLARED BY HIS COMPETITORS, THE SAME SHOULD NOT HAVE BEEN DOUBTED. 29. REFERRING TO THE CHART SHOWING THE CUSTOMER WIS E WORK DONE WHERE THE GOODS PURCHASED FROM THE 6 PARTIES ARE UT ILISED, THE LD. 22 COUNSEL FOR THE ASSESSEE SUBMITTED THAT IF THE ADDI TIONS SO MADE BY THE AO IS SUSTAINED THEN THE PROJECT-WISE PROFIT WILL BE MORE THAN 90% AND IN SOME CASES ABOVE 99% WHICH IS JUST NOT POSSIBLE. 30. HE SUBMITTED THAT ON THE BASIS OF VARIOUS DETAILS FURNIS HED BY THE ASSESSEE THE LD.CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. HOWEVER, THE REPORT OF THE AO DOES NOT SAY THAT WHAT THE ASSESSEE WAS SAYING IS WRONG. HE SUBMITTED THAT THE AO HAS BASICALLY HEAVILY RELIED ON THE STATEMENT OF MR. TUSHAR RU PAREL WHOSE STATEMENT WAS RECORDED DURING THE COURSE OF SUR VEY. HE SUBMITTED THAT MR. TUSHAR RUPAREL HAS EVADED SALES TAX FOR WHICH THE ASSESSEE SHOULD NOT BE PENALISED. HE SUBMITTED THAT ALL PURCHASES ARE GENUINE. THE DELIVERY OF GOODS HAVE BEEN ACCEPTED BY THE THIRD PARTY. WITHOUT THE MATERIAL THE ASSESSEE C OULD NOT HAVE EXECUTED THE WORK. THE ASSESSEE IS NOT CONCERNED FROM WH ERE MR. TUSHAR RUPAREL HAS PURCHASED THE GOODS. AS LONG AS THE ASSESSEE GETS THE MATERIAL AS PER THE ORDERS PLACED, IT IS IMMATERIAL FOR THE ASSESSEE AS TO FROM WHERE THE SUPPLIER HAS PURC HASED THE GOODS. REFERRING TO PAGES 229 TO 234 OF THE PAPER BOO K WHICH IS THE LETTER ADDRESSED TO THE AO ON 30-12-2009 THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FO LLOWING LINES (PAGE 233 OF THE PAPER BOOK) : WE WOULD ALSO LIKE TO REQUEST TO YOUR GOODSELF THAT WE W ANT TO CROSS EXAMINE ALL THE ABOVE PARTIES IN FRONT OF YOUR GOODSELF TO FURTHER PROVE OUR GENUINENESS OF THE TRANSACTIONS. YOU ARE THEREFORE REQUESTED TO KINDLY LET US KNOW THE DAY & TIME FOR CROSS EXAMINATION. 31. REFERRING TO THE DECISION OF THE PUNE BENCH OF THE TRIB UNAL IN THE CASE OF GOPAL PULSE PROCESSORS PVT. LTD. VIDE ITA NOS. 708 AND 636/PN/2001 ORDER DATED 29-09-2006 THE LD. COUNS EL FOR THE ASSESSEE SUBMITTED THAT UNDER IDENTICAL CIRCUMSTANCES W HEN THE 23 ASSESSEE COULD NOT PRODUCE THE SUPPLIERS FOR WHICH THE A O DISBELIEVED THE PURCHASES AS BOGUS, THE TRIBUNAL DELETED T HE ADDITION/DISALLOWANCE ON THE GROUND THAT IF ENTIRE PURCHAS ES WERE TREATED AS BOGUS AND EXCLUDED FROM THE MANUFACTURING PR OCESS, YIELDS RESULTING THERE FROM WOULD BE ABNORMAL AS COMPARED TO THAT OF PRECEDING YEARS. REFERRING TO THE DECISION OF THE HONB LE HIGH COURT FOR THE SAME CASE VIDE ITA NO.26/2007 ORDER DATE D 17-03- 2009 HE SUBMITTED THAT ON FURTHER APPEAL FILED BY THE REV ENUE THE HONBLE HIGH COURT DISMISSED THE APPEAL FILED BY THE REVENU E HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW AROSE. REFERRING TO THE DECISION OF THE CHANDIGARH BENCH OF THE TRIBUNAL (THIRD MEM BER) IN THE CASE OF J.R. SOLVENT INDUSTRIES PVT. LTD., VS. ACIT RE PORTED IN 68 ITD 65 (TM) HE SUBMITTED THAT THE TRIBUNAL IN THE SA ID DECISION HAS HELD THAT PURCHASE OF MATERIALS FROM AN UNIDENTIFIED SUP PLIERS CANNOT BE TREATED AS BOGUS WHEN IT IS ESTABLISHED FROM D AY TO DAY RECORDS THAT THE SAID QUANTITY WENT INTO PRODUCTION AND THE PRODUCTION AND SALES HAVE BEEN ACCEPTED BY THE DEPART MENT. REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUN AL IN THE CASE OF BALAJI TEXTILE INDUSTRIES PVT. LTD. VS. ITO REP ORTED IN 49 ITD 177 HE SUBMITTED THAT THE TRIBUNAL IN THE SAID DECISIO N HAS DELETED THE ADDITION MADE BY THE AO AND UPHELD BY THE C IT(A) ON ACCOUNT OF PURCHASES FROM UNTRACEABLE PARTIES TREATING S AME AS BOGUS ON THE GROUND THAT WHEN THE SAME ARE RECORDED IN BOOKS OF BOTH THE PARTIES, PURCHASES HAVE TO BE BELIEVED. HE ALS O RELIED ON THE FOLLOWING DECISIONS : 1. ITO VS. CHAUDHARI IFTEKHAR AHMAD RAMZANALI ITA NOS. 1056 AND 1190/PN/2011 ORDER DATED 18-09-2013 2. MRS. NURMA RUKMANGAD BAWANE VS. ITO ITA NO.637/PN/2010 ORDER DATED 20-06-2012 3. CIT VS. M/S. NANGALIA FABRICS PRIVATE LTD. TAX APPEAL NO.689 OF 2010 ORDER DATED 22-04-2013 24 4. ACIT VS. SHRI RAMILA PRAVIN SHAH ITA NO.5246/MUM/2013 ORDER DATED 05-03-2015 32. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE AO. HE SUBMITTED THAT IT HAS BEEN CLEARLY ESTABLISHED BY THE INVESTIGATION WING DURING THE COURSE OF SURVEY THAT THE PURCHASES ARE MERE ACCOMMO DATION ENTRIES. MERELY BECAUSE THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES THE SAME CANNOT BE ACCEPTED AS GENUINE ESPECIALLY WHEN HEAVY CASH HAS BEEN WITHDRAWN SUBSEQUENTLY AND THE CASH MIGHT HAVE COME BACK TO THE ASSESSEE. SINCE THE ASSES SEE IS NOT IN MANUFACTURING ACTIVITY AND IS ENGAGED IN THE BUSINESS OF IN TERIOR DECORATION ETC., THEREFORE, THE GP RATIO IS NOT IMPORTANT. SINCE THE ASSESSEE HAS NEVER PRODUCED THE PARTIES AND HAS NOT CONCLUSIVELY PROVED THE PURCHASES TO BE GENUINE, THEREFORE, THE ORDE R OF THE CIT(A) SHOULD BE SET ASIDE AND THAT OF THE ORDER OF THE A O BE RESTORED. HE ACCORDINGLY SUBMITTED THAT THE APPEAL FILED BY THE ASSESSEE SHOULD BE DISMISSED AND THE APPEAL FILED BY THE R EVENUE SHOULD BE ACCEPTED. 33. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE H AVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND THE AO IN THE INSTANT CASE MADE AN ADDITION OF RS.7,11,55,964/- BEING PURCHASES MADE FROM 7 PERSONS, (THE DETAILS OF WHICH ARE A LREADY GIVEN IN PARA 10 OF THE ORDER) ON THE GROUND THAT DURIN G THE COURSE OF SURVEY AT THE PREMISES OF MR.TUSHAR RUPAREL AND OTHE R CONCERNS MR. TUSHAR RUPAREL AND OTHER PERSONS HAVE ACCEPTED T HAT THEY HAVE ONLY ISSUED BILLS WITHOUT DELIVERY OF MATERIALS AND THE 25 CHEQUES RECEIVED WERE DEPOSITED IN THE BANK AND CASH W AS WITHDRAWN AND RETURNED TO THE ASSESSEE AFTER WITHHOLDING THEIR COMMISSION FOR THE SERVICES. THERE WAS NO INFRASTRUCTURE AT THE END OF THE SUPPLIERS FOR MAKING SUPPLIES LIKE GODOWNS ETC. AN D NO BOOKS OF ACCOUNTS WERE FOUND. FURTHER, THERE WERE IMME DIATE CASH WITHDRAWALS AFTER DEPOSITING THE CHEQUES IN THE BANK ACCOUNTS MAINTAINED BY MR. TUSHAR RUPAREL AND OTHERS FOU ND DURING THE COURSE OF SURVEY. MR. TUSHAR RUPAREL HAD SP ECIFICALLY TAKEN THE NAME OF THE ASSESSEE AND STATED THAT ASSE SSEE HAS AVAILED THE BENEFIT FOR TAKING BOGUS BILLS OF RS.8 TO 9 CROR ES. IT IS ALSO THE CASE OF THE AO THAT THE ASSESSEE FAILED TO PROD UCE THE ABOVE NAMED PERSONS AT ANY STAGE EITHER BEFORE THE AO OR DURING THE COURSE OF SURVEY BEFORE THE INVESTIGATION WING. IT IS ALSO THE CASE OF THE AO THAT DESPITE PURCHASES MADE THROUGHOUT THE YEAR THE PAYMENTS WERE MADE ONLY IN THE MONTH OF FEBRUARY AND MARCH OF THE FINANCIAL YEAR. FURTHER, THERE WAS ABSENCE OF THIR D PARTY TRANSPORT BILLS EITHER WITH THE ASSESSEE OR WITH THE SUPP LIER AND THERE WERE DEFECTS IN THE MAINTENANCE OF CHALLANS. 34. WE FIND WHEN THE MATTER TRAVELLED TO THE CIT(A) HE DELE TED 50% OF THE ADDITION AND SUSTAINED 50% FOR THE REASONS GIV EN BY HIM IN THE APPELLATE ORDER AND WHICH HAS BEEN SUMMARISED IN THE PRECEDING PARAGRAPHS. IT IS THE CASE OF THE ASSESSEE T HAT THERE WAS NO ADVERSE FINDING DURING SURVEY IN THE PREMISES OF THE AS SESSEE. NO UNACCOUNTED CASH OR EVIDENCE FOR BOGUS BILLS WERE FOUN D. THE ASSESSEE WAS NOT GIVEN ANY OPPORTUNITY TO CROSS EXAMI NE MR. TUSHAR RUPAREL. THE ASSESSEE HAS PRODUCED THE DETA ILS OF PAN NOS. SALES TAX REGISTRATION NO. VAT ETC. OF ALL THE SUPPLIERS. VENDOR REGISTRATION PROCESS MAINTAINED AT THE END OF TH E ASSESSEE AND GOODS RECEIVED NOTES WERE PREPARED AT THE SITE. THE ASSESSEE 26 HAS SUBMITTED THE RECONCILIATION OF MATERIALS BEFORE THE AO FOR RECEIPT OF GOODS, CONSUMPTION AND CLOSING BALANCE FOR EACH SITE. THE ASSESSEE HAS ALSO PRODUCED THE CERTIFICATE FROM CUS TOMERS THAT THE WORK WAS PROPERLY EXECUTED. IT IS ALSO THE CLAIM OF THE ASSESSE E THAT NO WORK CAN BE EXECUTED WITHOUT CONSUMPTION OF MA TERIAL. FURTHER, THE PAYMENTS WERE MADE BY ACCOUNT PAYEE CHE QUES. THE CONCERNED SUPPLIERS HAVE RESPONDED TO THE NOTICE ISSUE D U/S.133(6) AND HAVE CONFIRMED TO HAVE SUPPLIED THE GOODS T O THE ASSESSEE. 35. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE WE FIND THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE S. THE SUPPLIERS HAVE CONFIRMED TO HAVE SUPPLIED THE GOODS IN RE SPONSE TO THE NOTICE ISSUED U/S.133(6). THE ASSESSEE HAS PRODUCED THIRD PARTY EVIDENCES SUCH AS GATE RECEIPTS OF THE RESPECTIVE COMPANIES CERTIFYING THE RECEIPT OF GOODS IN THEIR PREMISES. THE COM PANIES WHERE THE ASSESSEE HAS EXECUTED THE WORK ARE WELL KN OWN REPUTED COMPANIES AND WITHOUT THE WORK CARRIED OUT AT THEIR SITE THEY WOULD NOT HAVE MADE THE PAYMENT TO THE ASSESSEE. FU RTHER, ALTHOUGH IT IS THE ALLEGATION OF THE AO THAT HUGE CASH WAS WITHDRAWN AFTER THE CHEQUES WERE DEPOSITED, HOWEVER, THE RE IS NO EVIDENCE WHATSOEVER TO SHOW THAT THE MONEY HAS COME BACK TO THE ASSESSEE IN SOME FORM OR OTHER. EVEN DURING THE COURSE OF SURVEY AT THE PREMISES OF THE ASSESSEE, NO INCRIMINATING MATERIALS WERE FOUND TO SHOW THAT ASSESSEE WAS INVOLVED IN ACCOMMODATIO N ENTRIES. NO EXCESS CASH WAS FOUND. FURTHER, THE ASSESS EE HAS MAINTAINED PROPER BOOKS OF ACCOUNTS. THE GOODS PURCHAS ED HAVE ENTERED INTO THE BOOKS OF ACCOUNT AND MATERIAL CONSUMED HAVE ALSO BEEN ENTERED INTO THE BOOKS OF ACCOUNT GIVING THE Q UANTITATIVE DETAILS. THE ASSESSING OFFICER AT PAGE 2 OF THE ASSESSMENT ORDER 27 HAS MENTIONED THAT REGULAR BOOKS OF ACCOUNT ARE MAINTA INED. THE ASSESSING OFFICER ALSO MENTIONS IN PARA 4.2.4 PAGE 5 OF T HE ASSESSMENT ORDER THAT A LARGE PART OF THE TOTAL WORKS CONTRACT EXECUTED BY THE ASSESSEE ARE CONTRACTS WITH MATERIALS. IT IS ALSO A FACT THAT NONE OF THE PARTIES FOR WHOM ASSESSEE HAS CAR RIED OUT THE WORK ARE RELATED TO THE ASSESSEE. NOTHING HAS BEEN BR OUGHT ON RECORD BY THE ASSESSING OFFICER THAT WORK HAS NOT BEEN CARRIED OUT BY THE ASSESSEE FOR THE PARTIES FROM WHOM ASSESSEE HAS RECEIVED THE CHEQUES AGAINST CONTRACT RECEIPTS WHICH HAS BEEN O FFERED TO TAX AND ACCEPTED BY THE ASSESSING OFFICER. WE FIND THE ASSESS ING OFFICER APART FROM RELYING HEAVILY ON THE STATEMENT OF MR. TUSHAR RUPAREL HAS NOT BROUGHT ANY CORROBORATIVE EVIDENCE TO NAIL THE ASSESSEE THAT IT HAD RECEIVED ONLY ACCOMMODATION ENTRIE S AND THE PURCHASES TO THE TUNE OF RS.7,11,55,964/- ARE IN FACT BOG US ESPECIALLY WHEN THE ASSESSEE HAS DISPUTED SUCH ALLEGATION BY PRODUCING OTHER MATERIALS TO SUBSTANTIATE THE PURCHASES . THE FINDING GIVEN BY THE LD.CIT(A) THAT THE STATEMENT OF THE P ROPRIETORS OF M/S. SUN ENTERPRISE, M/S. M.R. CORPORATION AND M/S. NEELAM ENTERPRISES HAVE NOT BEEN RECORDED COULD NOT BE CONTR OVERTED BY THE LD. DEPARTMENTAL REPRESENTATIVE. UNDER THESE CIRCUM STANCES DISBELIEVING THE ENTIRE PURCHASES MERELY ON THE STATEME NT OF MR. TUSHAR RUPAREL AND 3 OTHER PERSONS IS NOT JUSTIFIED ESPE CIALLY WHEN THE ASSESSEE HAS CARRIED OUT THE CONTRACT WORK FOR WHICH ASSESSEE HAS TO BEAR THE COST OF MATERIAL AND NOTHING H AS BEEN BROUGHT ON RECORD BY THE AO THAT NO WORK WAS CARRIED OUT BY THE ASSESSEE FOR THESE PARTIES AND THEY HAVE ALSO MADE PAY MENTS TO THE ASSESSEE FOR NO WORK DONE. FURTHER WE ALSO FIND SOM E FORCE IN THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT W HEN THE CONTRACT IS WITH COST OF MATERIAL TO BE BORNE BY THE ASS ESSEE, 28 CARRYING OUT THE CONTRACT WORK WITHOUT PURCHASE OF MAT ERIAL IS JUST NOT POSSIBLE. 36. UNDER THE AFOREMENTIONED CIRCUMSTANCES DISBELIEVING THE ENTIRE PURCHASES MERELY ON THE BASIS OF STATEMENT RECO RDED FROM MR. TUSHAR RUPAREL AND OTHERS WHO HAVE STATED TO HAV E ISSUED BOGUS BILLS TO THE ASSESSEE FOR SOME COMMISSION CANNOT BE BELIEVED ESPECIALLY WHEN THE ASSESSEE HAS STATED THAT HE HAD R ECEIVED THE GOODS AS PER HIS REQUISITION AND NO OPPORTUNITY TO CROSS EXAMINE MR. TUSHAR RUPAREL WAS PROVIDED BY THE AO. 37. AT THE SAME TIME WHEN THE MAIN SUPPLIER MR. TUSHAR RUPAREL HAS DENIED TO HAVE MADE ANY SUPPLY TO THE ASS ESSEE AND WAS ISSUING ONLY ACCOMMODATION ENTRIES AS STATED BY HI M AND VARIOUS OTHER CONCERNS, IT WAS INCUMBENT UPON THE ASSE SSEE TO PRODUCE THOSE PERSONS BEFORE THE AO TO SUBSTANTIATE H IS CASE. THE ASSESSEE IN THE INSTANT CASE HAS FAILED TO DO SO. FURTH ER WHEN REPUTED SUPPLIERS ARE AVAILABLE IN THE MARKET, THERE WAS N O NECESSITY OF BUYING GOODS FROM DUBIOUS SUPPLIERS WHO DO NO T HAVE PROPER GODOWN AND OFFICE. ALTHOUGH THE ASSESSEE IS AT LIB ERTY TO BUY GOODS FROM PERSONS/PARTIES ACCORDING TO HIS CHOICE, A T THE SAME TIME, IT RAISES A DOUBT IN THE MIND REGARDING THE AUT HENTICITY OF THE PURCHASES ESPECIALLY WHEN THE SAME IS PURCHASED FROM PARTIES WHO DO NOT HAVE THEIR OWN SHOPS/GODOWNS AND O NLY HAVING TABLE SPACE. THUS, A PERUSAL OF THE ORDERS OF THE AUTHOR ITIES BELOW AND THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES INDICATE THAT WHILE THE ENTIRE PURCHASES CANNOT BE TREATED AS BOGUS, AT THE SAME TIME THE ENTIRE PURCHASES ALSO CANNOT BE ALLOWED AS GENU INE. IF WE ALLOW SUCH TYPE OF TRANSACTIONS AS GENUINE IT WILL BE AGAINST ASSESSEES WHO METICULOUSLY MAINTAIN FULL RECORDS, PRODUCE T HE PARTIES BEFORE THE AO ON BEING DIRECTED AND PRODUCE THE NECESSARY 29 DETAILS TO SUBSTANTIATE THEIR TRANSACTIONS. WE THEREFORE AGREE WITH THE FINDING GIVEN BY THE LD.CIT(A) THAT THERE ARE STRENGTH S AND WEAKNESSES IN THE EVIDENCES AND THE ARGUMENTS OF BOTH THE SIDES AND IT IS NOT POSSIBLE TO HOLD EITHER THE AO OR THE ASSE SSEE AS FULLY CORRECT IN THEIR CLAIMS. 38. HAVING OBSERVED AS ABOVE NOW WE HAVE TO SEE AS TO WHAT EXTENT THE PURCHASES CAN BE TREATED AS BOGUS AND TO WHAT EXTENT PURCHASES CAN BE TREATED AS GENUINE. FROM THE VARIOU S DETAILS FURNISHED BY THE ASSESSEE WE FIND THE ASSESSEE HAS GIVEN SITE-WISE PROFITABILITY STATEMENT VIS--VIS THE DISALLOWANCE MADE BY TH E AO WHICH IS AS UNDER : BIRLA COTSYN BIRLA POWER KUMAR HO USING ROHAN BUILDERS ZENITH BIRLA RELIANCE INDUSTRIES AS FILED AS FILED AS FILED AS FILED AS FILED AS FILED SALES 9,581,143.00 33,579,895.00 10,630,648.00 21,214,699.00 20,837,143.00 55,935,793.00 PURCHASE MATERIAL 5,544,551.00 21,099,394.00 6,252,711.00 10,715,059.00 10,433,837.00 24,821,768.00 DIRECT EXPENSES 69,548.00 2,490,236.00 221,699.00 137,472.00 1,452,143.00 2,745,887.00 GROSS PROFIT 3,967,044.00 9,990,265.00 4,156,238.00 10,362,168.00 8,951,163.00 28,368,138.00 GROSS PROFIT % 41.40% 29.75% 39.10% 48.84% 42.96% 50.72% AS DETERMINED BY ASSESSING OFFICER AS PER AO AS PER AO AS PER AO AS PER AO AS PER AO AS PER AO SALES 9,581,143.00 33,579,895.00 10,630,648.00 21,214,699.00 20,837,143.00 55,935,793.00 PURCHASE - - DIRECT 69,548.00 2,490,236.00 221,699.00 137,472.00 1,452,143.00 2,745,887.00 GROSS PROFIT 9,511,595.00 31,089,659.00 10,408,949.00 21,077,227.00 19,385,000.00 53,189,906.00 GROSS PROFIT % 99.27% 92.58% 97.91% 99.35% 93.03% 95.09% 30 39. FROM THE ABOVE WE FIND IF THE ADDITION SO SUSTAINED BY THE AO IS ACCEPTED, THEN THE GP RATE IN 2 CASES IS ABOVE 99 %, IN ONE CASE IT IS ABOUT 98%, IN 2 CASES IT IS ALMOST 93% AND IN 1 CASE IT IS 95% WHICH APPEARS TO BE ABSURD AS COMPARED TO ASSESS EES ENGAGED IN SIMILAR LINE OF BUSINESS. 40. CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE AR E OF THE CONSIDERED OPINION THAT DISALLOWANCE OF LUMPSUM AMOUNT OF RS.75 LAKHS (RUPEES SEVENTY FIVE LAKHS ONLY) FOR A.Y. 2007-08 A ND RS.50 LAKHS (RUPEES FIFTY LAKHS ONLY) FOR A.Y. 2008-09 AS A GAINST DISALLOWANCE OF RS.7.12 CRORES IN A.Y. 2007-08 AND RS.2.48 CRO RES IN A.Y. 2008-09 BY THE AO WILL MEET THE ENDS OF JUSTICE. WE HOLD AND DIRECT ACCORDINGLY. 41. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DIS MISSED AND THE APPEALS FILED BY THE ASSESSEE FOR BOTH THE ASSESSMENT YEA RS ARE PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 26-06-2015. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED: 26 TH JUNE, 2015 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, PUNE 4. CIT-I, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE
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