ACIT, New Delhi V. M/s. Gupta Bros (India), New Delhi

ITA 1313/DEL/2012

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7864 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 16-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANUSHA KHURANA
• Assessee Lawyers: J C KAPOOR
• Keywords: Bogus purchase
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.1313/DEL/2012 ASSESSMENT YEAR : 2008-09 ACIT, GUPTA BROS. (INDIA), CIRCLE-38 (1), 232-JOR BAGH, NEW DELHI. V. NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAAFG AAAFG AAAFG AAAFG- -- -4326 4326 4326 4326- -- -Q QQ Q APPELLANT BY : SMT. ANUSHA KHURANA, SR. DR. RESPONDENT BY : SHRI J.C. KAPOOR, CA. ORDER PER TS KAPOOR, AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF LD CIT(A) XXVIII, NEW DELHI DATED 11.1.2012. THE GROUNDS RAISE D BY THE REVENUE ARE AS UNDER:- 1. THE LD CIT(A) HAS ERRED IN DELETING THE ADDITION OF ` .14,25,000/- NOT APPRECIATING THE FACT THAT THE ABOVE ADDITION W AS MADE BY THE ASSESSING OFFICER ON ACCOUNT OF NON PRODUCTION OF P URCHASE BILLS & VOUCHERS AND COPY OF LEDGER ACCOUNT FROM SUPPL IER NAMELY M/S RATHI BARS LTD. AND ALSO THAT THE NOTICE U/S 133(6 ) ISSUED TO THE ABOVE PARTLY RETURNED UN-SERVED. 2. THAT LD CIT(A) GROSSLY ERRED IN RESTRICTING THE ADDIT ION MADE ON ACCOUNT OF LABOUR CHARGES AND VERIFIABLE EXPENSES NOT ITA NO1313/DEL/2012 2 APPRECIATING THE FACT THAT THE ADDITION WAS MADE BY THE ASSESSING OFFICER AS THE ASSESSEE HAD NOT SUBSTANTIATED ITS CL AIM REGARDING THE GENUINENESS OF THE ABOVE EXPENSES WITH NE CESSARY DOCUMENTARY EVIDENCE. 3. THE APPELLANT CRAVES TO ADD, AMEND OR MODIFY THE GRO UNDS OF APPEAL AT ANY TIMES. 2. THE BRIEF FACTS OF THE CASE ARE THAT RETURN OF INC OME IN THIS CASE WAS FILED ON 30.9.2008. SUBSEQUENTLY, THE CASE WAS SELEC TED FOR SCRUTINY UNDER CASS. THE ASSESSEE IS A FIRM ENGAGED IN T HE BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY MAKING THE FOLLOWING ADDITIONS:- 1. ADDITION ON ACCOUNT OF NON PRODUCTION OF PURCHASE BILLS. ` .14,25,000/- 2. DISALLOWANCE ON ACCOUNT OF LABOUR CHARGES & WAGES. ` .3,00,000/- 3. DISALLOWANCE ON ACCOUNT OF UNVERIFIABLE PURCHASES. ` .3,00,000/- 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR VERIF ICATION OF PURCHASES, THE ASSESSING OFFICER ISSUED ENQUIRY LETTERS U/ S 133(6) TO VARIOUS SUPPLIERS FROM WHOM PURCHASES WERE MADE. THE E NQUIRY LETTER IN THE CASE OF M/S RATHI BAR LTD. FROM WHOM CLAIM OF PURCHASE OF STEEL WORTH ` .14,25,000/- WAS MADE HAD RETURNED UN-SERVED WITH THE REMARKS PARTY LEFT. THE ASSESSEE WAS GIVEN OPPORTUNITY TO PRODUCE COPY OF LEDGER ACCOUNT OF ABOVE SUPPLIER SO THAT CLAI M OF GENUINENESS OF PURCHASES COULD BE VERIFIED. THE ASSESSEE WAS ALSO REQU ESTED TO SUBMIT COPY OF PURCHASE BILLS, CHALLAN AND DETAILS OF P AYMENT MADE TO SUPPLIERS. HOWEVER, THE ASSESSEE STATED VIDE ITS LETTER DAT ED 8.12.2010 THAT PAYMENT TO THE ABOVE PARTY WAS MADE BY CHEQUES. IN THIS ITA NO1313/DEL/2012 3 RESPECT, HE FILED COPY OF BANK ACCOUNT ALONG WITH LE DGER SHOWING ACCOUNT OF THE SAID PARTY. IN RESPECT OF PURCHASE BIL LS, THE ASSESSEE STATED THAT MOST OF HIS STAFF HAD LEFT THE ORGANIZATION AND IT WAS NOT POSSIBLE TO TRACE THE PURCHASE BILLS/CHALLAN. HOWEVER, IN SUPPORT OF ITS CLAIM, THE ASSESSEE ENCLOSED A CERTIFICATE FROM THE SITE IN-CHARGE SHOWING THE RECEIPT OF MATERIAL AND UTILIZATION THER EOF AT THE SITE. 4. THE LD AR RELIED UPON IN THE CASE OF CIT V. GOODL ASS NEROLAC PAINTS LTD. 188 ITR 1 (BOM) WHEREIN IT WAS HELD THAT ACT DOES NOT SEEM TO PROVIDE THAT IF AN INFORMATION HAS NOT BEEN FURNI SHED THE CLAIM FOR DEDUCTION CAN BE DISALLOWED. HOWEVER, THE ASSESSING OFFI CER WAS NOT SATISFIED WITH THE REPLY FILED BY THE ASSESSEE AND MADE AN ADDITION OF ` .14,25,000/-. 5. AGGRIEVED, THE ASSESSEE FILED APPEAL WITH LD CIT(A) AND SUBMITTED THE FOLLOWING SUBMISSIONS:- 1) THAT THE ASSESSING OFFICER ISSUED SUMMONS U/S 133(6) TO SIX SUPPLIERS INCLUDING M/S RATHI BAR LTD. EVERY ONE RESPONDED. HOWEVER, LETTER TO M/S RATHI BARS LTD. CAME BACK UN-SERVED WITH THE REMARKS PARTY LEFT. 2) THE ASSESSEE HAD FILED COPY OF LEDGER ACCOUNT OF M/S RAT HI BARS LTD. ALONG WITH EVIDENCE OF PAYMENT THROUGH BAN K AND AN AFFIDAVIT IN SUPPORT OF SUPPLY OF MATERIAL BY SUPPLIERS TOGETHER WITH CERTIFICATE FROM SITE IN-CHARG E FOR UTILIZATION OF MATERIAL. 6. THE LD CIT(A) ON THE BASIS OF SUBMISSIONS MADE BY THE LD ASSESSING OFFICER DELETED THE ADDITION MADE ON ACCOUNT OF PURCHASES ITA NO1313/DEL/2012 4 OF ` .14,25,000/-. THE RELEVANT PORTION OF CIT(A)S ORDER IN THIS RESPECT IS REPRODUCED BELOW:- I HAVE GONE THROUGH THE ASSESSMENT ORDER AND WRITTEN SUBMISSION OF THE APPELLANT. DURING THE COURSE OF ASSESSMENT PROCE EDINGS, THE ASSESSING OFFICER ISSUED SUMMONS U/S 133(6) TO SIX SUPPLIERS INCLUDING M/S RATHI BARS LTD. ALL RESPONDED EXCEPT THE LETTER TO M/S RATHI BARS LTD,. CAME BACK UN-SERVED WITH THE REMARKS PARTY LEFT. HOWEVER, THE APPELLANT FILED THE FOLLOWING DOCUMENT S BEFORE THE ASSESSING OFFICER. 1. COPY OF LEDGER ACCOUNT OF M/S RATHI BARS LTD. 2. EVIDENCE OF PAYMENT THROUGH BANK BY CROSSED CHEQUES. 3. AN AFFIDAVIT FOR THE SUPPLY OF MATERIAL BY THE SUPPLI ER. 4. CERTIFICATE FROM THE SITE INCHARGE FOR THE UTILIZATI ON OF MATERIAL. APPELLANT HAS PLACED RELIANCE ON THE CASE OF GOODLASS NEROLAC PAINTS LTD. REPORTED IN 188 ITR 1 (BOM) THAT IF THE INFORMATION U/S 133(6) IS NOT FURNISHED, THE CLAIM OF DEDUCTION CANN OT BE DENIED ONLY ON THE GROUND. THE ACCOUNTS OF THE APPELLANT AR E AUDITED AND THE APPELLANT HAS SHOWN BETTER RESULTS. THE ASSESSING OFF ICER DID NOT CONSIDER THE DOCUMENTS FILED BY THE APPELLANT TO PROVE THE AUTHENTICITY OF THE TRANSACTIONS. NO ADVERSE INFERENCE HAS BEEN DRAWN AGAINST THE APPELLANT FROM THE DOCUMENTS FURNISH ED DURING THE COURSE OF ASSESSMENT PROCEEDINGS. IN VIEW OF THE FACT S AND CIRCUMSTANCES OF THE CASE, THE ADDITION OF ` .14,25,000/- MADE BY THE ASSESSING OFFICER IS UNJUSTIFIED AND IS THEREFORE DEL ETED. APPEAL ON THIS GROUND IS ALLOWED. ITA NO1313/DEL/2012 5 7. THE NEXT ADDITION WAS MADE ON ACCOUNT OF DISALLOWA NCE OF LABOUR EXPENSES. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF LABOUR CHARGES AND WAGES ON THE BASIS OF PROJECTS UNDERTAKEN ON VARIOUS SITES. THE ASSESSEE HAD FILED MUSTE R ROLL IN RESPECT OF WAGE EXPENSES OF FEW SITES. THE ASSESSING OFFICE R OBSERVED FROM THE VOUCHERS THAT MUSTER ROLL WAS SELF GENERATED AND PAYMENTS WERE MADE IN CASH AND THERE WERE CERTAIN DISCREPANCIE S IN THE FORM OF NON AVAILABILITY OF FATHERS NAME/ADDRESS AND NON AVAI LABILITY OF SIGNATURES. CONSIDERING THE NATURE OF CONTRACT BUSINESS, VOLUME OF BUSINESS AND TYPE OF EXPENDITURE, THE ASSESSING OFFICER MA DE DISALLOWANCE OF ` .3,00,000/-. 8. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD CIT(A ). 9. THE CIT(A) RESTRICTED THE ADDITION TO ` .1,00,000/- KEEPING IN VIEW THE FACT THAT PERCENTAGE OF LABOUR CHARGES ON GROSS T URNOVER HAD ACTUALLY COME DOWN TO 13.73% AS AGAINST 16.99% IN THE PRECEDING YEAR. 10. THE THIRD ADDITION WAS MADE ON ACCOUNT OF DISALL OWANCE ON ACCOUNT OF UN-VERIFIABLE PURCHASES. DURING ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTED THAT SMALL PURCHASES WERE MADE IN CASH AND SOME PURCHASES WERE NOT SUPPORTED BY PROPER DOCUME NTARY EVIDENCE. DURING RANDOM CHECKING HE FOUND THAT PUR CHASE VOUCHERS FOR ` .90,537/- WERE MISSING. THE LD AR SUBMITTED THAT THESE MIGHT HAVE BEEN MISPLACED OR LOST OR WERE PRESENTLY UN-TRACE ABLE DUE TO WORK AT VARIOUS SITES. HOWEVER, THE ASSESSING OFFICER DID NOT ACCEPT THE CONTENTIONS OF ASSESSEE AND MADE AN ADDITION OF ` .3,00,000/- IN VIEW OF NATURE OF CONTRACT BUSINESS AND TYPE OF EXPEND ITURE CONCERNED. ITA NO1313/DEL/2012 6 11. AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE LD CIT( A). 12. THE LD CIT(A) HELD THAT THE ASSESSING OFFICER HAD G IVEN A FINDING THAT TOTAL PURCHASES OF ` .90,537/- OF SMALL AMOUNT OF LESS THAN ` .20,000/- WERE NOT VERIFIABLE AND IN VIEW OF THE FA CT THAT THE ACCOUNTS OF THE APPELLANT ARE AUDITED, THE ADDITION ON THIS A CCOUNT CANNOT BE WARRANTED AND HELD THAT ADDITION BE RESTRICTED TO UN VERIFIABLE PURCHASES TO THE TUNE OF ` .90,537/-. 13. AGGRIEVED, THE REVENUE FILED APPEAL BEFORE THIS TRIBUNAL IN RESPECT OF ALL THE THREE DELETIONS MADE BY LD CIT(A). 14. THE LD DR ARGUED BEFORE US THAT THERE IS NO DIREC T PROOF TO SUBSTANTIATE THE PURCHASES MADE BY THE ASSESSEE. MORE OVER BANK STATEMENT SUBMITTED BY THE ASSESSEE TO PROVE THAT PAYMENT S HAVE BEEN MADE THROUGH CHEQUES IS A SECONDARY PROOF AND HAS NO VALUE IN THE ABSENCE OF PRIMARY PROOF. HE FURTHER ARGUED THA T AFFIDAVIT FILED BY THE ASSESSEE REGARDING PURCHASES IS SELF ATTESTED AND IS OF NO USE. REGARDING SECOND & THIRD ADDITIONS WITH RESPECT TO DEL ETION OF ADDITION ON ACCOUNT OF LABOUR CHARGES AND UN-VERIFIABLE PURCH ASES, HE ARGUED THAT DISALLOWANCE WAS VERY SMALL KEEPING IN VIEW THE T OTAL EXPENSES AND THESE DISALLOWANCES WERE MADE DUE TO CERTAIN IRREG ULARITIES IN VOUCHERS AND PAYMENTS TO LABOUR AND DUE TO NON AVAILA BILITY OF PURCHASE BILLS OF PETTY AMOUNTS. HE FURTHER ARGUED TH AT DISALLOWANCES WERE NECESSARY TO COVER UP THE POSSIBILITY OF CERTAIN B OGUS EXPENSES/BOGUS PURCHASES. 15. THE LD AR, HOWEVER, RELIED UPON THE ORDER OF LD CIT(A) AND REITERATED THAT ALL DOCUMENTARY EVIDENCE REGARDING PURCHASES WERE FILED BEFORE THE ASSESSING OFFICER AND MOREOVER KEEPIN G IN VIEW THE ITA NO1313/DEL/2012 7 RATIO OF EXPENSES TO GROSS TURNOVER THE ADDITION ON ACC OUNT OF DISALLOWANCE OF WAGES AND UNVERIFIABLE PURCHASES WERE N OT WARRANTED. 16. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. REGARDING FIRST ADDITION, IT IS SEEN THAT THE ASSESSING OFFICER HAD MADE THE ADDITION BECAUSE OF ONE POINT AND I.E. NON PRODUCTION OF BILL S AND NON APPEARANCE OF SUPPLIERS U/S 133(6) OF THE ACT. THE LD CIT(A) HAS RIGHTLY OBSERVED THAT UN-SERVED NOTICE WITH THE REMARKS PART Y LEFT MEANS THAT EARLIER THIS PARTY WAS THERE. THE ASSESSING OFFICER IN HIS ASSESSMENT ORDER HAS IGNORED THE FOLLOWING CRUCIAL FACTS WHILE MAKING THE ASSESSMENT:- 1) THAT THE PAYMENT OF PURCHASES WERE MADE THROUGH ACCOU NT PAYEE CHEQUES ONLY. 2) THAT THERE WAS CERTIFICATE FROM SITE IN-CHARGE CERTI FYING UTILIZATION OF MATERIAL. 3) THAT ASSESSING OFFICER HAS NOT CONSIDERED THE FACT THAT O UT OF SIX SUPPLIERS WHICH WERE SUMMONED U/S 133(6) ONLY ONE SUPPLI ER DID NOT APPEAR. 4) THAT THE ASSESSING OFFICER HAS IGNORED THE FACT THAT OPE RATIVE RESULTS HAD IN FACT INCREASED FROM 5.73% IN PRECEDING YEAR TO 6.9% DURING CURRENT YEAR. 17. KEEPING IN VIEW ALL THESE FACTS, WE ARE OF THE VI EW THAT LD CIT(A) HAD RIGHTLY DELETED THE ADDITION OF ` .14,25,000/-. REGARDING ADDITION OF ` .3,00,000/-, THE ASSESSING OFFICER HAD NOT MADE ANY SPEC IFIC FINDING TO REACH AT THE FIGURE OF DISALLOWANCE. THE ADDITION IS AN AD HOC ADDITION AND WHILE MAKING THE ADDITION, THE ASSESSING OFFICER H AD IGNORED THE FACT THAT PERCENTAGE OF LABOUR CHARGES TO GROSS TURNOV ER HAD COME DOWN TO 13.73% AS AGAINST 16.99% IN THE PRECEDING YEA R. THEREFORE, ITA NO1313/DEL/2012 8 LD CIT(A) HAS RIGHTLY RESTRICTED THE DISALLOWANCE TO 1.00,000/-. IN THE CASE OF THIRD ADDITION THE ASSESSING OFFICER HAD MADE AD DITION ON ACCOUNT OF RANDOM CHECKING OF VOUCHERS FROM WHICH HE FOUND THAT PAYMENTS FOR AN AMOUNT OF ` .90,537/- WERE NOT AVAILABLE. THE ASSESSEE HAD EXPLAINED THAT DUE TO WORK AT VARIOUS SITES THESE M IGHT HAVE BEEN LOST. THE ASSESSING OFFICER HAD MADE A FINDING IN RESPEC T OF ` .90,567/- ONLY IN WHICH THE VOUCHERS WERE NOT AVAILABLE. THERE FORE, LD CIT(A) HAD RIGHTLY RESTRICTED THE DISALLOWANCE TO ` .90,537/-. 18. IN VIEW OF THE ABOVE, WE DO NOT SEEN ANY REASON T O INTERFERE IN THE ORDER OF LD CIT(A). THE APPEAL FILED BY THE RE VENUE IS DISMISSED. 19. ORDER PRONOUNCED IN THE OPEN COURT ON THE 15TH DAY OF JUNE, 2012. SD/- SD/- (R.P. TOLANI) (T.S. KAP OOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 15.6.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 17.5.2012 ITA NO1313/DEL/2012 9 DATE OF DICTATION 4.6.2012 DATE OF TYPING 4.6.2012 DATE OF ORDER SIGNED BY 15.6.2012 BOTH THE MEMBERS & 25.6.2012 PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 25.6.2012 & SENT TO THE BENCH CONCERNED.