DCIT, Faridabad V. M/s. Piyush Developers Pvt. Ltd., New Delhi

ITA 2225/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7721 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 03-03-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMAN KANT GARG
• Keywords: Bogus purchase; Search and seizure; Principle of natural justice; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F , NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 2225 / DEL /201 3 A.Y. 200 9 - 10 DY. CIT, CENTRAL CIRCLE 1 VS. PIYUSH DEVELOPERS P.LTD. FARIDABAD A 16/B - 1, MOHAN CO - OP.INDUSTRIAL ESTATE, MATHURA ROAD NEW DELHI PAN: AAECP 2788 B AND ITA NO.2226/DEL/2013 AY: 2009 - 10 DY.CIT, C.C.1 VS. RIDGE HOUSING INDIA PVT.LTD. FARIDBAD A 16/B1, MOHAN COOP INDL.ROAD NEW DELHI PAN: AADCR 3225 N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAMAN KANT GARG, SR.D.R. RESPONDENT BY : NONE ORDER PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER BOTH THESE APPEALS ARE FILED BY THE REVENUE AND ARE DIRECTED AGAINST THE ORDER OF LD.CIT(A) (CENTRAL), GURGAON, PERTAINING TO THE A.Y. 2009 - 10. 2 . HEARD SH.RAMAN KANT GARG, LD.SR.D.R. ON BEHALF OF THE REVENUE. 3 . ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ORDERS OF LOWER AUTHORITIES AND CASE LAWS CITED, WE HOLD AS FOLLOWS. 4 . THE FACTS OF THE CASE ARE BROUGHT AT PARA 4 AND 4.1 OF THE LD.CIT(A) S ORDER WHICH ARE NOT EXTRACTED FOR BREVITY. THE FIRST APPELLATE AUTHORITY HAD ITA NOS. 2225 AND 2226/DEL/13 A.Y. 2009 - 10 DCIT VS. PIYUSH DEVELOPERS P.LTD., NEW DELHI 2 FOLLOWED THE ORDER IN THE CASE OF M/S PEEYUSH DEVELOPERS LTD. FOR THE A.Y. 2008 - 09 AND IN THE CASE OF M/S VARSHA BUILDWELL INDIA PVT.LTD. FOR THE A.Y. 2008 - 09 AND GRANTED RELIEF TO THE ASSESSEE. 5 . WE FIND THAT IN THESE TW O CASES REFERRED TO ABOVE, THE ISSUE HAS TRAVELLED TO THE ITAT AND THE ITAT FROM PARA 11 ONWARDS HELD AS FOLLOWS. 11 . RIVAL CONTENTIONS HEARD. ON A CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, ON PERUSAL OF MATERIAL ON RECORD, ORDE RS OF THE AUTHORITIES BELOW, CASE LAWS CITED, WE HOLD AS FOLLOWS. 12. WE FIRST TAKE UP THE REVENUE S APPEAL. 13. AS ALREADY NOTED THE ASSESSEE IS A CIVIL CONTRACTOR. PURCHASES FROM THREE PARTIES HAVE BEEN DISALLOWED, ON THE GROUND THAT THE ASSESSEE FAIL ED TO PRODUCE THOSE PARTIES AND HAS NOT FURNISHED CERTAIN DETAILS SUCH AS CONFIRMATION OF COPY OF ACCOUNTS, INCOME TAX PARTICULARS ETC. WHEN WE SEE THE QUALITY OF EVIDENCE PRODUCED BY THE ASSESSEE BEFORE THE A.O. WE HAVE TO COME TO A CONCLUSION THAT THE FIRST APPELLATE AUTHORITY WAS DULY JUSTIFIED IN DELETING THE ADDITION. THE ASSESSEE IN THIS CASE HAS FURNISHED ALL POSSIBLE EVIDENCES IN SUPPORT OF THE FACTUM OF PURCHASES FROM THESE THREE PARTIES. THE EVIDENCES INCLUDE, COPIES OF THE BILLS WHEREIN DETAILED NOTINGS HAD BEEN MADE IN RESPECT OF THE MATERIAL WHICH HAD BEEN PURCHASED BY THE APPELLANT, PURCHASE VOUCHERS PREPARED BY THE ASSESSEE IN THE NORMAL COURSE OF BUSINESS, EVIDENCES BY WAY OF THE MATERIAL WEIGHMENT PROOFS, COPIES OF THE GRS OR MATE RIAL RECEIPT NOTES SHOWING THE DELIVERY OF THE GOODS TO THE ASSESSEE WHERE THE BILL NUMBER AND TRUCK NUMBER HAS BEEN MENTIONED. EVIDENCE OF PAYMENTS HAVING BEEN MADE BY ACCOUNT PAYEE CHEQUES HAD ALSO BEEN FILED. SUCH PAYMENTS HAVE ALSO BEEN CLEARED FROM THE ACCOUNT OF THE ASSESSEE AND NO PAYMENT IS OUTSTANDING AS ON 31 ST MARCH, 2008. THESE EVIDENCES IN OUR VIEW CANNOT BE IGNORED UNLESS MATERIAL CONTRADICTING THE SAME IS FOUND BY THE REVENUE. NO SUCH MATERIAL IS AVAILABLE WITH THE REVENUE EVEN AFTER SEARCH. ITA NOS. 2225 AND 2226/DEL/13 A.Y. 2009 - 10 DCIT VS. PIYUSH DEVELOPERS P.LTD., NEW DELHI 3 14 . THE FIRST APPELLATE AUTHORITY AT PARA 4.11 OF HIS ORDER HA S HELD AS FOLLOWS. 4.11. IF A.O S ACTION OF DISALLOWING PURCHASES OF RS.2,89,34,711/ - TREATING THEM AS BOGUS IS ACCEPTED THEN FOLLOWING POSITION WOULD EMERGE : TOTAL PURCHASES RS.6,98,28,060 LESS: PURCHASES DISALLOWED RS.2,89,34,711 BALANCE PURCHAS ES ACCEPTED BY AO RS.4,08,93,349 LESS: CLOSING STOCK RS.2,76,39,224 BALANCE MATERIAL CONSUMED RS. 1,32,54,125 FROM THE AFORESAID DETAILS IT FOLLOWS THAT FROM THE MATERIAL OF RS.1,32,54,125/ - ASSESSEE HAS SHOWN WORK CERTIFIED OF RS.5,54,30,587/ - WHICH IN MY OPINION IS PRACTICALLY NOT POSSIBLE UNLESS OF COURSE PROVED BY THE AO WHICH THE AO HAS NOT DONE. THIS FACTUAL FINDING COULD NOT BE CONTROVERED BY THE LD.D.R. 14.1. NO DEFECTS HAVE BEEN FOUND IN THE STOCK REGISTER NOR ANY DEFECTS HAVE BEEN POINTED OUT BY THE A.O. IN THE AUDITED BOOKS OF ACCOUNTS MAINTAINED BY THE ASSESSEE. DESPITE SEARCH AND SEIZURE NO ADVERSE MATERIAL WAS FOUND TO SUBSTANTIATE THE DISALLOWANCE MADE BY THE A.O. THE SO CALLED SPOT ENQUIRY DONE BY THE INSPECTOR HAS NO CREDENCE AS NO DETAILS HAVE BEEN FILED BEFORE US, NOR WAS THE ASSESSEE CONFRONTED WITH THE MANNER IN WHICH SPOT ENQUIRY WAS CONDUCTED, THE PERSONS WHO CONDUCTED THE SPOT ENQUIRY OR THE MATERIAL GATHERED BY THE REVENUE IN THE SPOT ENQUIRY. THUS THE REVENUE CANNOT PLA CE RELIANCE ON THIS ENQUIRY. THE PURCHASES WHICH ARE DISALLOWED RELATE TO CEMENT AND STEEL WHICH ARE ESSENTIAL FOR THE PURPOSE OF CONSTRUCTION. NO ENQUIRIES ARE MADE WITH THE BANKS, OTHER STATUTORY AUTHORITIES ON THE IDENTITY OF THE PARTIES. DETAILS SU CH AS WHETHER SALES TAX AUTHORITIES HAVE ACCEPTED THE QUANTUM OF PURCHASES MADE BY THE ASSESSEE. HAVE NOT BEEN OBTAINED. UNDER THE CIRCUMSTANCES WE HAVE TO HOLD THE CONTENTIONS OF THE ASSESSEE THAT THE FINDING OF THE AO THAT THE ASSESSEE HAS NOT FURNISHE D ANY DETAILS IS FACTUALLY IN CORRECT. 14.2. COMING TO THE IDENTITY OF THE PARTIES WE FIND THAT ALL THE PARTIES ARE REGISTERED WITH SALES TAX DEPARTMENT AND HAVE CHARGED VAT IN EACH OF ITA NOS. 2225 AND 2226/DEL/13 A.Y. 2009 - 10 DCIT VS. PIYUSH DEVELOPERS P.LTD., NEW DELHI 4 THE BILLS. ALL THESE PARTIES HAVE BANK ACCOUNTS AND PAYMENTS WERE M ADE THROUGH ACCOUNT PAYEE CHEQUES. EVIDENCE OF MATERIAL HAVING BEEN RECEIVED BY THE ASSESSEE HAS BEEN FILED. THIS FACTUAL FINDING OF THE LD.CIT(A) COULD NOT BE CONTROVERTED BY THE LD.CIT, D.R. 14.3. AS REGARDS THE FACT THAT THE ASSESSEE WAS NOT ABLE T O PRODUCE THE PARTIES, WE AGREE WITH THE CONTENTIONS OF THE ASSESSEE THAT NON PRODUCTION OF THE PARTIES CANNOT BE A GROUND OF DISALLOWANCE OF ALL THE PURCHASES FOR THE FOLLOWING REASONS. (I) THE PERSONS FROM WHOM PURCHASES ARE MADE COULD NOT ALWAYS BE IN THE CONTROL OF THE ASSESSEE SPECIFICALLY WHEN THEY ARE UNRELATED PARTIES. (II) THE VOLUME AND QUALITY OF EVIDENCE PRODUCED BY THE ASSESSEE IS SUCH THAT NON PRODUCTION OF THE PARTY FROM WHOM THE ASSESSEE PURCHASED CANNOT LEAD TO A CONCLUSION THAT THE PURC HASES ARE NOT GENUINE. 14.4. THE LD.CIT(A) AT PARA 4.4 HELD AS FOLLOWS. 4.4. IT IS ALSO SEEN THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD FILED VARIOUS EVIDENCES (WHICH HAVE BEEN FILED IN THE PAPER BOOK) OF THE PURCHASES MADE FR OM THE SAID PARTIES IN THE SHAPE OF COPIES OF BILLS, PURCHASE VOUCHERS, MATERIAL RECEIPT NOTES, AS WELL AS THE COPIES OF BANK STATEMENT OF THE ASSESSEE COMPANY EVIDENCING THE PAYMENT MADE TO THE SAID PARTIES, WHICH HAVE BEEN CLEARED FROM THE ACCOUNT OF TH E ASSESSEE. IN FEW CASES COPIES OF GRS ALONGWITH EVIDENCE OF WEIGHMENT OF GOODS FROM DHARMKANTA HAVE BEEN FILED BY THE ASSESSEE. IT IS ALSO AN UNDISPUTED FACT THAT THE INVOICES ISSUED BY THE VARIOUS PARTIES ARE BEARING THE TRUCK NUMBER OF THE VEHICLE USED FOR DELIVERY OF GOODS AND VAT HAS ALSO BEEN CHARGED BY THE PARTIES IN THEIR BILLS. THE GOODS MENTIONED IN THE BILLS ARE MAINLY CEMENT AND STEEL (TMT BARS) WHICH ARE THE BASIC COMPONENT REQUIRED FOR CONSTRUCTION OF ANY BUILDING OR COMPLEX. THE EVIDENCE OF RECEIPT OF SUCH GOODS BY ASSESSEE 'IN THE FORM OF PURCHASE VOUCHER/MATERIAL RECEIPT NOTE IS ALSO THERE. MOST IMPORTANTLY AS STATED BY THE AR ALL THE PAYMENTS MADE TO THE PARTIES HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES AND SAME HAVE BEEN CLEARED FROM THE AS SESSEE'S BANK ACCOUNT. THE LD. AR HAS ALSO BROUGHT MY ATTENTION TO THE FACT THAT THE ASSESSEE IS MAINTAINING ITEM WISE STOCK REGISTER COPIES OF WHICH WERE FILED BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITA NOS. 2225 AND 2226/DEL/13 A.Y. 2009 - 10 DCIT VS. PIYUSH DEVELOPERS P.LTD., NEW DELHI 5 AND NO DEFECT HAS BEEN FOUND IN THE SAME. THUS IT IS OBSERVED THAT SUFFICIENT PIECES OF EVIDENCE OF TRANSACTIONS OF THE PURCHASES MADE FROM VARIOUS PARTIES HAVE BEEN PRODUCED BY THE APPELLANT WHICH HAVE NOT BEEN DENIED BY THE ASSESSING OFFICER AND HAVE NOT BEEN FOUND TO BE FALS E. THEREFORE, IN SUCH CIRCUMSTANCES THERE WAS HEAVY ONUS ON THE ASSESSING OFFICER TO PROVE OTHERWISE WHICH HAS NOT BEEN DISCHARGED BY HIM AND ON THE OTHER HAND INITIAL ONUS ON THE ASSESSEE HAS BEEN DISCHARGED. THE HON'BLE APEX COURT IN DAULAT RAM'S CASE 87 ITR 349 HAS HELD THAT THE ONUS TO PROVE THAT THE APPARENT WAS NOT REAL WAS ON THE PARTY WHO CLAIMED IT TO BE SO. THUS THE ONUS WAS. HEAVILY ON THE ASSESSING OFFICER IN THIS CASE. THE ASSESSING OFFICER HAS ALSO MENTIONED THE FACT OF MAKING CERTAIN SP9T. EN QUIRES WHICH ACCORDING TO HIM HAVE REVEALED THAT PARTIES M/S JAI AMBE TRADING COMPANY AND M/S SHREE GANPATI ENTERPRISES DID NOT EXIST AT THEIR GIVEN ADDRESSES FOR 6 - 7 YEARS. AR STATED AND ASSESSMENT ORDER ALSO DOES NOT SHOW THAT SUCH FACTS OR THE ENQUIRI ES HAVE BEEN CONFRONTED TO THE APPELLANT. ASSESSING OFFICER HAS THUS DISALLOWED PURCHASES IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE IN SUCH CIRCUMSTANCES I AM IN AGREEMENT WITH THE CONTENTIONS OF ID. AR THAT THE ACTION OF THE ASSESSING OFFICER IN SIMP LY BRUSHING ASIDE THE EVIDENCES BEFORE HIM WAS HIGHLY UNJUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE. THESE FINDINGS OF THE LD.CIT(A) COULD NOT BE CONTROVERTED BY THE LD.D.R. (III) THE OTHER ASPECTS ARE THAT THE VALUE OF WORK CERTIFIED, THE VALUE OF CLOSING STOCK HAVE BEEN ACCEPTED BY THE A.O. BOTH THESE CANNOT BE INDEPENDENT OF THE VALUE OF PURCHASES. THE PURCHASES EITHER FORM PART OF WORK CERTIFIED OR CLOSING STOCK. WHEN BOTH THESE ARE ACCEPTED AND NOT DISTURBED, THE QUESTION OF DISALLO WING THE PURCHASES DEBITED IN THE PROFIT AND LOSS ACCOUNT DOES NOT ARISE. (IV) THE LD.CIT(A) HAS RIGHTLY ANALYSED THAT IF THIS DISALLOWANCE OF PURCHASES IS UPHELD THEN THE G.P. RATE OF THE ASSESSEE WOULD BE ABNORMAL AT 67%. (V) THE HON BLE CALCUTTA HIGH C OURT IN DIAGNOSTICS VS. CIT (2012) REPORTED IN 20 TAXMANN.COM 692 (CAL.) AT PARAS 9 AND 10 HELD AS FOLLOWS. 9. HOWEVER, AS REGARDS THE PAYMENTS MADE TO M/S SELVAS PHOTOGRAPHICS ARE CONCERNED AMOUNTING TO RS.3,12,302/ - WE FIND THAT THOSE HAVE BEEN MADE ITA NOS. 2225 AND 2226/DEL/13 A.Y. 2009 - 10 DCIT VS. PIYUSH DEVELOPERS P.LTD., NEW DELHI 6 BY ACCOUNT PAYEE CHEQUES AND THOSE HAVE BEEN ENCASHED THROUGH THE BANKERS OF M/S SELVAS PHOTOGRAPHCIS. IT APPEARS THAT ACCORDING TO THE APPELLANT, AT THE TIME OF ASSESSMENT, THE APPELLANT HAD NO BUSINESS TRANSACTION WITH M/S SELVAS PHOTOGRAPHICS AND CONSE QUENTLY, THE SAID PARTY DID NOT COOPERATE WITH THE AO. HOWEVER, THE TRANSACTION HAVING TAKEN PLACE THROUGH ACCOUNT PAYEE CHEQUES, WE ARE UNABLE TO ACCEPT THE CONTENTION OF MR.AGARWAL, THE LD.ADVOCATE APPEARING FOR THE REVENUE THAT THE TRANSACTION WAS A N ON - EXISTENT ONE. IF AN ASSESSEE TOOK CARE TO PURCHASE MATERIALS FOR HIS BUSINESS BY WAY OF ACCOUNT PAYEE CHEQUES FROM A THIRD PARTY AND SUBSEQUENTLY THREE YEARS AFTER THE PURCHASE, THE SAID THIRD PARTY DOES NOT APPEAR BEFORE THE AO PURSUANT TO THE NOTICE OR EVEN HAS STOPPED THE BUSINESS, THE CLAIM OF THE ASSESSEE ON THAT ACCOUNT CANNOT BE DISCARDED AS NON EXISTENT. IN THE CASE BEFORE US, THE REVENUE HAS NOT PUT FORWARD ANY OTHER GROUND, SUCH AS, IT WAS NOT A GENUINE TRANSACTION FOR OTHER REASONS BUT HAS S IMPLY REJECTED THE CLAIM ON THE GROUND AS IF THERE WAS NO SUCH TRANSACTION. 10. THE TRANSACTION HAVING TAKEN PLACE THROUGH PAYMENT BY ACCOUNT PAYEE CHEQUES, SUCH PLEA IS NOT TENABLE AND IN SUCH CIRCUMSTANCES, THE TRIBUNAL BELOW ERRED IN LAW IN REVERSING T HE FINDING ARRIVED AT BY THE CIT(A) ACCEPTING THE SAID TRANSACTION AS A GENUINE TRANSACTION. (EMPHASIS OURS). 14.5. IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD THE FINDING OF THE LD.CIT(A) ON THE DELETION OF THE DISALLOWANCE OF RS.2,89,34,711/ - , WHICH WAS TREATED AS BOGUS PURCHASES BY THE A.O. THESE GROUNDS OF REVENUE ARE DISMISSED. 15. IN THE RESULT REVENUE S APPEAL IS DISMISSED. 6 . THE LD.D.R. COULD NOT POINT OUT ANY VARIATIONS IN THE FACTS AND ISSUES IN THIS CASE ON HAND AND THE FACTS AND ISSUES IN THE CASE OF M/S PEEYUSH DEVELOPERS LTD. AND M/S VARSHA BUILDWELL INDIA PVT.LTD. 6 . 1. THUS, C ONSISTENT WITH THE VIEW TAKEN THEREIN, WE UPHOLD THE FINDING OF THE LD.CIT(A) AND DISMISS BOTH THESE APPEALS BY THE REVENUE. ITA NOS. 2225 AND 2226/DEL/13 A.Y. 2009 - 10 DCIT VS. PIYUSH DEVELOPERS P.LTD., NEW DELHI 7 7 . IN THE RESULT BOTH THE APPEALS BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH MAY , 2016. SD/ - SD/ - (SU CHITRA KA MBLE ) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 11 TH MAY , 2016 MANGA COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR