DCIT, Faridabad V. M/s Varsa Buildwell India Pvt. Ltd., New Delhi

ITA 2227/DEL/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 97963 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Next Hearing Date: 03-09-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P CHANDRAKAR
• Keywords: Bogus purchase; Search and seizure; Principle of natural justice; Onus to prove

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH H , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA PILLAI , JM ITA NO S . 2227/DEL/2013 : ASSTT. YEAR : 2009 - 10 DEPUTY COMMISSIONER OF INCOM E TAX, CENTRAL CIRCLE - I , FARIDABAD VS M/S VARSA BUILDWELL INDIA PVT. LTD. A - 16/B - 1, MOHAN CO - OPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO. AA CCV2714R ASSESSEE BY : SH. SUDHIR SEHGAL, ADV. RE VENUE BY : SH. J. P. CHANDRAKAR , SR. DR DATE OF HEARING : 03.09 .2015 DATE OF PRONOUNCEMENT : 27 .11 .2015 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 12.02.2013 OF CIT(A) - CENTRAL , NEW D ELHI. 2. THE ONLY GRIEVANCE OF THE DEPARTMENT IN THIS APPEAL RELATES TO DELETION OF ADDITION OF RS. 4,80,17,031/ - MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE FILED THE RETURN OF INCOME DECLARING AN I NCOME OF RS. 50,84,390/ - ON 17.03.2010. LATER ON, THE CASE WAS SELECTED FOR SCRUTINY. THE AO COMPLETED THE ASSESSMENT AT AN INCOME OF RS. ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 2 5,31,01,420/ - B Y MAKING THE ADDITION ON ACCOUNT OF BOGUS PURCHASES ALLEGED TO BE MADE FROM THE FOLLOWING PARTIES : I) M/S AMBIKA ENTERPRISES RS. 8,33,887/ - II) M/S BHAWANI TRADING CO. RS. 69,36,676/ - III) M/S CHAMUNDA SALES CORPN. RS. 1,49,93,724/ - IV) M/S LALA KALLU MAL & SONS CO. RS. 9,10,132/ - V) M/S RAJ LAXMI ENTERPRISES RS. 3,28,092/ - VI) M/S SHIV SHANKER ENTERP RISES RS. 43,47,887/ - VII) M/S SHRI GANPATI ENERPRISES RS. 1,96,66,633/ - TOTAL RS. 4,80,17,031/ - 4 . BEING AGGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO DELETED THE ADDITION BY OBSERVING THAT THE SIMILAR ADDITION WAS DELETED BY THE LD. CIT(A) (CENTRAL), LUDHIANA IN ASSESSEE S OWN CASE IN THE EARLIER YEAR. BEING AGGRIEVED THE DEPARTMENT IS IN APPEAL. 5 . THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ASSESSEE S OWN CASE IN ITA NO. 1574/DEL/2013 FOR THE ASSESSMENT YEAR 2009 - 10 VIDE ORDER DATED 08.07.2015 (COPY OF THE SAID ORDER WAS FURNISHED). 6 . IN HIS RIVAL SUBMISSIONS THE LD. DR STRONGLY SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT AN ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 3 IDENTICAL ISSUE HAVING SIMILAR FACTS HAS ALREADY BEEN ADJUDICATED BY THE ITAT DELHI BENCH H , NEW DELHI IN ASSESSEE S OWN CASE IN AFORESAID REFERRED TO ORDER DATED 08.07.2015 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 14.1 TO 18.2 WHICH READ AS UNDER: 14.1. NO DEFECTS HAVE BEEN FOUND IN THE STOCK REGISTER NOR ANY DEFE CTS 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 H AS 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 RE VENUE CANNOT PLACE 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 SUCH AS WHETHER SALES TAX AUTHORITIES HAVE ACCEPTED THE QUANTUM OF PURCHASES MADE BY THE ASSESSEE HAVE NOT BEEN OBTAINED IDENTITY COULD BE ASCERTAINED BY THE AO, BOTH FROM THE BANKER AND THE SALES TAX AUTHORITIES. UNDER THE CIRCUMSTANCES WE HAVE TO UPHOLD THE CONTENTIONS OF THE ASSESSEE, THAT THE FINDING OF THE AO, THAT THE ASSESSEE HAS NOT FURNISHED FULL 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 DEPAR TMENT AND HAVE CHARGED VAT IN EACH OF THE BILLS. ALL THESE PARTIES HAVE BANK ACCOUNTS AND PAYMENTS WERE MADE THROUGH ACCOUNT PAYEE CHEQUES. EVIDENCE OF MATERIAL HAVING BEEN RECEIVED BY THE ASSESSEE, HAS BEEN FILED. ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 4 14.3. AS REGARDS THE FACT THAT THE ASSE SSEE WAS NOT ABLE TO 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 COU LD 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 CON CLUSION THAT THE PURCHASES ARE NOT GENUINE. 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 PURC HASES MADE FROM 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 A CCOUNT OF THE 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 V EHICLE 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 E VIDENCE 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 ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 5 ALL THE PAYMENTS MADE TO THE PARTIES HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUES AND SAME HAVE BEEN CLEARED FROM THE ASSESSEE'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 AND NO DEFE CT 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 FALSE. 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 RA M'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 CERTA IN SP9T. ENQUIRES 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 TH E ENQUIRIES 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 SIMPLY 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. WE FIND NO INFIRMITY IN THE SAME. ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 6 (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 DISALLOWING 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 COURT 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 BY ACCOUNT PAYEE CHEQUES AND THOSE HAVE BEEN ENCASHED THROUGH THE BA NKERS OF M/S SELVAS PHOTOGRAPHIC S. IT APPEARS THAT ACCORDING TO THE APPELLANT, AT THE TIME OF ASSESSMENT, THE APPELLANT HAD NO BUSINESS TRANSACTION WITH M/S SELVAS PHOTOGRAPHICS AND CONSEQUENTLY, 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 T HE REVENUE THAT THE TRANSACTION WAS A NON - 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 ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 7 TR ANSACTION FOR OTHER REASONS BUT HAS SIMPLY 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 TRIB UNAL BELOW ERRED IN LAW IN REVERSING THE FINDING ARRIVED AT BY THE CIT(A) ACCEPTING THE SAID TRANSACTION AS A GENUINE TRANSACTION. (EMPHASIS OURS). 14.4. IN VIEW OF THE ABOVE DISCUSSION WE UPHOLD THE FINDING OF THE LD.CIT(A) ON THE DELETION OF THE DISAL LOWANCE 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. 16. WE NOW TAKE UP ASSESSEE S APPEAL. THE FIRST APPELLATE AUTHORITY HAS SOUGHT TO REJ ECT THE BOOKS OF ACCOUNTS ON TWO GROUNDS. (A) THE ASSESSEE FAILED TO FILE CONFIRMATIONS AND PRODUCE THE PARTIES FROM WHOM PURCHASES WERE MADE. (B) THE GROSS PROFIT RATE OF THE ASSESSEE IS LESS THAN THE GROSS PROFIT RATE OF OTHER CONCERNS IN THE GROUP. 17. AS FAR AS THE FIRST ISSUE IS CONCERNED WE REFER TO OUR DETAILED DISCUSSION IN THE REVENUE S APPEAL AND HOLD THAT THE FIRST APPELLATE AUTHORITY HAS TAKEN A CONTRADICTORY STAND. THE LD.CIT(A) HELD THAT THE NON PRODUCTION OF PARTIES ETC. ON THE FACTS AN D CIRCUMSTANCES OF THE CASE, DOES NOT JUSTIFY DISALLOWANCE OF THE CLAIM OF EXPENDITURE ON ACCOUNT OF PURCHASES. ON THE OTHER HAND HE CITES THE SAME REASON FOR HOLDING THAT THE BOOKS OF ACCOUNTS ARE NOT RELIABLE AND HAVE TO ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 8 BE REJECTED. SUCH A CONTRADICTORY VIEW CANNOT BE COUNTENANCED. 18. THE SECOND GROUND ON WHICH BOOKS WERE REJECTED IS ALSO NOT SUSTAINABLE. (I) THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. PARADISE HOLIDAYS REPORTED IN 325 ITR 13 (DEL) HAS HELD THAT WHERE THE AO HAS NOT POINTED OUT ANY SPECIFIC DEFECT OR DISCREPANCY IN THE ACCOUNT BOOKS MAINTAINED BY THE ASSESSEE WHICH ARE DULY AUDITED BY AN INDEPENDENT CHARTERED ACCOUNTANT, THERE WAS NO JUSTIFICATION IN REJECTING THE BOOKS OF ACCOUNTS AND MAKING THE ADDITION TO THE DECLARED INCO ME. (II) SIMILARLY THE HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. POONAM RANI IN ITA 406/DEL/2009 JUDGEMENT DT. 7.5.2010 HAS HELD THAT THE FALL IN GROSS PROFIT RATION, IN THE ABSENCE OF ANY COGENT REASONS COULD NOT, BY ITSELF, HAVE BEEN A GROUND TO HOLD THAT PROPER INCOME OF THE ASSESSEE CANNOT BE DEDUCTED FROM THE ACCOUNTS MAINTAINED BY HER AND CONSEQUENTLY, COULD NOT HAVE BEEN A GROUND TO REJECT THE ACCOUNTS INVOKING SEC.145(3) OF THE ACT. THERE ARE NUMBER OF DECISIONS ON THE SAME LINES. 18.1. IN VIEW OF THE ABOVE DISCUSSION AND AS NO DEFECTS HAVE BEEN POINTED OUT IN THE BOOKS OF ACCOUNTS, WE UPHOLD THE CONTENTIONS OF THE ASSESSEE AND VACATE THE FINDING OF THE LD.CIT(A) ON ESTIMATION OF GROSS PROFIT. THE DIRECTION GIVEN TO THE AO TO RECOMPUTE TH E ASSESSEE S GROSS PROFIT @ 27% INSTEAD OF AT 16% IS HEREBY VACATED AND THIS GROUND OF THE ASSESSEE IS ALLOWED. 18.2. AS ALREADY STATED, THE GROUNDS OF APPEAL AND FACTS IN THE CASE OF PIYUSH DEVELOPERS PVT. LTD AND IN THE CASE OF M/S VERSA BUILDWELL INDI A P.LTD. ARE THE SAME. HENCE WE FOLLOW ITA NO S. 2227 /DEL /201 3 VARSA BU ILDWELL INDIA PVT. LTD. 9 OUR DECISION IN THE CASE OF PIYUSH DEVELOPERS PVT.LTD. AND ALLOW THE APPEAL OF THE ASSESSEE IN THE CASE OF M/S. VERSA BUILDWELL INDIA (P) LTD. AND ALSO DISMISS THE REVENUE S APPEAL IN THIS CASE. HENCE BOTH THE APPEALS OF THE ASSESSES ARE ALLOWED AND BOTH THE APPEALS OF THE REVENUE ARE DISMISSED. 8 . SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE IDENTICAL TO THE FACTS INVOLVED IN ASSESSEE S OWN CASE IN ITA NO. 1574/DEL/2013 FOR THE A SSESSMENT YEAR 2009 - 10 (SUPR A), S O, RESPECTFULLY FOLLOWING THE SAID ORDER, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT. 9 . IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DI S MISSED. ( ORDER PRON OUNCED IN THE COURT ON 27 /11 /2015 ) SD/ - SD/ - (BEENA PILLAI ) (N. K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 27 /11 /2015 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR