M/s Scantec (India) Pvt. ltd., Noida V. Addl. CIT, Uttar Pradesh

ITA 2893/DEL/2011

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7150 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 23-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 02-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B RAMANJANEYULA
• Assessee Lawyers: YOGESH K JAGI A
• Keywords: Bogus purchase; Opportunity of being heard; Additional evidence
• Section: 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH G NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 2893 /DEL./20 11 ASSTT. YEAR : 200 7 - 08 SCANTEC (INDIA) PVT. LTD., VS. ADDL. CIT , (PRESENTLY KNOWN AS TERACOM LTD.) , NOIDA RANGE . B - 84, SECTOR - 60 , NOIDA . (PAN: AAHCS 4330H) (APPELLANT) (RESPONDENT) APPELLANT BY : SH. YOGESH K. JAGIA, ADVOCATE RESPONDENT BY : SH. B. RAMANJA NEYULA, SR. DR DATE OF HEARING : 23.08.2016 DATE OF PRONOUNCEMENT : 16 .09.2016 ORDER PER L.P. SAHU, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), GHAZIABAD DATED 28.03.2011 FOR THE ASSESSMENT YEAR 200 7 - 08 ON THE FOLLOWING GROUNDS : 1. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN UPHOLDING PART OF PURCHASES AS BOGUS BECAUSE OF NON - RECEIPT OF CONFIRMATION BY IGNORING SUBSTANTIAL EVIDENCE PLACED ON RECORD. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN UPHOLDING ADDITION OF RS.2,84,660/ - ON ACCOUNT OF ALLEGED DIFFERENCE IN CONFIRMATION RECEIVED BY SHRI ITA NO. 2 893 /DEL./20 11 2 GAURAV ARORA, THE SUPPLIER, VIS - - VIS AMOUNT R ECORDED BY THE APPELLANT IN ITS BOOKS OF ACCOUNT AND JUSTIFICATION GIVEN THERE FOR. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF ELECTRO - MECHANICAL AND CIVIL ENGINEERING CONTRACTOR AND CARRIED OUT THE ERE CTION OF EXTRA HIGH VOLTAGE OVERHEAD TRANSMISSION LINES, INSTALLATION OF UNDERGROUND EHV POWER CABLES, MICROBE AND TELECOM TOWERS, REPAIR AND MAINTENANCE OF EHV TRANSMISSION AND DISTRIBUTION EQUIPMENTS FOR ELECTRIFICATION. THE ASSESSEE FILED ITS RETURN OF INCOME, DECLARING INCOME OF RS. 66,22,630/ - , WHICH WAS PROCESSED U/S. 143(1) AND WAS SELECTED FOR SCRUTINY THROUGH CASS. STATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE TO TAL GROSS RECEIPTS FOR FINANCIAL YEAR ARE AT RS. 10,43,73,272 / - AND TOTAL EXPENDITURE CLAIMED BY THE ASSESSEE IS RS. 9,72,65,878/ - . THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS ISSUED NOTICES U/S. 133(6) TO 23 PARTIES ON THE ADDRESSES PROVIDED B Y THE ASSESSEE FROM WHOM THE MATERIAL S W ERE PURCHASED BY THE ASSESSEE COMPANY. OUT OF THE ABOVE, SOME NOTICES U/S. 133(6) WERE RECEIVED BACK OR /AND IN SOME CASES, CONFIRMATIONS WERE NOT RECEIVED BY THE ASSESSING OFFICER TILL THE DATE OF ASSESSMENT ORDER NOR THE ASSESSEE WAS ABLE TO FILE ANY CONFIRMATIONS. THE DETAILS OF SUCH PARTIES ARE AS UNDER : ITA NO. 2 893 /DEL./20 11 3 SL. NO. NAME ADDRESS OF THE PARTY REMARK AMOUNT RECEIVED 1 M/S. KHAN TRADERS, NIGHASAN ROAD, NEAR MASJID, AKHIMPUR (UP) INCOMPLETE ADDRESS 524885 2 M/S. MARSHAL ENGINEERING WORKS, RAILWAY STATION ROAD, RAJ CHAMBERS, BHINMAL (U.P.) INCOMPLETE ADDRESS 489462 3 M/S. AMBICA TRADERS, KISANNI ROAD, MAINPURI NO SUCH ASSESSEE 365679 4 M/S AGARHARI AGENCIES NO CONFIRMATION 813385 5 M/S. BALAJI TRADERS NO CONFIRMATION 306773 6 M/S. GAYATRI BUILDING MATERIAL, ALIGARH NO CONFIRMATION 1257493 7 M/S. GULERIA CHINNI MILLS NO CONFIRMATION 353404 8 M/S. MAHALAXMI MARBLES NO CONFIRMATION 499365 9 M/S. RAM PRATAP & COMPANY NO CONFIRMATION 346700 10 SH.SUBHASH CHAND GUPTA NO CONFIRMATION 508877 TOTAL 5466023 3. OPPORTUNITIES WERE GRANTED BY THE AO TO THE ASSESSEE FOR FILING THE CONFIRMATIONS FROM THE ABOVE PARTIES. THE ASSESSEE SUBMITTED PURCHASE BILLS/BILLS RAISED BY THE CREDITORS. THE PAYMENTS WERE ALSO M ADE BY CASH/CHEQUES/DDS. COPY OF LEDGER ACCOUNTS OF THE CREDITORS WERE ALSO SUBMITT ED BEFORE THE ASSESSING OFFICER AS STATED ABOVE. ON 24.12.2009, THE AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE UNDERTAKES THE PROJECTS AT VARIOUS PLACES, SITES WHICH ARE SCATTERED ALL OVER AND MOST OF THE PROJECTS/SITES ARE LOCATED IN REMOTE AREAS. THE NATURE OF ASSESSEE S BUSINESS DEMANDS THAT THE PURCHASES AT PROJECTS BE MADE LOCALLY AND ONCE THE WORK GOT COMPLETED AT A PARTICULAR PROJECT, NO FURTHER CONTACT IS MAINTAIN ED OR AVAILABLE WITH THE LOCAL SUPPLIER. THEREFORE, NEITHER THE ASSESSEE IS IN POSSESSION OF THEIR PRESENT WHEREABOUTS NOR HAS ANY POWER OR AUTHORITY TO COMPEL THEM TO COMPLY WITH THE ABOVE SAID NOTICES SERVED BY THE ASSESSING OFFICER. ITA NO. 2 893 /DEL./20 11 4 4. THE ASSESSING OF FICER NOTED THAT THE ONUS IS ON THE ASSESSEE TO ESTABLISH THE IDENTITY OF THE PARTIES AND GENUINENESS OF THE TRANSACTIONS , WHICH HAS ACTUALLY NOT BEEN DONE BY THE ASSESSEE. THE ASSESSEE WAS GIVEN AMPLE OPPORTUNITY FOR PROVIDING CONFIRMATIONS FROM THE ABOVE CREDITORS BUT THE ASSESSEE DID NOT SUBMIT CONFIRMATIONS. THE FINDING OF THE ASSESSING OFFICER IS REPRODUCED AS UNDER : SINCE NOW A DAYS IT HAS BECOME A MODUS OPERANDI BY MANY ASSESSEES TO INFLATE THEIR PURCHASES FROM PARTIES WHO ARE ACTUALLY NOT DOING ANY SUCH BUSINESS, BUT OPERATE ON PAPER TO PROVIDE BILLS AND TAKE PAYMENTS IN CHEQUE. SUCH PAYMENTS ARE THEN WITHDRAWN SAME DAY AND RETURNED BACK TO THE PARTY THROUGH CIRCUITOUS ROUTE. IN THIS BACKGROUND WHEN THE ASSESSEE HAS NOT BEEN ABLE TO FURNISH EVEN BASIC CONFIRMATION FROM THE PARTIES FROM WHOM SUBSTANTIAL PURCHASES ARE MADE, THE GENUINENESS OF SUCH PURCHASES MADE IS NOT PROVED. THOUGH ASSESSEE HAS TAKEN A STAND THAT PURCHASES WERE MADE FROM LOCALLY AVAILABLE PARTIES. BUT THE FACT REMAINS THAT IN THE LIGHT OF SUBSTANTIAL AMOUNT OF BUSINESS DONE BY THOSE PARTIES, THEY SHOULD HAVE BEEN ABLE TO RESPOND TO INDEPENDENT CONFIRMATION. ANY PA RT Y DOING SUCH SUBSTANTIAL BUSINESS WOULD NOT JUST CHANGE THE IR WHEREABOUTS AND EVEN IF THERE IS ANY CHANGE IN ADDRE SS, THE SAME IS ALWAYS IN THE KNOWLEDGE OF LOCAL POSTAL AUTHORITIES. KEEPING IN VIEW THE FACT AND CIRCUMSTANCE OF THE CASE, THE PURCH A SES SHOWN FROM THE ABOVE PARTIES FOR THE YEAR UNDER CONSIDERATION ARE TREATED AS BOGUS PURCHASES INCLUDING THE PAYMENT MA DE/SHOWN THROUGH CHEQUE BECAUSE THE SAME HAS NOT BEEN CONFIRMED TO HAVE RECEIVED BY THEM IN CONNECTION WITH BUSINESS ACTIVITIES CARRIED OUT BY THE ASSESSEE. AC C ORDINGLY, THE PURCHASES MADE WITH THE ABOVE PARTIES AMOUNTING TO RS. 54,66,023 / - ARE DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE OUT OF THE EXPENSES CLAIMED UNDER THE HEAD PURCHASES. ITA NO. 2 893 /DEL./20 11 5 THE AO, ACCORDINGLY, MADE DISALLOWANCE OF RS.54,66,023/ - . 5. FURTHER, THE ASSESSING OFFICER NOTED THE DETAILS FROM THE CONFIRMATIONS RECEIVED FROM THE CREDITOR S FROM WHOM THE PURCHASES WERE MADE BY THE ASSESSEE AS UNDER : SI. N O. NAME OF PARTY AMOUNT OF PURCHASES SHOWN BY ASSESSEE AMOUNT AS PER CONFIRMATION DIFFERENCE 1 M/ S CHANDER KALA ENTERPRISES 1108453 .00 850000 .00 258453 .00 2. M/S BANWARI LAL BAIJ NATH 1 1 93291 .00 1083305 .00 109986 .00 3. SH. GAURAV AORRA 2582999 .00 2298339 .00 284660 .00 4. M/S KUCHHAL STEELS 2773430 .00 2534949 .00 23848 1 .00 5 M/S M.K.AGENCIES 3 1786 1 1.00 140000 .00 177861 .00 6 M/S. DEEPAK TRADERS 18700 11 .00 1864799 .00 5212 .00 TOTAL 9846045 .00 8771392 .00 1074653 .00 FROM THE ABOVE TABLE, THE AO NOTED THAT THERE IS NET DIFFERENCE OF RS.10,74,653/ - BETWEEN THE AMOUNT OF PURCHASES SHOWN BY ASSESSEE AND THAT CONFIRMED BY THE ABOVE SELLERS AND , THEREFORE, IT WAS OBSERVED THAT THE ASSESSEE IS INFLATING THE EXPENSES AND REDUCING THE PROFITS TO THAT EXTENT. ACCORDINGLY, INFLATED BOGUS PURCHASES MADE FROM THE ABOVE PARTIES AMOUNTING TO RS.10,74,653/ - WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO. 2 893 /DEL./20 11 6 6. AGGRIEVED BY THE ABOVE TWO ADDITIONS, THE ASSESSEE APPEALED BEFORE THE FIRST APPELLATE AUTHORITY AND SUBMITTED ADDITIONAL EVIDENCES BEFORE THE LD. CIT(A) WHICH WERE FORWARDED TO THE AO FOR HIS COMMENTS. THE LD. AO FURNISHED THE REMAND REPORT, CATEGORICALLY STATING THAT THE ADDITIONAL EVIDENCES SHOULD NOT BE ACCEPTED BECAUSE THE ASSESSEE DOES NOT FALL IN ANY OF THE CONDITIONS LAID DOWN U/R 46A OF THE IT RULES. COPY OF THE REMAND REPORT WAS PROVIDED TO THE ASSESSEE AND THE ASSESSEE ALSO SUBMITTED ITS REJOINDER. THE LD. CIT(A) CONSIDERING THE NATURE OF WORKS AND DIFFICULTIES FACED BY THE ASSESSEE, ACCEPTED THE ADDITIONAL EVIDENCE AND RESTRICTED THE ADDITIONS TO RS.21,95,676/ - AS AG AINST RS.54,66,023/ - MADE BY THE AO . IN RESPECT OF SECOND ADDITION OF RS.10,74,653/ - MADE ON ACCOUNT OF DIFFERENCE BETWEEN THE AMOUNT OF PURCHASE SHOWN BY THE ASSESSEE AND THAT CONFIRMED BY THE SELLERS, THE LD. CIT(A) AFTER CONSIDERING THE ADDITIONAL EVID ENCES, SUSTAINED THE ADDITION OF RS.2,84,660/ - WITH RESPECT TO DIFFERENCE IN THE CASE OF GARAV ARORA. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 7. THE LD. AR OF THE ASSESSEE SUBMITTED THAT ALL TH E INFORMATION WERE SUBMITTED BEFORE THE ASSESSING OFFICER AS REQUIRED, VIZ., COPY OF LEDGER ITA NO. 2 893 /DEL./20 11 7 ACCOUNTS, BILLS RAISED BY THE CREDITORS, COMPLETE POSTAL ADDRESS ETC. ONLY THREE SUMMONS WERE NOT SERVED OUT OF 23 SUMMONS ISSUES. THE ASSESSEE HAS NO CONTROL OVER THEM. HE CANNOT COMPEL TO ANYBODY FOR GIVING INFORMATION TO THE ASSESSING OFFICER. THE REVENUE HAS WIDE POWERS WHICH MAY BE EXERCISED AS PER ACT. THE ASSESSEE HAS EXECUTED WORKS AT VARIOUS PLACES AND SOME MATERIALS WERE PURCHASED LOCALLY. AFTER COMPLETION OF WORKS, THE SITE IS CLOSED AND THERE IS NO RELATION WITH THE CREDITORS. PAYMENTS HAVE BEEN MADE THROUGH CASH/CHEQUES/DRAFTS. THE AO COULD DEPUTE THE INSPECTOR FOR VERIFICATION OR HE CAN EXERCISE HIS POWERS REGARDING VERIFICATION OF PAYMENTS WHICH WERE MA DE BY CHEQUES/DRAFTS, BUT HE DID NOT DO SO. AS SUCH, ONCE THE ONUS IS DISCHARGED BY THE ASSESSEE BY SUBMITTING ALL THE DETAILS REQUIRED BY AO, THE ONUS IS SHIFTED UPON THE ASSESSING OFFICER TO PROVE THE PAYMENTS MADE BY CHEQUES/DRAFTS WAS ONLY FOR BOGUS PU RCHASES AND THE AMOUNT PAID HAS BEEN RECEIVED BACK IN CASH OR BY ANY OTHER MODE BY THE APPELLANT. THE ASSESSING OFFICER PREFERRED TO LABEL THE ALLEGATIONS WITHOUT ANY BASIS AND JUSTIFY THE ADDITIONS ON WHIMS AND FANCIES SO MUCH SO THAT NOT EVEN AN IOTA OF EVIDENCE HAS BEEN PLACED ON RECORD TO DEMONSTRATE BOGUS TRANSACTIONS LIKE RECEIVING CASH BACK FROM THOSE PARTIES. THE LD. AR PLACED RELIANCE ON THE FOLLOWING DECISIONS : (I). CIT VS. FANCY INTERNATIONAL, 166 TAXMAN 183 (II). ACIT VS. AMAR MINING CO. 121 IT D - 273 (AHD. TRIBUNAL) ITA NO. 2 893 /DEL./20 11 8 (III). DCIT VS. ALLIED LEATHER FINISHER PVT. LTD. (32) SOT 549 (LKO BENCH) (IV). C.B. GAUTAM VS. UOI, 199 ITR 530 (SC) (V). STATE OF KERALA VS. K.T. SHADULI YUSUF, 39 STC 478 ( SC) (VI). RAGHUVIR HARIHAR (1957) ZSTC 770(SC) (VII). DHAK ESHWARI COTTON MILLS LTD. VS. CIT, 26 ITR 775. 8. THE LD. DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 9. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE LD. AO AND CIT(A) HAS EXAMINED IN DETAIL THE APPELLANT S SUBMISSIONS, BUT BOTH OF THEM HAVE FAILED TO EXAMINE THE BANK TRANSACTIONS UNDERTAKEN BY THE ASSESSEE. BOTH THE AUTHORITIES BELOW COULD HAVE VERIFIED THE PAYMENTS FROM THE CONCERNED BANKS. THE LD. CIT(A) HAS ACCEPTED THE ADDITIONAL EVIDENCES AND ALLOWED THE APPEAL PARTLY WITH RESPECT TO SUCH PARTIES WHOSE CONFIRMATIONS WERE RECEIVED, BUT IN CASE OF FOLLOWIN G FIVE PARTIES FROM WHOM NO RESPONSE WERE RECEIVED FROM THE CREDITORS, THE LD. CIT(A) SUSTAINED THE ADDITION. THE DETAILS OF SUCH CREDITORS ARE PLACED IN THE PAPER BOOK AS UNDER : (I). M/S. KHAN TRADERS - PAPER BOOK PAGES 94 150 (II). M/S. MARSHAL ENG INEERING - PAPER BOOK PAGES 151 165 (III). M/S. AMBICA TRADERS - PAPER BOOK PAGES 166 172 (IV). M/S. BALAJI TRADERS - PAPER BOOK PAGES 173 192 (V). SHRI SUBHASH CHAND GUPTA - PAPER BOOK PAGES 193 - 199 THE ABOVE PARTIES LEDGER ACCOUNT S SHOW TH AT THE PAYMENTS HAVE BEEN MADE THROUGH CASH/CHEQUES/DD AND THE ASSESSEE HAS SUBMITTED THE BILLS RAISED BY ITA NO. 2 893 /DEL./20 11 9 THE ABOVE CREDITORS, BUT THE LOWER AUTHORITIES HAVE NOT EXAMINED THE TRANSACTIONS DEBITED /CREDITED IN THEIR LEDGER ACCOUNTS. THE AO COULD ALSO VERIFY THE GENUINENESS OF PAYMENTS FROM THE CONCERNED BANKS WHERE THE PAYMENTS WERE MADE AGAINST PURCHASES BY WAY OF ACCOUNT PAYEE CHEQUES OR DEMAND DRAFTS, AS ARE REFLECTED IN THE LEDGER ACCOUNTS OF ABOVE FIVE PARTIES WHOSE CONFIRMATIONS WERE NOT BROUGHT ON REC ORD OR NOTICES U/S. 133(6) STOOD UN - RESPONDED. IN SUCH STATE OF AFFAIRS, AND IN THE PECULIAR FACTS OF THE PRESENT CASE, WE DEEM IT EXPEDIENT IN THE INTEREST OF JUSTICE TO RESTORE THE MATTER TO THE FILE OF AO FOR DECIDING THE ISSUE AFRESH IN VIEW OF THE OBS ERVATIONS MADE ABOVE AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 10. ADVERTING TO THE NEXT ADDITION OF RS.2,84,660/ - , ON PERUSAL OF THE LEDGER ACCOUNTS MAINTAINED BY THE ASSES SEE (PAPER BOOK PAGES 200 & 201) AND THAT MAINTAINED BY M/S. GAURAV ARORA (PAPER BOOK PAGE 246), WE FIND THAT BILL NOS. 15, 16 AND 14 DATED 20.02.2007, 21.02.2007 AND 31.03.2007 FOR RS.76,962/ - , RS.1,03,710/ - & RS.1,05,200/ - RESPECTIVELY ARE FOUND CREDITED IN THE LEDGER ACCOUNT OF ASSESSEE, BUT THE SAME ARE NOT FOUND DEBITED IN THE LEDGER ACCOUNT OF GAURAV ARORA. SINCE, ADMITTEDLY, THIS PARTY IS TRACEABLE AND HAS FILED CONFIRMATION, IT WAS NECESSARY ON THE PART OF THE AUTHORITIES BELOW TO ITA NO. 2 893 /DEL./20 11 10 VERIFY THE ABOVE T HREE BILLS FROM THIS PARTY AS TO WHETHER THE SE BILLS HAVE BEEN ISSUED BY GAURAV ARORA OR NOT. HOWEVER, NO SUCH STEPS HAVE BEEN TAKEN BY THE AUTHORITIES BELOW. WE, THEREFORE, DEEM IT PROPER TO REMAND THIS ISSUE ALSO TO THE FILE OF AO FOR DECIDING THE SAME AFRESH AFTER MAKING DUE VERIFICATION AS OBSERVED ABOVE. NEEDLESS TO SAY, THE ASSESSEE SHALL BE GIVEN REASONABLE OPPORTUNITY OF BEING HEARD. ACCORDINGLY, THIS GROUND OF APPEAL IS ALSO ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 16.09.2016 . SD/ - SD/ - ( I.C. SUDHIR ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 16.09.2016 *AKS/ - COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT. REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI