DCIT, New Delhi V. M/s. Gardenia Aims Developers Pvt. Ltd., Noida

ITA 5279/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5029 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2017
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 26-09-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SHEFALI SWAROOP
• Assessee Lawyers: AMIT GOEL
• Keywords: Bogus purchase
• Section: 153A; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E : NEW DELHI) BEFORE HONBLE PRESIDENT, SHRI G.D. AGRAWAL AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.5279/DEL./2014 (ASSESSMENT YEAR : 2010-11) DCIT, CENTRAL CIRCLE 7, VS. M/S. GARDENIA AIMS DEVE LOPERS PVT. LTD., NEW DELHI. PLOT NO.GH-1, SECTOR 46, NOIDA 201 301 (U.P.). (PAN : AADCG5568K) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AMIT GOEL, CA REVENUE BY : MS. SHEFALI SWAROOP, CIT DR DATE OF HEARING : 10.08.2017 DATE OF ORDER : 25.08.2017 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : APPELLANT, DEPUTY COMMISSIONER OF INCOME-TAX, CENT RAL CIRCLE 7, NEW DELHI (HEREINAFTER REFERRED TO AS TH E REVENUE), BY FILING THE PRESENT APPEAL SOUGHT TO SET ASIDE THE I MPUGNED ORDER DATED 10.07.2014 PASSED BY THE COMMISSIONER OF INCO ME-TAX (APPEALS)-I, NEW DELHI, FOR THE ASSESSMENT YEAR 201 0-11 ON THE GROUNDS INTER ALIA THAT :- 1. THE ORDER OF LD. CIT (A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT (A) HAS ERRED IN LAW IN DELETING THE ITA NO.5279/DEL./2014 2 ADDITION OF RS.1,10,67,600/- MADE BY AO ON ACCOUNT OF DISALLOWANCE OF 'BOGUS PURCHASE' WHICH WERE CAPITALIZED BY THE ASSESSEE COMPANY. 2. BRIEFLY STATED THE FACTS NECESSARY FOR ADJUDICAT ION OF THE CONTROVERSY AT HAND ARE : ON THE BASIS OF SEARCH AN D SEIZURE OPERATION CARRIED ON 09.09.2010, ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 153A OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT) TO THE ASSESSEE ON 30.03.2012 AND THEREAFTER NOTICES U/S 143(2) AND 142 (1) ALONG WITH QUESTIONNAIRE ON 21.0 9.2012 WERE SERVED UPON. LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME AND FILE D DETAILS. AO NOTICED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE O N ACCOUNT OF PURCHASES FROM CERTAIN PARTIES WHO ARE INTO MERELY ISSUING PURCHASE BILLS AND EFFECTING PAYMENTS THROUGH BANKI NG CHANNELS FOR COMMISSION WITHOUT ANY PHYSICAL TRANSFER OF THE GOODS. AO EXAMINED INCRIMINATING DOCUMENTS, NAMELY, LEDGER AC COUNTS OF VARIOUS PARTIES SEIZED AS PER ANNEXURE A-3 AND FOUN D THAT M/S. SHRI SARASWATI STEEL CENTRE AND M/S. LAXMI ENTERPRI SES ARE BOGUS ENTRY PROVIDERS AND ADMITTED DURING SURVEY PROCEEDI NGS TO HAVE PROVIDED ENTRIES FOR PURCHASE BILLS AMOUNTING TO RS .31,43,88,970/- AND RS.72,28,04,582/- TO THE ASSESSEE COMPANY. AO GOT CONDUCTED PHYSICAL ENQUIRY THROUGH INSPECTOR, INCOME-TAX WHO REPORTED THAT BOTH THE AFORESAID PARTIES ARE NOT GENUINE AND TRAN SACTIONS OF ITA NO.5279/DEL./2014 3 PURCHASES OF RAW MATERIAL BY THE ASSESSEE REMAINED UNVERIFIABLE AND THE AO THEREBY REDUCED THE AMOUNT OF BOGUS PURC HASE OF RS.1,10,67,600/- FROM THE CLOSING WORK-IN-PROGRESS CLAIMED BY THE ASSESSEE. 3. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT ( A) BY WAY OF FILING AN APPEAL WHO HAS ALLOWED THE APPEAL. FEELI NG AGGRIEVED, THE REVENUE HAS COME UP BEFORE THE TRIBUNAL BY WAY OF CHALLENGING THE IMPUGNED ORDER PASSED BY LD. CIT. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS R ELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN T HE LIGHT OF THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. FROM THE GROUNDS OF APPEAL, ARGUMENTS ADDRESSED BY LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE AP PEAL AND FACTS & CIRCUMSTANCES OF THE CASE, THE SOLE QUESTION ARISES FOR DETERMINATION IN THIS CASE IS :- AS TO WHETHER THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION MADE BY THE ASSESSING OFFICER BY RELYING UPON HIS OWN ORDER RENDERED IN M/S. ULTRA HOME CONSTRUCTION PVT. LTD. FOR AY 2011-12 ORDER DATED 17.01.2014 IN ITA NO.108/2013-14 AND ON THE GROUND THAT WHEN THE SAID EXPENDITURE EMBEDDED IN THE WORK-IN- PROGRESS WILL BE CONSIDERED FOR COMPUTING THE INCOME OF THE ASSESSEE AS PER POC METHOD, ADDITION MADE BY THE ASSESSING OFFICER IS NOT SUSTAINABLE? ITA NO.5279/DEL./2014 4 6. AO MADE AFORESAID ADDITION ON THE BASIS OF DISCR EET ENQUIRY CONDUCTED BY HIM FIRSTLY BY ISSUING SUMMONS U/S 131 OF THE ACT WHICH RECEIVED BACK UNSERVED FOR LACK OF COMPLETE A DDRESS AND THEN BY GETTING THE MATTER ENQUIRED INTO THROUGH CI RCLE INSPECTOR, INCOME-TAX WHO HAS ALSO REPORTED THAT NO SUCH FIRMS / SUPPLIER OF RAW MATERIAL EXISTS AT THE GIVEN ADDRESSES IN ALL T HE CASES ON THE GROUND THAT THE IDENTITY AND EXISTENCE OF SUPPLIER OF RAW MATERIAL HAS NOT BEEN PROVED AND GENUINENESS OF TRANSACTIONS ALSO REMAINED UNVERIFIABLE BY RETURNING FOLLOWING FINDINGS :- A) AS DURING THE COURSE OF SURVEY DONE BY ADIT (INV.), UNIT-II, GHAZIABAD (U.P) THAT THE ABOVE PARTY ADMITTED TO HAVE RECEIVED COMMISSION OF 25 PAISE FOR EVERY 100 RUPEES FOR PROVIDING ENTRY FOR SALE OF GOODS. B) THE EXISTENCE OF THE PARTIES ON THE GIVEN ADDRESSES ARE VERIFIABLE DEJURE BUT DE-FACTO THEY ARE NOT FUNCTIONING AND DOING THE REAL BUSINESS OF SALE AND PURCHASE OF STEEL. C) THE LOCATION OF THE PREMISES FROM WHICH BUSINESS IS PURPORT TO BE CARRIED IS SUCH FROM WHICH OPERATION OF BUSINESS ALLEGED TO BE CARRIED OUT IS NOT POSSIBLE. ITA NO.5279/DEL./2014 5 D) THE LEVEL OF TRANSACTIONS ROUTED THROUGH THE BANK ACCOUNT OF THESE PARTIES ARE SUCH VOLUMINOUS AND BIG, WHICH PERSON OF STATUS OF THESE PARTIES IN NO MANNER CAN MATCH. E) MONEY ROUTED THROUGH THE BANK ACCOUNTS ARE AT FIRST STAGE TRANSFERRED TO OTHER ACCOUNTS AND AT SECOND STAGE THESE ARE WITHDRAWN MOSTLY IN CASH, WHICH IS REPATRIATED TO THE BENEFICIARY I. E. THE ASSESSEE COMPANY AND ITS ASSOCIATES IN CASH. F) MOREOVER, FAILURE ON THE PART OF THE ASSESSEE TO PRODUCE SUCH PARTIES INSPITE OF THE REPEATED OPPORTUNITY GIVEN TO THEM CONCLUSIVELY PROVE THAT NO SUCH PARTY ACTUAL EXIST WHICH CAN STAND AND OWN-UP THE TRANSACTIONS ALLEGED TO BE ROUTED THROUGH THEIR BANK ACCOUNTS AND ISSUE OF PURCHASE BILLS. 7. WHEN THE AO HAS BASED HIS FINDINGS ON ITS DISCRE ET INQUIRY THAT THE FIRMS FROM WHOM THE ASSESSEE HAS CLAIMED T O HAVE PURCHASED THE RAW MATERIAL ARE NOT IN EXISTENCE, TH OUGH THE TRANSACTIONS WERE ROUTED THROUGH BANK, IT CERTAINLY DISPUTES THE GENUINENESS OF THE TRANSACTIONS AND APPARENTLY LEAD S TO THE CONCLUSION THAT THESE ARE THE BOGUS PURCHASES MADE TO INFLATE THE COST IN ORDER TO FURTHER EVADE THE TAX. ITA NO.5279/DEL./2014 6 8. BUT, ON THE OTHER HAND, LD. CIT (A) WITHOUT EXAM INING THE ISSUE AS TO BOGUS PURCHASES, THOROUGHLY ENQUIRED IN TO BY THE AO, DELETED THE ADDITION ON THE GROUND THAT WHEN THE SA ID EXPENDITURE IS EMBEDDED IN THE WORK-IN-PROGRESS, THE SAME WILL BE CONSIDERED FOR COMPUTING THE INCOME OF THE ASSESSEE AS PER POC MET HOD. 9. HOWEVER, FROM THE TOTALITY OF THE FACTS AND CIRC UMSTANCES AND THE ORDER PASSED BY AO IN THE YEAR UNDER ASSESS MENT, IT IS APPARENTLY CLEAR THAT THOUGH THE EXPENDITURE CLAIME D BY THE ASSESSEE DOES NOT HAVE ANY BEARING ON ITS INCOME / PROFIT DURING THE SAID ASSESSMENT YEAR AS THE SAME HAVE BEEN ACCOUNTE D FOR AS WORK-IN-PROGRESS, BUT THE SAME WILL CERTAINLY EFF ECT THE INCOME OF THE ASSESSEE IN THE NEXT ASSESSMENT YEAR AS WELL AS AT THE CONCLUSION OF PROJECT. 10. IN THE GIVEN CIRCUMSTANCES, WE ARE OF THE CONSI DERED VIEW THAT THOUGH THE AO HAS MADE A DISCREET ENQUIRY THRO UGH INSPECTOR AS TO THE EXISTENCE OF THE FIRM FROM WHOM THE ASSES SEE ALLEGED TO HAVE PURCHASED THE RAW MATERIAL, BUT AT THE SAME TI ME AO CATEGORICALLY RECORDED THE OBSERVATIONS IN PARA 5.5 (F) THAT THE ASSESSEE HAS FAILED TO PRODUCE SUCH PARTIES INSPITE OF REPEATED OPPORTUNITIES GIVEN TO THEM BUT NO SUCH ADEQUATE OP PORTUNITY ALLEGEDLY PROVIDED BY THE AO TO THE ASSESSEE IS VIS IBLE ON THE RECORD, PARTICULARLY WHEN EXAMINED IN THE LIGHT OF THE FACT THAT LD. ITA NO.5279/DEL./2014 7 CIT (A) HAS CATEGORICALLY MENTIONED IN THE IMPUGNED ORDER THAT THE ASSESSEE HAS FILED ALL THE REQUISITE EVIDENCES AGAI N WITHOUT HIGHLIGHTING THE SAID PIECE OF EVIDENCE. EVEN THE ASSESSEE HAS NOT BEEN CONFRONTED WITH THE REPORT OF INCOME-TAX INSPE CTOR, RELIED UPON BY THE AO. SO, THE IMPUGNED ORDER IS LIABLE T O BE SET ASIDE TO REMAND THE SAME TO THE FILE OF THE AO FOR DE NOVO A SSESSMENT WHO SHALL PROVIDE ADEQUATE OPPORTUNITY TO THE ASSESSEE TO PROVE THE ALLEGED BOGUS PURCHASES. 11. RESULTANTLY, THE AFORESAID APPEALS FILED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON THIS 25 TH DAY OF AUGUST, 2017. SD/- SD/- (G.D. AGRAWAL) (KULDIP SINGH) PRESIDENT JUDICIAL MEMBER DATED THE 25 TH DAY OF AUGUST, 2017 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.