TaxTMI 
TaxTMI 
2017 (2) TMI 906
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....essee has filed these appeals and cross objection challenging the addition sustained by the learned CIT(A). 3. Facts relating to the case are stated in brief. The assessee is engaged in the business of undertaking civil contract works under his proprietary concern named M/s. Kinjal Construction Company. The assessee mainly undertakes contract given by the Government and Semi Government bodies by obtaining them through tenders floated by them. Original assessment for A.Y. 2009-10 and 2010-11 were completed u/s. 143(3) of the Act. Return of income filed by the assessee for A.Y. 2011-12 was processed u/s. 143(1) of the Act. The Assessing Officer subsequently received information from DGIT(Inv) that certain dealers have admitted before the Maharashtra Sales Tax Department that they have issued bogus bills without actual delivery of goods. The list of those dealers was categorized as "Suspicious dealers" and was published by the Sales tax department. It was noticed that the assessee has purchased goods from some of the dealers who have been categorized as "suspicious dealers". Hence the Assessing Officer reopened the assessment of the assessee for A.Y. 2009-10 and 2010-11. Assessment r....
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..... The Department had conducted a survey operation in the hands of the assessee u/s. 133A of the Act. During the course of survey, a statement from the project engineer named Mr. Arvind M. Jain was recorded u/s. 131 of the Act. In the said statement, the project engineer had explained the methodology adopted for purchase of material and for making payment. In the said statement he had stated that certain purchases debited in the books of account of the assessee do not have supporting documents. The Assessing Officer also referred to the statement taken from the assessee on the date of survey as well as post survey. In the statements, the assessee had admitted that supporting documents are missing in respect of certain purchases. He had also stated that he has not been able to justify these purchases and will file a revised return. 7. In view of the above, the Assessing Officer came to the conclusion that the purchases made from suspicious dealers are bogus in nature and accordingly disallowed the purchases in all the three years as detailed below:- A.Y. Amount in Rs. 2009-10 2.35 crores 2010-11 7.99 crores 2011-12 3.34 crores 8. In the appellate proceedings, the le....
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.... of 2012 dated 16.1.2013), the Ld CIT(A) came to the conclusion that only a portion of purchases can be disallowed by estimating profit element involved therein. Accordingly, the learned CIT(A) restricted the addition to 12.5% of the alleged bogus purchases. The revenue is aggrieved by the relief granted to the assessee and the assessee is aggrieved by the addition sustained by the Ld CIT(A). 9. We have heard rival contentions and perused the record. The Ld D.R placed strong reliance on the orders passed by the AO and contended that the Ld CIT(A) should have upheld the addition made by the AO in all the three years. On the contrary, the Ld A.R submitted that the Ld CIT(A) should have deleted the additions in entirety, since the assessing officer has made the additions only on suspicions and further the assessee has proved the genuineness of purchases by furnishing necessary documents. 10. We notice that the Ld CIT(A) has extracted the following submissions made by the assessee before him. For the sake of convenience, we also extract the same hereunder:- "(n). The AR of the appellant has further submitted as under:- i) In the course of survey action, no incriminating material ....
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....alleged bogus parties are mainly used in 2 contracts namely M/East and Narayan Ngr (LW). Out of the total materials of Rs. 2,-35,04,632/- purchased from said parties, materials of Rs. 88,56,743/- are * used in M/East and materials of Rs. 1,41,97,306/- are used in Narayan Ngr (LW). The allegation of the AO of non-genuine purchase is considered, the GP ratio of these 2 contracts give absurd result if these alleged purchases are excluded from the total purchases made for the contract. For e.g., in respect of M/East contract, the alleged nongenuine purchase is stated to be Rs. 88,56,743/- and the GP including these purchases comes to -18.21% whereas the GP excluding this alleged non- genuine purchase works out to 33.46%. Similarly, for Narayan Ngr (LW) Works contract, the GP including alleged non-genuine purchase of Rs. 1,41,97,3061- works out to 17.61% and excluding this purchase, the GP works out to 34.50%. Thus, the appellant submits that from this chart of GP, it--proves beyond doubt that the purchases are made by the appellant and the same cannot be disallowed. (xii) The appellant submits that all the details in respect of each of the party was duly furnished to the AO in the c....
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....considered for resolving the issue. The FAA has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. As far as the case of Western Extrusion Industries (supra) is concerned, we find that in that matter cash was immediately withdrawn by the supplier and there was no evidence of movement of goods. But, in the case before us, there is nothing, in the order of the AO, about the cash traial. Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the case under appeal, we are of the opinion that the order of the FAA does not suffer from any legal infirmity and there are not sufficient evidence on file to endorse the view taken by the AO. So, confirming the order of the FAA, we decide ground no.1 against the AO." (o) The -assessee further submits that it is not possible to construct projects without the consumption of the raw-materials and hence, there is no question of appellant not having purchased goods from these parties. (p) The appellant further submits that its books of account are duly audited and there are no such defects pointed out by the auditor. Further, the....
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....e Revenue that the amounts withdrawn from the Syndicate Bank account No.2668 had been received by the assessee. In the present case, the books maintained by the assessee have not been rejected by the Assessing Officer and in fact the addition is based on the entries made in the books of account maintained by the assessee. The fact that the said Bipinkumar B. Shah has not paid sales tax payable on sale of 50 M.Ts. of HOPE or the fact that the assessee has paid for the goods after the date of search and claimed 10 M. Ts. of HDPE belatedly does not in any way affect the genuineness of the transaction. Having rejected the addition of the value of 40 M.Ts. of HOPE powder, the Tribunal could not have sustained addition of the value of 10 M.Ts. of HOPE powder, when the nature and source of investment has been duly explained by the assessee." (u) The appellant submits that it has made payments for purchase from its regular bank account and the relevant copies of cross-examine the said person. The appellant relies upon the following decisions for the proposition that no addition could be made on the basis of the statement given by the third party if the appellant is not given opportunity ....
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....ithout furnishing the copy thereof to the assessee or without giving an opportunity of cross-examination, if the addition is made, the same is required to be deleted on the ground of violation of the principles of natural justice. (y) The appellant further submits that no addition could be made relying upon the third party statement as held in- CIT v. Concord Capital Management Co. Ltd. 334 ITR 346 (Del) Dr. R.L. Narang 174 Taxman 96 (Chd)(Mag) (z) In view of the above, the appellant submits that the disallowance out of purchases of Rs,2,35,04,632/- is without any justification and liable to be deleted. Without prejudice to above, the appellant submits that similar disallowance of purchases has been in the case of the appellant for the Assessment Year 2011-12 in the assessment u/s.143(3). The appellant preferred appeal before the Honble CIT(A) and the CIT(A) has restricted the addition/ disallowance to 12.5% of the purchases. The appellant further placed reliance in the following cases wherein it has been held that entire purchases cannot be disallowed and only profit element is to be added: i) CIT v. Bholanath Poly Fab Pvt. Ltd. (2013)355 ITR 290 (Guj)(HC) ii) CIT V....
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.... that the assessing officer has rejected the evidences available with the assessee in a summary manner, i.e., the AO did not conduct any type of enquiry or investigation to prove that those documents are not reliable. The assessee has also pointed out that the goods were transported by the suppliers directly to the sites and the lorry numbers have been duly noted down in the relevant invoices. He has also submitted that the delivery challans have been furnished in most of the cases. We notice that the AO did not consider these submissions of the assessee at all. There is no dispute with regard to the fact that the payments to the suspicious dealers have been made by way of account payee cheques. The bank statements also records the names of the dealers by whom the relevant cheques have been encashed. We notice that the AO did not make any comment about the evidences relating to the payments made by the assessee. We have earlier noticed that the Ld CIT(A) has observed that the assessee has given the payments in several installments, which in a way prove the genuineness, i.e., in case of bogus purchases, the payment would normally be made in one go or it would be shown as outstanding....
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....h in the case of M/s Vaman International P Ltd (ITA No.794/Mum/2015 dated 16.11.2016), the coordinate bench has deleted the addition made u/s 69C of the Act towards bogus purchases. The AO has also stated that the assessee did not produce the dealers before him. The assessee has stated that he has stopped business transactions about four years ago and hence he could not have enforced them to appear before the AO, particularly when they have shifted their addresses. The assessee has also submitted that it would have been easy for the AO to locate them through the details available with the income tax department. 16. Another important point, which has been duly considered by Ld CIT(A) is that the gross profit rate and net profit rate declared by the assessee has increased substantially during the three years under consideration when compared with the Gross profit rate and Net profit rate declared by the assessee in AY 2007-08 and 2008-09. We also find merit in the contentions of the assessee that the above said profit rates would go abnormally high, if the disallowance of part of purchases has been held to be high. We notice that the Ld CIT(A) has rightly appreciated this contention....