TaxTMI 
TaxTMI 
2021 (2) TMI 606
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.... issue involved in this appeal relates to addition of Rs. 3,35,87,118/- made by the AO by holding the purchases made by the appellant as bogus. The facts leading to the addition are that the A.O. required the appellant to furnish the details of purchases made during the year. After scrutinizing these details, the A.O. required the appellant to produce the parties from whom purchases exceeding Rs. 10 lacs were made. As the appellant failed to produce the parties, the A. O. selected on random basis, certain parties and the Inspector was deputed to make spot inquiry and give a factual report. On the basis of the report of the Inspector and other facts, in respect of the following parties, the purchases made by the appellant were not found genuine by the AO. The relevant extract from the assessment order is as follows: "I. M/ s Meet Enterprises 1.1 Information received from Investigation Wing Dehradun in respect of M/s Meet Enterprises: i. The Investigation Wing, Dehradun has informed that the assessee. M/s GTM Builders & Promoters Pvt. Ltd received accommodation entries of Rs. 98,56,480/- in F.Y. 2008-09 in the form of purchases claimed to be made from M/s Meet Enterprises. Afte....
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....ount opening form Sh. Sunil Kumar s/o Sh. Lala Ram is a Proprietor of M/s Meet Enterprises, B-262, Nand Gram. ADA Colony, Ghaziabad. As per these bank accounts, the assessee made payments amounting to Rs. 98,56,480 /- to M/ s Meet Enterprises during the year under consideration. The cheques received from the assessee as well as other parties were\deposited in two bank accounts and after a few days or on the same day cash of almost the same amount was withdrawn or cheques were issued to different parties. The assessee, M/s GTM Builder and Promoters Pvt. Ltd. also examined in respect of transaction made with M/ s Meet Enterprises by investigation wing, the assessee has submitted that it was contacted by Sh. Vikas Kumar, Prop. M/s Meet Enterprises, Ramdhan, Colony, Shivalik Nagar, Haridwar, TIN No. 05006640257 and purchases of Rs. 9856480/- of steel were made from M/ s Meet Enterprises. Inquiries from trade tax department revealed that proprietor of this firm is Sh. Vikas Kumar s/o Sh. Vijay Pal Singh r/o 464/A, Keshwavpuri, Muzffar Nagar. Mr. Vikas was also examined and he stated that he used to run the business of M/ s Meet Enterprises and that he only had one transaction in which h....
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....f party including M/ s Meet enterprises. However, the assessee has furnished copy of cheques issued to M/s Meet Enterprises, copy of purchase bills and weightage of M/s Meet Enterprises. iii. To verify the claim of assessee in respect of purchases made from M/ s Meet Enterprises, the Inspector was deputed to make spot enquiry and give his report in respect of this party. After making spot enquiry, the Inspector has reported that any entity in the name of M/s Meet Enterprises is not available in the entire Ramdham Colony, Shivalik Nagar, Haridwar. He also enquired from various persons to know whereabouts of M/s Meet Enterprises in the colony but no one was known of the entity in the name of M/s Meet Enterprises. The Inspector has further reported that the party M/s Meet Enterprises could not be located in the entire Ramdham, Colony, Shivalik Nagar, Haridwar. iv. In this regard, letter dated 29.11.2011 was sent to the assessee in which factual position reported by the Inspector in reaped of M/ s Meet Enterprises was informed. It was also informed that in view of the facts as narrated above, it is crystal clear dial the claim of purchases made from this party is not proven to be g....
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....r that the claim of purchases mode from this party is not proven to be genuine. Further, the assessee was asked to produce this party alongwith complete books of accounts, income tax records, bills of purchases and sales, bills of transportation of goods and challans. v. In response, the assessee has furnished copy of ledger of accounts of this party from its own books showing payment of Rs. 43 lakhs to this party during the year and closing balance of Rs. 1,07,26,303/- and bills of purchases having the name of M/s Suman Enterprises and the same address which was given earlier (as above). Upon perusal of these bills, it appears that each bill is for the purchases of " Steel" from M/s Suman Enterprises, for more than Rs. 1 lakh amount. vi. Thereafter, enquiry in respect of cheques issued to M/s Suman Enterprises from the bank of assessee (GTM) was made, requesting to provide the details of transferee and account in which the cheques got credited in the account of M/s Suman Enterprises. On the basis of information provided by the banks of assessee. Information in respect of bank account number, bank statement for the period under consideration alongwith account opening form of M/....
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....ts. Total transaction in the hank appears to be around of Rs. 60 to 70 Crores during the year under consideration alone. viii. As reported by the Inspector after making intensive enquiry, Statement of the so called prop, Sh. Amit Vashisht and other corroborative evidences as discussed above, the purchases claimed to be made from M/s. Suman Enterprises appears to be bogus claim of the assessee as no such entity is found to be in existence for actual business and name of Sh. Amit Vashisht is being used for providing accommodation entries only. In view of the above facts and circumstances, it is crystal clear that the claim of the assessee in respect of purchases from this party is not genuine/hence held as bogus expenditure claimed by the assessee. III. M/s Durga Enterprises, near Bus; Stand Daultabad, Gurgaon i. The assessee has shown to have purchased of steel bar of Rs. 49,12,514 /- from M/ s Durga Enterprises during the year under consideration, the assesses was asked to produce this party with the complete books of accounts and bills of transportation etc. which it has failed to do so. ii. The Inspector was also deputed to make enquiry in respect of claim of purchases of....
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....mpany, 338, West Amber Talab, Roorkee. The Inspector has reported that this premises belongs to Sh. Devender Sharma who is working on the post of TGI in Hydel Department, Uttranchal and he is residing at the said premises since 1983 and since then they have not given the premises on rent to anybody. He further stated that he is working in government department and has not done any business activity in the name of either M/s Bharat Trading Company or anybody else. The inspector has also made local enquiry/ and it came to notice that information given by the land lord, Sh. Devender Sharma is correct. iii. In this regard, letter dated 29/11/2011 was sent to the assessee in which factual position reported by the Inspector in respect of M/ s Bharat Trading Company, 338, West Amber Talab, Roorkee was informed. It was also informed that in view of the facts as discussed in the report of Inspector, the claim of purchases made from this party is not proven to be genuine. Further, the assessee was asked to produce this party alongwith complete books of accounts and income tax records, bills of purchases and sales, bills of transportation of goods and challans. iv. In response, bills of p....
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....as not provided the overall information in respect of each project, the certificate of approved Engineer/architect and stage wise cost of each project, the certificate from Architect obtained as on date has no relevancy and appears to be a afterhough step. It is considerable fact that non of Architects can find out/estimate the actual material/steel bar used in construction of any building after 2 -3 years back. Further, the confirmations of the contractors has not been supported by any supporting evidence which could prove that they got received the material from the aforesaid parties. Therefore, the same cannot be considered to be genuine one as the purchases from all four parties, M/s Meet Enterprises, Suman Enterprises, Durga Enterprises and Bharat Trading Company have not been proven to be genuine one, as discussed above. 7. In view of the above facts, all above entities, from whom the assessee claimed to be purchased the steel bar, are nothing but on paper entities only which are providing accommodation entries by issuing bogus sales bills on account of which the assessee as well as other parties (buyers) could inflate its expenditure and reduce profits. Having regard to the....
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....tion of principles of natural justice, it is unnecessary for us to go into the merits of the order contentions raised. In the normal course, we would have set aside the order giving liberty to the respondents to hold a fresh inquiry. Since the appellant has superannuated and at this length of time, we think it is neither appropriate nor desirable to direct a fresh inquiry". It was observed by the Apex Court that an order passed in violation of the principles of natural justice is a nullity as held in A. K. Kraipak vs. Union of India AIR- 1970 SC-150 RB, Shree Ram Durga Prasad and Fatesh Chand vs. Settlement Commissioner 1989-SC-1038. The party wise submissions are made as under: 1. M/s Meet Enterprises Rs. 98,56,480/- It is submitted that the Ld. Assessing Officer has made the disallowance of expenditure on account of purchases of building material made for Dehradun project from M/s. Meet Enterprises amounting to Rs. 98,56,480/- by mainly relying on the report of the Investigation Wing of the Department that GTM Builders and Promoters Ltd received accommodation entries in the form of purchases. Further, the AO during the course of assessment proceedings required the appellant....
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....nst him without disclosing that material to him or giving any opportunity to the assessee to cross-examine the person whose statement has been used by the revenue against the interest of the assessee. Reliance is also placed on the following judgments of the Hon'ble High Court of Delhi and Hon'ble Supreme Court of India wherein it was held that: "Not providing copy of adverse material, statements, opportunity to cross examine, opportunity to rebut the claim of revenue is gross violation of principal of natural justice. The addition made by Assessing Officer cannot be sustained." * 2008 -306 ITR 35 (Del) CIT Vs. Real Time Marketing Pvt. Ltd. * 2009 -315 ITR 265 (Del) CIT Vs. Jindal Vegetable Products * 1985 - AIR - 1416 (SC) U. O. I. Vs. Tulsi Ram Pate * 218 - IT- 721 (SC) Vasant C. Lal Vs. CIT The next allegation is that Shri Sunil Kumar, Proprietor of M/s. Meet Enterprises has stated that he has no knowledge of the said firm. The appellant has no comments to offer on this as it is an internal matter of the said firm. The AO has further alleged that the said firm was not existent. At the same time, the AO states that cheques were deposited in its account and withdrawa....
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....een made by the appellant as stated by the appellant especially when the appellant has not been confronted with the report of Investigation Wing and the various statements relied upon. Based on the above report, the AO asked the appellant to produce the party, file copy of transportation bill, copy of challans, bills of purchases and sales, books of account etc. The appellant furnished copy of cheques issued to Meet Enterprises, copy of purchase bills and weightage bills as already noted by the AO in the assessment order. The AO deputed the Inspector to make spot enquiries who reported that Meet Enterprises is not available at the address given. The AO again required the appellant to produce the party and file copy of bills of purchases and sales. The appellant again filed the copies of cheques and bills etc. already filed before the AO. As regards producing the party before the AO, the appellant could not do this as it could not enforce attendance of a person under any law as that power is vested with the Assessing Officer. Simply on the ground that the party is not available or it was not produced, the AO has disallowed the claim. As stated above, the appellant has not been c....
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....gation Wing. Here also the Ld. Assessing Officer has made the disallowance of expenditure on account of purchases of building material made from M/s Suman Enterprises amounting to Rs. 1,50,26,303/- in respect of Dehradun project by alleging that the said party was not produced for verification of genuineness of transaction by relying upon Inspector's report that the party is not existing on the given address. The AO has stated in the assessment order that on enquiry by the Inspector at the address given it was gathered from one lady namely Smt. Rama that she had no knowledge of any business of Suman Enterprises. The AO required the appellant to produce the party and file copy of bills of purchases and sales. The appellant filed the copies of ledger accounts and bills etc. As regards producing the party before the AO, the appellant could not do this as it could not enforce attendance of a person under any law as that power is vested with the Assessing Officer. The AO again made enquiries from the bank from which it was gathered that the proprietor of Suman Enterprises is one Sh Amit Vashist who was issued summons u/s 131 and his statement was recorded. In his statement he admitt....
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....appellant has made purchases from the said party, has issued cheques to it which has been encashed by the party, the appellant has utilized the material so purchased in its business. Simply because the party is not available at the address given, a fact which has been proved to be otherwise, it cannot be a reason for treating the purchases made by the appellant from the said party as bogus when supporting documents have duly been furnished by the appellant. 3. M/s Durga Enterprises Rs. 49,12,514 /- In this case also there is no adverse report of investigation Wing. The Ld. Assessing Officer has made the disallowance of expenditure on account of purchase of building material made from M/s Durga Enterprises amounting to Rs. 49,12,514 /- in respect of Dehradun project by alleging that the said party was not produced for verification of genuineness of transaction. As regards producing the party before the AO, the appellant could not do this as it could not enforce attendance of a person under any law as that power is vested with the Assessing Officer. No enquiries have been conducted by the AO from the bank etc. as has been done in the case of Suman Enterprises to come to his concl....
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....spector is not reliable as it was proved to be otherwise. But again the AO continued to give weightage to the report of the Inspector instead of making concrete enquiries from bank etc. He also gave no consideration that without purchase of material the appellant could not have done construction activities. The Assessing Officer also required the appellant to furnish copy of project report, details of closing stock, certificate of architect in respect of each project. In response to this the appellant filed certificate of approved architect and confirmation from the contractors. But the AO did not believe the certificate of approved architect as according to him this cannot show the correct position that prevailed 2-3 years ago. Further, the confirmations of the contractors also did not find favour with the AO as it was not supported by any evidence. The AO, therefore, concluded that the purchases made from all the above parties are bogus with a view to inflate the expenditure and reduce the profit. As stated above, the appellant has produced/furnished all the necessary documents available with it in support of its claim. The very crucial evidence that was furnished by the appe....
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....e reassessment proceedings it was found that the purchases worth Rs. 61.40 lakhs were not supported by sufficient evidence. The assessee's claim of having purchased such goods from various suppliers was verified but was not found genuine. It was found that such parties had never supplied the goods as named by the assessee. On such basis the AO made addition of the entire amount of purchase of Rs. 61.40 lakhs. The CIT (A) added only profit element and not the entire amount of purchase. The Tribunal gave further relief to the assessee. In this background the Hon'ble High Court held as under: "The present case, thus, being one of only purchase but not from disclosed sources, it would be only the profit element embodied in such purchase which could be added in the income of the assessee and, thus, rightly so done by the CIT(A) and the Tribunal. 3. Hon'ble ITAT Ahmedabad in the case of Simit P Seth l/h of Shri Pankaj J Seth v. ITO ITA No. 3238 and 3239 /Ahd/2009 The issue in this case relates to confirmation of addition of Rs. 12.71 lakhs on account of alleged bogus purchase of the assessee. It was held by the Hon'ble Tribunal that: "Having heard the submissions of both side....