TaxTMI 
TaxTMI 
2021 (2) TMI 606
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....lleged bogus purchases is reproduced as under: "4. The only 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....
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.... of M/ s Meet Enterprises address has been given at B-262, Nand Gram, ADA Colony, Ghaziabad. As per account 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parties were\deposited in two bank accounts and after a few days or on the same day cash of almost the same amount was withdrawn or cheques were issued to different parties.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 th....
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....ccount and income tax records, bills of purchases and sales etc. ii. In response, the assessee has failed to produce any of 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....
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....h factual position reported by the inspector in respect of M/ s Suman Enterprises was informed. It was also informed that in view of the facts as narrated above, it is crystal clear 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....
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....t received that cheques issued by the assessee (GTM) have been deposited/credited in this account and after few days or on the same day cash are withdrawn or funds have been transferred to other accounts. 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 assess....
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....om M/s Bharat Trading Company. The assessee was asked to produce this party with complete books of accounts and bills of transportation etc., which it has failed to do so. ii. The Inspector was also deputed to make spot enquiry in rasped of M/s Bharat Trading Company, 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 pur....
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....architect in respect of work in progress for each project. c. Stage wise cost for each project. 6. The assessee has failed to furnish the above requisite details during the assessment proceedings despite it was asked again to furnish the same, vide this office letter dated 16.11.2011. Since, the assessee has 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 abov....
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....s account books was correct and that mentioned in the accounts of whole sale dealers was wrong. The Hon'ble Supreme Court in the case of Bhupinder Pal Singh (2003) Supreme Court Cases 633 has held as under: "it appears to us that no opportunity was given to the appellant either during the inquiry made for the first time or in the second inquiry. Since the order passed is in clear violation 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 h....
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.... while making addition on the third party statements for which the appellant was not given an opportunity of cross examining. Therefore, the addition made is held to be unjustified. Further, the Delhi High Court in the case of Commissioner of Income Tax Vs. Rajesh Kumar vide citation no. [2008] 112 Taxman 74 (Delhi) dated April 4, 2008 wherein it was held that it is quite clear that material collected by the revenue behind the back of the assessee was used against 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 ....
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....Department revealed that Proprietor of Meet Enterprises is Vikas Kumar. Mr. Vikas admits that he used to run the business of Meet Enterprises and that he had only one transaction. At the same time the fact that the appellant had entered into transactions with Meet Enterprises is not in dispute. Therefore, the statement of Mr. Vikas is not reliable. Thus which contention of the Assessing Officer is to be taken as correct? All these facts and the other facts stated by the AO cannot lead to the conclusion that no real purchases have been 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. ....
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....ed the architect's report submitted by the appellant and vouchers showing material received & supplied to contractors, copy of Purchase Bills which show the TIN, Truck No. Mobile No. of the Parties and VAT deducted, copy of cheques issued, purchase bills and weightage bills and confirmation of the parties from whom purchases were made and various other documents submitted by the appellant running into more than 50 pages in support of its case. 2. M/s Suman Enterprises Rs. 1,50,26,303/- In respect of this party, there is no adverse report of Investigation 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.....
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....rietor by the name of Sh Amit who used to sign the cheques and other documents. The cheques issued by the appellant have been duly credited and accounted for in the account of the said firm. It is quite unnatural that a person signing huge cheques would not know for what and why he is signing the cheques. Therefore, the ignorance expressed by Sh Amit, the proprietor of the firm is baseless. Be that it may, the appellant has not been confronted with the statements of the said Amit and therefore, no value can be attached to the averments made in his statement. The fact remains that the 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. As....
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....t genuine" despite the fact that the appellant filed bills of purchases, weighing bills and copy of cheque issued to the party in question. As stated above, in this case also the AO in his mind kept the Investigation Report in the case of Meet Enterprises to draw such a conclusion and without making any effort by sending summons to the party or calling information u/s 133 (6), he has jumped to the conclusion on the basis of Inspector's report that the party is not existent at the address and also ignoring the various documents filed before him. In the case of Suman Enterprises, the AO has already found that the report of the Inspector 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 confi....
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....ding with regard to each payment, perusal of which clearly shows that the entire payment made by the assessee was by cheque and was debited in the assessee' s bank account. Since the assessee has made the payment by cheque, which is duly debited in the assessee's bank account, the same cannot be said to be unexplained payment. Therefore, in our opinion, there was no justification for making the addition of Rs. 26,76,559 /- as unexplained payment." 2. Hon'ble Gujarat High Court in the case of CIT v. Sathyanarayan P. Rathi 2013 -(ITI)- GJX-0133-GUJ. In this case the assessee is in the business of trading in iron and steel. For the AY 2003- 04 during the 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 ....
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....opportunity to cross examine the parties has been afforded which is a violation of principles of natural justice. The assessee has provided copies of purchase bills, weightage bills and architect certificates. The AO has not reasoned that the bills or the certificate of the architects are bogus and wrong on facts. 7. As per accounting standards AS-7, the purchases and working progress have to be reconciled along with architect report. The AO has not rejected the books of accounts and accepted the book profits while making the addition. The Assessing Officer's observation that none of the architects can find out the actual material, steel bars used construction of any building of 2 to 3 years cannot be accepted as the consumption of the material can be well estimated from the drawings and the site books. In the case of M/s Suman Enterprises, the statement of Amit Vashisht indicates that the firm has been registered and run by Shri Deepak, no further enquiries have been conducted. In the case of M/s Meet Enterprises, the statement of Shri Sunil Kumar was recorded but nowhere it reveals or confirms that the purchases were bogus or inflated. There was no doubt about the payments mad....