TaxTMI 
TaxTMI 
2026 (8) TMI 1560
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....s. 4 & 5 raised by the assessee were stated to be not pressed by the learned AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed. 3. The Ground Nos. 1 and 21 raised by the assessee are general in nature and does not require any specific adjudication. 4. The assessee company is engaged in the execution of civil and industrial construction contracts. During the relevant years under consideration, it executed, inter alia, the OPPO Mobile Manufacturing Centre Phase -II Project and the Haier North India Industrial Park Project at Greater Noida, the Chenfeng Technology factory EPC Project, "The Icon" project at Thane, and worked for Foxconn and ATL. The operational revenue was Rs 509.40 crores for Financial Year 2019-20 and Rs 685.69 crores for Financial Year 2020-21 on which net profit of 0.54% and 0.57% was earned respectively. The books of accounts of the assessee were duly subjected to audit and the same were accepted by the revenue. The assessee filed its original return of income on 31-03-2021 declaring total income of Rs 9,93,41,780. Subsequently, a revised return was filed on 31- 05-2021 declaring total i....
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....e as under:- a) Bogus purchases (Dethat Trading Pvt Ltd) - Rs 95,76,70,592 b) Suspicious purchases (Bhagwati Enterprises) - Rs 1,01,53,673 c) Purchases made from parties who are non-filers / cancelled GSTIN entities such as Shaurya Enterprises (Rs 10,20,503), Hwbat Trading Pvt Ltd (Rs 46,58,712) and Amplec Power Solutions (Rs 1,31,340) - Rs 58,19,555 6. We have heard the rival submissions and perused the materials available on record. During the course of search proceedings, it was found that assessee has made purchases amounting to Rs. 95,76,70,592 from M/s Dethat Trading Pvt. Ltd in assessment year 2020-21. The said party M/s Dethat Trading Pvt. Ltd was also covered in the search operation on 18- 11-2020. However, no entity was found existing on the known address. The Learned AO noted that subsequently, ample evidences were gathered during post-search enquiries that M/s Dethat Trading Pvt. Ltd. had siphoned off the amount to the account of bunch of shell entities / companies controlled by Mr Charlie Peng and his associates given as under:- M/s Jumpmonkey Promotions - Rs. 36,35,42,884 M/s Radhe Shyam Enterprises - Rs. 5,66,33,849 ....
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....bmission of these documents do not rebut or address the fundamental findings established during the course of search and post search investigation of M/s Dethat Trading Pvt Ltd and these documents are self-generated and they do not establish the actual movement of goods or rendering of services. No corroborative evidence such as transportation documents, e-way bills, stock registers, delivery challans or confirmation from the supplier has been furnished during assessment proceedings. Crucially, the assessee failed to produce the principal officer or director of M/s Dethat Trading Private Limited either during assessment proceedings or in response to notice under section 133(6) of the Act to verify the genuineness of the transactions. Further, M/s Dethat Trading Private Limited was found to be non-existent at all known addresses, its GST registration was suo moto cancelled and it had not filed any income tax return or conducted any genuine business activity. Accordingly, the learned AO concluded that the transactions of the assessee with Dethat Trading Private Limited are sham and accommodation entries. 6.4. The assessee filed rejoinder to the remand report before the learned CIT....
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....he assessee. However, the learned CIT(A) noted that the assessee has not furnished any corroborative evidence such as transportation documents, e-way bills, stock registers, delivery challans or confirmation from the supplier. Further, the supplier was found to be non-existent at all known addresses, its GST registration was suo moto cancelled and it had not filed any income tax return or conducted any genuine business activity and mere submission of accounting entries and invoices in the absence of supporting third party verification and credible documentation cannot be accepted as valid evidence in the light of overwhelming material on record indicating that the transactions with M/s Dethat Trading Private limited are sham and accommodation entries. Furthermore the nature of assessee's business is such where the different kinds of inputs in the shape of materials and labour / manpower are required to produce the saleable output in the shape of execution of construction contract which analogically can be compared with manufacturing business where certain fixed inputs are required to produce unit output. The learned CIT(A) noted that in the instant case, the assessee has failed....
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....lly asked from him in question number 18 for sharing details of parties from whom assessee has made purchases from, he has clarified that he does not know the purchase parties and yet provided the details as appearing in Tally data. This clarifies the position of the assessee that Shri Gorachand Mandal was the site manager and was not responsible to look after the procurement process of the assessee, which was the responsibility of the stores and purchase department. Therefore, the learned AO cannot draw any adverse inference from the answers of Shri Gorachand Mandal when asked specifically for M/s Dethat Trading Pvt. Ltd., when he answered that he does not have knowledge of the same, since he does not have knowledge of not only this particular vendor, but for the entire procurement process of the assessee and hence no adverse inference could be drawn from such statements. 6.8. With regard to statement of Shri Kapil Kumar, the material manager of the assessee for site OPPO, he had categorically stated and explained in his statement that his role with the assessee was in the capacity of material manager except stores for the OPPO site and there was a separate stores manager Shri ....
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....extracts therefrom reproduced by the learned AO in the assessment order and in the show-cause notice. We are in complete agreement with this contention of the assessee as unless the complete statement of a person is provided to the assessee, the assessee cannot be expected to give a comprehensive reply on the questions posed and that the same could be given only after having a holistic understanding of the statement recorded behind the back of the assessee by the department. Further, we find that the assessee had sought to explain on perusal of the specific extracts reproduced by the learned AO in the show-cause notice that Shri Nitish Kumar who worked in capacity as translator for the assessee has very clearly stated that he had knowledge of procurements made from this vendor M/s Dethat Trading Pvt. Ltd. and can also produce the invoices and other documents for the same. The Learned AO had exceeded his jurisdiction by placing reliance on his response to a completely unrelated question put up to him as to whether he has checked the raw material supplied with this vendor. In this regard, it was submitted that a translator's job is to ensure proper communication between the asses....
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.... the extracts of the statements of Shri Praveen Murarka and had only produced his interpretation of the statements given by him. Either way, without handing over the complete statement of Shri Praveen Murarka to the assessee, using the said statement against the assessee would be against the law and against the general principles of tax jurisprudence. Even in the interpretation given by the learned AO on the statement of Shri Praveen Murarka, there was no question asked concerning the assessee or the transactions undertaken by the assessee with Dethat Trading Private Limited. Hence, in our considered opinion, the reliance placed on the statement of Shri Praveen Murarka is totally misconceived and hence no adverse inference could be drawn against the assessee from that statement. 6.12. With regard to certain chats of Mr. Charlie Peng and Gu Peng, the learned AO had reproduced certain extracts of "We-chats" in the showcause notice. At the outset, we find that none of the chat is legible, nor the learned AO had provided the assessee with the complete documentary set so relied upon by him. Yet, we find that there is no adverse finding drawn, even from the inferences drawn therefrom ....
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....ce whatsoever has been brought on record by the revenue in the instant case linking the ultimate beneficiaries of the funds from Dethat Trading Pvt Ltd with the assessee herein. Hence, in the absence of such nexus, there could not be any adverse inference that could be drawn against the assessee with regard to alleged siphoning of funds by Dethat Trading Pvt Ltd to some other entities. In any event, if at all the siphoning of funds by Dethat Trading Pvt Ltd had been proved, then it has to be looked and considered in the assessment of Dethat Trading Pvt Ltd and assessee cannot be held anyway responsible for the said transactions. It is not the case of the revenue that Dethat Trading Ltd after receipt of monies from the assessee by regular banking channels had sought to withdraw cash and had given back that cash to the assessee. Hence, the purchases made from Dethat Trading Pvt Ltd cannot be held to be bogus qua the assessee. 6.15. We find that the assessee in the instant case had even clarified the discrepancies in GST registration of the supplier addressed by the learned AO. It was submitted that that any person under the GST law is required to state any 5 HSN codes related to t....
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....that Trading Pvt. Ltd upto the date of cancellation were genuine on which due taxes have been paid by the vendor to the GST department. 6.16. With regard to non-filing of income tax return by Dethat Trading Pvt. Ltd. referred to by the Learned AO in the assessment order multiple times, the assessee cannot be held responsible for the same as assessee does not have any control over the said vendor income tax compliances. Even if it be so, the action need to be taken on Dethat Trading Pvt Ltd for the same and not on the assessee. Hence, the adverse observation made in this regard by the Learned AO is without any basis and has to be construed as an irrelevant consideration to draw adverse inference against the assessee. 6.17. The assessee on its part had furnished the transaction wise documents in support of the genuineness of the claim of the assessee as under:- a) Detailed Contract provided The detailed "labour subcontracting contract" entered into with the vendor Dethat Trading Pvt Ltd was enclosed. The subcontract is worded in both English language and Chinese language and is duly signed and stamped by both the counterparts. The subcontract summarily contain....
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....de by the vendor as per sub-contracting works completed by it and as per the terms of the overall contract entered; it gets established beyond doubt that the labour sub-contracting charges paid to this vendor are completely genuine and valid for which no addition is warranted. The assessee in this regard even provided the sample documents for labour expenditure for the period April 2019 to August 2019 before the learned CIT(A) as additional evidences which were duly admitted by the learned CIT(A). e) Complete set of documents for material supply by this vendor were provided in the form of tax invoices, material purchase statement evidencing physical receipt of material with the assessee and the delivery challans wise breakup of the amount charged in the tax invoice by the vendor, individual delivery challans specifying the exact description of goods along with quantity and also containing vehicle number by which the goods have been transported, purchase orders raised to the vendor etc. All these documents prove the physical movement of goods and physical delivery of goods from the vendor to the assessee's site. f) Bank statements of the assessee duly highlighting ....
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....s. 4,41,246 in its books of accounts and hence no expenditure has been claimed on the same and only depreciation has been claimed in the books and in the return. Factually, the assessee had claimed expenditure only to the tune of Rs. 80,10,40,140 for the procurements made from this vendor in the Profit and Loss account. Hence, on without prejudice basis, it was submitted that in any event, only a sum of Rs. 80,10,40,140 could be disallowed as against Rs. 95,76,70,592. Further the assessee on its own had made suo moto disallowance of Rs 8,37,60,544 under section 40(a)(ia) of the Act in the return and the said fact is also mentioned in the tax audit report filed along with the return. Hence in any event, it was submitted on without prejudice basis that only a sum of Rs 71,72,79,596 could be added as against Rs 95,76,70,592. This aspect of the argument would be of no relevance as we have already held that the entire purchases made from Dethat Trading Pvt Ltd to be genuine and no addition is warranted thereon. 7. Purchases from Bhagwati Enterprises - Rs 1,01,53,673 The assessee has booked purchases of Rs 1,01,53,673 from M/s. Bhagwati Enterprises (Proprietor Mr Gulshan) towards o....
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....owever, there is absolutely no bar anywhere in the GST law which restricts a person to only sell the stipulated five HSN codes in its business. Any taxpayer can undertake numerous businesses under the single GST number varying from different HSN, yet there shall be only five HSN codes mentioned in its registration certificate. Therefore, merely because a supplier has mentioned a different HSN code in its registration certificate and the material being supplied to the assessee is different, it does not have any implication for the genuineness of the transactions undertaken by the assessee. With regard to the cancellation of GST registration of the supplier, it was submitted that there could be several reasons under GST law due to which the registration of a taxpayer could be cancelled by the GST department. Hence, no inference could be drawn that the GST registration stood cancelled for Bhagwati Enterprises, because the said vendor was bogus or non-existent. No cross-verification was made by the Learned AO with the GST department to understand this fact. Further, the effective date of cancellation mentioned on the GST portal was 02-06-2020, which is after the period when the transac....
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.... actual receipt of goods from the vendor by the assessee. 7.2. We find from the invoices placed on record in the paper book that the transactions with this vendor had happened during the period of November 2019 to February 2020. Hence the non-availability of the said vendor at the address mentioned in the invoice at the time of Inspector's personal visit at the time of assessment proceedings in May 2022 (which is after a period of two years from the conclusion of the transaction) would not make the transactions carried out by the assessee as ingenuine. Hence the purchases made from this vendor M/s Bhagwati Enterprises in the sum of Rs 1,03,53,673 cannot be subjected to any disallowance and cannot be termed as bogus. 7.3. It was also submitted that the Learned AO while making the addition had made an incorrect amount of addition. The Learned AO had picked the aggregate of credit balance appearing in the ledger account of M/s. Bhagwati Enterprises reproduced by him in the show cause notice. It was submitted that the credit balance posted in the vendor ledger was including the GST amount charged by the vendor, but since input tax credit of the GST amount is availed by the assess....
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....omeless shelters, hotels etc. The said entity was also registered at the same shop where M/s. Dethat Trading Private Limited was registered which clearly proved that the transaction of the said entity was ingenuine. 8.2. With regard to purchases made from M/s Amplec Power Solutions for Rs 1,31,340, the learned AO noted that on perusal of the e-filing portal that the said entity did not file any income tax return. It was also gathered from the GSTIN registration details that registration of the said entity was cancelled suo moto by the GSTIN department. It was also observed that it deals in electrical installation services including electrical wiring and fitting services, burglar alarm system installation services. 8.3. The learned AO noted that no proper clarification was given by the assessee to prove the genuineness of purchases and transactions made with the aforesaid parties. An inspector of the office of learned AO was asked to make field inquiries in respect of these three parties. The inspector on his visit on some entities reported that no such address exists and on inquiry from nearby people, no such entity had ever existed at the given address. Accordingly, the lear....
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....the same is cancelled retrospectively from the date of registration by the department. In this case, the registration is cancelled only from a subsequent date when transactions with assessee had concluded. This itself proves that the transactions undertaken by the assessee with this vendor M/s Hwbat Trading Pvt Ltd upto the date of cancellation were genuine on which due taxes have been paid by the vendor to the GST department. The payments were made by the assessee to the said vendor through regular banking channels. The same observations that were made hereinabove with regard to cancellation of GST registration would apply to these cases also. Admittedly, the learned AO had not made any cross verification from the GST department to ascertain the correct status of the GST registration of the vendors and their GST law compliances thereon. The observation made by the learned AO that the GST registration is suo moto cancelled by the GST department due to fraud committed by the vendors, is totally baseless. It was submitted that section 29 of CGST Act 2017 takes care of circumstances under which registration of any dealer could be cancelled on suo moto basis. The assessee on its part h....
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....tions, the Ground Nos. 6 to 20 raised by the assessee are allowed. 10. No arguments were advanced by the learned AR with regard to the Ground Nos. 2 & 3 raised by the assessee. Accordingly, the same are hereby dismissed as not pressed. 11. In the result, the appeal of the assessee in ITA No. 7866/Del/2025 for Assessment Year 2020-21 is partly allowed. ITA No. 7867/Del/2025 - Asst Year 2021-22- Assessee Appeal 12. The Ground Nos. 4 & 5 raised by the assessee were stated to be not pressed by the learned AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed. 13. The Ground Nos. 1 and 18 raised by the assessee are general in nature and does not require any specific adjudication. 14. With regard to additions made on account of purchases from M/s Dethat Trading Pvt Ltd and M/s Shaurya Enterprises in the sums of Rs 21,00,18,854 and Rs 36,29,694 respectively are concerned, the observations made hereinabove for Assessment Year 2020-21 qua the said vendor shall apply mutatis mutandis for this assessment year also, except with variance in figures. 15. With regard to the addition made on account of purchas....