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Before: Shri Amit Shukla & Shri L.P. Sahu
ORDER Per Bench: Out of above appeals, former three appeals have been filed by the assessee and later two appeal by Revenue against separate orders of ld.CIT(A)-3, New Delhi dated 11.08.20114, 12.08.2014 & 12.08.2014 respectively for the assessment years 2009-10, 2010-11 and 2011-12.
The solitary issue involved in all these appeals is with respect to additions made on account of unverifiable purchases. Since the issue, grounds of appeals and the facts involved in these appeals are identical barring the amounts of additions, all these appeals were heard together and are, thus being disposed of by this consolidated order for the sake of convenience and brevity. Both the parties agreed that the decision in appeal for A.Y. 2009-10 would be equally applicable to other appeals. We, therefore, take up the appeal of assessee for A.Y. 2009-10. The grounds raised in this appeal are as under :
That the Learned Commissioner of Income Tax (Appeals) - III erred on facts as well as in law, in confirming an addition of Rs. 22,03,491/- on account of unverifiable Purchases, out of such total addition of Rs. 88,13,962/- 2. That the Learned Commissioner of Income Tax (Appeals) - III erred on facts as well in law, in not properly appreciating the various submissions, arguments & documentary evidences filed, in support of our contentions. 3. That the Learned Commissioner of Income Tax (Appeals)- III erred on facts as well as in law, in relying merely on circumstantial evidence/s, without any concrete & specific adverse evidence/s, on which to base his finding/s and conclusion/s. That the above grounds of appeal; are without prejudice to each other.
The assessee had also filed additional grounds of appeal by application dated 16.10.2017, which was not pressed during the course of hearing by the ld. AR of the assessee. Therefore, this additional ground stands rejected as not pressed.
The brief facts of the case are that a search and seizure action u/s. 132 of the IT Act was carried out on 11.03.2011 in M/s. Paramount, Gulshan and Ajnara group of cases. The case of the assessee was also covered u/s. 132(1) of the Act. The assessee company belongs to Paramount Group companies which is engaged in the business of residential and commercial projects in Uttar Pradesh. The assessee was issued notice u/s. 153A on 06.03.2012. In response, the assessee filed return declaring income at Rs.1,27,21,436/- on 20.12.2012. In response to the questionnaire issued, the assessee filed information. It was noticed by the Assessing Officer that the assessee had made purchases of material from following parties :
(i). M/s. Shyamji Traders Rs. 1,01,712/- (ii). U-Tek Sales Corporation Rs.87,72,250/- In the course of search proceedings, it was noticed by the Investigation Wing that these parties were not in existence at the addresses mentioned on the bills and could not be found in the field enquiries also. In order to ascertain the genuineness of the purchases, the Assessing Officer issued summons u/s. 131 of the IT Act. The summons were received back un-served from the postal authorities. The AR of the assessee was asked many a times to produce these parties for verification. However, the assessee failed to produce the above parties for verification of alleged purchases. The AR filed written submissions, which has been incorporated in the assessment order by the Assessing Officer. The Assessing Officer was not satisfied from the submissions made. In all these existing facts, the Assessing Officer doubted the purchases made from the above parties and added the entire purchases to the income of the assessee as unverifiable. In appeal before the ld. CIT(A) and filed detailed written synopsis before him. The remand report was also called from the Assessing Officer and rejoinder was also filed by the assessee. The ld. CIT(A) while examining the remand report and written synopsis and rejoinder of the assessee, observed many drawbacks for proving the genuineness of the purchases made from the above two parties. Accordingly, he partly allowed the appeal of the assessee sustaining the addition to the extent of 25%.
The ld. AR of the assessee reiterating the submissions made before the ld. CIT(A), submitted that the co-ordinate Bench of Tribunal in cross appeals of other group case of assessee, namely, Paramount Residency Pvt. Ltd. vs. DCIT (ITA No. 4907/Del/2014 and 6102/Del/2014- A.Y. 2010-11). He further submitted that in the assessment proceedings as well as remand proceedings several evidence was provided to the Assessing Officer, viz., VAT registration, PAN, TIN, purchase bills, confirmation of accounts, GR notes, stock register etc. No any discrepancy has been noted by the Assessing Officer. Payments were made through banking channels. There was no any instance pointed out by the Assessing Officer that any cash transaction was made or any cash was received back from the suppliers of goods. The Revenue also referred the case to the valuation officer and the report of the DVO was accepted to the Revenue.
On the other hand, the ld. DR relied on the order of the Assessing Officer and submitted that the parties were not found at the addresses given on the bills as well as post search enquiry. The Assessing Officer also made separate enquiry and 131 notices issued were returned back un-served. The bank statement obtained by the Assessing Officer from the bank clearly showed that after receiving the payment from the assessee, the cash had been immediately withdrawn. The ld. CIT(A) has examined the issue in detail. Many discrepancies have been noted by the ld. CIT(A) too and that there is huge gap between the date of invoices and the date of GRs (Good Receipts), which creates grave doubt on the genuineness of the purchase. The case laws relied by the AR are not applicable to the present facts of the case, once the parties are found fake. She has also relied upon following decisions :
(i). N.K. Proteins Ltd. vs. CIT(2017-TIOL-23-SC-IT) (ii). N.K. Proteins Ltd. vs. CIT 292 CTR 354 (Gujrat HC) (iii). CIT vs. Arun Malhotra 47 taxmann.com 385(Delhi) (iv). CIT vs. La Medica, 250 ITR 575 (Del)
We have heard the rival submissions and have gone through the entire material available on record and the case laws cited by parties and we find that the issue involved in this appeal is squarely covered by the decision of Hon’ble Co-ordinate Bench of Tribunal in group case of the assessee (ITA Nos. 4907 and 6102/Del/2014 – A.Y. 2010-11) dated 13.08.2018, whereby in the identical facts, circumstances, grounds of appeal, common search, the issue has been decided in favour of the assessee observing as under :
14. We have given thoughtful consideration to the orders of the authorities below. The facts on record show that a search and seizure operation was carried out in the appellant’s group on 11.3.2011. It is pertinent to mention here that no incriminating material was found during the course of search proceedings. The AO chose four parties from whom building construction materials were purchased. It would not be out of place to mention that the fair market value of the project situated at Paramount Symphony, NH – 24, Ghaziabad is at Rs. 3,29,82,68,526/- which was estimated by the Valuation Cell of the Income-tax Department at Rs. 3,53,47,33,961/-. This means that the Valuation Cell of the I.T. Department has estimated the fair market value of the said project much higher than the value declared by the assessee. Further, on a project of more than 300 crores, the AO has doubted the genuineness of purchases only to the extent of Rs. 7.86 crores, which is about 2.52%.
15. The lower authorities have harped upon the fact that the parties were not produced for verification. While doing so, both the lower authorities have ignored the conclusive direct evidences brought on record, namely, PAN details, VTA details, TIN Numbers, confirmations and bank statements. There is no dispute that all the payments have been made by account payee cheques. The lower authorities have taken an adverse view because they found that the payees have withdrawn cash on the same or succeeding day. There is not an iota of evidence whatsoever to show that the cash has reached back to the assessee.
16. The Hon'ble Calcutta High Court in the case of CIT Vs. Dataware Private Limited in Tax Appeal No. 263 of 2011 & GA No. 2856 of 2011 in its order dated 21.09.2011 has observed as under:
“In our opinion, in such circumstances, the Assessing officer of the assessee cannot take the burden of assessing the profit and loss account of the creditor when admittedly the creditor himself is an income tax assessee. After getting the PAN number and getting the information that the creditor is assessed under the Act, the Assessing officer should enquire from the Assessing Officer of the creditor as to the genuineness of the transaction and whether such transaction has been accepted by the Assessing officer of the creditor but instead of adopting such course, the Assessing officer himself could not enter into the return of the creditor and brand the same as unworthy of credence”
The Hon'ble Supreme Court in the case of Tejua Rohit Kumar Kapadia 94 Taxmann.com 325 has declined to allow the SLP against the judgment of the Hon'ble Gujarat High Court wherein the Hon'ble High Court has held that purchases made by the assessee - trader were duly supported by bills and payments were made by account payee cheque and the seller also confirmed the transaction and there was no evidence to show that the amount was recycled back to the assessee and, accordingly, held that addition was not called for. In that case also, the AO had disallowed some expenditure treating the purchases as bogus and made the addition.
The ld. DR has strongly relied upon the judgment of the Hon'ble Gujarat High Court in the case of N.K. Proteins Ltd 2016-TIOL-3165- AHM- IT wherein the facts show that during the course of search proceedings at the office premises of NKPL, blank signed cheque books and vouchers of number of concerns were found. Further, endorsed blank cheques of NKPL by these concerns were also found wherein the endorsement was on the back of the cheques. Accordingly, the purchases made from these concerns were treated as bogus purchases by the AO.
The facts of the case in hand are clearly distinguishable from the facts of this case in as much as there was nothing of such documents, as referred, were found from the possession of the assessee even during the course of search and seizure operation. The ld. DR has also placed reliance on some other judicial decisions, but the facts are totally different from the facts of the case in hand.
As mentioned elsewhere, total estimated value of the project for the year under consideration is more than Rs. 300 crores. Therefore, it would be a futile exercise to doubt the genuineness of a meagre amount of Rs. 7.86 crores. Moreover, as mentioned elsewhere, the purchases were duly supported by bills and vouchers. The payments have been made through account payee cheques. The payments are reflected in the bank statement of the payer and the payee. We, therefore, do not find any reason for doubting the genuineness of these purchases. While restricting the disallowance to Rs. 1,96,55,330/-, the reasoning given by the first appellate authority is not only absurd, but illogical. The first appellate authority has heavily relied upon the decision in the case of Vijay Proteins Ltd 55 TTJ [Ahd] 76. Considering the facts of the case in totality, as discussed hereinabove, we are of the considered view that that entire addition deserves to be deleted. We, accordingly, set aside the findings of the CIT(A) and direct the AO to delete the entire addition of Rs. 7,86,21,320/-.”
Respectfully following the above decision of co-ordinate Bench in the identical facts and circumstances of the case, we do not find any justification to sustain 25% of the addition by the ld. CIT(A). The decisions relie by the ld. DR are distinguishable on facts. Accordingly, the appeal of the assessee deserves to be allowed.
As already noted, the issue and facts involved in appeals for the assessment years 2010-11 and 2011-12 are verbatim to the appeal for A.Y. 2009-10. Therefore, our decision in appeal for A.Y. 2009-10 would equally apply to the appeals of the assessee and the Revenue for A.Yrs. 2010-11 and 2011-12. Accordingly, the appeals of assessee for A.Y. 2010-11 and 2011-12 are also allowed and those of Revenue are dismissed.
In the result, all the three appeals of the assessee are allowed and those of the Revenue are dismissed.