ITO, WARD 3(2) (7), AHMEDABAD vs. M/S G.D. INFRASTRUCTURE,, AHMEDABAD

O R D E R

PER T.R. SENTHIL KUMAR, JUDICIAL MEMBER:

2 2. Brief facts of the case is that, the assessee is a partnership firm engaged in the business of construction of residential and commercial apartments. For the Asst.Year 2012-13, the assessee filed its return of income declaring total income at Rs.16,33,610/- on 28.3.2013. The return of income was processed under section 143(1) of the Act on 6.5.2013. Thereafter, the case of the assessee was selected for scrutiny assessment and requisite notices were issued from time to time. The AO made addition of Rs.3,56,15,282/- on account of purchases made by the assessee from nine parties treating the purchases as bogus, non-genuine and unverifiable expenses. The AO also made another disallowance of Rs.25,000/- under section 40A(3) of the Act. Thus, the AO determined total income at Rs.3,72,73,892/- and computed tax thereon.

4 Enterprise and details of purchases from Mahvir Trades, Riya Enterprise, for the items viz. treadmill, cycles, four pieces of abdominal equipments, heavy exercise equipments, cardio equipments totaling into five in numbers costing Rs.4,12,650/- which are necessary for the gymnasium facilities at the proposed construction site. However, the ld.AO has not appreciated the above purchases and concluded without making any verification, treated the same as bogus purchases, which is not in accordance with law. The ld.counsel for the assessee further submitted that evidences produced before the lower authorities are enough to prove genuineness of the purchase transaction of the assessee, and the assessee could not be held responsible for non-appearance of five parties to whom summons were issued by the AO. For the non- appearance of those entities no adverse inference should be drawn about the genuineness of the transactions. The transactions are almost seven years old, and few parties have shifted their premises to some other areas, and whereabouts of the parties are not known to the assessee. In this context, the assessee has also relied upon judgment of Hon’ble Supreme Court in the case of Anis Ahmad & Sons Vs. CIT, 297 ITR 441 (SC). The assessee has also relied upon Hon’ble Gujarat High Court judgment in the case of ACIT Vs. Vardhman Exports, in Tax Appeal No.265 of 2008 wherein the Hon’ble Court held that source of the fund was duly explained since payment was made through banking channel, thus provisions of section 69C would not be applicable in such cases. Further, from the discussion on the remand report, it was clear that there is no clear cut finding by the AO against the assessee during the remand proceedings, and the ld.AO requested the ld.CIT(A) to decide the appeal on merit as there is no adverse inference given by the AO

5 during the remand proceedings. Accordingly, the ld.AR pleaded that confirmation of addition of Rs.37,33,583/- at the rate of 15% of the purchase amount made by the Ltd. CIT(A) is to be deleted, and appeal to be allowed in their favour.

6. Per contra, the ld.DR appearing for the Revenue has supported the order of the AO and also pleaded that the ld.CIT(A) is not correct in reducing the disallowance to Rs.37,33,583/- and the entire addition ought to be sustained by the Tribunal. The ld.R, however, could not controvert the various details in the form of invoices, confirmation letters and other details filed by the assessee before the Tribunal, to support its claim. The ld.DR has not raised serious objection against the remand report filed by the AO to sustain the disallowance made by the AO.

“5. We have heard the Representatives of the respective parties. We have perused the relevant materials available on record. So far as the genuineness of the transaction is concerned, we are satisfied upon the method and manner applied by the Ld.CIT(A) in coming to the conclusion on the basis of the content of the remand report, other evidences and specially on the bank statement of the suppliers which was, in fact, obtained by the AO himself and we thus declined to interfere with the same. The appeal preferred by the Revenue on this ground is dismissed.

5.1. In respect of the cross objection of the assessee, we have also gone through the order passed by the Ld.Tribunal in the matter of Gujarat Ambuja Exports Ltd.(supra) as relied upon by the Ld.AR. The reason for disallowance of only 5% out of total purchase has been justified in the following manner by the Co-ordinate Bench of this Tribunal.

"Having considered all the judgments cited by both sides, we feel that in the facts of the present case, some token disallowance is to be made to take care of some possible inflation in the purchase price in respect of purchases from Vishal Traders. We hold for only a token disallowance only because of these reasons that the yield reported by the assessee is better in the present year as compared to the preceding year. It is also noted by us that as noted by learned CIT(A), the prices charged by Vishal Traders are at par with other parties and the GP/NP is better in the present year as compared to the preceding year. Hence, we fell that only a token disallowance will meet the ends of justice in the facts of the present case as noted above. Here, this question may be relevant as to when all the above factors are supporting the case of the assessee then why even a token disallowance is called for? On this aspect, we feel that there is inconsistency in the statements of three persons related with Vishal Traders and it is quite possible that some extra price is paid by the assessee to this party to obtain material and bills and hence, we feel that in totality of the facts of this case, some disallowance is justified. Now, the next question is then how much token disallowance is justified in the facts of the present case. Learned AR of the assessee has indicated for 2 - 3 % disallowance but we feel that 5% disallowance out of purchase from Vishal Traders will meet the ends of justice in the facts of the present case. We direct the assessing officer accordingly. The balance disallowance is deleted. The relevant ground of the revenue is rejected and that of the assessee is partly allowed." 5.1 We find that the facts of the case in hand is identical to that of the assessee dealt in the aforesaid judgement and therefore, the case of the assessee is squarely covered by the aforesaid decision. Taking into consideration the entire aspects of the matter and the ratio of the judgement, we think it fit to modify the order passed by the Ld.CIT(A) by disallowing 5% from 12.5% as made by him in effect Rs.8,16,362/- out of the total purchase.