ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 1, BHAVNAGAR, BHAVNAGAR vs. RUDRA GLOBAL INFRA PRODUCTS LIMITED, BHAVNAGAR

The brief facts of the case are that the assessee-company is engaged in manufacturing of ‘TMT bars’ by using ‘billets’ which, in turn, are made by melting ‘MS scrap’. In this case, the assessee filed its return of income for the year under consideration, declaring NIL income and book profit under MAT at Rs.1,88,64,123/-. Further, the return was processed u/s 143(1) by making a disallowance of the credit of Bought Forward Losses of Rs. 9,20,26,780/- resulting into an assessed income of Rs. 9,20,26,781/-. The case was selected for scrutiny through CASS. During the assessment proceedings, the Assessing Officer treated purchases aggregating to Rs. 41,71,10,137/- as bogus in respect of the following four suppliers:

Before gate in truck to be unloaded in scrapyard QC department is verifying raw material and requisite lab test are done before unloading and after that the raw material get unloaded in factory yard.

More than 90% of payment done by the company are done online and through RTGS and NEFT mode which always restrict the bogus payments as online payments always done in account which is provided by supplier along with complete bank details of supplier. 6.5 It is, accordingly, submitted that the appellant has completed the onus or burden of proof of transaction with four mentioned parties which meets the requirement of law but the AO has not taken all the things in positive manner and taken these all the transactions as bogus or sham transactions. It is submitted that the AO issued notice u/s. 133(6) to almost all the parties approximately more than 150 parties as the appellant got the information from its buyers and sellers as well as all the unsecured loan and secured loans. The appellant submitted all the details (as almost data more than 1 TB). 6.6 I have considered the submission of the appellant and it is noticed that out of more than 150 parties, only two parties Shri Naresh Ram and Ruby Kumar did not make any submission despite service of notice u/s 133(6). The AO on the basis of this and without conducting any further enquiry concluded that these transactions are not genuine. In the case of GSRS Steel and Alloys Pvt. Ltd, the AO got persuaded to treat the transaction as bogus merely because the company was not found at the address by the verification unit. The AO did not even seem to have confronted this to the appellant in order to ascertain whether there was a change in address or there were other circumstances whereby this company was not found by the verification unit at the given address. In the case of Merry Sales Pvt. Ltd, the party replied before the AO and submitted the confirmation copy of the N CO No. 70/Ahd/2025 ACIT Vs. Rudra Global Infra Products Ltd Asst. Year : 2022-23 - 6– ledger account but the AO treated this transaction as bogus on the basis that no ‘other details’ were furnished. Though, it is not clear from the assessment order as to what other details were called for and in the event of non-response what further action was taken by him in the case of Merry Sales Pvt. Ltd. 6.7 It is trite law that no adverse inference can be drawn only on the basis that the parties did not submit details in response to notice u/s 133(6) or on the ground that the said party was not found on the address given without falsifying the documentary, contemporaneous evidence submitted by the appellant on the basis of enquiry conducted by the AO. It is noticed that in this case, the appellant purchased the MS scrap from this party to the tune of Rs.10,68,38,357.00/- i.e. 4663.605 M.T. of MS scrap which is almost equal to 5% of total raw material purchase during the year under review. Further, all the transactions which are done are duly reflected in GSTR 2A of the appellant. This shows that the suppliers had filed the GSTR 1 after sales were made by them. Further, the appellant submitted the confirmation of supplier and GSTR filing status of supplier and same was active at the time of purchase made by the appellant. The payments were made by account payee cheques and above that all the payments were done online in account of supplier from appellant’s bank account and the same is reflecting in appellant’s bank statement. As online payment with the name of payee it can’t be settled with any other party. Further, the appellant deducted the TDS on purchase of raw material and same is reflecting in TDS return filed by them means assessee have taken all the precautions and compliances well in place. 6.8 Likewise, in the case of Merry Sales Pvt. Ltd, the appellant purchased the MS scrap from this party to the tune of Rs. 24,53,38,519.00/- i.e. 10937.48 M.T. of MS scrap which is almost equal to 15% of total raw material purchase during the year under review and just because of that party had not replied to the notice u/s. 133(6), the assessing officer considered it as bogus purchase. It is noticed that all the transactions which are done are duly reflected in GSTR 2A of the appellant. This shows that the suppliers filed the GSTR 1 after sales were made by them. The appellant also submitted that the confirmation of supplier and GSTR filing status of supplier and same was active at the time of purchase made by the appellant. All the payments were made by account payee cheques and all the payments were done online in account of supplier from appellant’s bank account and same is reflecting in appellant’s bank statement. The appellant deducted the TDS on purchase of raw material and same is reflecting in TDS return filed by them. The supplier has also submitted the ledger confirmation on income tax portal over which is not considered.

The Ld. AR strongly supported the order of the Ld. CIT(A) and submitted that the impugned addition was made purely on the basis of presumptions without rebutting or controverting the documentary evidence placed on record by the assessee. The Ld. AR contended that neither sales, opening stock nor closing stock had been doubted by the Assessing Officer, and the books of accounts had also not been rejected by the Assessing Officer. It was further argued that no addition can be sustained merely on account of non-compliance with notice issued u/s 133(6), in the absence of any adverse material or without controverting documentary evidences furnished by the assessee. In the present case, the assessee had duly filed all supporting documentary evidences, which remained uncontroverted by the Assessing Officer. In support of this proposition, reliance was placed on the following judicial precedents:-

We have carefully considered the rival submissions, perused the orders of the authorities below, and examined the material available on record. It is pertinent to note that the addition has been made solely on the basis of non- response or partial response to notices issued under section 133(6) of the Act. We find that the Ld. CIT(A) has recorded supplier-wise factual findings, which remain uncontroverted by the Revenue. We find that the Assessing Officer made addition as the supplier GSRS Steel and Alloys Pvt Ltd was not found at the given address by the verification unit. The addition was made on account of purchases made from Shri Naresh Ram and Ruby Kumar as the parties did not make any submissions in response to the notice issued u/s 133(6) of the Act. The party namely Merry Sales Pvt Ltd has submitted confirmation, copy of the ledger; but the Assessing Officer alleged that no other details were filed. The Assessing Officer made addition as the party did not submit bank account statements. In the case of GSRS Steel and Alloys Pvt. Ltd, the Assessing Officer got persuaded to treat the transaction as bogus merely because the company was not found at the address by the verification unit. The Assessing Officer did not even seem to have confronted this to the assessee in order to ascertain whether there was a change in address or there were other circumstances whereby this company was not found by the verification unit at the given address. In the case of Merry Sales Pvt. Ltd, the party replied before the Assessing Officer and submitted the confirmation copy of the ledger account but the Assessing Officer still treated this transaction as bogus on the basis that no 'other details' were furnished. Though, it is not clear from the assessment order as to what other details were called for and in the event of non-response what further action was taken by him in the case of Merry Sales Pvt. Ltd.

It is trite law that no adverse inference can be drawn only on the basis that the parties did not submit details in response to notice u/s 133(6) or on the ground that the said party was not found on the address given without falsifying the documentary, contemporaneous evidence submitted by the assessee on the basis of enquiry conducted by the Assessing Officer. It is noticed that in this case, the assessee purchased the MS scrap from this party to the tune of Rs.10,68,38,357.00/- i.e. 4663.605 M.T. of MS scrap which is nearly 5% of total raw material purchase during the year under review. Further, all the transactions which are done are duly reflected in GSTR 2A of the assessee. This shows that the suppliers had filed the GSTR 1 after sales were made by them. Further, the assessee submitted the confirmation of supplier and GSTR filing status of supplier and same was active at the time of purchase made by the assessee. The payments were made by account payee cheques and above that all the payments were done online in account of supplier from assessee's bank account and the same is reflecting in assessee's bank statement. Further, the assessee deducted the TDS on purchase of raw material and same is reflecting in TDS return filed by them means assessee have taken all the precautions and compliances well in place.

Likewise, in the case of Merry Sales Pvt. Ltd, the assessee purchased the MS scrap from this party to the tune of Rs. 24,53,38,519,00/- i.e. 10937.48 M.T. of MS scrap which is almost equal to 15% of total raw material purchase during the year under review and just because of that party had not replied to the notice u/s. 133(6), the assessing officer considered it as bogus purchase. It is noticed that all the transactions which are done are duly reflected in GSTR 2A of the assessee. This shows that the suppliers filed the GSTR 1 after sales were made by them. The assessee also submitted that the confirmation of supplier and GSTR filing status of supplier and same was active at the time of purchase made by the assessee. All the payments were made by account payee cheques and all the payments were done online in account of supplier from assessee's N CO No. 70/Ahd/2025 ACIT Vs. Rudra Global Infra Products Ltd Asst. Year : 2022-23 - 13– bank account and same is reflecting in assessee's bank statement. The assessee deducted the TDS on purchase of raw material and same is reflecting in TDS return filed by them. The supplier has also submitted the ledger confirmation on income tax portal over which is not considered.

In the case of Naresh Ram (Prop. M/s. Ram Enterprises), the assessee purchased the MS scrap from this party to the tune of Rs. 1,70,93,619.00/-i.e. 390.995 M.T. of MS scrap which is almost equal to 0.5% of total raw material purchase during the year under review and just because of that party had not replied the notice u/s. 133(6), the assessing officer has considered it as bogus purchase. The assessee submitted in its reply that all the transactions which are done duly reflect in GSTR 2A of the assessee. This shows that the suppliers have filed the GSTR 1 after sales were made by them. The assessee also submitted the confirmation of the supplier and GSTR filing status of supplier and the same was active at the time of purchase made by the assessee. All the payments were made by account payee cheques and all the payments were done online in account of supplier from assessee's bank account and same was reflecting in assessee's bank statement. The assessee deducted the TDS on purchase of raw material and same is reflecting in TDS return filed by them.

In the case of Ruby Kumar (Prop. M/s. Kumar Enterprises), the assessee purchased the MS scrap from this party to the tune of Rs. 4,78,39,642/- i.e. 1080.855 M.T. of MS scrap which is almost equal to 1.5% of total raw material purchase during the year under review. The assessee submitted in its reply that all the transactions which are done duly reflect in GSTR 2A of the assessee. The assessee also submitted the confirmation of supplier and GSTR filing status of supplier and same was active at the time of purchase made by the assessee. All the payments were made by account payee cheques and all the related payments were done online in account of supplier from assessee's bank account and same was reflecting in assessee's bank statement. The assessee deducted the TDS on N CO No. 70/Ahd/2025 ACIT Vs. Rudra Global Infra Products Ltd Asst. Year : 2022-23 - 14– purchase of raw material and same is reflecting in TDS return filed by them means assessee have taken all the precautions and compliances well in place.

It is noticed that merely because some parties have not responded to notices issued u/s 133(6) despite service of notice and that the parties who appeared before him did not submit 'other details' without specifying what details were called for and what further action was taken for non-compliance or on the basis that against purchases only miniscule payments were made in the year under consideration without even enquiring whether further payments were made in the subsequent years, the Assessing Officer concluded that the transactions of bogus. The legal position in this regard is almost settled that once a notice u/s 133(6) is issued and the parties do not respond to the said notices, the Assessing Officer must conduct necessary enquiry in terms of law to take this enquiry to its logical conclusion and no adverse inference can be drawn merely on the basis that the parties did not respond to the notices. The Assessing Officer did not carry out any of these exercises and rejected the whole set of transactions including GSTR and TDS records.

There was no enquiry by the Assessing Officer to treat the purchases as bogus. In the course of appellate proceeding, before the Ld. CIT(A), the assessee submitted that the assessee company is a listed company and getting its accounts audited by chartered accountants duly appointed by the board and shareholders in its annual general meeting, which is an independent agency, having verified and certified the books of accounts of company including the inventory of same. It was submitted that the assessee industry falls under requirement of cost audit which is required to be done for the cost audit of manufacturing process of company as well as certifying the cost of material produced by the company, which too is an independent agency. Being listed company the internal controls and checks are in place, which is duly and periodically verified by the internal auditor of company and they have never N CO No. 70/Ahd/2025 ACIT Vs. Rudra Global Infra Products Ltd Asst. Year : 2022-23 - 15– questioned the inventory of company in their report. During the relevant year, a search operation was conducted by DGGI Jaipur and CGST team at the assessee’s premises and there was no stock variation/deviation, found or reported by them during their search operation. It is also submitted that the search operation was conducted by Income tax department during the year at their premises and there was no stock variation/deviation, found or reported by them during their survey operation. There is no other information from the CGST authorities regarding any bogus purchases which is different from the year 2017-18. During the year, the assessee has produced delivery challan, evidences pertaining to movement of the goods and the transport bills. The addition has been made solely for the reason that the parties are not complied to the notices u/s 133(6) of the Act. No iota of corroborative material has been brought on record. Where an assessee submits documentary evidence, the same cannot be rejected merely on the basis that the parties did not comply with the notices issued u/s 133(6) unless the Assessing Officer conducts further enquiry and records a finding to reject the documentary evidence furnished by the assessee. The AO is required to record his finding in respect of each of the documentary evidence furnished by the assessee and draw necessary inference thereafter. On the other hand, the assessee has discharged their onus by producing all the relevant documents. Hence, the conclusion drawn by the Assessing Officer cannot be legally and judicially countenanced. The addition made, therefore, on the basis of mere presumption cannot be sustained, more so, when the Assessing Officer is not doubting the identity of the lender and genuineness of the transaction. Placing reliance on the order of the Co-ordinate Bench of the Tribunal and the Hon’ble High Court in the case of ACIT v Hareshbhai Mohanbhai Sakariya [2023] 148 taxmann.com 115 and Commissioner of Income-tax, Faridabad V GP International Ltd. [2010] 186 Taxman 229, we decline to interfere with the order of the Ld. CIT(A).

Since we upheld the order of the Ld. CIT(A), the Cross Objection raised by the assessee becomes academic in nature and does not call for adjudication.