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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI C.N. PRASAD, JM & SHRI MANOJ KUMAR AGGARWAL, AM
आदेश / O R D E R
Per Bench 1. These are cross appeals for Assessment Year [AY] 2010-11 which contest the order of Ld. Commissioner of Income Tax (Appeals)-35 [CIT(A)], Mumbai, Appeal No.CIT(A)- 35 / Jt.CIT.25(3) / ITA.167/12-13 dated 29/07/2013. The assessment for impugned AY was framed by Ld. Joint Commissioner of Income Tax, Range 25(3), Mumbai [AO] u/s 143(3) of the Income Tax Act, 1961 on 28/12/2012 wherein the income of the assessee was determined at Rs.313.77 Lacs after certain addition as against returned income of Rs.278.22 Lacs filed by the assessee on 25/09/2010. The assessee is a resident firm and was engaged as builders & developers in the impugned AY. 2. During assessment proceedings, upon receipt of certain information from Sales Tax Department, Maharashtra regarding suspicious dealers indulging in bogus purchase bills without delivering any material, it was noted that the assessee made aggregate purchase of Rs.35,54,956/- from four such dealers, the details of which have been extracted in para-3.1 of the quantum assessment order. The copies of the material available with the department, in this regard, were confronted to the assessee. Further, notices u/s 133(6) sent to all such suppliers to confirm the transactions elicited no satisfactory response. The assessee defended the purchases and submitted that the impugned purchases were made through brokers and payment of the material was through banking channels and therefore, the purchases were genuine. However, not convinced with assessee’s submissions, Ld. AO noted that the assessee failed to substantiate the delivery of material and therefore, added the same to the income of the assessee.
Aggrieved, the assessee contested the same with success before Ld. CIT(A) vide impugned order dated 29/07/2013, wherein the assessee, inter- alia, contended that the material was used in specified construction and therefore, the additions were not justified. Finally, the matter was concluded in assessee’s favor by making following observations:- DECISION: 5a. I have considered the stand of the A.O. as well as the submissions of the appellant. It is a fact that the purchases have been made through account payee cheques which are duly reflected in the bank statement of the appellant. The materials procured have been utilized in the construction of the project at ‘Knox Plaza’ and the same is duly certified by the Licensed Surveyor. The labour charges paid for establishing the fact that actual work has been done have also been produced by the appellant. The A.O. has at no stage countered the evidences produced by the appellant. The A.O. has also not conducted any independent enquiries to establish his contention that the said purchases may be treated as bogus. Only the fact that delivery challans have not been produced or statement of the seller that no sale has been made is not sufficient to prove that the purchases at the end of the appellant were bogus. The same position is supported by a number of judgments. The most significant judgment in this regard is Hilux Automotive Pvt.Ltd. vs. ITO (2007) 163 Taxman 90 (Delhi) wherein it has been held that where the assessee established its claim by furnishing relevant bills, bank statements and considering the fact that without purchase of raw material and job work charges incurred, manufacture could not have been possible, addition was not justified and was required to be deleted. The case of the appellant is also supported by the judgment in the case of Jagdamba Trading Co. vs. ITO (2007) 107 TTJ 398 (Jodhpur) wherein it was held that since there is no evidence of the assessee receiving any money back, the purchase in question could not be held to be bogus. In the case of ITO vs. parmanand (2008) 25 SOT 11 (Jodhpur) it has been very categorically held that where the AO has made addition merely on the basis of observations made by the Sales Tax Dept and has not conducted any independent enquiries for making the addition by the Sales Tax Dept and has not conducted any independent enquiries for making the addition especially in a case where the assessee has discharged its primary onus of showing books of account, payment by way of account payee cheque and producing vouchers of sale of goods, such an addition could not be sustained. The same position has been taken in the case of G.G.Diamond International vs. DCIT (2006) 104 TTJ 809 (Mumbai). I also find merit in the contention of the appellant that no opportunity for cross examination of the said four sellers has been provided to the appellant despite specifically asking for the same. The appellant is valid in raising the issue that in a scenario where no cross examination has been allowed, the affidavits could very well be only self-serving documents. In this regard the Judgment of the Hon’ble Apex Court in the case of Standard Chartered Bank vs. Andhra Bank Financial Services Ltd. (2006) 6 SCC 94 (SC) comes to the support of the appellant’s argument. Same decision has been held in number of other judgments of the Hon’ble Supreme Court as well as High Courts. In the result, the addition of Rs.35, 54,956/- is hereby deleted.
Aggrieved, the revenue is in further appeal before us. The assessee’s cross-objections contest the assessment proceedings on legal grounds. However, the same has not been pressed before us by Ld. Authorized Representative for Assessee [AR], Shri. Hitesh P. Shah and therefore, dismissed in limine.
The Ld. Departmental Representative [DR], Shri Rajesh Kumar Yadav, submitted that the assessee miserably failed to substantiate the purchases made during impugned AY and therefore, the stand of Ld. CIT(A) was not justified. The same has been controverted by Ld. AR by submitting that no opportunity of cross examination was provided to the assessee and therefore, the stand of Ld. CIT(A) was reasonable under the circumstances.
We have carefully heard the rival contentions and perused relevant material on record. Upon due consideration of factual matrix, we find that the assessee, during impugned AY, was engaged in construction activities, which could not be carried out without actual consumption / purchase of material. The sales turnover achieved by the assessee has not been disputed by the revenue and the payments were through banking channels. The assessee was in possession of primary purchases documents. At the same time, the assessee could not conclusively substantiate the purchases made by him and failed to produce any of the party to confirm the transactions. Notices issued u/s 133(6) elicited no satisfactory response. It is also noted that the assessee was confronted with the adverse material during assessment proceedings. The delivery of material could not be substantiated by the assessee. All these factors, in our opinion, cast a serious doubt on assessee’s claim. The Ld. CIT(A) erred in giving full relief to the assessee by observing that the cross examination was not provided to the assessee whereas the assessee could not discharge the primary onus of proving the transactions beyond doubt. The adverse material, as available on record was duly confronted to the assessee whereas the assessee could not substantiate delivery of material and also could not produce any of the four parties to confirm the transactions.
In the given factual matrix, the addition, in our opinion, which could be made, was to account for profit element embedded in these purchase transactions to factorize for profit earned by assessee against possible purchase of material in the grey market and undue benefit of VAT against such bogus purchases. We estimate the same @12.5% of alleged bogus purchases of Rs.35,54,956/- which comes to Rs.4,44,370/-. The addition to that extent stand confirmed by us. The revenue’s appeal stand partly allowed.
Resultantly, the revenue’s appeal stand partly allowed whereas the assessee’s cross objection stand dismissed in limine in terms of our above order.
Order pronounced in the open court on 11th July,2018