M/S SANGITA CONSTRUCTION CO.,KOLKATA vs. ITO, WD-26(1), KOLKATA, KOLKATA

O R D E R

PER S.S.Godara, Judicial Member:

is dismissed.”

3. We have given our thoughtful consideration to rival contention. It is evident from the above extracted finding that CIT(A) has upheld the impugned disallowance of transportation charges on account of non-deduction of TDS. Hon'ble jurisdictional high court’s decision in CIT vs. M/s Stumm India in of 2009 dated 16.08.2010 holds that unless the department brings on record any evidence there existed on oral or written contract between the payer & payees passing on the necessary contractual liability to the latter sec. 40(a)(ia) disallowance is not sustainable. There can hardly be any dispute that A.Y. 2010-11 M/s Sangita Construction Co. Vs. ITO Wd-26(1) Kol. Page 4 no such facts are forthcoming from the lower authorities’ findings under challenge. We draw support from hon'ble jurisdictional high court’s decision hereinabove therefore to delete the impugned disallowance of ₹28,12,459/- in these facts and circumstances therefore. The assessee succeeds in its former substantive ground.

4. Next comes the assessee’s latter grievance seeking to reverse the CIT(A)’s findings in enterity partly upholding Assessing Officer’s action disallowing its purchase / expenses of ₹76,19,346/- in assessment order to the extent of ₹70,05,242/- as follows:- “Ground No.1 is related to the addition of Rs.76,19,346/- on account of bogus purchases. The assessing officer dealt with the issue in the assessment order as under: During the year the assessee firm has shown gross receipts of Rs.3,60,65,846/- which it had received mainly from Bridge & Roof Co. (1) Ltd. Hardly 10% of these receipts were utilized for making cheque payments and the rest of the sum was withdrawn from the bank in cash and claimed to have been spent in cash. The assessee firm has not done any TDS on its labour charges payments claim of Rs.1,82,83,693/- and neither did it produce any bills from the said labour parties. The assessee firm had claimed sundry creditors of Rs.1,93,77,185/- in the current year as compared to Rs.1,53,58,596/- in the last year. On being asked to produce the details of the said sundry creditors the assessee firm could produce a list of sundry creditors only to the extent of Rs.1,17,57,839/-. Sundry creditors with no names & addresses are treated as bogus purchase/expenses i.e (Rs.1,93,77,185 Rs.1,17,57,839) = Rs. 6,19,346/- 1.1 During the appeal the appellant's AIR made written submission and submitted some supporting papers containing copy of bills & vouchers, list of sundry creditor and bank statement. In his submissions the A.R of the appellant stated as under: "Your petitioner is a civil contractor and in the F. Y. 2009-10, the firm has received a sum of Rs.3,60,65,846/- from M/s Bridge & Roof Co. (I) Ltd. Your petitioner produced bills, vouchers and other relevant documents as called for by the Ld. AO time to time. The books of accounts had been duly audited. In the audit report, Form 3CD, SI.No.9(b), the Chartered Accountant had clearly mentioned that your petitioner had maintained books of accounts i.e. Cash Book, General Ledger etc. The firm has been discontinued and the cash book was somehow miss located. As per requisition of the Ld. AO your petitioner furnished a list of sundry creditors along with name and address. But unfortunately, your petitioner submitted the said list of sundry creditors for the current financial year without considering the opening balance of the parties as on 01.04.2009 which was Rs.1,53,58,696/-. Moreover the list of sundry creditors, submitted before the Ld AO was all above A.Y. 2010-11 M/s Sangita Construction Co. Vs. ITO Wd-26(1) Kol. Page 5 Rs. 20, 000/-. The complete list of sundry creditors along with name and address is attached herewith for your kind perusal. On perusal of the enclosed list of sundry creditors, your honour will find that there are no discrepancies in the balance of sundry' creditors. Further it is to inform your honour that the total balance of creditors consists of both materials and labour charges. Being aggrieved with the assessment order, your petitioner preferred this appeal before your honour. First of all the Ld. Assessing Officer passed the assessment order u/s 144 of the I. T. Act 1961 without rejecting the books of accounts u/s 145 of the I. T. Act, 1961. Therefore it is clear that he had accepted the figure of purchases, labour charges and other expenses as per books of accounts. He added back a sum of Rs.76,19,346/- on account of Bogus Purchases/Expenses under the head sundry creditors on surmise basis. That your petitioner make purchases from the respective parties as per list and make payments by Bank cheques/RTGS. The payment was made partly during the year and partly in the next year. For the end of justice, the entire amount of Rs.76,19,346/- should be deleted". 1.2 Since the appellant filed fresh evidence, the same has been admitted under Rule 46A(3) and sent to the AO for submission of remand report. The AO submitted remand report on 28/01/2015 vide his letter No.ITO/Wd- 26(l)/Kol/Remand Report/2015-16/395 as under: In the course of remand proceeding, the appellant has appeared before the undersigned and requested to issue notices u/s 133(6) to sundry creditors because without fresh notice they might refuse to appear. Accordingly, notice u/s 133(6) was issued to twelve (12) sundry creditors only, out of twenty seven (27) sundry creditors because the appellant was unable to furnish complete postal address of those sundry creditors. In response of notice u/s 133(6) only eight (8) sundry creditors has made their compliance. Details of compliance are given below: Sl. Name of the party Nature of Amount of payment Closing No job during the FY. Balance (Rs) 2009-10 (Rs) 1 Sandhukhan lectric Sale 3865/- 19,000/- 2 Uma Trading Sale 41714/- 71,000/- 3 Premier Road Service Ltd Sale 75000/- 20,000/- 4 New Modern Enterprise Sale 1287/- 21,000/- 5 Laddu Lal Bera Labour 600500/- 77690/- Supplier 6 Bikas Chandra Saha Labour 600152/- 60000/- Supplier 7 Jhuma Enterprise Labour 605839/- 191969/- supplier 8 Shivam Constructions Mach. 87259/- 153445/- Hire charages Total outstanding of Rs.6,14,104/- A.Y. 2010-11 M/s Sangita Construction Co. Vs. ITO Wd-26(1) Kol. Page 6 The above payment were made mostly by cash and partly in cheques. The cheque payment were verified with the bank statement of the assessee and found in order. Labour charges payments were found made in cash which was reflected in the daily labour register. The above mentioned sundry creditors liabilities tallied with details pertaining to the in the sundry creditors list furnished by the appellant in course of appeal proceeding. In respect of others 19(nineteen) sundry creditors, verification could not be made as the appellant had failed to furnish their full postal address and also failed to produce them for verification. It clearly shows that the assessee has nothing to substantiate the transaction resulting in outstanding liabilities in these cases. Thus, the assessee firm may not be allowed to obfuscate the appellate proceedings any more. 1.3 Copy of the remand report was given to the A. R of the appellant. The A. R of the appellant in his rejoinder stated asunder: On perusal of the remand report it is seen that the Ld. Assessing Officer issued notices u/s 133(6) to 12 (Twelve) Sundry Creditors out of 35 (Thirty Five) and alleged that your petitioner was unable to furnish complete postal address of those Sundry Creditors. The above allegation is not at all correct as your petitioner furnished the full name, address and amount of respective sundry creditors at the time of original assessment and thereafter also. Remaining Sundry Creditors were not produced before the Ld. A.O. at the time of remand hearing because they left elsewhere. The addition should not be made on the ground that the parties are not traceable. But the payment was made either by cheque or cash in the succeeding years. Here the Ld. A.O could not bring on record any evidence. Even he did not found any evidence that the payment which were made came back to your petitioner. Further it is to inform your honour that in this case sales and purchase shown by your petitioner has duly been accepted by the Ld. A.O. and the books of accounts were not rejected u/s 145. Here my submission is that the payment has been made to these parties in the subsequent year due to non receipt of payment from parties. Once the sales has been accepted by the Ld. A.O. therefore the entire purchase cannot be considered as not genuine because there cannot be any sale without purchase. In support of the above contention your petitioner is relying up the decision of the I. T.A. T Kolkata Bench in the case I. T.O vs. Shri Ramashis Shaw vide case NO.:6721K0U2012 dated 07/05/2015 held that the assessee cannot make the sales until and unless the purchase has been made by the assessee. The A. O has not rejected the books of accounts but made the additions towards the bogus purchase. The payment has been made to these parties in the subsequent year which has not been disputed by the revenue. It is not a case where the accounts has been rejected or the profit has been estimated. We accordingly confirm the order of the C.I. T (A) deleting the addition. A.Y. 2010-11 M/s Sangita Construction Co. Vs. ITO Wd-26(1) Kol. Page 7 Your petitioner is also relying upon the judgment of the Kamataka High Court C.I. T vs. Sridev Enterprise, 1921TR Pg 165 held that in case of trading tile rejection of purchases would impact the sales and this fact has been ignored by the A.O. Allahabad High Court in the case of C.I. T vs. Pancham Das Jain 205 CTR 444, held that once goods were accepted to have been purchased and profits there from considered by the assessing officer then the creditors could not be considered as bogus. Jharkhand High Court in the case of Amitabh Construction Pvt. Ltd. vs. A.C.I. T 335 ITR pg 523, held that once books of accounts were not found reliable, only course available was to proceed u/s 145(3) of the I. T Act and no addition could be made for sundry creditors. 1.4 I have gone through the submissions made by the A/R of the appellant, the assessment order and the remand report. The A.O made the addition of Rs.76,19,346/- under the head Sundry creditors since the appellant has not even furnished the addresses at the time of assessment. The A.O held that the expenses incurred in the names of sundry creditors as bogus purchases. The appellant also did not produce the books of accounts in spite of number of opportunities given to him. Finally the appellant has accepted that he was not in a position to produce the books of accounts. During the appeal the appellant was given an opportunity to prove the genuineness of purchases by remanding the case to the A.O. During the remand proceedings the appellant has furnished the 12 (twelve) addresses and the A.O issued notices u/s 133(6) and 8 (eight) creditors involving the total credit of Rs.6,14,104/- have confirmed the credit. The appellant argued that the appellant could not produce the parties because they left the place. Further he submitted that the addition should not be made on the ground that the parties were not traceable. Further he argued that the A.O has accepted the purchases and sales books of accounts not rejected u/s 145 and the payments have been made to these parties in the subsequent year due to non receipt of payment from the debtors. Further he argued that once the sales has been accepted by the Ld. A.O the purchase cannot be considered as bogus because there cannot be any sale without purchase. The appellant also relied on the decision of Hon'ble ITAT Kolkata cited (supra) The appellant claimed to have made purchases from the parties mentioned in the assessment order during the Previous Year relevant to the A.Y. This fact has not been disputed by the appellant. Once he claimed to have made the purchases, it is the duty of the appellant to prove the genuineness of purchases. Inspite of giving repeated opportunities, the appellant did not prove the expenditure as genuine. Merely on the basis of the bill the purchase cannot be proved as genuine. It is only a primary evidence to claim the expenditure. As per the information filed before me, the appellant has billed an amount of Rs.2,76,60,095j- during the year and an amount of Rs.1,93,77,185/- was outstanding at the end of the year. It appears to me that no TDS has been made on the entire payment. The addresses furnished by the appellant were totally incomplete and not capable of verification. The A.Y. 2010-11 M/s Sangita Construction Co. Vs. ITO Wd-26(1) Kol. Page 8 appellant's argument that there cannot be any sales without purchases and when the sales were accepted the purchases also must be accepted, is not tenable. The appellant required to explain the genuineness of purchase as well as the source of the payment. Though the purchase bills were produced and the books of accounts were maintained the appellant did not establish the identity of the supplier by furnishing the clear address. As per the information the appellant was having the transactions with these creditors in earlier years also and it shows that the purchases were made from them regularly. If this fact is correct there should not be any problem to furnish the address and to produce the creditors before the assessing officer. Though the appellant stated that the payment was made in the subsequent year the genuineness of the outstanding is doubtful. The appellant has to prove the outstanding creditors were genuine, otherwise the automatic presumption is that the payments were made outside the books of accounts and claiming the bogus outstanding. The appellant was given two years time for completion of assessment and the appellant failed to produce the evidence and during the assessment, the case was remanded to the assessing officer and the appellant failed to produce the creditors. At the time of appeal also the appellant failed to produce any evidence regarding the identity of the supplier, their professional tax assessment, their income tax assessment details and commercial tax assessments and the books of accounts to prove the genuineness of purchases. The case laws relied upon by the appellant cannot come to his help because in the appellant's case the A.O did not made addition of purchases and the A.O made the addition representing the unproved outstanding of the sundry creditors. In the balance sheet the appellant required to prove the genuineness of the outstanding liabilities by producing the necessary evidences. The appellant failed to produce any evidence to support the genuineness of outstanding sundry creditors not even in a position to furnish the complete postal address. Under the circumstances the A.O. has no option except to conclude that the creditors were bogus. Therefore, I have no hesitation to hold that the sundry creditors to the extent of Rs.70,05,242/- (76,19,346 - 6,14,104) were bogus. During the remand proceedings the A.O made verification and accepted the outstanding creditors to the extent of Rs.6,14,104/- out of the total outstanding sundry creditors of Rs.76,19,346/-. Accordingly I confirm the addition of Rs.70,05,242j- and the balance amount of Rs.6,14,104/- is deleted. This ground of appeal is partly allowed.”

5. We have heard rival contentions. Case file including assessment and lower appellate findings stand perused. The issue between the parties herein is qua genuineness of assessee’s expenses / purchases having remained unsubstantiated right from assessment to remand and the lower appellate proceedings. We make it clear first of all that there is no dispute about assessee being a civil contractor deriving its case contractual receipts of ₹3,60,65,846/- mainly from M/s Bridge & Roof Co.(I) Ltd. It claimed the