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Income Tax Appellate Tribunal, MUMBAI BENCH “I”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI N.K. PRADHAN, HONBLE
2 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd O R D E R PER C.N. PRASAD (JM) 1. These appeals are filed by the Revenue for the Assessment Years 2009-10 to 2011-12 and assessee for the Assessment Year 2009-10 against the orders of the Learned Commissioner of Income Tax (Appeals) – 53, Mumbai dated 30.06.2016.
The grievance of the Revenue in its appeals is that the Ld.CIT(A) erred in deleting the addition made u/s. 69C of the Act in respect of bogus purchases from M/s. Siddhi Enterprises, M/s Devchaya Trading Co. and M/s. D.C. Corporation, and the assessee in its appeal for the Assessment Year 2009-10 challenged the order of the Ld.CIT(A) in sustaining the disallowance u/s. 69C in respect of bogus purchases from M/s. Disha Transport Co. and M/s. D.K. Enterprises.
Briefly stated the facts are that, the assessee is engaged in the business of civil contracts and there was a survey action u/s. 133 of the Act conducted on 14.02.2013 and in the course of survey proceedings statement of Shri Vishal Balkisan Wardhawan, Director of the assessee was recorded, wherein it was admitted that the purchases made from Kapasi family are non-genuine and withdrawn the claim of purchases for all these Assessment Years. Subsequently the assessments were 3 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd reopened u/s. 147 of the Act and the re-assessments were completed on 26.03.2014 u/s. 143(3) r.w.s. 147 of the I.T Act. In the course of re- assessment proceedings, it was noticed that assessee made purchases from five parties namely M/s. Siddhi Enterprises, M/s Devchaya Trading Co., M/s. D.C. Corporation, M/s. Disha Transport Co. and M/s. D.K. Enterprises. First three concerns are relating to Kapasi family. The Assessing Officer in respect of M/s. Siddhi Enterprises observed that the statement recorded u/s. 131 of the Act from Shri Devang H. Kapasi proprietor admitted that the concern has issued accommodation entries to different parties and one of such beneficiaries is the assessee company also. Similarly, he noticed that Smt Chhaya Devang Kapasi who is the wife of Shri Devang H. Kapasi also indulged in providing accommodation entries through her proprietary concerns M/s. Disha Transport Co. and M/s. D.K. Enterprises. Assessing Officer also observed that a statement was recorded and she admitted that she is providing accommodation entries as well as supplying materials. In view of these the assessee was asked to explain as to why alleged purchases from the above mentioned parties should not be treated as unexplained. The assessee appears to have submitted before Assessing Officer that, all the payments to these parties have been made by cheques and the purchases are genuine and also relied on the affidavit filed for retraction of admission made by the 4 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd Director Shri Vishal Balkisan Wardhawan. However, the Assessing Officer did not accept the submissions of the assessee for the following reasons: -
(i) The contention that he payment ware made by account payee cheques is not a fail-safe method of substantiating the assessee’s claim as it is already accepted by the persons, whose statement, deposition or affidavit are mentioned above, that cash is returned after deducting commission/brokerage once cheques is realized. (ii) The assessee could not produce any delivery challan, lorry receipt, the mode of transport of goods, evidence of payment of Octroi (if any), stock register, etc. from the alleged suppliers support of its claim that purchases are genuinely made from these parties. (iii) The purchases of the assessee, per Se, are not the issue here and these alleged purchases are not being treated as bogus. The Sales Tax Department has come down hard on the pernicious practices indulged in by these unscrupulous traders figuring in the list of suspicious dealers-and it is evident that the assessee has not purchased the goods from these alleged suppliers. It is equally true that the goods, have somehow entered in the assessee's regular business. The assessee has been unable to give any convincing or cogent explanation as to how these goods happened to come in his possession. The assessee has, thus, incurred expenditure on such purchases which is not explained. The purchases are not being treated as bogus or sham rather the expenditure incurred on such purchases is treated as unexplained. (iv) It is also clear from the statement given before the Assessing Officer by the Kapasi Family and statement of the director of the assessee company during the course of survey proceedings that it has not made any genuine purchases from these parties.
5 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd (v) The submission with regard to consumption of the goods is not acceptable as it is conclusively proved that the purchases made are bogus transactions only. (vi) The case laws on which the assessee relied upon are distinct from the case of the assessee company. Reliance is placed on decision of Delhi High Court in the case of CIT vs. La Medica [250 ITR 575] 4. Thus the Assessing Officer treated the purchases made from the above parties as unexplained expenditure u/s. 69C of the Act.
The matter was carried before the Ld.CIT(A) and in the course of Appellate Proceedings the assessee filed additional evidences in the form of confirmations, Income-Tax returns of the supplier’s VAT Returns etc., and the Ld.CIT(A) called for the Remand Report and the assessee also submitted its rejoinder for the Remand Report. In the course of proceedings before the Ld.CIT(A) it was submitted by the assessee that the disallowance was made only based on the statements recorded from Shri Devang H. Kapasi and Smt Chhaya Devang Kapasi wherein it was stated that they have issued certain accommodation bills to various parties. It was submitted before the Ld.CIT(A) that in the statements recorded from those persons, it is nowhere mentioned that the assessee is one of beneficiaries to the accommodation entries provided by them. It was contended that the statement reflected various persons to whom they have provided accommodation entries and also various persons to whom
6 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd they have supplied the materials. It was further contended that in the statements recorded the assessee’s name figures in the list of parties to whom Shri Devang H. Kapasi and Smt Chhaya Devang Kapasi had supplied material and transportation services. It was submitted before the Ld.CIT(A) that since the name of the assessee was not appearing in the list of the beneficiaries to whom the parties have provided accommodation entries there is no justification in treating the entire purchases made by the assessee from those parties as bogus/non-genuine. For the contention of the Assessing Officer that no delivery challans were produced, no lorry receipts were produced, it was submitted that the materials were obtained from the parties/suppliers at the worksites directly. Thus it was vehemently asserted that neither Shri Devang H. Kapasi nor Smt Chhaya Devang Kapasi had in their statements recorded by the department admitted to have issued any accommodation bills to the assessee. Therefore, in view of this position the purchases effected by the assessee from the above parties could by no means treated as non-genuine. Convinced with the submissions of the assessee the Ld.CIT(A) deleted the purchases made from M/s. Siddhi Enterprises, M/s Devchaya Trading Co. and M/s. D.C. Corporation in all these Assessment Years. However, the Ld.CIT(A) sustained the disallowance
The Ld.DR submits that the assessee did not produce any evidence before the Assessing Officer to substantiate the genuineness of the purchases made from these parties. The Ld.DR referring to the Assessment Order submits that assessee has simply said that the payments were made by account payee cheques and assessee could not produce any delivery challan, lorry receipt, mode of transportation of goods, evidence of payment of octroi, no stock register is produced, no consumption records were produced and there was a statement given by the persons related to Kapasi family during the course of survey proceedings that they have provided accommodation entries. He relied upon the decision of the Hon'ble Punjab and Haryana High Court in the case of Narendra Kumar Gupta [55 taxman.com 371]
On the other hand, Learned Counsel for the assessee submits that addition was made merely based on the statement Shri Devang H. Kapasi and Smt Chhaya Devang Kapasi. Learned Counsel for the assessee submits that after recording the statements from the family members of Kapasi family, notices u/s. 148 were issued to the assessee for reopening the assessments. Referring to Page No.54 of the Paper Book Learned
8 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd Counsel for the assessee submits that the statement recorded on oath u/s. 131 from Smt Chhaya Devang Kapasi was recorded in the I.T office but not during the course of survey as contended by the Ld.DR. Learned Counsel for the assessee referring to Question No. 7 and Question No. 14 and the replies thereto submits that the list of parties mentioned in the statement to whom the parties said to have been issued accommodation bills, the assessee did not appear in that list and in fact the list of parties to whom the material supplied as was stated in the statement the assessee’s name did appear and therefore the Learned Counsel for the assessee submits that the contention of the Revenue that only the accommodation bills were issued to assessee by Kapasi family is basically wrong and this is evident from the statements recorded from them. He reiterated the submissions made before the lower authorities and strongly placed reliance on the order of the Ld.CIT(A).
In reply the Ld.DR submits that assessee could not prove that the material has come from the parties/suppliers and no evidence of consumption was shown by the assessee and no evidence whatsoever in respect of the stock registers, consumption record, delivery challan etc., have been furnished before the Assessing Officer. It is submitted that even in the remand proceedings the assessee could not produce all these details before the Assessing Officer. Ld.DR submits that the affairs of the 9 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd Kapasi family are very much in doubtful and the Assessing Officer clearly established that the purchases are non-genuine.
We have heard the rival submissions, perused the orders of the authorities below. We have also gone through the statement recorded from Smt Chhaya Devang Kapasi. The Assessing Officer based on the statement recorded from Smt Chhaya Devang Kapasi appears to have conducted survey proceedings in the premises of the assessee and in the course of the survey proceedings assessee Director though withdrawn the claim of purchases based on the statements recorded from Kapasi Family this was latter on retracted by filling an affidavit. All these assessments for Assessment Years 2009-10 to 2011-12 were reopened only based on the statements recorded from Kapasi family who have stated that they are providing accommodation entries to various parties. The assessee in the course of the Assessment Proceedings appears to have not furnished complete details in respect of the purchases made from these parties. However in course of the Appellate Proceedings the assessee produced confirmations from these parties Income Tax returns, VAT returns etc., and the Ld.CIT(A) considering the submissions taking note of the fact that the assessee’s name is not appearing in the list of beneficiaries to whom the parties have provided accommodation entries as deposed in the statements, the Ld.CIT(A) deleted the addition in so far as the purchases
10 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd made from the suppliers namely M/s. Siddhi Enterprises, M/s Devchaya Trading Co. and M/s. D.C. Corporation for all these Assessment Years. Ld.CIT(A) sustained the disallowance in respect of purchases made from M/s. Disha Transport Co. and M/s. D.K. Enterprises during the Assessment Year 2009-10. The order of the Ld.CIT(A) is a well-reasoned order and therefore no inference is called for in so far as the decision taken by the Ld.CIT(A) that the purchases cannot be treated as bogus/non- genuine, in respect of the parties/suppliers namely M/s. Siddhi Enterprises, M/s Devchaya Trading Co. and M/s. D.C. Corporation.
At the same time the assessee could not produce the stock registers, consumption registers and assessee could not prove that the material have come from the suppliers as there was no delivery challan and it was contended that the material were supplied by the parties directly at the sites. Further in execution of contracts assessee makes purchases of some of the items on site from local suppliers belonging to un-organized section. In such circumstances the possibility of assessee making the purchases in gray market on cash without transportation bills, delivery challans etc., cannot be ruled out. Therefore, keeping in view the nature of the business of the assessee and the fact that the assessee is making the local purchases without any transportation bills, delivery challans etc. and also keeping in view the fact that assessee is a sub-contractor, we
11 5634 & 5635/MUM/2016 M/s. Shanti Engg. Construction Co. Ltd direct the Assessing Officer to disallow 4% of the purchases made from M/s. Siddhi Enterprises, M/s Devchaya Trading Co. and M/s. D.C. Corporation to meet the anomalies and to cover up the leakage of Revenue
In respect of the other two parties namely M/s. Disha Transport Co. and M/s. D.K. Enterprises it is the finding of the Ld.CIT(A) that assessee could not furnish any iota of evidence to show that the purchases made from the parties are genuine, no confirmations, copies of income tax returns, no purchase invoices etc., have been furnished. Therefore, he sustained the disallowance in respect of these two concerns. The action of the Ld.CIT(A) in sustaining the disallowance of purchases from these two parties is upheld.
In the result, appeals of the Revenue are partly allowed and assessee’s appeal is dismissed.
Order pronounced in the open court on the 31st October, 2017.