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Income Tax Appellate Tribunal, MUMBAI BENCH “J”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI RAJESH KUMAR, HONBLE
(A.Y: 2009-10) C.O.NO.183/MUM/2017 (A.Y: 2009-10) M/s. Empire industries Ltd O R D E R PER C.N. PRASAD (JM) 1. This appeal is filed by the Revenue and Cross Objection by the assessee against the order of the Learned Commissioner of Income Tax (Appeals)–12 Mumbai dated 03.11.2016 for the Assessment Year 2009-10.
The Revenue challenged the orders of the Ld.CIT(A) in deleting the addition of ₹.58,76,833/- on account of bogus purchases and the assessee in its cross objection challenged the order of the Ld.CIT(A) in holding that the reopening of assessment u/s. 147 of the Act is valid.
Briefly stated facts are that, the assessment of the assessee was reopened based on the receipt of information by the Assessing Officer that assessee is a beneficiary from two parties namely Dharmesh Trading Company and P.Y. Distributors Pvt. Ltd. which provided only accommodation entries without transportation of goods as per the information received from Sales Tax Department. The reopened assessment was completed on 27.03.2015 and in the course of reassessment proceedings the assessee was asked to produce the parties, furnish various details of transportation of materials etc., The assessee furnished the copies of ledger accounts of the parties, (A.Y: 2009-10) C.O.NO.183/MUM/2017 (A.Y: 2009-10) M/s. Empire industries Ltd purchases bills, payment details to such parties and submitted that these two parties have conducted repairs to the buildings of the assessee and the assessee has made TDS on the payment made to these parties and further photographic evidence of civil and repairs works undertaken by the parties in the assessee’s premises was also furnished. Therefore, it was contended before the Assessing Officer that these parties have rendered services to the assessee by conducting repairs to assessee’s building and the expenditure was incurred towards repairs to buildings and it cannot be treated as a case of bogus purchases.
However, the Assessing Officer treated the payments made to these parties as bogus purchases observing that the parties did not respond to the notices issued u/s. 133(6) of the Act. Notices have returned unserved. Assessee could not produce the parties for verification and the Assessing Officer completely relied upon the Maharashtra Sales Tax Department’s investigations according to which these parties provided only accommodation entries without any delivery of goods.
On appeal, the Ld.CIT(A) deleted the addition/disallowance made by the Assessing Officer observing that the payment made by the assessee to these parties is for civil and repair works not for any purchases of goods and the expenditure was incurred under the head (A.Y: 2009-10) C.O.NO.183/MUM/2017 (A.Y: 2009-10) M/s. Empire industries Ltd Repairs and Maintenance in the Books of Accounts and the genuineness of the transaction was proved by furnishing ledger accounts of the vendors, bills raised by the vendors, copy of bank statement evidencing payment made to such purchases, copies of TDS certificates issued to the parties and also copies of photographs evidencing the civil and repair work undertaken in the assessee’s premises by the parties. Therefore, the Ld.CIT(A) held that the Assessing Officer did not disprove these facts and Assessing Officer has also not been able to show that the work has been actually carried out or that the payment was not made to the said bills. Therefore, he concluded that the very issue of which the addition has been made i.e. the transaction is that of bogus purchases is wrong. In so far as the reopening is concerned the Ld.CIT(A) upheld the action of the Assessing Officer in reopening the assessment.
Ld. DR vehemently supported the orders of the Assessing Officer, strongly placed reliance on the Assessment Order. The Learned Counsel for the assessee reiterated submissions made before the lower authorities and submitted that this is not a case of purchases of materials but it is a case of the parties conducting civil and repair works in the premises of the assessee for which payments were made to these parties after deducting TDS.
(A.Y: 2009-10) C.O.NO.183/MUM/2017 (A.Y: 2009-10) M/s. Empire industries Ltd 7. We have heard the rival submissions, perused the orders of the authorities below. In so far as the addition/disallowance made by the Assessing Officer treating the payments made to Dharmesh Trading Company and P.Y. Distributors Pvt. Ltd treating them as bogus purchases, we find that the Assessing Officer misguided himself in holding that the payments were made for purchases of material and the suppliers are bogus. The fact is that the assessee incurred expenditure towards repairs and maintenance to its buildings and the works were executed by Dharmesh Trading Company and P.Y. Distributors Pvt. Ltd and the assessee is also deducted TDS and the payments made to these parties. The payments were made through banking channels, parties has issued invoices for the work carried out by them and the invoice clearly shows that work is carried for demolition and removal of civil works for Masonry Walls, Plaster, Flooring, Ceramic Tiles, Water Proofing (under Toilet), Plumbing & Sanitary Works, Door Frames & Doors etc., this clearly shows that these parties have executed civil works to the office building of the assessee and it is not a mere purchase of goods by the assessee from these parties. Further the Ld.CIT(A) also observed as under: - “It is seen that the payment made to the two parties is for civil and repair work and not for any purchases of goods. The material for carrying out the civil and repair work were brought by these two parties and the same was consumed by the appellant in the course of its civil and repair works.
(A.Y: 2009-10) C.O.NO.183/MUM/2017 (A.Y: 2009-10) M/s. Empire industries Ltd The said amount has been debited to the Profit and Loss Account for the F.Y. 2008-09 under the head “Repairs and Maintenance” account. It is seen that the appellant had discharged the onus of proving the genuineness of the transaction. It has submitted the ledger accounts of the vendor, bills raised by the vendor, copy of bank statement evidencing payment made to such parties, copies of TDS certificates issued to the parties and also copies of photographs evidencing the civil and repair work undertaken in the appellant’s premises by the parties. It is seen that the A.O has not disproved these facts and A.O. has also not been able to show that the work has not been actually carried out or that payment was not made to the said parties. Thus, it is seen that the appellant has discharged its primary onus of proving the genuineness of the transactions and that the A.O. has also failed to disprove the same. The onus had shifted to the A.O. to rebut the same with proof which has not been done so by the A.O. Thus, the addition u/s. 69 is not justified. It is also seen that the opportunity of cross examination was also not provided to the appellant and also that the statement of oath was not given to the appellant. This is in contravention of the directions given by the Jurisdictional Mumbai ITAT decisions in the case of ACIT v. Tristar Jeweler Exports P. Ltd. (ITA.No. 7593/MUM/2013) and Videocon Industries Ltd. v. Addl. CIT [2015] 55 taxmann.com 263. Thus, it seen that the very issue on which the addition has been made, that is, that the transaction is that of bogus purchase is wrong. Thus, in the light of the discussion here, Ground Nos. 3 to 10 of appeal allowed.”
Therefore, in view of what is stated above, we do not find any valid reason to disturb the findings of the Ld.CIT(A) in deleting the (A.Y: 2009-10) C.O.NO.183/MUM/2017 (A.Y: 2009-10) M/s. Empire industries Ltd addition/disallowance made towards bogus purchases. Thus grounds raised by the Revenue are dismissed.
Coming to the cross objection where the assessee challenged the reopening of assessment, we find that the assessment was reopened based on the materials before the Assessing Officer that the suppliers are provided only accommodation entries and assessee is one of the beneficiary from those suppliers. Therefore, it cannot be said that there is no information which has come on record to suggest that there is no escapement of income. Prima facie Assessing Officer had in his possession the external information which suggest that there is an escapement of income by the assessee. In these circumstances, we uphold the action of the Ld.CIT(A) in holding that reopening of assessment u/s. 147 of the Act is valid. The grounds raised by the assessee in its cross objection are dismissed.
In the result, both the appeal of the Revenue and the cross objection of the assessee are dismissed.
Order pronounced in the open court on the 06th October, 2017.