M/S. EDAC ENGINEERING LTD.,CHENNAI vs. DCIT, CHENNAI

O R D E R

PER DUVVURU RL REDDY, JUDICIAL MEMBER:

6. With regard to the disallowance towards expenditure on purchases made by the assessee, the ld. counsel for the assessee has submitted that the ld. CIT(A) has given any valid reason for sustaining the disallowance made by the Assessing Officer and therefore, he prayed that the disallowance made by the Assessing Officer should be deleted.

The total value of the transactions with these Hawala Bill Operations was ₹.12,83,84,294/- for the Assessment Year 2011-12 and the above information was shared by the Sales-Tax Department, Maharashtra on their website also. In view of the above, during the assessment proceedings, the assessee was required to furnish evidence of the impugned purchases. On verification of the details filed by the assessee, the Assessing Officer has observed that the assessee has filed only invoices with documentary support of bank account statement, etc., along with certified ledger copies of the parties as appearing in the assessee’s books. However, the Assessing Officer has noted that the material receipt cum inspection report did not have the transportation details, even though there is a column to that effect. Before the Assessing Officer, the assessee has not filed details with regard to the transportation, such as mode of transport, registration number of the vehicles and corresponding details. Therefore, the Assessing Officer concluded that assessment under section 143(3) r.w.s. 147 of the Act assessing total income of the assessee at ₹.39,91,07,174/- by treating the purchase transaction as non-genuine.

8.1 On appeal, the submissions of the assessee and observations of the ld. CIT(A) are as under:

“6.3 In the written submission filed, the appellant has reiterated the arguments made before the Assessing Officer. Copies of purchase order placed on the parties for the supply of welding electrodes, bearings, cable trays and MS flat, etc. have been furnished. In the background of the Investigation made by the Maharashtra Sales Tax Department as well as the Director of Income- tax (lnv.), Mumbai, the appellant company was given an opportunity in the hearing to produce additional connected evidences with regard to the purchases. The AR was requested to furnish details, serial and model number of machinery equipments purchased, evidence regarding the Annual Maintenance Contract of the machinery so purchased, transportation details of the procurements/inspection reports, etc. However, no such evidences were forthcoming. It was submitted that all procurements were of consumables, nuts and bolts, washers, bearings, etc. where there is no proof, etc. and no evidence can be furnished. The Authorised Representative further reiterated that the Assessing Officer has not examined the alleged defaulting dealers. The Authorised Representative also placed strong reliance on the fact that payments have been made through bank accounts. It was also submitted that the inventory has been properly accounted in the books of the appellant company. 6.4 The matter is considered. The investigation by the Sales Tax Department Maharashtra and Director of Income-tax (lnv.), Mumbai has conclusively established that the transaction entered with dubious operators. It would be inconceivable, given the volume of purchases made that the appellant company is not able to produce a single shred of evidence and justify its contention. In the absence of the same, I am convinced that the Assessing Officer has taken the correct decision in treating these purchases as fictitious and bringing the same to tax. No interference in the order of the Assessing Officer is therefore called for. The grounds of appeal fail.” 8.2 We have gone through the paper book consisting 140 pages, which includes copies of purchase invoices from different parties. In none of the invoices, neither the mode of transportation of the materials stated to have purchased have been given nor the assessee has furnished any details with regard to the transportation of the above goods or any stock details. Moreover, the goods stated to have been procured was from Mumbai and the assessee is stated to have procured the electrodes in large quantities, which cannot be carried in a bag or so. From Shubham Enterprises, the item mentioned was 42 MT of MS Plate 25mm THK, 72 MT MS Flat 50 x 10 MM THK – 4 to 6 MTRS long, 53.508 MT of MS Flat 75 x 6MM THK 4 to 6 MTRS long, etc. These materials also cannot be carried in a bag. If the assessee purchased the materials, it is bound to furnish not only the details of its transport from seller, but actually, where it was supplied, on what basis it was purchased and supplied. Through unsigned written submissions before the ld. CIT(A), page No. 132 of paper book, the assessee claims that JSW has given a project completion certificate vide its letter 01.07.2013 certifying that the assessee have successfully completed the scope of work for all the 4 x 2300MW Coal based JSW Energy Thermal Power Plants and successfully commissioned by the assessees. If it is so, the assessee would have definitely transported the goods purchased for the purpose of commissioning the power plant at Jaigad, Ratnagiri, Maharashtra. To admit the claim of purchase, the assessee was directed to furnish complete particulars with regard to details of transport of goods purchased by it, as was directed by the ld. CIT(A) during the course of appellate proceedings. However, the assessee has not furnished the details as called for and therefore, the ld. CIT(A) sustained the disallowance made by the Assessing Officer. Under the above facts and circumstances, we are of the considered opinion that the assessee should be given one more opportunity to furnish all the details as required by the authorities below. If the assessee fails to furnish the details as called for, the disallowance made by the Assessing Officer and confirmed by the ld. CIT(A) stands sustained. Thus, the Assessing Officer is directed to give the assessee one more opportunity to furnish the details as required in this case and decide the issue as directed above as well as in accordance with law.

Order pronounced on the 28th February, 2017 at Chennai.