ACIT, NEW DELHI vs. M/S. ULTRA HOME CONSTRUCTION PVT. LTD., NOIDA

ORDER PER BENCH: This batch comprises of three appeals by the Revenue relating to the assessment years 2007-08 to 2009-10 and four cross objections by the assessee for the assessment years 2006-07 to 2009-10. Since some common issues are raised in this batch of appeals, we are, therefore, proceeding to dispose of these appeals by this consolidated order for the sake of convenience.

Departmental appeal - Assessment Year 2007-08

Notice u/s 153A was issued to the assessee in response to which a return declaring total income of Rs.2,28,90,610/- was filed. On perusal of the purchases shown by the assessee, it was observed that the assessee claimed to have made purchases, inter alia, worth Rs.52,76,800/- from M/s Shree Saraswati Steel Centre which is a proprietorship concern.

This concern was subjected to survey proceedings u/s 133A of the Act in which the proprietor admitted that he received commission of 25 paise for ever Rs.100/- for providing entry for sale of goods. The assessee showed to have made purchases from this concern as under:-

S.No. A/c Name & Date Particulars Amount Address 1. M/s Shree 02.07.2007 Corporation Bank – CA010712, 12,63,217 Saraswati Steel Cheque No.931054 Centre 2. - do- 08.02.2007 Corporation Bank – CA010712, 13,80,303 Cheque No.931056 3. - do- 09.02.2007 Corporation Bank – CA010712, 12,40,620 Cheque No.931057 4. - do- 10.02.2007 Corporation Bank – CA010712, 13,92,660 Cheque No.931058 Total 52,76,800 to 5624/D/2013 CO Nos.35 to 38/Del/2015 4. For ascertaining the genuineness of this proprietorship concern and the transactions entered by the assessee company and other entities of Amrapali group, the AO issued summons u/s 131 requiring the party to attend the proceedings and submit the evidence in support of sale of goods to these companies. The summons were returned unserved.

Subsequently, an Inspector of the Circle was deputed to identify the party and ascertain its genuineness. The Inspector reported that no such party existed at the given addresses. Later on, further summons were issued which, again, remained unserved. The assessee was apprised as to the inquiries conducted in terms of the summons u/s 131 and the physical inquiry conducted by the Inspector. The assessee was called upon to produce the above party along with its books of account for proving the genuineness of the transactions. In the absence of any appearance put in by the assessee, the AO treated purchases of Rs.52,76,800/- made from M/s Shree Saraswati Steel Centre as bogus and made addition for the equal sum. The ld. CIT(A) deleted the addition by observing that the assessee produced copy of account, to 5624/D/2013 CO Nos.35 to 38/Del/2015 purchase bills, freight bills and Dharma Kanta weighing bills, in support of the genuineness of the purchase transactions and the said party could not be produced because it was not in existence at the time of assessment and had left the premises. He further noticed that M/s Shree Saraswati Steel Centre was duly registered with the VAT authorities. Appropriate course of action for the AO, in the view of the ld. CIT(A), was to inform the VAT authorities about the tax deducted, so that the deposit of tax could have been verified by them. He still further noticed that the AO of the selling party could have also been informed about the sales made so as to verify if these were reflected in the tax return filed. In this view of the matter, the ld. CIT(A) deleted the addition. The Revenue is aggrieved against the deletion of addition.

The ld. AR has placed on record a copy of the order passed by the Tribunal in M/s Amrapali Grand, one of the Amrapali Group of entities, in which similar addition made on account of bogus purchases from M/s Shree Saraswati Steel Centre, came to be deleted. A copy of this order dated 23.11.2015 passed in has been placed on record. On perusal of para 38 of the order, it is noticed that in that case to 5624/D/2013 CO Nos.35 to 38/Del/2015 also the ld. CIT(A) observed that the relevant purchase bills, freight bills and Dharam Kanta weighing bills were produced before the AO, but, the addition was made on account of the failure of the assessee to produce the vendor. At para 40 of the order, the Tribunal has affirmed the view taken by the ld. CIT(A) in deleting the addition by observing as under:-

“40. At the very outset, we note that the CIT(A) has followed proposition laid down by Hon’ble Jurisdictional High Court (supra) in the case of SSP Aviation Ltd. vs DCIT. We further observe that after detailed discussion on the documentary evidence of the assessee, the Ld. CIT(A) rightly noted that in the eventuality when assessee failed to produce alleged vendors, the appropriate course of action for A.O was to inform VAT authorities about the tax said to be deducted by the sellers so that the deposit of VAT tax could have been verified by them. Simultaneously, the A.O of the vendors could have also been informed about the sales made and to verify whether these sales had been reflected in their respective tax returns. The Ld. CIT(A) also mentions that the A.O could also have investigated bank accounts of the parties (Vendors) available with him and none of these courses have been taken by the A.O. The First Appellate Authority rightly concluded that instead of adopting said available courses, the A.O proceeded to made disallowance and addition for non-production of vendors parties and adverse inference drawn by the A.O was I.T.A. 6205 & CO 150/D/14 ASSESSMENT YEAR 2009-10 36 pre-mature and without any sound basis. The Ld. CIT(A) rightly concluded that u/s 153C of the Act, the A.O cannot travel beyond the satisfaction recorded and the impugned addition based on alleged bogus purchases does not pertain to or emanate from allegation of suppression of sales or receipt of unaccounted cash in the sale of flats. This view also finds support from dicta laid down by Hon’ble High Court of Delhi in the case of CIT vs MGF Automobiles Ltd. (supra) and Pr. CIT vs Kurele Paper Mills. P. Ltd (supra). Accordingly, we are unable to see any perversity or any other valid reason to interfere with the impugned to 5624/D/2013 CO Nos.35 to 38/Del/2015 order and thus we uphold the same on this issue of additions in regard to purchases. Accordingly, Ground No. 2 of the Revenue fails.”

The facts and circumstances of the instant case are, mutatis 6. mutandis, similar to those considered and decided by the Tribunal in the case of Amrapali Grand (supra). As it is only a question of fact, which already stands decided by the co-ordinate bench, we express our inability to the ld. DR from registering any departure from the same.

Respectfully following the precedent, we uphold the impugned order on this score.

Assessment Year 2008-09

Following the view taken hereinabove, we uphold the impugned order in deleting this addition. 8 to 5624/D/2013 CO Nos.35 to 38/Del/2015 9. The only other ground is against the deletion of addition of Rs.2,72,100/- on account of sale of scrap. The facts apropos this ground are that the AO observed from the perusal of purchases that the assessee had claimed total purchases at Rs.8,30,01,37,318/-, after deducting the sale of scrap at Rs.2,72,100/-. He opined that sale of scrap is an item of income which should have been separately reflected on the credit side of the Profit & Loss Account and not reduced from the cost of construction/work-in-progress. He, therefore, made addition for this sum, which came to be deleted in the first appeal.

Assessment Year 2009-10

The order pronounced in the open court on 19.10.2016.