2019 (7) TMI 294 - AT - Income Tax

Genuineness of purchases - non compliance of notices u/s 133(6) by the suppliers - purchases was capitalised in book - disallowing depreciation claimed @15% - exclusion of balance from written down value WDV of the fixed assets - HELD THAT - We find that the assessee had filed plethora of documents to substantiate the purchases. It is noted that the three suppliers under question were corporate entities who were duly registered under respective State Sales Tax / VAT, had registration under Excise Laws / Service Tax. The material was purchased by the assessee against C Form. The assessee has obtained certain services from these entities and made the payment thereof after deduction of appropriate tax at source u/s 194 C / 194J. All the payments were through banking channels. The confirmation of account as well as reconciliation of balances was available on record. Further, similar purchases made by the assessee in subsequent AY 2009-10 has been accepted. The assessee erected approx. 610 new Towers during the year which was uniquely identifiable and the same could not have been achieved without actual purchase of the material. he assessee has placed on record the Income Tax Return as well as VAT returns for impugned AY 2008-09 in respect of Aster Teleservices Pvt. Ltd. which demonstrate that the entity was very well in existence. The assessee also made an effort to procure similar documents from official liquidator of another entity namely R.N. Infrastructure Pvt. Ltd. Nothing on record suggest that the above entities, in any manner, have been declared as Hawala / Bogus dealers by any of the authorities. The totality of all these facts demonstrate that the assessee was able to produce overwhelming documents to substantiate the purchase as pitied against the revenue s stand that notices u/s 133(6) were not responded to. However, we find that even the response to notice u/s 133(6) was not within the control of the assessee and the same were to be replied to by the third party suppliers. The factual matrix as well as documentary evidences, in our opinion, was tilted more in favor of the assessee. - appeal of revenue stands dismissed

Summary

Issues Involved:
1. Whether the Ld. CIT(A) erred in treating the purchases from M/s Aster Infrastructure Pvt. Ltd. and R.N. Infra Communication Pvt. Ltd. as genuine despite non-compliance with notices issued u/s 133(6) of the IT Act.
2. Whether the Ld. CIT(A) erred in treating the purchases as genuine when the assessee failed to produce the vendors for confirmation during assessment proceedings.
3. Whether the order of the CIT(A) should be set aside and that of the A.O. be restored.

Detailed Analysis:

Issue 1: Non-compliance with Notices u/s 133(6)
The revenue contested the genuineness of purchases from M/s Aster Infrastructure Pvt. Ltd. and R.N. Infra Communication Pvt. Ltd. due to non-compliance with notices issued u/s 133(6). The Tribunal noted that the notices were served but not responded to by the suppliers, which was beyond the control of the assessee. Additionally, one of the suppliers, R.N. Infrastructure Pvt. Ltd., was under liquidation. The Tribunal emphasized that the existence of the suppliers was established, and the non-response did not automatically imply that the purchases were bogus.

Issue 2: Failure to Produce Vendors for Confirmation
The assessee was unable to produce the vendors for confirmation during assessment proceedings. However, the assessee provided substantial documentary evidence, including purchase invoices, material receipt notes, bank statements, and confirmations from the suppliers. The Tribunal observed that the assessee demonstrated the trail of the purchased material and the utilization of the same in constructing towers, which were uniquely identifiable and generated lease income. The Tribunal found that the documentary evidence provided by the assessee was sufficient to substantiate the genuineness of the purchases.

Issue 3: Setting Aside the Order of CIT(A)
The Tribunal upheld the order of the CIT(A), which deleted the disallowance made by the A.O. The CIT(A) had carefully considered the evidence provided by the assessee, including confirmations from the suppliers, sample invoices, and proof of payments through banking channels. The CIT(A) also noted that similar purchases in the subsequent assessment year were accepted by the revenue. The Tribunal found no reason to interfere with the CIT(A)'s order, as the assessee had provided overwhelming evidence to substantiate the purchases.

Conclusion:
The Tribunal dismissed the appeal by the revenue, affirming the CIT(A)'s decision to treat the purchases as genuine. The Tribunal concluded that the non-response to notices u/s 133(6) did not invalidate the substantial evidence provided by the assessee, and the purchases could not be deemed bogus based on suspicion alone. The Tribunal's decision was in line with the principles laid down in the cited judicial precedents, including CIT Vs. Nikunj Eximp Enterprises Pvt. Ltd.