9911796707
TMI Blog2015 (7) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... ve entered into the books of account and material consumed have also been entered into the books of account giving the quantitative details. Perusal of the orders of the authorities below and the rival submissions made by both the sides indicate that while the entire purchases cannot be treated as bogus, at the same time the entire purchases also cannot be allowed as genuine. If we allow such type of transactions as genuine it will be against assessees who meticulously maintain full records, produce the parties before the AO on being directed and produce the necessary details to substantiate their transactions. We therefore agree with the finding given by the Ld.CIT(A) that there are strengths and weaknesses in the evidences and the arguments of both the sides and it is not possible to hold either the AO or the assessee as fully correct in their claims. From the various details furnished by the assessee we find the assessee has given site-wise profitability statement vis-à-vis the disallowance made by the AO if the addition so sustained by the AO is accepted, then the GP rate in 2 cases is above 99%, in one case it is about 98%, in 2 cases it is almost 93% and in 1 case it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... und that the assessee company has shown purchases of material from the below mentioned concerns of Shri Tushar Ruparel. The Assessing Officer further noted that as per the details furnished during post survey investigation and the details produced during the assessment proceedings the purchases made from various parties are as under : Sr. No. Name of the assessee F.Y. 06-07 F.Y. 07-08 1. M/s. Foram Traders - 67,59,282 2. M/s. Apple India Marketing Co. 82,98,924 47,46,122 3. M/s. V.S.K. Steels - 39,63,133 4. V.S.K. Enterprises 71,70,625 39,16,081 5. M/s. Khushi Enterprises 1,92,56,857 - 6. M/s. Samarth Trading Co. 78,15,429 - 7. M/s. Balaji trading - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es in question too. (c) The material brought from parties in question have been used at six locations and the assessee company has received confirmation letter from four parties stating that materials have been received at respective site locations. (d) The actual sales have taken place and payments against all sale bills have been received through cheques. Payments to purchase parties have been made through cheques. (e) The quantitative tally of sales with consumption chart, GRN etc. confirm the purchased quantity with minor wastage. 5. The Assessing Officer thus observed from the report of ADIT that the assessee not only failed to produce the parties in question before the survey party but also its contention does not have much force. He observed that the assessee has not submitted any quantitative reconciliation between material purchased and its consumption. He has only submitted confirmations from 4 customers stating that certain amount of goods have been received at certain work site. The Assessing Officer noted that the assessee company is executing both kinds of contracts in the field of interior work, i.e. work contract without supply of material by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... do not have any entry of against the column 'time in' i.e. such GRNs generally do not show when the goods were receive. On several occasions, even inward number, P.O. No. and date are not mentioned on such GRNs. Whereas, the GRNs for the goods received from other parties have such details written on them . He accordingly held that the GRNs submitted by the assessee cannot be relied upon. The AO further noted that the assessee could not produce any evidence in the form of delivery challan, transportation details etc. The assessee also did not produce any delivery note issued by Shri Tushar Ruparel or his concerns. He further noted that in the case of the assessee he has followed the practice which is reverse of the general practice in the trade. Assessee itself is making Goods Receipt Note and puts its employee s signature thereon without giving duplicate copy of such note to seller. 8. As regards the submission of the assessee that it has followed vendor registration procedure to enquire into the genuineness of vendor including the parties in question, the AO noted that the parties in question did not have requisite infrastructure such as godown to supply the goods as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee F.Y. 06-07 1. M/s. Apple India Marketing 82,98,924 2. V.S.K. Enterprises 71,70,625 3. M/s. Khushi Enterprises 1,92,56,857 4. M/s. Samarth Trading Co. 78,15,429 5. M/s, Sun Enterprises 1,00,40,207 6. M/s. M.R. Corporation 1,38,49,532 7. M/s. Neelam Enterprises 47,24,390 Total 7,11,55,964 11. During the course of assessment proceedings the assessee submitted that purchases could normally be disallowed if the same are bogus or shown as paper transaction and in other cases it cannot be disallowed. It was argued that in the case of the assessee the purchases effected from various parties referred to in the statement of Shri Tushar Ruparel cannot be treated as bogus or paper transaction as the same were supported by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds the fag end of the year which has been deposited by these parties on their respective bank accounts and cash withdrawn against them. On being asked by the AO to produce the copy of the bank account of these parties the assessee could not produce the same. The assessee has also not disproved that cash has been withdrawn by these parties against the cheques given by assessee and returned the cash to the assessee for a commission which was stated by Shri Tushar Ruparel. Distinguishing the various decisions cited before him and rejecting the submissions the AO made addition of ₹ 7,11,55,964/- to the total income of the assessee being the purchases made from the 7 parties treating the same as bogus. 13. Before CIT(A) the assessee more or less reiterated the same arguments as made before the AO. It was submitted that the AO mainly and largely relied upon the findings of survey tem and the statement of Mr. Tushar Ruparel. It was stated that Mr. Tushar Ruparel is proprietor of only one concern, i.e. M/s. VSK Enterprises whereas other persons are proprietors of other 6 concerns. Although Mr. Tushar Ruparel has stated that he is the controlling person of all 6 other parties but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidence. Various decisions were also relied upon to the proposition that statement recorded u/s.133A cannot be used as evidence without its corroboration by any other evidence to prove the correctness thereto. 17. As regards the contention of the AO that the assessee has not produced the parties from whom purchases were made it was submitted that all those suppliers had submitted various details such as vendor registration form, PAN card copies of the partners/ proprietors, sales tax registration number, Account confirmation statements etc. to substantiate the sales made by them to the assessee. Even the survey party had also impounded the invoices of the above parties. Further, they have responded to the notice issued to them u/s.133(6). The assessee reiterated the submissions as made before the AO stating that assessee had produced documentary evidence about actual supply of material by the above parties by furnishing the confirmation from the customers regarding the receipt of goods at the site and consumption thereof. It was submitted that the contracts with the 5 customers were lumpsum contract including material and the purchase from the aforesaid parties was all for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it to the assessee after deducting their commission for service, had no regular site for carrying on the business of genuinely supplying materials, non-maintenance of books of account, and therefore what was being admitted by him and others were looking to be correct on the face of it. The evidence gathered by the investigation unit at the end of the supplier were quite clearly showing that the assessee was engaged in taking bogus bills from the concerns of Mr. Tushar Ruparel. 20. However, he also observed that when the evidences gathered at the end of the assessee during the course of follow up survey conducted subsequently is looked into it is also not difficult to see that not much of adverse complimentary evidence could be found when the survey was conducted at the premises of the assessee on 28-12-2007. It is possible that in the intervening period of 20 days the assessee has taken care of all the adverse evidences but still the DDIT(Investigation) and the AO had the responsibility to establish the complexity of the assessee to the affairs accepted by Mr. Tushar Ruparel to the extent possible. According to Ld.CIT(A) it should have been demonstrated that all admissions wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Mr. Tushar Ruparel and others in itself were quite strong to substantially nail the assessee had the opportunity to cross examine was granted to the assessee. However, since the same was not done the case has to be decided considering other evidences placed on record by the rival sides. Relying on various decisions the Ld.CIT(A) observed that under the income-tax proceedings the strict rules of evidence are not applicable for arriving at the correct decision (Chuharmal Vs. CIT reported in 172 ITR 250 (SC). 22. Considering the totality of the facts of the case the Ld.CIT(A) further observed that there are strengths and weaknesses in the evidences and the arguments of both the sides and it is not possible to hold either the AO or the assessee as fully correct in their claims. He observed that although the evidences forwarded by the AO was overwhelmingly against the assessee but the entire disallowance cannot be sustained as no answer could be found by the AO to the arguments made that the contracts cannot be executed without the purchases which are being disallowed by the AO. He observed that even if the site wise purchases and consumption prepared and submitted by the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds by Assessee : 1. The learned Commissioner of Income Tax (Appeals) - I, Pune [CIT(A)] erred in confirming the disallowance of 50% of the so called bogus purchases of ₹ 7,11,55,964 i.e. ₹ 3,55,77,982. Your appellant submits that entire purchases of ₹ 7,11,55,964 are genuine purchases and the same ought to have been allowed. 2. The learned CIT(A) erred in not excluding the amount of closing stock of material purchased from so called bogus parties while computing the income. Your appellant submits that if the purchases from the parties or part thereof are treated as bogus, the closing stock representing the said so called bogus purchases ought to be reduced from the total purchases and only the net purchases after reducing the closing stock ought to be considered for disallowance. 3. The learned CIT(A) erred in not appreciating the evidences produced by the appellant and making various observations without substantiating the same. Your appellant submits that the observations of the learned CIT(A) are not supported by any evidences and are made in disregard of the principles of natural justice. Your appellant submits that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 47 dated 09-10-2006. Referring to 141 of the paper book he drew the attention of the Bench to the goods received cum inspection note vide RC No.4 Challan No.1347 dated 09-10-2006. Referring to page 142 of the paper book he drew the attention of the Bench to the delivery challan of M/s. M.R. Corporation which has gone to the site of Birla Cotsyn (India) Ltd. which also contains the stamp of Birla Cotysn (India) Ltd. Referring to page 143 of the paper book he drew the attention of the Bench to the purchase order raised on M/s. M.R. Corporation. Referring to subsequent pages the Ld. Counsel for the assessee submitted that when the goods have come to the place of third party such as Birla Cotsyn (India) Ltd., Kumar Housing Corporation Ltd., Zenith Birla India Ltd., Birla Power Solutions Ltd., Rohan Builders Ltd. etc., which have been authenticated by these companies, therefore, the same should not have been disbelieved. He filed the following details and explained the purchases from the 7 parties and their destination. Customer where goods consumed /delivered......... Purchase from...... Kumar H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s where the work was going on have authenticated the receipts of such goods in their premises. Further, the payments have been made by account payee cheques. There is no evidence that the money has come back to the assessee. Referring to pages 17 to 32 of the paper book the Ld. Counsel for the assessee drew the attention of the Bench to the confirmations given by the assessee to the various suppliers and those parties have accepted the same and signed as a token of their acceptance with their PAN Nos. Referring to pages 107 to 128 of the paper the Ld. Counsel for the assessee drew the attention of the Bench to the sales tax registration No. VAT No. PAN No. etc. of the suppliers. He submitted that the assessee has executed the work for reputed companies and those parties have certified that the goods have been received in their premises. Further, all those parties are not related to the assessee. The Ld. Counsel for the assessee submitted that for the assessment year the assessee has earned GP of 36.93% and net profit of 17.18%. If the addition as made by the AO is confirmed, then the gross profit comes to 57.21% and the net profit comes to 37.41% for A.Y.2007-08. Similarly, as agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. Tushar Ruparel whose statement was recorded during the course of survey. He submitted that Mr. Tushar Ruparel has evaded sales tax for which the assessee should not be penalised. He submitted that all purchases are genuine. The delivery of goods have been accepted by the third party. Without the material the assessee could not have executed the work. The assessee is not concerned from where Mr. Tushar Ruparel has purchased the goods. As long as the assessee gets the material as per the orders placed, it is immaterial for the assessee as to from where the supplier has purchased the goods. Referring to pages 229 to 234 of the paper book which is the letter addressed to the AO on 30-12-2009 the Ld. Counsel for the assessee drew the attention of the Bench to the following lines (page 233 of the paper book) : We would also like to request to your goodself that we want to cross examine all the above parties in front of your goodself to further prove our genuineness of the transactions. You are therefore requested to kindly let us know the day time for cross examination. 31. Referring to the decision of the Pune Bench of the Tribunal in the case of Gopal Pulse Processors P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e by account payee cheques the same cannot be accepted as genuine especially when heavy cash has been withdrawn subsequently and the cash might have come back to the assessee. Since the assessee is not in manufacturing activity and is engaged in the business of Interior Decoration etc., therefore, the GP ratio is not important. Since the assessee has never produced the parties and has not conclusively proved the purchases to be genuine, therefore, the order of the CIT(A) should be set aside and that of the order of the AO be restored. He accordingly submitted that the appeal filed by the assessee should be dismissed and the appeal filed by the Revenue should be accepted. 33. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the AO in the instant case made an addition of ₹ 7,11,55,964/- being purchases made from 7 persons, (the details of which are already given in para 10 of the order) on the ground that during the course of survey at the premises of Mr.Tushar Ruparel and other con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issued u/s.133(6) and have confirmed to have supplied the goods to the assessee. 35. From the various details furnished by the assessee we find the payments have been made by account payee cheques. The suppliers have confirmed to have supplied the goods in response to the notice issued u/s.133(6). The assessee has produced third party evidences such as gate receipts of the respective companies certifying the receipt of goods in their premises. The companies where the assessee has executed the work are well known reputed companies and without the work carried out at their site they would not have made the payment to the assessee. Further, although it is the allegation of the AO that huge cash was withdrawn after the cheques were deposited, however, there is no evidence whatsoever to show that the money has come back to the assessee in some form or other. Even during the course of survey at the premises of the assessee, no incriminating materials were found to show that assessee was involved in accommodation entries. No excess cash was found. Further, the assessee has maintained proper books of accounts. The goods purchased have entered into the books of account and material con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the goods as per his requisition and no opportunity to cross examine Mr. Tushar Ruparel was provided by the AO. 37. At the same time when the main supplier Mr. Tushar Ruparel has denied to have made any supply to the assessee and was issuing only accommodation entries as stated by him and various other concerns, it was incumbent upon the assessee to produce those persons before the AO to substantiate his case. The assessee in the instant case has failed to do so. Further when reputed suppliers are available in the market, there was no necessity of buying goods from dubious suppliers who do not have proper godown and office. Although the assessee is at liberty to buy goods from persons/parties according to his choice, at the same time, it raises a doubt in the mind regarding the authenticity of the purchases especially when the same is purchased from parties who do not have their own shops/godowns and only having table space. Thus, a perusal of the orders of the authorities below and the rival submissions made by both the sides indicate that while the entire purchases cannot be treated as bogus, at the same time the entire purchases also cannot be allowed as genuine. If we allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O Sales 9,581,143.00 33,579,895.00 10,630,648.00 21,214,699.00 20,837,143.00 55,935,793.00 Purchase - - Direct 69,548.00 2,490,236.00 221,699.00 137,472.00 1,452,143.00 2,745,887.00 Gross Profit 9,511,595.00 31,089,659.00 10,408,949.00 21,077,227.00 19,385,000.00 53,189,906.00 Gross Profit % 99.27% 92.58% 97.91% 99.35% 93.03% 95.09% 39. From the above we find if the addition so sustained by the AO is accepted, then the GP rate in 2 cases is above 99%, in one case it is about 98%, in 2 cases it is almost 93% and in 1 case it is 95% which appears to be absurd as compared to assessees engaged in simil ..... X X X X Extracts X X X X X X X X Extracts X X X X
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