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TMI Blog2015 (7) TMI 528X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in the case of M/s Piyush Developers Pvt.Ltd. may be adopted for Varsa Buildwell India P.Ltd. also. 3. Facts in brief:- The assessee is engaged in Real Estate development and construction activity. It does not own land. It carries out construction activity and development activity, in the capacity of a contractor, on the land owned by its clients. The assessee neither purchased land nor sells the same. 3.1. A search and seizure operation was conducted on Piyush group of companies on 16.1.2008 both at the office premises as well as at the residential premises of the Directors. Certain documents were seized and impounded, certain cash and jewellery was also found. Survey u/s 133A of the Act was conducted in the office premises of some of the assesses in the group on the same date. 3.2. Notice u/s 142(1) dated 7.9.2001 was issued to M/s Piyush Developers Pvt.Ltd. In response, the assesses filed a return of income on 12.10.2009 declaring income of Rs. 61,79,070/-. M/s Varsa Buildwell India P.Ltd. filed return of income on 17.3.2010 declaring income of Rs. 50,84,390/-. 3.3. In the case of M/s Piyush Developers Pvt.Ltd. the AO completed assessment u/s 143(3) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the group and there after went on to estimate the gross profit of the assessee at 27% as against 16% declared by the assessee. 4. Aggrieved by the deletion of addition on account of bogus purchases, Revenue has filed appeal before us on the following grounds. "1. The Ld.CIT(A) has erred both in law and on facts of the case in deleting an addition of Rs. 2,89,34,711/- made on account of bogus purchases, without appreciating that despite abundant opportunities given by the AO and being confronted on record, the assessee failed to produce the parties and to prove genuineness, identity and creditworthiness of the parties from whom the alleged purchases were made, the onus for which had squarely shifted on the assessee after the relevant parties were not found to exist at the addresses furnished by the assessee to the AO. 2. The Ld.CIT(A) has erred both in law and on facts of the case in deleting the said addition of Rs. 2,89,34,711/- made on account of bogus purchases despite the fact that the CIT(A) himself, in the course of appellate proceedings gave the assessee an opportunity to produce the parties and to file confirmations before the AO, for which the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r K Sehgal, the Ld.Counsel for the assessee and Shri Syed Nasir Ali, Ld.CIT, D.R on behalf of the Revenue. 7. The Ld.CIT,D.R. relied on the order of the A.O. and submitted that the assessee could not produce these three parties before the A.O. and enquiries made by the A.O. demonstrate that these particular firms were not existing at the addresses given for the last six to seven years. He argued that the assessee had not furnished confirmation copies of accounts, income tax return etc. of these firms and under those circumstances purchases made by them were rightly held as non genuine by the A.O. He submitted that mere payment through cheques does not demonstrate genuineness of the transactions. 8. The Ld.Counsel for the assessee Mr.Sehgal on the other hand relied on the order of the First Appellate Authority and submitted that the identity of the parties from whom purchases were made was beyond doubt because they were registered with the sales tax department and had paid VAT. He argued that payments were made through banking channels and the evidences such as copies of bills, purchase invoices, material weighment proofs, material receipt notes along with bill numbers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; 10. The Ld.D.R. supported the order of the Ld.CIT(A) and relied on the same. He submitted that the assessee has disclosed very low net profit and hence the books are not reliable, specifically when the purchases have not been proved as genuine by the assessee. 11. Rival contentions heard. On a careful consideration of the facts and circumstances of the case, on perusal of material on record, orders of the authorities below, case laws cited, we hold as follows. 12. We first take up the Revenue's appeal. 13. As already noted the assessee is a real estate contractor. Purchases from three parties have been disallowed, on the ground that the assessee failed to produce those parties and has not furnished certain details such as confirmation of copy of accounts, income tax particulars etc. When we see the quality of evidence produced by the assessee before the A.O. we have to come to a conclusion that the First Appellate Authority was justified in deleting the addition. The assessee in this case has furnished all possible evidences in support of the factum of purchases from these three parties. The evidences include, copies of the bills wherein detailed notings had been m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /- assessee has shown work certified of Rs. 5,54,30,587/- which in my opinion is practically not possible unless of course proved by the AO which the AO has not done." These factual finding could not be controvered by the Ld.D.R. 14.1. No defects have been found in the stock register nor any defects have been pointed out by the A.O. in the audited books of accounts maintained by the assessee. Despite search and seizure no adverse material was found to substantiate the disallowance made by the A.O. The so called spot enquiry done by the Inspector has no credence as no details have been filed before us, nor was the assessee confronted with the manner in which spot enquiry was conducted, the persons who conducted the spot enquiry or the material gathered by the Revenue in the spot enquiry. Thus the Revenue cannot place reliance on this enquiry. The purchases which are disallowed relate to cement and steel which are essential for the purpose of construction. No enquiries are made with the banks, other statutory authorities on the identity of the parties. Details such as whether sales tax authorities have accepted the quantum of purchases made by the assessee have not been obta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n made by account payee cheques and same have been cleared from the assessee's bank account. The ld. AR has also brought my attention to the fact that the assessee is maintaining item wise stock register copies of which were filed before the Assessing Officer during the course of assessment proceedings and no defect has been found in the same. Thus it is observed that sufficient pieces of evidence of transactions of the purchases made from various parties have been produced by the appellant which have not been denied by the Assessing Officer and have not been found to be false. Therefore, in such circumstances there was heavy onus on the Assessing Officer to prove otherwise which has not been discharged by him and on the other hand initial onus on the assessee has been discharged. The Hon'ble Apex Court in Daulat Ram's case 87 ITR 349 has held that the onus to prove that the apparent was not real was on the party who claimed it to be so. Thus the onus was. heavily on the Assessing Officer in this case. The Assessing Officer has also mentioned the fact of making certain SP9t. enquires which according to him have revealed that parties M/s Jai Ambe Trading Company and M/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Revenue has not put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as if there was no such transaction. 10. The transaction having taken place through payment by account payee cheques, such plea is not tenable and in such circumstances, the Tribunal below erred in law in reversing the finding arrived at by the CIT(A) accepting the said transaction as a genuine transaction." (Emphasis ours). 14.4. In view of the above discussion we uphold the finding of the Ld.CIT(A) on the deletion of the disallowance of Rs. 2,89,34,711/-, which was treated as bogus purchases by the A.O. These grounds of Revenue are dismissed. 15. In the result Revenue's appeal is dismissed. 16. We now take up assessee's appeal. The First Appellate Authority has sought to reject the books of accounts on two grounds. (a) the assessee failed to file confirmations and produce the parties from whom purchases were made. (b) the gross profit rate of the assessee is less than the gross profit rate of other concerns in the group. 17. As far as the first issue is concerned we refer to our detai ..... 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