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TMI Blog2017 (10) TMI 1250X X X X Extracts X X X X X X X X Extracts X X X X ..... rofit at 5% on the actual value of purchases made from the suspicious dealers in the years under consideration. The orders passed by Ld CIT(A) would stand modified accordingly. - I.T.A. No. 3946/Mum/2016, I.T.A. No. 2703/Mum/2015, I.T.A. No. 4381/Mum/2016 And I.T.A. No. 2407/Mum/2015 - - - Dated:- 20-9-2017 - Shri B.R. Baskaran (AM) And Shri Pawan Singh (JM) For The Assessee : Shri Shailesh Parmar For The Department : Smt. S. Padmaja-CIT Ms. Pooja Swarup ORDER Per B.R. Baskaran (AM) :- These cross appeals are directed against the orders passed by Ld CIT(A)- 33, Mumbai and they relate to the assessment years 2009-10 and 2010-11. The addition relating to bogus purchases, having been partially confirmed by Ld CIT(A), both the parties are in appeal before us. 2. The assessee is the proprietor of M/s Syndrome Technologies, which is engaged in providing IT and Networking hardware services. It also deals in hardware products of leading companies like CISCO, HP, DELL, AVAYA etc. The assessee s clients are also leading companies like 3I infotech, Asian paints, Bharti Airtel, BNP Paribas, Tata group, NDTV etc. Consequent to the information received from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nly in AY 2010-11, i.e., the purchases amount pertaining to AY 2009-10, but later rectified the same by passing an order u/s 154 of the Act by disallowing correct amount of ₹ 3.78 crores. 4. Before the Ld CIT(A), the assessee contended in AY 2009-10 that its clients are reputed companies and the products were used in fulfilling contracts entered with them. Hence the sale of products was beyond doubt. It was submitted that the AO has simply placed reliance on the statement given by the suppliers before the sales tax department, but did not make enquiries with the customers of the assessee to whom the goods have been sold by the assessee. It was also pointed out that the AO has disallowed wrong amount without comparing the data received from the sales tax department with the books of assessee. It was submitted that the AO has added a sum of ₹ 1,40,13,513/- in AY 2009-10 as against the purchases of ₹ 1,13,28,155/-. The assessee submitted that the suppliers have merely defaulted in payment of VAT tax liability and nowhere, the sales tax department has said that they have failed to supply the materials. Accordingly it was submitted that it cannot be said that the su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee is assailing the addition sustained by Ld CIT(A) and the revenue is assailing the relief granted by Ld CIT(A). 8. The Ld A.R submitted that the assessing officer was wrong in observing that the assessee did not correlate purchases with sales. He submitted that the assessee has filed a detailed paper book before the tax authorities and have identified the use of products purchased from the impugned suppliers. He submitted that the Ld CIT(A) has extracted the index of paper book furnished before him in his order passed for AY 2010-11, which clearly establishes that the assessee has correlated purchases with sales. The Ld A.R also took us through the pages of paper book to buttress his contentions. He further submitted that the products purchased by the assessee are that of reputed companies and they have been sold to reputed companies. He submitted the assessee cannot dare to supply sub-standard items to its reputed clients and hence the inference drawn by the Ld CIT(A) that the assessee might have purchased goods from some other source is not correct. He submitted that the prices of products of standard companies are generally same in all places and hence the infere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitted before the sales tax department that they have provided only accommodation bills and since the notices/summons issued to them have been returned back un-served, the AO has taken the view that those suppliers do not exist and the purchases made from them are bogus in nature. The AO has also taken support of the fact that the assessee also could not produce those suppliers before him and also observed that the assessee did not maintain day to day stock register. Accordingly the AO has taken the view that the entire purchases made from those suppliers should be disallowed and accordingly disallowed the same in both the years. 11. We notice that the Ld CIT(A) did not agree with the view taken by the assessing officer. He was of the view that the assessing officer could not have placed reliance on the general statement given by the suppliers before the sales tax authorities. For the sake of convenience, we extract below the relevant discussions made by Ld CIT(A) in the order passed for AY 2009-10:- 27. As far as the information received from the sales tax authorities regarding the default committed by the above mentioned 10 parties in payments of VAT is concerned, thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pliers, Bank statements highlighting the payment entries through account payee cheque, copies of invoices, stock reconciliation statements before the AO: and merely because the suppliers did not appear before the AO, one cannot conclude that the purchases were not made by the assessee. The AO cannot disallow the purchases on the basis of suspicion because the suppliers were not produced before them. 30. The fact cannot be ignored that the appellant has submitted all invoices/bills issued by the parties in question in respect of the goods purchased from them, which contains the description of the goods purchased amount of the sale price and the amount of the VAT charged. Further there is also a printing on every bill certifying that the registration certificate under Maharashtra Value Added Act 2002 of the party is in force on the date of sale of goods. The VAT/TIN no. of these parties are also mentioned on the bills issued by them. These parties have also charged the VAT @ 4% on the sales made by them to the appellant. Subsequently, If these parties have not paid VAT to the Sales Tax department on the sales made by them, the appellant cannot be penalized for this default com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO which proves the genuineness of these sale/purchase of materials shown in the bills issued by these 10 parties. 32. All the above referred evidences such as invoices/bills, copy of purchase bills, details of the payments made through cheques, placed on record by the appellant during the assessment proceedings cannot be set aside summarily by the Assessing Officer without making further investigations in the matter to prove that these are not genuine purchases. The purchases cannot be treated as bogus only for the reason that the 10 parties had admitted in the statement recorded before the Sales Tax authorities that they indulged in bogus billing without actual delivery of goods. These confessional statement were uncorroborated by other material evidences placed on record by the Assessing Officer to prove the authenticity of the statements given. Such confessional statements, in the absence of corroborative evidences or the cross examination of these parties, do not justify complete disallowance of purchases as stated above. 33. The facts and circumstances as outlined above, clearly suggest that the purchases of materials by the appellant as indicated from the parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tock details, yet the assessee has shown that he has correlated purchases with the consumption/sales. The Ld A.R also drew our attention to the paper books filed by the assessee in this regard. He submitted that the Ld CIT(A) has extracted the index of paper book in his order passed for AY 2010- 11, meaning thereby, he has also examined the above said submissions of the assessee. We have noticed that the assessee s clients are reputed clients and the products supplied to them are also from reputed companies. Hence there is merit in the contentions of the assessee that he could not have supplied substandard items to them. Under these set of facts, we have to accept the view taken by Ld CIT(A) that the sales are above suspicion. In that case, what is required to be added is the profit element, if any, embedded in the impugned purchases. 13. We notice that the assessing officer has called for details from the Sales tax department and the sales tax official, vide his letter dated 14/01/2013 has observed as under:- . During the course of investigation of books of account of M/s Syndrom Technologies*, it is noticed that some of the purchases are effected from suspicious/declare ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard to purchase made, it was incumbent upon him to make further investigation to ascertain the genuineness of the transactions. Without making any further enquiry or investigation, the assessing officer cannot sit back and make the addition by simply relying upon the information obtained from the Sales tax department and issuing notices under section 133(6) of the Act. As the assessing officer has failed to make any enquiry or investigation to prove the fact that the purchase transactions are not genuine whereas the assessee has brought documentary evidences on record to prove genuineness of such transactions which are not found to be fabricated or non-genuine, the action of the assessing officer in ignoring them cannot be accepted. When the payment to the concerned parties are through proper banking channel and there is no evidence before the assessing officer that the payments made were again routed back to the assessee, the addition made by estimating further profit of 12.5% earned by the assessee is not sustainable in law and facts. In the instant case, though the AO has observed that the assessee has not maintained stock register, yet the Ld CIT(A) has held, on the basis ..... X X X X Extracts X X X X X X X X Extracts X X X X
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