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TMI Blog2018 (2) TMI 1145X X X X Extracts X X X X X X X X Extracts X X X X ..... Unexplained receipt in the transactions with M/s Moon Buildtech Private Limited. - Held that:- CIT-(A) has mentioned that these flats continued to be reflected in the balance sheet of the assessee company, however, he has not mentioned, whether – the evidences relied upon by him in this regard are additional evidence. AO has also not been provided opportunity to rebut those evidences. If according to the Ld. CIT-(A), there was no sale of the flats to M/s MBPL, then he has not brought on record whether the money invested by MBPL was returned back by the assessee alongwith interest. Hon’ble Delhi High Court in the case of Jansampark Advertising and Marketing Private Limited (supra) has observed that in the event of AO failing to discharge its function properly, the obligation to conduct proper Inquiry on the facts were naturally shift to the door of the first appellate authority. Thus we feel it appropriate to restore the issue to the file of the Ld. CIT-(A), with the direction to carry out effective inquiries and decide the issue afresh Addition on account of scrap sales - Held that:- Since in the instant case, it is not clear, whether that assessee has debited the cost of const ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee s counsel. On 22/11/2017, on the request of the assessee, the appeals and cross objection were clubbed alongwith appeal and cross objection in the case of M/s Amrapali Princely Estate Pvt. Ltd. and cases were adjourned to 27/11/2017. Again on next date of hearing i.e. 27/11/2017, none was present on behalf of the assessee(s) and thus the fresh notice was issued to the assessee(s) fixing the appeal on 30/01/2018. This notice was duly sent by the registered post at the address provided in form No. 36A of the cross objection filed by M/s Amrapali Princely Estate Pvt. Ltd. This notice has not returned unserved and, therefore, it is deemed to have been served. Therefore, these appeals as well as cross objections are pending for adjudication since long for want of prosecution. In view of the above, we are of considered view that further adjournment of these appeals and cross objections would not be just and proper and, thus, heard ex-parte qua the assessee. 3. The grounds raised in C.O. No. 239/Del/2014 in the case of M/s. Ultra Home Construction Pvt. Ltd. for assessment year 2010-11, are reproduced as under: 1 . On the facts and circumstances of the case and in la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e paper books so as to enable hearing of the reference, the court is not bound to answer the reference . 3.5 Similarly, Hon'ble Punjab Haryana High Court in the case of New Diwan Oil Mills vs. CIT (2008) 296 ITR 495) returned the reference unanswered since the assessee remained absent and there was not any assistance from the assessee. 3.6 Their Lordships of Hon'ble Supreme Court in the case of CIT vs. B. Bhattachargee Another (118 ITR 461 at page 477-478) held that the appeal does not mean, mere filing of the memo of appeal but effectively pursuing the same. 3.7. In view of above, both the Cross Objections are dismissed for nonprosecution. 4. As far as appeals of the Revenue are concerned, we are of the opinion that these appeals may be disposed off on the basis of the record after hearing the Ld. Departmental Representative appearing on behalf of the Revenue. We, therefore, proceeded to hear and adjudicate these appeals ex party qua the assessee. ITA No . 417 / Del / 2014 for AY : 2010 - 11 5. First, we take up the appeal having ITA No. 417/Del/2014 in the case of M/s. Ultra Home Construction Private Limited for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... numbered as 8) is general in nature and it is covered by other grounds of the appeal and, therefore, we are not adjudicating upon specifically. 8. The ground No. 2 (wrongly numbered as 9) relates to addition of ₹ 5,08,25,724/- made by the Assessing Officer on account of bogus purchases of raw material. 8.1 The facts qua the addition are that in the search action Ledger accounts of the parties from whom the assessee made purchases of raw material/building construction material like cement, iron and steel etc. worth ₹ 44,87,02,688/- were found, which are inventarised as pages No. 77 to 105 of Annexure A-1 at premises searched by party AB-1. In the statement recorded under section 132(4) of the Act, Sh. Anil Sharma, director of the assessee company was asked to furnish corroborating evidences like bills of transport, toll Naka entries, details of destination and utilization thereof, however, he could not furnish the said detail and surrendered the amount of ₹ 44,87,02,688/- as unaccounted income of the assessee company on account of bogus expenses claimed. 8.2 The Department further carried out enquiries and issued summons under section 131 of the Act to al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stage transferred to other accounts and at second stage these are withdrawn mostly in cash, which is repatriated to the beneficiary i . e . the assessee company and its associates in cash . e ) Moreover, failure on the part of the assessee to produce such parties inspite of the repeated opportunity given to them conclusively prove that no such party actual exist which can stand and own - up the transactions alleged to be routed through their bank accounts and issue of purchase bills . 8.4 The Ld. CIT-(A), however, deleted the addition. The relevant finding of the Ld. CIT-(A) are reproduced as under: 6 . 2 The facts are that the appellant purchased certain construction materials ( steel, hardware, etc .) from these 3 parties . The purchase orders, biils . payment details and other supporting documents relating to these purchases were produced before the AO . The payments for the purchases were made by the appellant from its bank accounts with Bank of Baroda ( A / c No . 21580200000057 ) and HDFC Bank ( A / c No . 01938630000187 ) and were duly credited to the respective bank accounts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant to physically produce the party before the AO unless some defect had been found in the documentary evidence so produced . Though technical rules of evidence are not strictly applicable to tax proceedings ( Dhakeswari Cotton Mills Ltd . v . CIT [ 1954 ] 26 ITR 775 Dhakeswari Cotton Mills Ltd . v . CIT [ 1955 ] 2 / 7 ITR 126 ( SC ) }, taxing authorities are not required to put on blinkers while looking at the documents produced before them and they are to look into the surrounding circumstances to find out the reality of the recitals made in those documents {CIT v . Durga Prasad More [ 1971 ] 82 ITR 540 ( SC ) } . Therefore, in the present case it was not appropriate to require the appellant to produce the party for physical verification without finding any defect in the documentary evidence produced . From the documents produced, it is seen that the seller were duly registered with the VAT authority having TIN as follows : M / s Balaji Enterprises - 09465706633, M / s Bajranj Trading Co . - 09166106335, M / s SC Trading Co . - 09265706785; and VAT @ 4 . 5 % / 5 % as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... she requested that the matter may be restored back to the file of the Assessing Officer. 8.6 We have heard the submission of the Ld. DR and perused the relevant material on record. In the instant case, Sh. Anil Sharma, the director of the assessee company, during statement under section 132(4) of the Act, surrendered unexplained purchases amounting to ₹ 44,87,02,688/- which included the unexplained purchases in dispute also. Nothing has been brought on record by the assessee that Sh. Anil Sharma retracted at any time from the statement given by him under section 132(4) of the Act. The summons issued to concerned suppliers also remain unserved and the assessee also failed to produce those parties before the Assessing Officer. 8.6.1 The Ld. CIT-(A) pointed out following defects and observed that the Assessing Officer did not carry out enquiries which should have been carried out in the case: i. It was not appropriate to enforce to produce the parties for physical verification without finding any defect in the documentary evidence produced. ii. The AO should have informed the VAT authorities about the tax deducted and verified the VAT so deposited. iii. The AO sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o make proper inquiry and reach finding on facts does not end with the AO . This obligation moves upwards to CIT ( Appeals ) , and also ITAT, should it come to their notice that there has been default in such respect on the part of the AO . In such event, it is they who are duty bound to either themselves properly inquire or cause such inquiry to be completed . If this were not to be done, the power under Section 148 would be rendered prone to abuse . 8.6.3 The Hon ble High Court further in Paras - 38 and 39, observed that various provisions under which the Ld. CIT-(A) could have carried out enquiries. The relevant paragraphs are reproduced as under: 38 . The provision of appeal, before the CIT ( Appeals ) and then before the ITAT, is made more as a check on the abuse of power and authority by the AO . Whilst it is true that it is the obligation of the AO to conduct proper scrutiny of the material, given the fact that the two appellate authorities above are also forums for fact - finding, in the event of AO failing to discharge his functions properly, the obligation to conduct proper inquiry on facts would naturally s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble High Court also observed in Para - 40 that doubts as to the genuineness of the some of the parties persisting on account of non-delivery of the process, the initial burden of the assessee to adduce proof of identity, cannot be treated as discharged. 8.6.5 In Para - 42 and 43 of the judgment, the Hon ble High Court remitted the matter to the CIT-(A) for fresh consideration/adjudication in accordance with law. The relevant finding of the Hon ble High Court is reproduced as under: 42 . The AO here may have failed to discharge his obligation to conduct a proper inquiry to take the matter to logical conclusion . But CIT ( Appeals ) , having noticed want of proper inquiry, could not have closed the chapter simply by allowing the appeal and deleting the additions made . It was also the obligation of the first appellate authority, as indeed of ITAT, to have ensured that effective inquiry was carried out, particularly in the face of the allegations of the Revenue that the account statements reveal a uniform pattern of cash deposits of equal amounts in the respective accounts preceding the transactions in question . This necessitated a detailed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... According to the MOU, M/s. MBPL paid 9 (nine) cheques of ₹ 25,000 each dated 13/06/2008 towards full and final payment of 9 (nine) flats allocated by the assessee with numbers and towers of each flat duly specified. However, during assessment proceeding it was submitted by MBPL that investment was made in three flats (towers different then mentioned in MOU) each at the ₹ 75,00,000/-. The Assessing Officer asked M/s MBPL to produce the agreement in respect of purchase of three flats and other details. In response, Sh. Subhash Jain, Director of M/s MBPL attended before the Assessing Officer, however, did not file details or explanation in respect of the agreements. According to the Assessing Officer, he could not convincingly give reply to the questions asked by the Assessing Officer. In view of the above facts, the Assessing Officer was of the opinion that the assessee has sold nine flats at the rate of ₹ 75,00,000/- per flat in respect of which payment through cheque were made at the rate of ₹ 25,00,000/- per flat and the balance amount of ₹ 50,00,000/- per flat were received in cash and accordingly, he made the addition of ₹ 4,50,00,000/- 9.2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t . 9.3 Before us, the Ld. CIT(DR) submitted that no proper enquiries have been done on the issue in dispute either by the Assessing Officer or by the Ld. CIT-(A). According to her, the Ld. CIT-(A) has relied on certain facts which were filed first-time before him like MOU an extension of financing agreements, flats continued to be appearing in the balance sheet of the assessee company etc. She submitted that this issue may also be restored to the file of the Ld. CIT-(A) for carrying out detailed enquiries. 9.4 We have heard the submission of the Ld. Departmental Representative and perused the material on record. We find that the assessee did not produce the agreements claiming that M/s MBPL invested only in three flats. Thus, there being obvious contradiction in the MOU found during the course of search and the claim of the assessee, the Assessing Officer presumed that the assessee sold the flats at the the value of each flat being ₹ 75,00,000/- and accordingly, he presumed that balance amount of ₹ 4,50,00,000/- was paid in cash. The Ld. CIT-(A) on the basis of the submission of the assessee allowed relief to the assessee. The Ld. CIT-(A) did not verify the ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmissions made . The appellant is engaged in construction activity . Scrap is necessarily generated from such activity . There are two ways the appellant can account for the income from sale of scrap it can credit the other / misc . income account; or it can reduce the income from the cost of construction as it has done . In either case, the income will be accounted for under the head business , and not under the head other sources as has been done by the revenue . Even if, the income is charged under the head other sources , there will be no difference to the overall income of the appellant as the cost of construction will have to be increased, thus, reducing the income under the head business by equal amount . In any view of the matter the addition made by the revenue is erroneous . The addition of Rs . 15,93,836 /- is, therefore, deleted . 10.2 The Ld. CIT(DR) relied on the order of the Assessing Officer. 10.3 We have heard the submission of Ld. DR and perused the relevant material on record. We agree with the finding of the Ld. CIT-(A) that scrap is necessarily gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ground No. 12) is general in nature and thus dismissed as infructuous. 12. In the result, appeal of the Revenue is partly allowed for statistical purposes. ITA No . 1877 / Del / 2014 for AY : 2011 - 12 13. Now we take up the appeal of the Revenue in ITA No. 1877/Del/2014 for assessment year 2011-12 in the case of Ultra Home Construction Private Limited. 14. The grounds of appeal raised by the Revenue are reproduced as under: 1 . The order of Ld . CIT ( A ) is not correct in law and facts . 2 . On the facts and circumstances of the case, the Ld . CIT ( A ) has erred in deleting the addition of Rs . 60,29,48,809 /- made by the Assessing Officer on account of Bogus purchases . 3 . On the facts and circumstances of the case the Ld . CIT ( A ) has erred in law in deleting the addition of Rs . 97,75,832 /- made by the AO on account of Scrap Sale . 4 . The appellant craves leave to add, amend any / all the grounds of appeal before or during the course of hearing of the appeal . 15. The ground No. 1 of the appeal is general in nature and covered by the oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) has erred in deleting the addition of Rs . 1,50,06,277 /- made by the AO on account of bogus purchases which were capitalized . 4 . The appellant craves leave to add, amend any / all the grounds of appeal before or during the course of hearing of the appeal . 21. Briefly stated facts of the case are that the assessee company was incorporated on 26.02.2010 and was engaged in the business of building, construction and allotment of residential/commercial project. The search and seizure action under section 132 of the Act was carried out in the case of the assessee on 09/09/2010 alongwith other cases of the group. The assessee filed return of income under section 139 of the Act on 30/09/2011 declaring loss of ₹ 5,43,987/-. The case was selected for scrutiny and notice under section 143(2) of the Act was issued and complied with. The assessment under section 143(3) of the Act was completed on 28/03/2013 after adding disallowance of scrap sales to the returned loss and with the direction to reduce the closing work in progress by the amount of ₹ 1,50,06,277/- held as bogus purchases. Aggrieved, the assessee filed appeal before the Ld. CIT-(A), ..... X X X X Extracts X X X X X X X X Extracts X X X X
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