Income Tax Appellate Tribunal - Delhi
M/S. Jhajharia Nirman Ltd., New Delhi vs Dcit, New Delhi on 26 February, 2020
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "D", NEW DELHI
BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No. 4956/DEL/2016
AY: 2012-13
M/S JHAJHARIA NIRMAN LTD., VS. DCIT, CENTRAL CIRCLE-14,
688A, SHIV NAGAR EXTN., NEW DELHI
JAIL ROAD,
TILAK NAGAR,
NEW DELHI - 110 005
(PAN: AABCJ9891J)
(APPELLANT) (RESPONDENT)
Assessee by : Sh. Ved Jain, Adv.
Department by : Sh. R.K. Gupta, Sr. DR.
ORDER
PER H.S. SIDHU, JM
Assessee has filed the present appeal against the impugned order dated 12.07.2016 passed by the Ld. CIT(A)-5, Delhi on the following grounds:-
1. On the facts and circumstances of the case, the order passed by the, learned Commissioner of Income Tax (Appeals) {CIT(A)} is bad, both in the eye of law and on the facts.
2. (i) On the facts and circumstances of the case, the learned CIT(A} has erred both / on facts and in law in sustaining the addition of Rs. 9,02,200/- on account of cash found during the survey.
(ii) That the above addition has been confirmed ignoring the explanation and submissions along with the evidences filed by the assessee before the AO.
3. (i) On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming addition of Rs.1,71,95,333/- in respect of the purchases made from 13 parties.
(ii) That the above said addition has been confirmed despite the fact that nothing adverse came on record in the detailed independent enquiry made with the respective supplier by the AO.
(iii) That the above said addition has been confirmed ignoring the explanation and evidences submitted by the assessee in support of its contention.
4. (i)On the facts and circumstances of the case, the learned CIT(A) has erred both on facts and in law in confirming the addition of Rs.49,36, 160/- made by the AO in respect of the purchases made from the following parties:-
a) Sh. Easwar Lal; b) Sh. MahendraDewangan &
c) Sh. Mohan Rao Chouhan
ii) That the abovesaid addition has been confirmed despite the fact that nothing adverse came on record in the detailed independent enquiry made with the respective supplier by the AO.
(iii) That the abovesaid addition has been confirmed ignoring the explanation and evidences brought on record by the assessee.
5. That the abovesaid additions have been confirmed by the learned CIT(A) ignoring the contention of the appellant that the AO having accepted the sales made by the assessee the disallowance of the entire purchases made in the ordinary course of the business is unjustified and untenable in the eye of the law.
6. On the facts and circumstances of the case, the abovesaid additions are otherwise untenable as the AO has not rejected the books of accounts.
7. The appellant craves leave to add, amend or alter any of the grounds of appeal.
2. The brief facts of the case are that the assessee company is engaged in the business of civil construction. Return of income declaring total income of Rs. 2,07,96,365/- was filed by the assessee company electronically on 28.09.2012. The case of the assessee was selected for scrutiny under CASS and 2 statutory notices u/s 143(2) of the Income Tax Act, 1961 (in short "Act") dated 16.08.2013 was issued & served upon the assessee. Fresh notice u/s 143(2) of the Act on 17.10.2014 and a detailed questionnaire dated 20.10.2014 were issued & served upon the assessee. Again a notice u/s 143(2) of the Act was issued and served upon the assessee on 18.11.2014. In response thereto, the A.R. of the assessee company attended the proceedings from time to time and furnished the requisite details/information. Books of accounts were produced and the same were examined on test check basis. In this case, a survey operation u/s. 133A of the I.T. Act was carried out on 27.09.2011 in the business premises of assessee company at Bilaspur, Chattisgarh. Based on the findings of the survey operations, the AO proceeded to make further enquiries during assessment proceedings including issue of query letters to various suppliers. The assessment was concluded after making certain disallowances and additions at an income of Rs.4,38,43,750/- vide order dated 31.03.2015 passed u/s. 143(3) of the I.T. Act, 1961. Against the assessment order, assessee appealed before the Ld. CIT(A), who vide his impugned order dated 12.7.2016 has partly allowed the appeal of the assessee. Aggrieved with the impugned order dated 12.7.2016 of the Ld. CIT(A), assessee is in appeal before the Tribunal.
3. As regards the addition of Rs. 9,02,200/-, during the hearing, Ld. Counsel for the assessee stated that the AO was of the view that the cash balance as per the books of the assessessee company was Rs. 2,45,290/- as against Rs. 7,02,030/- balance appearing the documents impounded during the course of survey and accordingly, the AO made the addition of Rs. 9,02,200/- in the hands of the assessee. He further submitted that the Ld. CIT(A) has wrongly confirmed this addition because the AO has incorrectly picked up the figures of Rs. 2,45,290/- as against Rs. 7,02,030/- appearing in the books of the asessee.
3He draw our attention towards Assessee's Paper Book (APB) Pages 127 to 134 and stated that nothing is adverse against the assessee as pointed out by the AO. He further stated that regarding the difference of Rs. 4,45,460/- does not belong to the assessee which was completely ignored by the AO and the Ld. CIT(A) and wrongly made/confirmed the addition. He requested that keeping in view of the APB Pages 127-134, the addition in dispute may be deleted.
3.1 As regards disallowance of purchases from thirteen parties, Ld. Counsel for the assessee stated that disallowance of purchase from 13 parties amounting to Rs. 1,71,95,333/- and stated that the AO issued notice u/s. 133(6) of the Act to 13 parties. In response to the same, assessee submitted confirmations from them and also filed income tax returns of these parties. To support this argument, he draw our attention towards APB page no. 162 to
229. He further stated that Ld. CIT(A) has also wrongly confirmed this addition without any basis inspite of the fact in response to the notice u/s. 133(6) of the Act all parties have filed confirmations of the transactions, therefore, disallowance not required. Even otherwise, AO has not rejected the books of accounts of the assessee which are required u/s. 145 of the Act. Therefore, these transactions are genuine because the AO has completed the assessment in dispute u/s. 143(3) of the Act in the subsequent years and no such addition has been made by the AO in those years. To support his contention, he draw our attention towards page no. 253-265 of the APB.
3.2 As regards the addition of Rs. 49,36,160/- on account of disallowance of purchase from 3 parties is concerned, Ld. Counsel for the assessee draw our attention towards assessment order page nos. 3 to 5, para 5 and the Ld. CIT(A)'s order page no. 28 para no. 6.3.8 and stated that the assessee has purchased the raw material from these 03 parties amounting to 4 Rs. 49,36,160/-. Similarly, notice u/s. 133(6 ) of the Act were issued to these 03 parties and in response to the same, these 03 parties filed their confirmations and income tax returns which are at page no. 136-161 of APB filed by the assessee. Similarly, the AO has not rejected the books of accounts u/s. 145 of the Act, therefore, addition has wrongly been made by the revenue authorities and therefore, he requested that keeping view of the documentary evidences produced in the shape of paper book, as aforesaid, the addition in dispute may be deleted.
3.3 Ld. Counsel for the assessee further stated that when the sale accepted the disallowance of purchase cannot be made. He stated that in the present case the AO has not doubted the sale and gross profit declared by the assessee and in the absence of the same disallowance on account of purchase cannot be made. In support of his contention he cited the following case laws:-
- Smt. Sudha Loyalka vs. Income Tax Officer, Ward 35(2), New Delhi (2018) 97 taxmann.com 303 (Delhi- Trib.)
- Shri Gems Vs. Income Tax Officer, Ward 33(2), New Delhi 2017 (12) TMI 1254 - ITAT Delhi.
- Assistant Commissioner of Income tax vs. Jaybharat Textiles & Real Estates Ltd. (2017) 82 taxmann.com 59 (Mumbai -Trib.) 3.4 Ld. Counsel for the assessee further stated that in the present case, the books of accounts of the assessee company are audited as per law and nothing adverse had been pointed by the AO as well as Ld. CIT(A) and the same is not rejected u/s. 145 of the Act, therefore, addition on account of bogus purchase 5 cannot be made. In support of his contention, he cited the decision in the case of Manoj Sharma vs. ITO, Ward 39(5), New Delhi (2019) 103 taxmann.com 105 (Delhi Trib); CIT vs,. Nikunj Eximp Enterprises (P) Ltd. ITA 5604/2010 dated 17.12.2012 of the Hon'ble Bombay High Court and the decision of the Hon'ble Supreme Court of India in the case of CIT, Tax-7, New Delhi vs. M/s Odeon Builders Pvt. Ltd. 2019 (8) TMI 1072.
3.5 Lastly, Ld. Counsel for the assessee requested that in view of his arguments alongwith the support of the documentary evidences filed in the shape of paper book and the case laws relied therein, the additions in dispute may be deleted by accepting the appeal filed by the assessee.
4. On the contrary, Ld. DR relied upon the orders of the revenue authorities.
5. We have heard both the parties and perused the records, especially the orders passed by the revenue authorities. Ground no. 1 is general, hence, no adjudication is required. As regards ground no. 2 is concerned, we are of the view that assessee company is in the business of government construction activities as a civil contractor. The assessee company filed its return of income declaring total income of Rs. 2,07,96,365/- on 28.9.2012. A survey operation u/s. 133A of the Act was carried out on 27.9.2011 in the business premises of the assessee company at Bilaspur, Chattisgarh. Thereafter, the case of the assessee company was selected for scrutiny assessment and notice under section 143(2) of the Act was issued to the assessee. During the course of survey, cash of Rs. 11,47,490/- was found at the premises as against the cash in hand of Rs. 7,02,030/- appearing in the books of accounts of the assessee.
The copy of seized documents during the course of survey clearly shows that the balance of the assessee company was Rs. 7,02,030/- in its books of 6 accounts. We have perused the assessee's paper book pages 60-117 to support this contention raised by the assessee and verified the same. During the course of assessment proceedings, it was also explained to the AO that excess cash found of Rs. 4,45,460/- does not belong to the assessee as such this amount belongs to the joint venture company and Directors of the company. But the AO was of the view that the cash balance appearing in the document impounded during the course of survey and accordingly, AO made the addition of Rs. 9,02,200/- in the hands of the assessee. After going through the APB page 127-134, we are of the view that AO has incorrectly picked up the figure of Rs. 2,45,290/- against Rs. 7,02,030/- appearing in the books of account. Even otherwise, during the assessment proceedings, nothing adverse was pointed out by the AO, therefore, regarding the difference of Rs. 4,45,460/-, fact that the cash does not belong to the assessee was also completely ignored by AO and Ld. CIT(A). Keeping in view of the facts and circumstances of case and in view of the supporting documentary evidences at APB page no. 129-134, the addition in dispute is not sustainable in the eyes of law, therefore, we delete the addition of Rs. 9,02,200/- and allow the ground no. 2 raised in the appeal.
5.1 As regards disallowance of purchase from 13 parties amounting to Rs. 1,71,95,333/- is concerned, we are of the view that the AO has issued the notice to 13 parties and in response to the same, these 13 parties filed their confirmations alongwith return of income which assessee has attached at Paper Book page 162 to 229 which clearly shows that the certain parties have supplied the material to the assessee company and the purchases made by the assessee are genuine. Even otherwise, keeping in view of the documentary evidences filed by the assessee company before the AO and the Ld. CIT(A) and even before us, we are of the view that the AO has not doubted 7 the sale made by the assessee in the absence of the same, disallowance on account of purchases cannot be made. Secondly, the AO has not rejected the books of account as required under section 145 of the I.T. Act, therefore, the addition on account of purchases cannot be made. As stated by the Ld. Counsel for the assessee that the proof of the documentary evidences at page no. 253 to 265, the assessee company was assessed u/s. 143(3) of the Act in the subsequent years and no such addition has been made by the AO in those years. Keeping in view of the facts and circumstances of the case as discussed above, we are of the view that the addition in dispute is not sustainable in the eyes of law and hence, we delete the addition in dispute made on account of purchases from the parties and allow the ground no. 3 raised in the appeal.
5.2 As regards disallowance of purchase from three parties amounting to Rs. 4,93,160/- is concerned, we have perused the assessment order at page no. 3 to 5, para no. 5 and Ld. CIT(A)'s order page no. 28 para no. 6.3.8 and find that notice u/s. 133(6) of the Act was issued to 03 parties and in response to the same, all the 03 parties filed their confirmations as well as income tax returns which are placed at page no. 136 to 161 of the Assessee's paper book filed by the ld. Counsel for the assessee. The books of accounts of the assessee company were audited as per law and nothing adverse had been pointed by the AO as well as Ld. CIT(A) and the same was not rejected u/s. 145 of the Act, therefore, addition on account of bogus purchase cannot be made. Keeping in view of the facts and circumstances as explained above and the documentary evidences filed by the assessee in the shape of paper book page no. 136 to 161 and 253 to 265 the addition in dispute is not sustainable in the eyes of law, therefore, we delete the addition in dispute and allow the ground no. 4 raised in the appeal.
85.3 We agree with the contention of the Ld. Counsel for the assessee that when the sale accepted the disallowance of purchase cannot be made, because in the present case the AO has not doubted the sale and gross profit declared by the assessee and in the absence of the same disallowance on account of purchase cannot be made. This view is supported by the following cases.
- Smt. Sudha Loyalka vs. Income Tax Officer, Ward 35(2), New Delhi (2018) 97 taxmann.com 303 (Delhi- Trib.) wherein it has been observed as under:-
"6.9 Moreover, sales made by the assessee have been accepted and also the purchase have been accepted by the sales tax authorities and so much so purchase input tax credit has been given as is evident from sales tax returns at PB 18-41 and sales tax assessment order at PB 135. 6.10 Even assuming that purchase could not be got verified, the fact that the sales have been accepted such sales obviously could not have been made without purchases. Therefore, in such situation G. P. Rate of the earlier years can act as a guide as held in judicial decisions including CIT v. Bholanath Poly Fab (P.) Ltd.
[2013] 40 taxmann.com 494/[2014] 20 taxman 82 (Guj.) (Mag.) is the copy of G.P. chart of various years.
6.11 We note that PB 136-143 is the copy of profit and loss account and trading account of earlier years together with assessment orders u/s 143(3) in which G.P. at the rate of 3.52%,4.13%, 2.99%, 2.-9%,2.60%,2:21 %, 1.88% for Financial years 2007-08,2008-09, 2009-10, 2010-11, 2012-13, 2013-14, 2014-15 respectively has been accepted (PB 17).
96.12 Wit00ut prejudice to above, the assessee's sale was Rs. 6.21 Crores as is evident form profit and loss account enclosed at PB 13 and assessed income is at Rs. 3.54 Crores as is evident from the last page of the assessment order which would constitute 56% of the sale which is impossible and against all norms.
7. In view of above discussions, it is clear that the transactions were not bogus and therefore, the case laws relied upon by the Ld. OR are not applicable in this case. As far as case law relied upon by the Ld. CIT(A) as well as relied by the Ld. OR during the hearing i.e. La Medica (supra), we note that Hon'ble High Court has specifically noted in this decision that this was not the case of the assessee at any stage prior to the Hon 'ble High Court whereas in this case, this was the plea taken by assessee before Ld. CIT(A) that if sale has been accepted,purchases must have been made.
How can there be sale without purchases?
Hence this decision does not apply.
8. In the background of the aforesaid discussions and respectfully following the aforesaid decisions, we are of the opinion that the authorities below are not justified in making / sustaining the addition in dispute.
Accordingly, the total addition of Rs.
3,50,94,758/- made by the AO and confirmed by the Ld. CIT(A) is hereby deleted.
9. In the result, the appeal of the assessee is allowed."
- Shri Gems Versus Income Tax Officer, Ward-33 (2) , New Delhi, 2017 (12) TMI1254 -ITAT DELHI wherein it has been held as under:-
"11. I have considered the submissions of both the parties and carefully gone through the 10 material available on the record. In the present case, it is noticed that the AO doubted the purchases made by the assessee from M/s Parshanath Enterprises only on the basis of statement of one Sh. MukeshMangla. However, it is not brought on record, in which capacity Sh. MukeshMangla has given statement when Sh. Sachin Jain was the proprietor of M/s Parshanath Enterprises. The assessee furnished the copy of ledger account of the assessee in the books of M/s Parshanath Enterprises and also filed confirmation as well as its bank account alongwith copy of ITR of the proprietor of M/s Parshanath Enterprises. The AO did not make any inquiry from the proprietor of M/s Parshanath Enterprises. It is also not in dispute that the sales made by the assessee from the purchases under consideration and the gross profit rate has been accepted then there was no reason to consider the purchases amounting to Rs. 36,23,600/- - as bogus purchases. In that view of the matter, the addition sustained by the Id. CIT(A) amounting to Rs. 36,23,600/- is deleted."
5.4 We further agree with the contention of the Ld. Counsel for the assessee that when books of accounts have not been rejected, no disallowance of purchases can be made. This view is supported by the following cases.
Manoj Sharma vs Income-tax Officer, Ward-39(5), New Delhi:- [2019] 103 taxmann.com 105 (Delhi - Trib.) has observed as under:-
"10. Once the quantity of opening stock and purchases on the debit side; and sales and closing stock in the credit side in the books of account has been accepted, then to hold that the some quantity of purchases recorded in the books are unexplained or outside books of account, is very difficult proposition to accept. Because, the quantitative details of stock, 11 purchases, sales have not been discarded or any defect has been found, then purchases as debited in the books of accounts cannot be added u/s 69C. Here in this case, even balancing figure of the gross profit shown by the assessee has not disturbed. Even if it is to be accepted that the purchases made from the three parties were in the nature of accommodation entries, then it has to be seen, firstly, whether these purchases have been made outside books or does not matches with the quantitative tally; or secondly, whether such bills have been obtained merely to suppress the gross profit. Ostensibly, the first reason is lacking here in this case as discussed above; and in so far as the second reasoning is concerned, one has to examine, if purchases have been made through cheques, the source of which are from the books account and if later on, cash has been received in lieu of such cheque but no purchases have been made, then clearly there would be a difference in quantitative tally of purchases as well as in the stock an such a discrepancy has been found then purchases can be held be bogus. But here in this case no such difference in the quantitative tally has been found. Further, if assessee after receiving the cash in lieu of the cheque has made purchases from the grey market for getting the same quantity of material in cash from some different vender, then at the most it could be a case of the suppressing of gross profit. In other words, assessee has debited higher amount for the purchase which in fact has purchased the same material and quantity at a lesser amount, thereby suppressing the gross profit. Under these circumstances any addition at all which could be made, is by enhancing the Gross Profit on such purchases. Nowhere there is a finding or whisper either by the AO or CIT (A) that the gross profit shown by the assessee during the year was less as compared to earlier or subsequent years or there is any material to show that gross profit has been low during the year. If all the entries in the trading account including the quantitative tally of purchases, 12 opening stock, -sales and closing stock are found to be correct and no discrepancy has been found, then no addition on account of unexplained purchases can be made, because nowhere it has been found that assessee has made purchases outside the books. The entire finding of the Ld. CIT (A) hinges upon the fact that there was material indicating purchase under consideration are bogus without even appreciating that if the source of purchases are from the books and through account payee cheque, then how such purchases can be treated as un accounted. Since gross profit rate and gross profit has been accepted, including the trading account, then no such addition can be made. In the result on merits addition made by the AO is deleted and consequently assessee's appeal is allowed."
In the case of CIT v. Nikunj Eximp Enterprises (P.) Ltd., ITA 5604/2010 dated 17.12.2012, Bombay High Court held as under:-
"We have considered the submission on behalf of the revenue. However, from the order of the Tribunal dated 30-04-2010, we find that the Tribunal has deleted the additions on account of bogus purchases not only on the basis of stock statement i.e. reconciliation statement, but also in view of the other facts. The Tribunal records that the Books of Accounts of the respondent-assessee have not been rejected. Similarly, the sales have not been doubted and it is an admitted position that substantial amount of sales have been made to the Government Department i.e. Defence Research and Development Laboratory, Hyderabad. Further, there were confirmation letters filed by the suppliers, copies of invoices for purchases as well as copies of bank statement all of which would indicate that the purchases were infact made. In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as 13 CIT(A) have disallowed the deduction of Rs. 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated 30-04- 2010 of the Tribunal.
8. In view of the above, we find that question as formulated is not a substantial question of law. Therefore, the appeal is dismissed with no order as to costs."
6. Keeping in view of the facts and circumstances of the case as explained above and respectfully following the precedents, as aforesaid, the grounds raised by the assesee are allowed in the aforesaid manner.
7. In the result, the appeal of the assessee is allowed.
Order pronounced on 26.02.2020.
Sd/- Sd/-
[PRASHANT MAHARISHI] [H.S. SIDHU]
ACCOUNTANT MEMBER JUDICIAL MEMBER
"SRB"
Date: 26.02.2020
Copy forwarded to: -
1. Appellant - M/s Jhajharia Nirman Ltd., 688A, Shiv Nagar Extn., Jail Road, Tilak Nagar, New Delhi - 5.
2. Respondent - DCIT, Central Circle 13(2), New Delhi
3. CIT
4. CIT (A)
5. DR, ITAT TRUE COPY By Order, Assistant Registrar, ITAT, Delhi Benches 14