Income Tax Appellate Tribunal - Pune
Yashowardhan Promoters & Developers ... vs Assessee on 18 March, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH "A", PUNE
BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER
AND MS. SUSHMA CHOWLA, JUDICIAL MEMBER
ITA No.1418/PN/2013
(Assessment Year : 2007-08)
M/s Yashowardhan Promoters &
Developers Pvt. Ltd.,
2nd Floor, City Point,
Dhole Patil Road,
Pune - 411 001.
PAN : AAACY2528A .... Appellant
Vs.
Dy. Commissioner of Income Tax,
Central Circle 1(1), Pune. .... Respondent
ITA Nos.1475 to 1477/PN/2013
(Assessment Years : 2007-08 to 2009-10)
Dy. Commissioner of Income Tax,
Central Circle 1(1), Pune. .... Appellant
Vs.
M/s Yashowardhan Promoters &
Developers Pvt. Ltd.,
2nd Floor, City Point,
Dhole Patil Road,
Pune - 411 001.
PAN : AAACY2528A .... Respondent
Assessee by : Mr. Nikhil Pathak
Department by : Mrs. Mitali Madhusmita
Date of hearing : 09-03-2015
Date of pronouncement : 18-03-2015
ORDER
PER G. S. PANNU, AM
The captioned appeals, three by the Revenue and one by the assessee, belonging to different assessment years involve a common issue, therefore they have been clubbed and heard together and a consolidated order is being passed for the sake of convenience and brevity. 2 ITA No.1418/PN/2013
ITA Nos.1475 to 1477/PN/2013
2. In all the appeals, the primary dispute is with regard to the action of the Assessing Officer in treating purchases made by the assessee from certain parties as bogus. The facts relevant to appreciate the background of the dispute is that the assessee company belongs to M/s Kolte Patil Developers Ltd. group cases wherein a search action u/s 132(1) of the Income Tax Act, 1961 (in short "the Act") was conducted in course of which, Department made enquiries with some of the parties who had supplied steel and other material to the assessee as well as to other group companies belonging to M/s Kolte Patil Developers Ltd. group of cases. On the strength of such enquiries carried out on six suppliers, namely, (i) M/s Unique Ferro Metals Pvt. Ltd.; (ii) M/s Fresho Metals Pvt. Ltd.; (iii) M/s Praky Metals Pvt. Ltd.; (iv) M/s Meghana Enterprises;
(v) M/s Narendrakumar & Co.; and, (vi) M/s R.D. Jain & Co., it was held by the Assessing Officer that the purchases made from them were bogus. Apart from enquiries with the aforesaid six concerns, Assessing Officer also held that purchases made from other five parties, namely, (i) Vora Mercantile Pvt. Ltd.;
(ii) M/s Mayoora Metal Trade Corporation; (iii) Yash Trading & Co.; (iv) M/s Shri Surya Steel; and, (v) M/s Satyam Steel were also bogus. In the case of M/s Kolte Patil Developers Ltd. vide ITA Nos.1411 to 1415/PN/2013 dated 20.02.2015, the Tribunal has dealt with an identical controversy, inter-alia, purchases made from the aforesaid eleven parties which held to be bogus by the Assessing Officer. It was a common point between the parties that the issues raised in the captioned appeals are covered by the decision of the Tribunal in the case of M/s Kolte Patil Developers Ltd. vide order dated 20.02.2015 (supra). In this background, now we may deal with the issues raised in the individual captioned appeals so as to impart completeness to this order.
3. First, we shall take-up the cross-appeals preferred by the assessee and the Revenue vide ITA Nos.1418 & 1475/PN/2013 for assessment year 3 ITA No.1418/PN/2013 ITA Nos.1475 to 1477/PN/2013 2007-08 respectively. The cross-appeals are directed against a consolidated order of the Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in turn, has arisen from order dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act respectively.
4. In assessment year 2007-08, the Assessing Officer, following his stand in the other assessees of the Kolte Patil Developers Ltd. group, held that purchases made by the assessee from the following three suppliers were bogus : (i) Parky Mercantile Pvt. Ltd. - Rs.13,30,352/-; (ii) Shree Surya Steel - Rs.10,34,479/-; and, (iii) Mayoora Metal Trade Corporation - Rs.10,65,080/-. As a consequence, purchase of steel from the aforesaid three parties to the extent of Rs.34,29,911/- was held to be bogus and the said sum was added to the returned income. The CIT(A) has sustained the addition with respect to the purchase from M/s Praky Mercantile Pvt. Ltd. - Rs.13,30,352/- and has deleted the addition with respect to the purchases from Shree Surya Steel and Mayoora Metal Trade Corporation of Rs.10,34,479/- and Rs.10,65,080/- respectively. The assessee and Revenue have challenged the action of the CIT(A) in their respective - assessee has challenged the sustenance of addition of Rs.13,30,352/-, whereas Revenue has challenged the deletion of addition of Rs.20,99,559/-. It was also a common point between the parties that the impugned decision of the CIT(A) is similar to his decision in the case of M/s Kolte Patil Developers Ltd., which was a subject-matter of consideration by the Tribunal in its order dated 20.02.2015 (supra).
5. In so far as assessee's appeal against the addition of Rs.13,30,352/- on account of purchases from M/s Praky Mercantile Pvt. Ltd. is concerned, the same is liable to be dismissed having regard to the decision of the Tribunal in the case of M/s Kolte Patil Developers Ltd. vide order dated 20.02.2015 4 ITA No.1418/PN/2013 ITA Nos.1475 to 1477/PN/2013 (supra) on the similar issue. The relevant discussions in the order of the Tribunal dated 20.02.2015 (supra) read as under :-
"23. We have carefully considered the rival submissions. In sum and substance, the dispute is with regard to the purchases claimed to have been effected by the assessee from the aforesaid 11 parties. The case setup by the Assessing Officer is that the purchase of steel, etc. made from the said 11 parties was in-genuine and therefore an amount of Rs.7,75,34,092/- representing purchases effected from such parties has been disallowed while computing the total income. The reasons for the Assessing Officer to hold the purchases as bogus have been detailed by us in the earlier part of this order and are not being repeated for the sake of brevity. Be that at it may, in our view, the purchases effected from six parties stand on a different footing than the purchases effected from the balance five parties. The point of distinction is the manner and the material relied upon by the Assessing Officer in order to treat such purchases as bogus. In so far as the purchase from the six parties is concerned, the same has been held to be bogus based on the enquiries conducted by the Department in the post-search proceedings. Statements of the six parties were recorded u/s 131 of the Act, which elucidated that all of them denied of having made actual supply of goods to the assessee. In one of the cases, the Assessing Officer has also referred to the statement recorded of the Transporter wherein also it was confirmed by him that no actual transportation of goods was effected. The aforesaid adverse material obtained by the Revenue was put across to the assessee right from the beginning. In this context, it would also be relevant to observe that neither the six suppliers and nor the assessee has been able to produce on record even the primary evidence to show the movement of goods from them to the assessee. For instance, no delivery challans or octroi receipts or any other form of evidence of delivery has been brought out. The plea of the assessee was that the payments have been made through cheques and that the purchases are evidenced by the bills raised by the said suppliers. Assessee also asserted that cross-examination of the said parties was not allowed to the assessee.
24. As per the Revenue, in the course of post-search investigations itself, Shri Rajesh Patil, CMD of the assessee-company was confronted on this aspect and was offered cross-examination of the said parties. It appears that the assessee did not avail of this opportunity as the CFO of the assessee- company was not present because the day-to-day nitty-gritty of purchases was not known to the CMD. Even in the course of assessment proceedings, it transpires that the Assessing Officer allowed an opportunity of cross- examination but on the relevant date and time, the suppliers did not turn-up. Be that as it may, in our considered opinion, cross-examination of the suppliers would become material only when the assessee is able to demonstrate with certain primary evidence that the statements given by the suppliers are wrong or that they do not reflect the correct state of affairs. In this context, assessee has merely referred to the purchase bills issued by the suppliers and the cheque payments made. So however, there is no other evidence, namely, GRNs, octroi receipts, delivery challans, etc. which would show that the supplies were indeed made. Therefore, in such a situation, can the absence of cross-examination be fatal to the addition in question ?, especially when at the initial stage, an opportunity of cross-examination was indeed allowed, which could not be availed for the reasons we have already stated above. In our view, the right of cross-examination is not automatic, but 5 ITA No.1418/PN/2013 ITA Nos.1475 to 1477/PN/2013 it would be incumbent only in a situation where the assessee is able to prima- facie demonstrate that the onus cast on him to establish his version of affairs is based on primary evidence. In this case, the assessee had failed to lead any primary evidence, viz. GRNs, octroi receipts, delivery challans, etc. which would show that the supplies were indeed made.
25. Now, the assessee has also referred to an affidavit of Shri Narendrakumar Timbodia, Prop. of Narendrakuma & Co. and partner of R.D. Jain & Co., wherein he confirmed that the purchases made by the assessee from him were genuine. This affidavit was obtained by the assessee only after the completion of assessment proceedings and was submitted to the CIT(A). The CIT(A) has admitted such additional evidence and on that there is no dispute. However, he has not accepted the averments made therein. We have also perused the copy of such affidavit, a copy of which has been placed in Paper Book. In this connection, we have also perused the statement of Shri Narendrakumar Timbodia recorded u/s 131 of the Act on 15.09.2008, whose relevant portion has been extracted in the assessment order itself. In his deposition, he has categorically confessed that there is no actual supply of goods to the assessee and he explained that in order to give a colour of genuineness to the sale bills, they have prepared the Lorry Receipt of M/s New ARC Transport showing transportation of goods to the assessee. The aforesaid averment of the said person made in the course of post-search enquiries stood corroborated by the statement deposed by the Transporter, M/s New ARC Transport. In contrast, the affidavit furnished in the course of the appellate proceedings before the CIT(A) does not deal with the above circumstance and it does not even explain the reasons for retraction of his statement, and in any case, the retraction is uncorroborated. In-fact, the statement made by him in the course of post-search enquiries stands corroborated by the statement of the Transporter whereas there is no such corroboration to his averments made in the affidavit furnished before the CIT(A). Under these circumstances, in our view, the original admission of the said person made at the time of post-search enquiries would hold the field. Thus, on this aspect also, we find that the CIT(A) made no mistake. Therefore, on the aspect of the purchases effected from the six parties with whom enquiries were conducted during post-search period, the CIT(A) justifiably held such purchases as bogus. We hereby affirm his action, and assessee fails on this aspect.
26. Before parting on this issue, we may also touch-upon an alternate plea raised by the assessee with regard to the quantum of addition on this count. In this context, assessee pointed out that if the entire amount of purchase debited in the Profit & Loss Account with respect to the six parties is disallowed, it would mean that the corresponding consumption of steel has not taken place in quantitative terms. Before the lower authorities, assessee had furnished a working, which was confirmed by a structural engineer regarding the minimum requirement of steel in the projects undertaken by the assessee. As per the said working, if the aforesaid disputed quantity of steel purchase was excluded, it would show that the consumed quantity of steel was lower than the minimum required to undertake construction. Therefore, according to the assessee, the only presumption that can be withdrawn is that assessee had indeed effected the purchases. It was pointed out that on the failure of the assessee to substantiate the purchases, at best, the addition can be made with respect to the gross profit element corresponding to the amount of purchases but not the entire amount of purchase bills. The reliance has also been placed on certain decisions in this regard, which we have noted in earlier paras.6 ITA No.1418/PN/2013
ITA Nos.1475 to 1477/PN/2013
27. We have carefully considered the aforesaid alternate plea of the assessee but find ourselves unable to accept the same, having regard to the facts and circumstances of the present case. The proposition being relied upon by the assessee on the strength of the decisions of the Hon'ble Gujarat High Court noted earlier is not disputed. But the moot question is as to whether the position canvassed by the assessee that the quantity of steel corresponding to the impugned purchases has been consumed stands established or not ? The confirmation of the structural engineer, a copy of which has been placed in Paper Book at page 79 does not elaborate as to the time period in which the consumption of steel has taken place. Moreover, at the relevant point of time, multiple projects of the assessee were under construction and there is no material to co-relate as to whether at the time when the impugned purchases were effected any projects were being carried out. Therefore, the ratio of the judgements of the Hon'ble Gujarat High Court in the case of (i) Bholanath Poly Fab Pvt. Ltd. (supra); and, (ii) Sanjay Oilcake Industries (supra) cannot be applied in the present case. Therefore, the action of the CIT(A) in holding the purchases effected from six parties as bogus is affirmed."
6. Following the aforesaid precedent, the action of the lower authorities in holding the purchases effected from M/s Praky Mercantile Pvt. Ltd. as bogus is hereby sustained.
7. In so far as the cross-appeal of the Revenue is concerned, the Grounds of Appeal raised, read as under :-
"1) On the facts and circumstances of the case, the Ld. Commissioner of Income-tax (A) erred in treating the bogus purchases of steel from five parties namely (a) Vora Mercantile Pvt. Ltd., (b) M/s Mayoora Metal Trade Corporation, (c) M/s Yash Trading Co., (d) M/s Shree Surya Steel, and (e) M/s Satyam Steel as genuine ignoring the materials available on records brought by A.O.
2) The order of the Commissioner of Income-tax (A) may be vacated and that of the Assessing Officer be restored."
8. Although, the Ground of Appeal raised by the Revenue contains purchases effected from (i) Vora Mercantile Pvt. Ltd.; (ii) M/s Mayoora Metal Trade Corporation; (iii) M/s Yash Trading Co.; (iv) M/s Shree Surya Steel; and,
(v) M/s Satyam Steel, but in so far as assessment year 2007-08 is concerned, purchases in question relate to M/s Shree Surya Steel - Rs.10,34,479/- and M/s Mayoora Metal Trade Corporation - Rs.10,65,080/- only; and, the other parties mentioned involve purchases effected in the balance captioned 7 ITA No.1418/PN/2013 ITA Nos.1475 to 1477/PN/2013 assessment years, i.e. 2008-09 and 2009-10. The Revenue has raised a common Ground of Appeal for all three captioned years.
9. On this aspect, the Tribunal vide its order dated 20.02.2015 (supra) affirmed the order of the CIT(A) and the relevant discussion is as under :-
"28. Now, we may deal with the decision of the CIT(A) whereby the purchases made from five parties have been accepted. In this context, we find that the Assessing Officer did not carry out any third party verification as he had undertaken with respect to the six parties discussed earlier. The five parties i.e. (i) Vora Mercantile Pvt. Ltd.; (ii) M/s Mayoora Metal Trade Corporation; (iii) Yash Trading & Co.; (iv) M/s Shri Surya Steel; and, (v) M/s Satyam Steel were not put through any enquiry or verification by the Assessing Officer. It was only on the basis of the documents put-forth by the assessee that purchases from the said parties have been held to be bogus. Notably, assessee had furnished the invoices raised by the said parties and had also explained that all the payments were made by the cheques. Assessee had also furnished their sales-tax numbers. With respect to the transportation, assessee had explained that the responsibility of transportation was of the supplier and therefore assessee could not produce the transport receipts. The explanations put-forth by the assessee were not subject to any enquiry or verification by the Assessing Officer but have been merely disbelieved. The Assessing Officer, in our view, was influenced by the outcome of enquiries made with respect to the other six parties. However, in the absence of any material on record to negate the position canvassed by the assessee with respect to the said five parties, the explanation of the assessee could not be disbelieved. Under these circumstances, in our view, the CIT(A) made no mistake in deleting the addition with respect to the aforesaid five parties. As a consequence, on this aspect Revenue fails."
10. Following the aforesaid precedent, the order of the CIT(A) deleting the addition made with respect to the purchases from M/s Shree Surya Steel and M/s Mayoora Metal Trade Corporation for assessment year 2007-08 is hereby affirmed. Thus, Revenue fails in its appeal for assessment year 2007-08.
11. Thus, for assessment year 2007-08 appeal of the assessee as well as the cross-appeal of the Revenue are dismissed.
12. In so far as the appeals of the Revenue for assessment years 2008-09 and 2009-10 are concerned, they are directed against the order of the 8 ITA No.1418/PN/2013 ITA Nos.1475 to 1477/PN/2013 Commissioner of Income Tax (Appeals)-II, Pune dated 28.03.2013 which, in turn, has arisen from two different assessment orders dated 31.12.2010 passed by the Assessing Officer u/s 143(3) r.w.s. 153A of the Act respectively.
13. In this appeals also, the CIT(A) has deleted the addition with respect to the purchases made from (i) Shree Surya Steel; (ii) Mayoora Metal Trade Corporation; and, (iii) Yash Trading Co., an issue which is liable is to be decided in the light of the order of the Tribunal dated 20.02.2015 (supra) which has formed the basis to dispose of the appeal of the Revenue for assessment year 2007-08 in the earlier paras. Following the aforesaid precedent, in these appeals also, the order of the CIT(A) is hereby affirmed and the Revenue fails.
14. Resultantly, all the captioned appeals are dismissed.
Order pronounced on 18 th March, 2015.
Sd/- Sd/-
(SUSHMA CHOWLA) (G.S. PANNU)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune, Dated: 18 th March, 2015.
Sujeet
Copy of the order is forwarded to: -
1) The Assessee;
2) The Department;
3) The CIT(A)-II, Pune;
4) The CIT-II, Pune;
5) The DR "A" Bench, I.T.A.T., Pune;
6) Guard File.
By Order
//True Copy//
Assistant Registrar
I.T.A.T., Pune