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Cit v. Odeon Builders Pvt. Ltd.
Factual and Procedural Background
The present appeal filed by the Revenue challenges the order dated 29.03.2012 of the CIT(A)-III, Delhi, relating to the assessment year 2008–2009. The assessee is a construction company engaged in developing residential and commercial complexes, primarily for the Suncity Group of companies. The assessee declared a net taxable income of Rs. 6,16,40,171/- on 13.09.2008. Subsequently, it was subjected to search under section 132 of the Income Tax Act on 25.09.2008 along with the Suncity Group. Proceedings under section 153A were initiated, and a notice dated 07.09.2009 was served. The assessee filed the same income return in response.
During the search, certain documents were seized, including a ledger account of Padmesh Realtors Pvt. Ltd. in the assessee’s books and a summary of purchases made by Odeon Builders Pvt. Ltd. from Padmesh Realtors Pvt. Ltd. The Assessing Officer (AO) conducted inquiries and found that Padmesh Realtors Pvt. Ltd. could not be located at the addresses provided by the assessee. Further inquiries revealed that Padmesh Realtors had made purchases from numerous companies that were found to be non-existent or paper companies. Based on these findings, the AO concluded that the purchases made by the assessee through Padmesh Realtors were bogus and made an addition of Rs. 19,39,60,866/- to the income by rejecting the assessee’s books under section 145(3) of the Income Tax Act, 1961.
The assessee appealed to the CIT(A), who after detailed consideration of the documents and submissions, including the genuineness of Padmesh Realtors and its suppliers, deleted the addition. The Revenue is aggrieved by this order and has filed the present appeal before the Tribunal.
Legal Issues Presented
- Whether the addition of Rs. 19,39,60,866/- made by the AO on account of alleged bogus purchases through Padmesh Realtors Pvt. Ltd. was justified.
- Whether the CIT(A) erred in law and on facts in deleting the addition made by the AO.
- Whether the AO rightly appreciated the evidence and findings of departmental inquiries in treating the purchases as bogus.
Arguments of the Parties
Revenue's Arguments
- Padmesh Realtors Pvt. Ltd. is a paper company incorporated only shortly before making large purchases, which is unusual in the construction sector.
- The assessee was initially unable to provide correct addresses of Padmesh Realtors; field inquiries revealed the company did not exist at those addresses.
- Many suppliers from whom Padmesh Realtors claimed to have made purchases were found to be non-existent or paper companies.
- Statements of third parties and field inquiries supported the conclusion of bogus purchases.
- The assessee failed to produce managing directors or principals of these suppliers despite summons issued.
- Documents such as NOCs and VAT registrations were not found during search and were suspected to be tampered or irrelevant.
- Reliance was placed on the judgment in CIT v. La Medica to support treatment of purchases as bogus where suppliers were not found at given addresses.
- The CIT(A) ignored relevant facts and was misled by paper trail without considering field inquiries.
Assessee's Arguments
- All necessary details and documents substantiating the genuineness of purchases from Padmesh Realtors were filed before the AO and CIT(A).
- Padmesh Realtors Pvt. Ltd. is a subsidiary of Suncity Projects Pvt. Ltd. and was duly incorporated and registered with statutory authorities including VAT and Income Tax.
- Documents such as Memorandum & Articles of Association, PAN card, VAT registration certificates, NOCs for business premises and godown, audited accounts, VAT returns, IT returns, invoices, and transportation documents were filed.
- Payments were made through banking channels, and transportation of goods was supported by delivery receipts and owned vehicles.
- Suppliers from whom Padmesh Realtors made purchases exist and have confirmed transactions; evidence includes invoices, bank statements, audited accounts, and returns.
- The alleged statements of third parties were not confronted to the assessee and therefore cannot be relied upon.
- The AO did not provide the assessee with copies of adverse statements or opportunity to cross-examine witnesses, violating principles of natural justice (relying on Kishinchand Chellaram v. CIT).
- Comparative trading results for prior years show consistent gross profit and material consumption ratios, which would be distorted if the purchases were disallowed.
- Reliance was placed on judicial precedents holding that additions based on suspicion, conjecture, or surmise without cogent evidence are not sustainable.
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| CIT v. La Medica, 2001 250 ITR 575 (Delhi) | When evidence suggests fictitious arrangements to inflate purchases, AO is justified in treating purchases as bogus under section 37 of the Income Tax Act. | The AO relied on this precedent to support the addition for bogus purchases; however, the CIT(A) distinguished the facts, finding the case before it materially different. |
| Kishinchand Chellaram v. CIT, 1980 125 ITR 713 (SC) | Statements of third parties not confronted to the assessee cannot be relied upon to draw adverse inferences. | The CIT(A) and Tribunal upheld that the AO failed to provide opportunity to cross-examine witnesses whose statements formed the basis of adverse findings, thus violating principles of natural justice. |
| CIT v. Leaders Valves (P.) Ltd., 285 ITR 435 (P&H) | Where it is impossible to manufacture goods shown to have been manufactured out of remaining purchases, additions on account of bogus purchases can be deleted. | Assessee relied on this to argue that disallowing purchases would distort trading results unrealistically; the CIT(A) accepted this reasoning. |
| Uma Charan Shaw & Bros. v. CIT, 1959 37 ITR 271 (SC) | Additions cannot be made on suspicion, conjecture or surmise without evidence. | Assessee argued that AO’s conclusion was based on suspicion without cogent evidence; CIT(A) and Tribunal agreed. |
| Lal Chand Bhagat Ambica Ram v. CIT, 1959 37 ITR 288 (SC) | Similar principle as above regarding evidence required for additions. | Used to support assessee’s contention against addition without substantive evidence. |
| Commissioner Of Income-Tax v. Kulwant Rai, 291 ITR 36 (Delhi HC) | Reinforces principle that additions require proper evidence. | Relied upon by assessee to argue against addition based on suspicion. |
| Dhakeshwari Cotton Mills Ltd. v. CIT, 1954 26 ITR 775 (SC) | Similar evidentiary requirements for additions. | Assessee relied upon it to contest addition. |
| Commissioner Of Income-Tax, Delhi (Central-2) v. Mrs. Sunita Vachani, 184 ITR 121 (Delhi HC) | Strict adherence to evidentiary standards before making additions. | Supported assessee’s arguments on lack of evidence. |
| Commissioner Of Income-Tax v. Anupam Kapoor, 299 ITR 179 (P&H HC) | Requirement of evidence beyond suspicion for additions. | Assessee relied on this precedent to challenge addition. |
| DCIT v. Adinath Industries, 2001 252 ITR 476 (Guj) | Supports the principle of substantiating purchases with documentary evidence. | Assessee cited this to support genuineness of purchases. |
| CIT v. J.M.D Computers & Communications (P.) Ltd., 20 DTR 317 (Delhi) | Where purchases are supported by complete accounts and payments through banking channels, adverse inference cannot be drawn. | Assessee relied on this to argue genuineness of purchases. |
| CIT v. Interseas, (2010) 40 DTR 143 (Ker.) | Supports requirement of evidence for additions on bogus purchases. | Assessee cited this precedent in support. |
Court's Reasoning and Analysis
The Tribunal carefully examined the facts, documents, and submissions of both parties. It noted that the assessee had furnished extensive documentary evidence to substantiate the existence of Padmesh Realtors Pvt. Ltd., including incorporation certificates, PAN, VAT registration, NOCs for office and godown premises, audited accounts, VAT and income tax returns, invoices, and bank statements showing payments made through banking channels. The assessee also provided evidence of transportation arrangements for goods.
The AO’s adverse findings were primarily based on statements of third parties and field inquiries conducted by the Investigation Wing, which were not confronted to the assessee, thereby denying the assessee the opportunity to cross-examine witnesses. The Tribunal emphasized the principle of natural justice, citing Kishinchand Chellaram v. CIT, holding that such statements cannot be used to draw adverse inferences without confrontation.
The Tribunal further observed that the AO’s inquiries regarding the existence of suppliers from whom Padmesh Realtors made purchases were limited to only a few parties, and the assessee had filed confirmations, accounts, and returns for all these suppliers, which remained unchallenged. The alleged non-existence of some suppliers was based on unverified summons returns and incomplete inquiries.
Additionally, the Tribunal found that the trading results and material consumption ratios of the assessee for the year under consideration were consistent with previous years, and disallowing the purchases would lead to an unrealistic increase in gross profit margin, which was not plausible in the nature of the business.
The Tribunal also rejected the Revenue’s reliance on the judgment in CIT v. La Medica, finding the facts of that case materially different. It held that the AO’s reliance on suspicion, conjecture, and surmise without substantive evidence was untenable. The Tribunal upheld the CIT(A)’s conclusion that the assessee had discharged its onus to prove the genuineness of purchases and that the addition made by the AO was not sustainable.
Holding and Implications
The Tribunal dismissed the Revenue’s appeal and upheld the order of the CIT(A) deleting the addition of Rs. 19,39,60,866/- made on account of alleged bogus purchases through Padmesh Realtors Pvt. Ltd.
The direct consequence of this decision is the acceptance of the assessee’s claim of genuine purchases and the rejection of the AO’s addition. No new precedent was set as the decision primarily rests on the facts and evidence of the case and the application of settled principles of natural justice and evidentiary standards.
Diva Singh, J.M:— The present appeal filed by the Revenue against the order dated 29.03.2012 of CIT(A)-III, Delhi pertaining to 2008–2009 assessment year agitates the following grounds:—
1. “On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in deleting the addition of Rs. 19,39,60,866/- made by the Assessing Officer on account of bogus purchases.
2. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in not appreciating that the Assessing Officer had proved beyond doubt in the asstt. order that the assessee company had used Padmesh Realtors Pvt. Ltd. as a conduit of inflate expenses.
3. On the facts and in the circumstances of the case, the CIT(A) has erred in law and on facts in not appreciating the findings of inquiries conducted by the department.
4. The order of the CIT(A) is erroneous and is not tenable on facts and in law.
5. The appellant craves leave to add, alter or amend any/all of the grounds of appeal before or during the course of the hearing of the appeal.”
2. The assessee as per record in the year under consideration is a construction company which was involved in conceiving and constructing residential and commercial complexes for real estate builders. It is further seen that as per record the assessee was mainly carrying out development activity for Suncity Group of cases as most of the payments have been received from the Suncity Group on account of construction of various projects in different years. The record shows that the assessee declared net taxable income of Rs. 6,16,40,171/- on 13.09.2008 and that the assessee was subjected to search u/s. 132 on 25.09.2008 alongwith Suncity Group of cases. Proceedings u/s. 153A were initiated and notice u/s. 153A dated 07.09.2009 was issued and served upon the assessee. In response thereto the assessee again returned income of Rs. 6,16,40,171/-.
2.1 A perusal of the assessment order u/s. 153A/144 r.w.s 143(3) shows that during the course of search on Suncity Group of cases, a document inventorized as Annexure AS-3 Party SCN pages 102-109 was found and seized from the premises of Suncity Projects (P.) Ltd., N-49, 1 Floor, Connaught Place, New Delhi. The document has been described in the assessment order as a ledger account of Padmesh Realtors (P.) Ltd. in the books of accounts of the assessee. The department categorized it as a “Core document” which showed that sales have been made by the said concern to the assessee on various dates for which payments had been received. The AO however was of the view that the enquiries revealed otherwise.
2.2 Apart from this document the AO records that another document inventorized as Annexure AS-3 Party SCN Page 111 was also found and seized from the premises of the assessee. The document was stated to contain a summary of purchases made by Odeon Builders (P.) Ltd. from Padmesh Realtors (P.) Ltd. Copy of this document is extracted hereunder from the assessment order for ready-reference:—
Odeon Builders (P.) Ltd.
N-49, 1st Floor, Cannought Place, New Delhi
Padmesh Realtors (P.) Ltd.
Monthly Summary
1st April 2007 to 31 March 2008
Transactions Closing Balance Opening Balance April May June July September October November December January 63,705 63,705 Cr. February 99,80,000 2,58,06,475 1,58,90,180 Cr. March 83,01,462 16,80,90,686 17,56,79,404 Cr.
2.3 The enquiries referred to by the AO are found mentioned in para 4.2 of the assessment order. A perusal of the same shows that the AO took note of the fact that Padmesh Realtors (P.) Ltd. had made total purchases of Rs. 24,25,68,850/- from a number of companies who were not found to be inexistence. The AO refers that the details of the companies from whom purchases had been made were enquired into by him and were found to be not in existence. The specific details of these companies as found mentioned in the seized documents is found reproduced at pages 3 to 5 of the assessment order at para 4.2 The same is extracted hereunder for ready-reference:—
4.2 Further enquiries in this regard was conducted and it came to notice that Padmesh Realtors (P.) Ltd. has made total purchases of Rs. 24,25,68,850/- from a number of companies who were not found to be inexistence. The detail of these companies from whom purchases have been made were enquired and the amount as mentioned in the seized document is reproduced hereunder:—
Party Name Registered Address Correspondence Address Amount (Rs.) Daga Trading Co. (P.) Ltd. Y162, Loha Mandi, Naraina, New Delhi-110028 Y162, Loha Mandi, Naraina, New Delhi-110028 2590380.00 Delhi Trading Co. Y/14/17, Second Floor, Loha Mandi, Naraina, New Dlehi-110028 Y/14/17, Second Floor, Loha Mandi, Naraina, New Dlehi-110028 391114454.25 GUPTA SONS Sector-10, Plot No. 13, Odeon Plaxa-II, M.L.U Market, Dwarka, New Delhi Sector-10, Plot No. 13, Odeon Plaxa-II, M.L.U Market, Dwarka, New Delhi 1190.00 India Steels 4969/200 Ind. Floor, Sirkiwalan Hauz Qazi, Delhi-110006. 4969/200 Ind. Floor, Sirkiwalan Hauz Qazi, Delhi-110006. 3168375.75 Ishwar & Sons Timber Traders 1/3730, Timber Market, Lone Road, Shahdara, Delhi 1/3730, Timber Market, Lone Road, Shahdara, Delhi 55000.00 Kamdhenu Industries Ltd. 24, Shivaji Marg, Najafgarh Raod, New Delhi 24, Shivaji Marg, Najafgarh Raod, New Delhi 19325642.00 Kasliwal Enterprises Y-220/102, 1st Floor, Loha Mandi, Naraina, New Delhi-110028. Y-220/102, 1st Floor, Loha Mandi, Naraina, New Delhi-110028 13931438.00 Northern Steel & General Mills Y-162, Loha Mandi, Naraina, New Delhi-110028 Y-162, Loha Mandi, Naraina, New Delhi-110028 9613382.00 N.P Sales Corporation Y-32, First Floor, Loha Mandi, Naraina, New Delhi-110028 Y-32, First Floor, Loha Mandi, Naraina, New Delhi-110028 8847630.00 Rima Trading Co. Shop No. - 14/25, Mandoli Extn., Shahdara, New Delhi-110032 Shop No. - 14/25, Mandoli Extn., Shahdara, New Delhi-110032 5538588.00 R.V Mercantile Pvt. Ltd. 22, Amar Colony, Main Rohtak Road, Nangloi, Delhi-110041 22, Amar Colony, Main Rohtak Road, Nangloi, Delhi-110041 27335604.50 Sai traders E-279, Nag Mandir Road, Shahtri Nagar, Delhi-110052 E-279, Nag Mandir Road, Shahtri Nagar, Delhi-110052 15257865.00 Shiv Om Sales Corporation House No. - 23B, Gali No. - 7, Bank Colony, Harash Vihar, Delhi-03. House No. - 23B, Gali No. - 7, Bank Colony, Harash Vihar, Delhi-03. 7624760.00 Shiv trading Company 11/790, Main road, Gandhi Nagar, Delhi-110031 119, Navyug Market, Ghaziabad 7509600.00 Shree G.J Trading Co. Off-Shop No. 1, Kh. No-191-192 Block No. - 17, Vishwas Nagar, Shahdara, Delhi-32. Off-Shop No. 1, Kh. No-191-192 Block No. - 17, Vishwas Nagar, Shahdara, Delhi-32. 11925801.00 Shree Murli Enterprises Shop No. - C-38, 1st Floor, Madhu Vihar, Delhi-110092 Shop No. - C-38, 1st Floor, Madhu Vihar, Delhi-110092 19537981.00 Sri Sai Trading Co. Shop No. - 10A 2363-2368, 1st Floor, Gali raghu Nandan Naya Bazaar. Delhi Shop No. - 10A 2363-2368, 1st Floor, Gali raghu Nandan Naya Bazaar. Delhi 12015008.00 Shree Shyam Enterprises A-147, DDA Flats, Gajipur Dairy Farm, Delhi-110096 A-147, DDA Flats, Gajipur Dairy Farm, Delhi-110096 7333729.00 Shri Ganpati Sales 30/7B, Gali No. - 6, Vishwas Nagar, Shahdara, Delhi-110032 30/7B, Gali No. - 6, Vishwas Nagar, Shahdara, Delhi-110032 19169230.00 Shri Krishna Steels X-38/2, Loha Mandi, Delhi-110028 X-38/2, Loha Mandi, Delhi-110028 23393188.00 Siddhi Vinayak Enterprises Shop No. - 83-A, Chajjurpur Gate Marg, Babarpur Shahdara, Delhi-32 Shop No. - 83-A, Chajjurpur Gate Marg, Babarpur Shahdara, Delhi-32 10273411.00 Surprise Enterprises 2632, 1st Floor, Gali Lalten Wali, Naya Bazaar, Delhi-110006 2632, 1st Floor, Gali Lalten Wali, Naya Bazaar, Delhi-110006 6561171.00 Swastik International 127, Ochandi Road, Bawana, Dlehi-110039 127, Ochandi Road, Bawana, Dlehi-110039 7646431.00 24,25,68,850.00
2.4 On the basis of the above, the AO was of the view that in regard to the purchase and sale some important facts had came to notice during the search as well as during the post search enquiries. He observed that during the entire search proceedings, the assessee could not explain the actual address of Padmesh Realtors (P.) Ltd. and the relation of the company with the said concern. He observed that in this regard a No. of questions were asked to clarify the identity of Padmesh Realtors (P.) Ltd. but every time the assessee had expressed his ignorance about the company. As per para 4.3 the AO records that the assessee after a lot of persuasion stated that Padmesh Realtors (P.) Ltd. is operating from A-102, Dream Apartments, Plot No-14, Sector-22, Dwarka, New Delhi. The AO records that the said version of the assessee was found to be not correct. The assessee thereafter stated that the said company was operating from Godown at Plot No-3, Patparganj Industrial Area, Delhi. As per page 6 of the assessment order survey u/s. 153A was conducted on both the addresses and the outcome of the survey is tabulated in the assessment order. The same is extracted from the assessment order hereunder for ready-reference:—
Outcome of the post search actions conducted in respect of Padmesh Realtors Pvt. Ltd. Delhi
S. No. Authorization Outcome Observation 1. Authorization u/s. 133A of the I.T Act, 1961 issued A102, Dream Apartment, Plot no-14, Sector-22, Dwarka, New Delhi-75. Not executed. The statement of Kamini Gupta was recorded, who was the owner of this flat. She stated categorically that “I have never heard the name of Padmesh Realtors Pvt. Ltd. and whether it was functioning from my flat or not. I do not know who is running this company.” Even the owner of the flat does not know the occupant. It is reasonable to infer that these addresses are not in occupation of Padmesh Realtors Pvt. Ltd. 2. Authorization u/s. 133A of the I.T Act 1961 issued for godown at Plot No. 3, Patparganj Industrial Area, Delhi Executed, Statement of Sh. Sanjay Aggarwal recorded during survey operations u/s. 133A of the IT Act 1961 on Padmesh Realtors Pvt. Ltd. at its godown at Plot No. - 3, Patparganj Industrial Area, Delhi stated that the said premises was not given on lease/rent to Padmesh Realtors Pvt. Ltd. Further on inspection, it was found that the said property is a two storeyed building constructed on a plot measuring 450 sq. meters and that building can never be used for storing the building material. Enquiries conducted at the given address of the company proved that none of such company exists at that address. Regarding the godown; it was submitted in the report that the building can never be used to store the building material.
2.5 In view of the above, the AO was of the view that it clearly demonstrated that company Padmesh Realtors (P.) Ltd. did not exist at the address given by the assessee. In the circumstances he concluded that firstly the assessee has concealed the identity and the address of the company Padmesh Realtors (P.) Ltd. and secondly wrong information with regard to the address has been given. 2.6 In view of these facts he concluded that the purchases and sale made by Padmesh Realtors (P.) Ltd. became doubtful. Accordingly in order to enquiry into the genuineness of the purchase and sale further inquiries were conducted from parties from whom Padmesh Realtors (P.) Ltd. claimed that purchases have been made. The outcome of the enquiry made from some of the companies is summarized in the assessment order at page 7 & 8. The same is extracted hereunder for ready-reference:—
Sl. No. Name of the Party from which the alleged purchase was made Address Findings 1. R.V Mercantile Pvt. Ltd. 22, Amar Colony, Main Rohtak Road, Nangloi, New Delhi In this case, summons u/s. 131 (I A) of the J.T Act 1961 could not be served as there is no existence of the company in the given address. Even it is confirmed that the premises numbers are based on Khasra numbers and also in blocks as in “A”, ‘B’, etc. in Amar Colony. Therefore, the number 22 does not exist 111 Amar Colony. It appears that the company has not given proper address. 2. Shree Ganapati Sales 30/7B, Gali No-6, Vishwas Nagar, Shahdara, Delhi-32. ADIT (Inv.), Unit-V(3), New Delhi along with IT Inspector visited 30/7B, Gali No. 6, Vishwas Nagar, Shahdara, Delhi-32 to serve the summons dated 23-12-08. In this premises, it was found that Smt. Rekha Sachdeva was residing. She stated that one room of this premises on the ground floor was given on rent to Shri Pramod, whose mobile No. is 987300695I from June 2006 to June 2007. Now he has left the premises and she also stated that she did not know the business of Shree Ganapati Sales and the present address. We have also contacted Shri Pramod on his mobile number and he stated on phone that his company Shree Ganapati Sales has shifted to 110-112, Abdul Aziz Road, Karol bagh. We also went there to verify the existence of the company but the address given by Shri Pramod appears to be incomplete and not in existence. Hence, the summons could not be served. 3. Sai Traders E-279, Nag Mandir Road, Shastri Nagar, Delhi-52. ADIT (Inv.), Unit-V (3), New Delhi along with IT Inspector visited E-279, Nag Mandir Road, Shastri Nagar, Delhi-52 on 27-12-2008 to serve the summons dated 23-12-08. In this premises, it was found that Srnt. Kamlesh Devi, w/o Shri Bani Singh, was residing. She stated that this property belonged to her mother-in-law. She further stated that one part of the mentioned premises was given on rent to Sai Traders about 16 years back. They had left these premises and the current address and whereabouts were not known to her. Hence, the summons could not be served.
2.7 In the background of the above inquiries as per record show cause notice was issued to the assessee on 27.08.2010 which made the assessee aware that the inquiries from the firms/companies from whom purchases are said to have been made by Padmesh Realtors (P.) Ltd. are not inexistence. Similarly the contents of the inquiries made by the department that the companies from whom purchase are stated to be made are mere paper companies formed with the motive to provide accommodation bills. It was also confronted to the assessee that neither any purchases have been made by Padmesh Realtors (P.) Ltd. nor anything has been passed on to the assessee and the expenditure debited in the P&L A/c. infact as such was not genuine and also not admissible. As per para 4.5 of the assessment order it was further conveyed that Padmesh Realtors (P.) Ltd. did not have any godown to store any raw material. In the said background the assessee was required to show cause as “to why the purchases made from these companies through Padmesh Realtors (P.) Ltd. be not treated as bogus purchases and to explain why the same amount be not added to his income as false claimed of expenditure.”
2.8 The assessee's reply in response to the same is extracted from the assessment order hereunder for ready-reference:—
“We have not made any purchases through Padmesh Realtors (P.) Ltd. However, we have made purchases from Padmesh Realtors (P.) Ltd. As desired, we are enclosing herewith details of purchases made during financial year 2007–2008 from parties specified in the proforma given in query No. 10 of questionnaire dated 27.08.2010 along with their current addresses, PAN & TIN etc.”
2.9 A perusal of the assessment order shows that the AO records in para 4.6 of his order the assessee's reply dated 15.12.2010 alongwith documents was examined. He also records that the assessee had also filed copy of account of Padmesh Realtors (P.) Ltd. as appearing in different branches of Odeon Builders (P.) Ltd. He summarized the same in para 4.6 for the period 01.04.2007 to 31.03.2008 The same is extracted from the assessment order hereunder:—
Name of the Company Total Purchase Amount Paid Odeon Builders (P.) Ltd., Rajasthan 1,64,71,850 NIL Odeon Builders (P.) Ltd., Haiderpur Branch 17,74,89,016 1,82,81,462 Total 19,39,60,866 1,82,81,462
2.10 The AO considering the reply of the assessee found it to be a general reply to specific findings. He took note of the fact that there is definite evidence available with the department to hold that Padmesh Realtors (P.) Ltd. is not in the business of making any purchases of construction material from any companies. The enquiries according to him also showed that Padmesh Realtors (P.) Ltd. does not have any godown to store the raw material; infact Padmesh Realtors (P.) Ltd. did not even have an independent office as the addresses given were found to be false. He observed that finally the company was found at the address of Suncity Group of cases itself i.e at N-49, 1 Floor, Connaught Place, New Delhi. He also held that Padmesh Realtors (P.) Ltd. also failed to explain that what was the mode of transportation of goods and before selling these goods where were they stored. He was also of the view there is no document with the assessee to show how these were received by the assessee etc. Accordingly for the reasons set out in para 4.6 to para 4.12, the explanation offered by the assessee was not accepted by the AO. The same is reproduced hereunder for ready-reference in the words of the AO himself:—
“4.6 The plea of the assessee has been examined, The assessee has given a general reply to the specific finding of the Department. There are definite evidences with the Department that on the first place Padmesh Realtors (P.) Ltd. is not in the business of making any purchases of construction material from any companies. The enquiries made have also revealed that Padmesh Realtors (P.) Ltd. do not have any godown to store the raw material. The enquiries have revealed to the extent that Padmesh Realtors (P.) Ltd. do not even have an own independent office and the addresses given were false. Finally, the company was found to be at the address of Suncity Group of cases itself i.e, N-49, 1st Floor, Connaught Place, New Delhi. Padmesh Realtors (P.) Ltd. have also failed to exhibit that what was the mode of transportation of goods and before selling where these were stored. There is also no document with the assessee as through which transportation mode these goods have been received by the assessee.
4.7 The companies were found to be non-existent and further enquiries also suggest that the companies from whom Padmesh Realtors (P.) Ltd. have made purchases are only paper companies and actually they are non-existent. Thus, the summon u/s. 131 were issued on 21-09-2010 to all the companies from whom Padmesh Realtors (P.) Ltd. have made purchases but all the summons were received back with the comments that no such company at the given address. Detail of these summons issued to various companies is placed on record. However, with regard to one company viz., Ishwar & Sons Timber Traders from whom purchase of Rs. 57,20/- has been made by Padmesh Realtors (P.) Ltd. has furnished reply confirming the purchase amount during the period 31-03-2008 and 31-03-2009. Excepting this single reply none of the companies mentioned in the table were found to be existent nor has any reply been received from any of the companies. The assessee has also failed to furnish confirmed copy of A/c. of these companies. The assessee also could not produce Managing Directors' of these companies' so as to get verified the expenditure incurred.
4.8 The next plea of the assessee is that he has made payment through A/c. payee cheque. The plea of the assessee has been examined and it is found that the assessee has made payment to Padmesh Realtors (P.) Ltd. But, the payments so made have gone to different A/cs of paper companies. Accounts of these companies were also examined but it was found that the money has again been transferred to some other A/cs and after multiple rotations the ultimate destination of the money is not clear. However, the field enquiries have clearly established that none of these companies are firstly in existence and secondly, none of the companies are dealing with building material which can be supplied to Odeon Builders (P.) Ltd.
4.9 The enquires made makes the modus operandi very clear. The assessee has used the group company Padmesh Realtors (P.) Ltd. as a conduit to inflate the expenditure. Padmesh Realtors (P.) Ltd. have finally disbursed the payments to a number of companies in order to equalize the sale with the purchase but the fact remains that neither anything was purchased nor anything was sold and the expenditure was finally claimed by Odeon Builders (P.) Ltd. by transferring the money to the A/e of Padmesh Realtors (P.) Ltd. and finally to the account of paper companies.
4.10 In a similar case of bogus purchase, Hon'ble Delhi High Court in the case of CIT v. La Medica 2001 250 ITR 575, Delhi held that when there are evidences to suggest that fictitious arrangement has been made to inflate the purchases, AO is right in treating the purchases as bogus within the meaning of section 37 of the Act. The fact of the case was that the assessee made purchases from an alleged seller who was not found at the given address. Summon u/s. 131 were also issued to the alleged seller but he was not found to be there. The assessee failed to produce the party. Thereafter, a registered letter was sent which was also received back un-served. It is in this background that the AO treated the purchases as bogus purchases and made addition uls. 37 of Income Tax Act, 1961. The addition so made was sustained by Hon'ble High Court.
4.11 The facts of the present case are identical to the case referred to by Hon'ble Delhi High Court. The assessee has made a fictitious arrangement to inflate the purchases. Padmesh Realtors (P.) Ltd. is a recently made company of the group. Excepting these fictitious, the company has not carried out any business whatsoever. There is neither any purchase nor any sale in Padmesh Realtors (P.) Ltd. excepting these fictitious transactions. The company has been apparently used by the group as a conduit to facilitate the arrangement of bogus purchases. Padmesh Realtors (P.) Ltd. has no storage facility nor any transportation facility. The assessee has not contradicted this observation of the department. Padmesh Realtors (P.) Ltd. has shown purchases from companies who are not in existence and this fact is a matter of record and against this fact, the assessee has failed to furnish any evidence, whatsoever. In view of these facts, it is held that purchases of Rs. 19,39,60,866/- shown by Odeon Builders (P.) Ltd. are bogus purchases.
4.12 The assessee has claimed expenditure of Rs. 19,39,60,866/- which has been clearly found to be false. Under these circumstances, the book results shown by the assessee are not reliable. The books of accounts of the assessee has been maintained in a manner which do not show the correct picture of profit. In view of these, the book results of the assessee are hereby rejected within the meaning of section 145(3) of Income Tax Act, 1961 and addition of Rs. 19,39,60,866/- is hereby made.
Income for the year is computed as under:—
Income returned 6,16,40,171 Addition 19,39,60,866 Total 25,56,01,037
3. Aggrieved by this, the assessee went in appeal before the CIT(A). A perusal of the same specific para 3 page 9 of the impugned order shows that on behalf of the assessee assailing the assessment order it was canvassed that all necessary details and documents substantiating the genuineness of the purchases from Padmesh Realtors (P.) Ltd. were filed before the AO. It would be appropriate at this stage to extract these submissions from the impugned order itself:—
“(3) During the course of assessment proceedings u/s. 153A read with section 143(3) of the LT. Act, 1961, the assessee company has filed all the details & documents as sought by the Ld. Assessing Officer including documents in support of genuineness of purchases made from Padmesh Realtors (P.) Ltd. Copy of final reply dated 15.12.2010 filed during the course of assessment proceedings is annexed herewith as annexure - X (Page 1 to 7) and copy of documents filed alongwith the said reply dated 15.12.2010 are enclosed herewith as Paper Book-A (containing Page 1 to 871) and Paper Book - B (containing Page 872 to 1826). The said reply was filed during the course of assessment proceedings to substantiate the genuineness of purchases made by the assessee company from Padmesh Realtors (P.) Ltd. Paper Book - A (Page 1 to 871) contains documents relating to purchases made by the assessee company from Padmesh Realtors (P.) Ltd. and Paper Book - B (Page 872 to 1826) contains documents received from Padmesh Realtors (P.) Ltd. relating to purchases made by Padmesh Realtors (P.) Ltd. from various parties during the financial year 2007–2008 relevant to Ass. Yr. 2008–2009. From the replies and documents filed during the course of assessment proceedings the genuineness of the purchases made from Padmesh Realtors (P.) Ltd., has been duly established beyond any doubt. The Ld. Assessing Officer has not pointed out any infirmity or discrepancy in these documents and treated these purchases as bogus merely on assumptions, conjectures and surmises which are not sustainable at law.”
3.1 A perusal of the impugned order further shows that it was also canvassed that the genuineness of the purchases made by the assessee from Padmesh Realtors (P.) Ltd. was demonstrated from the various evidences available on record of the AO. These submissions for ready-reference are also extracted from the impugned order found reproduced at pages 10-12 in para 4 of the impugned order:—
“4. Genuineness of the Purchases made by the assessee company from Padmesh Realtors (P.) Ltd.
(a) During the financial year 2007–2008, the assessee company has made purchases of building materials from Padmesh Realtors (P.) Ltd., A-102, Dream Apartments, Plot No. 14, Sector-22. Dwarka, New Delhi-I 10075 (Godown: 3, Patparganj Industrial Area, Delhi-110092) amounting to Rs. 19,39,60,866/-
(b) The Regd. Office of Padmesh Realtors (P.) Ltd. was changed to N-49, (1st Floor) Connaught Place. New Delhi w.e.f 08-09-2008, which was again changed to 1240 (3rd Floor) Kucha Mahajani, Chandni Chowk, Delhi-110006 w.e.f 02-03-2009.
(c) Padmesh Realtors (P.) Ltd. was duly registered with Value Added Tax Deptt. (Sales Tax Deptt.) vide Regn. No.: TIN: 07120338063 w.e.f 14-012008.
(d) Padmesh Realtors (P.) Ltd. was assessed to income tax vide PAN: AAECP0018N.
(e) Padmesh Realtors (P.) Ltd. was a subsidiary company of Suncity Projects (P.) Ltd., N-49, (Ist Floor) Connaught Place, New Delhi w.e.f 2211-2007. During the year under consideration, the assessee company has executed contract works worth Rs. 71,87,52,620/- for Suncity Projects (P.) Ltd.
(f) Except for the payment of very small amount, all payments against purchase of goods were made to Padmesh Realtors (P.) Ltd. through account payee cheques/account payee drafts/account payee RTGS etc.
(g) The goods purchased from Padmesh Realtors (P.) Ltd. were either transported through goods carrier for which Bilty/G.R's were received or transported through trucks owned by the assessee company having Regn. No. HR 38J 2599, HR 63 4567, HR 63 4568, HR 38F 2405, HR 38F 2409 & HR 38J 2600.
(h) In support of the identity of Padmesh Realtors (P.) Ltd. following documents were filed during the course of assessment proceedings:—
S. No. Particulars of documents filed during the course of assessment proceedings Refer to Page No. of the Paper Book-A (i) Memorandum & Articles of Association Certificate of Incorporation issued by ROC 1 to 25 (ii) Photocopy of PAN card 26 (iii) Photocopy of Registration Certificate issued by VAT Deptt. (Sales Tax Deptt.) 27 (iv) Photocopy of Form No. 18 filed with ROC & 28 to 31 (v) Photocopy of NOC issued by land lady Mrs. Kamini Gupta for allowing use of business premises at A-102, Dream Apartment, Plot No. - 14, Sector-22, Dwarka, New Delhi-110075 & proof of her ownership. 32 to 37 (vi) Photocopy of NOC issued by Kumar Ice Facto (P.) Ltd. for allowing use of godown premises at Patpar Ganj, Industrial Area, Delhi-110092 alongwith proof of its ownership. 38 to 40 (vii) Photocopy of DVAT 07 regarding addition Godown premises (3, Patparganj Industrial Area, Delhi-110092) in Sales tax Deptt. Records. 41 to 50
(i) In support of genuineness of purchases made from Padmesh Realtors (P.) Ltd., following were filed during the course of assessment proceedings documents:—
S. No. Particulars of documents filed during the course of assessment proceedings Refer to Page No. of the Paper Book-A (i) Confirmed copy of accounts of Padmesh Realtors (P.) Ltd. for the year ended 31.03.2008 Relating to Haiderpur Viran Gurgaon (Haryana Sites) Relating to Rajasthan (Jaipur Sites) 51 to 62 63 to 64 (ii) Confirmed copy of accounts of Padmesh Realtors (P.) Ltd. for the year ended 31.03.2009 Relating to Haiderpur Viran Gurgaon (Haryana Sites) Relating to Rajasthan (jaipur Sites) Relating to Delhi Sites 65 to 67 68 to 69 70 to 71 (iii) Photocopy of assessee company's bank account statement showing payment made to Padmesh Realtors (P.) Ltd. 72 to 128 (iv) Photocopy of audited annual accounts of Padmesh Realtors (P.) Ltd. for the year ended 31st March 2008 129 to 147 (v) Photocopy of VAT returns filed by Padmesh Realtors (P.) Ltd. for financial year 2007–2008 148 to 153 (vi) Photocopy of IT returns filed by Padmesh Realtors (P.) Ltd. for financial year 2008–2009 154 to 168 (vii) (i) Photocopy of all Invoices issued by Padmesh Realtors (P.) Ltd. (ii) Photocopy of all Bilty/GR's for transportation of goods (iii) Photocopy of all F. No. 38 issued by Haryana VAT Deptt./F. No. 47 issued by Rajasthan VAT Deptt. 169 to 865 (viii) Photocopy of National Permit of Trucks owned by assessee company 866 to 871
(bold texted for emphasis)
3.2 On the basis of the above documents it was canvassed that the claim was genuine and these documents on record demonstrate this fact. On the basis of these documents it was canvassed that they demonstrated the correctness of assessee's claim. These submissions found advanced are found reproduced at page 13 of the impugned order and are extracted hereunder for ready-reference:—
(j) The perusal of aforesaid documents shows the following:—
(i) That all the purchases made by the assessee company from Padmesh Realtors (P.) Ltd. were duly supported by invoice which contains all details of Padmesh Realtors (P.) Ltd. including its address & TIN (Sales Tax Regn. No.), date of sale, dispatch detail (mode of transportation), dispatch No. (Bilty/GR No.), description of goods, quantity, rate, amount, sales tax charged, freight/cartage charged, total amount, particulars of F. No. 38 issued by Haryana Govt./F. No. 47 issued by the Rajasthan Govt., address of Odeon Builders (P.) Ltd. & its TIN (Sales Tax Regn. No.) and terms of payment etc.
(ii) Copy of GR/Bilty in support of Mode of Transport and copy of F. No. 38 issued by Haryana Govt./F. No. 47 issued by the Rajasthan Govt. were attached with each & every invoice.
(iii) Except for very small payment, all payment were made by the assessee company to Padmesh Realtors (P.) Ltd. through banking channel and bank statement of assessee company duly shows payment made to Padmesh Realtors (P.) Ltd. against purchases made.
(iv) Padmesh Realtors (P.) Ltd. has duly confirmed the transactions with assessee company by way of confirming the account statement showing all details of purchases & payments thereof and PAN of Padmesh Realtors (P.) Ltd.
(v) The purchases made by the assessee company from Padmesh Realtors has been duly accounted for by Padmesh Realtors (P.) Ltd. in its books of accounts as evidenced by its audited annual account for financial year 2007–2008, VAT returns (Sales Tax returns) for financial year 2007–2008 and I.T return for assessment year 2008–2009.
(vi) Huge amount of Sales Tax/Central Sales Tax has been paid by the assessee company on purchases made from Padmesh Realtors (P.) Ltd. which was charged by Padmesh Realtors (P.) Ltd. in its invoices issued to the assessee company.
Hence the above facts duly establish the genuineness of purchases made by the assessee company from Padmesh Realtors (P.) Ltd. beyond any doubt.
3.3 It was further canvassed that the genuineness of the claim of the purchases made by the assessee from Padmesh Realtors (P.) Ltd. was submitted was further substantiated by various other facts available on record. These submissions are found reproduced at pages 14-15 of the impugned order and are extracted hereunder for ready-reference:—
(k) The genuineness of purchases made by the assessee company from Padmesh Realtors (P.) Ltd. is further substantiated on account of the following:—
(i) The accounts of the assessee company have been regularly audited under the companies Act as well as Income tax Act.
(ii) The assessments of the assessee company have been completed u/s. 143(3) of the IT Act, 1961 from year to year basis and trading results as declared by the assessee company have been accepted by the Income tax Deptt. in all these assessments. No addition/disallowance has been made in relation to purchases in any of these assessments.
(iii) No incriminating material has been found during the search & seizure operation u/s. 132 of the IT Act, 1961 carried out on various business premises of the assessee company and residential premises of its directors.
iv) The comparative trading results of the assessee company for the last three years are as under:—
S. No. Particulars Ass. Yr. 2008–2009 (Rs.) Ass. Yr. 2007–2008 (Rs.) Ass. Yr. 2006–2007 (Rs.) A(i) Certified Contract work 1,12,67,62,111 72,79,62,927 54,44,42,549 (ii) Uncertified Contract Work (WIP) 8,75,27,876 - - (iii) Total value of contract work 1,21,42,89,987 72,79,62,927 54,44,42,549 B Material Consumption 84,29,72,332 51,40,88,214 37,46,81,298 C % of Material consumption to total value of contract work (5) of B to A(iii) 69.42% 70.62% 68.82%
3.4 In order to support its claim the assessee further assailed the AO's conclusion demonstrating fallacy of the approach of the AO. It was argued that if for a moment the conclusion of the AO is accepted and the purchases of 19.39 crores is treated as bogus the result would be fallacious. For ready-reference relevant portion is extracted from the impugned order:—
“On making adjustment to aforesaid trading results by treating the purchases made from Padmesh Realtors (P.) Ltd. during the F.Y 2007–2008 relevant to A.Y 2008–2009 amounting to Rs. 19,39,60,866/- as bogus on the basis of allegation made by the Ld Assessing Officer, the trading results of the assessee company will emerge as under:—
S. No. Particulars Ass. Yr. 2008–2009 (Rs.) Ass. Yr. 2007–2008 (Rs.) Ass. Yr. 2006–2007 (Rs.) A(i) Certified Contract work 1,12,67,62,111 72,79,62,927 54,44,42,549 (ii) Uncertified Contract Work (WIP) 8,75,27,876 - - (iii) Total value of contract work 1,21,42,89,987 72,79,62,927 54,44,42,549 B Material Consumption 84,29,72,332 51,40,88,214 37,46,81,298 C % of Material consumption to total value of contract work (5) of B to A(iii) 69.42% 70.62% 68.82%
3.5 Referring to the material available on record it was further argued that no disallowance has been made by the AO out of declared consumption of material/adjustment to declared trading results of the assessee company has been made by the AO even in the Block assessment completed u/s. 153A r.w.s 143(3) of the Income Tax Act, 1961 for assessment years 2003–2004 to 2007–2008 and assessment year 2009–2010 except in the year under consideration. Referring to the comparison chart extracted above from the impugned order it was argued that it shows that if the purchases made from Padmesh Realtors (P.) Ltd. are treated as bogus then the percentage of material consumption would come down by more than 15% to 17% which would not be feasible under any circumstances as it is impossible to execute works contract amounting to Rs. 1,21,42,89,987/- in the year under consideration with material consumption of only Rs. 64,90,11,466/-.
3.6 Accordingly it was claimed that on all accounts, the conclusions of the AO in regard to the purchases made from Padmesh Realtors (P.) Ltd. during the financial year 2007–2008 are not tenable on facts. Reliance was placed upon the judgement of the Punjab & Haryana High Court in the case of CIT v. Leaders Valves (P.) Ltd., (2006) 285 ITR 435 (P&H) wherein the Hon'ble High Court had declined to interfere with the findings of the Tribunal pertaining to deletion of the addition made on account of alleged bogus purchases on the ground that it was impossible to manufacture the goods shown to have been manufactured by the assessee out of remaining purchases if the AO's conclusion is accepted.
3.7 It was further submitted that in the year under consideration Padmesh Realtors (P.) Ltd. had made purchases of material amounting to Rs. 24,25,69,850/- and made sales of Rs. 24,34,11,036/- and out of this sales to the extent of Rs. 19,39,60,866/- have been made to assessee company. Referring to these facts it was his submissions that on the one hand the AO has completed the assessment of Padmesh Realtors (P.) Ltd. for Ass. Yr. 2008–2009 U/s 153A read with section 143(3) of the I.T Act, 1961 accepting the position as such the trading results of Padmesh Realtors (P.) Ltd. has been accepted and on the other hand he arbitrarily assumed the purchases made by the assessee company as bogus.
3.8 It was further claimed that although the assessee is not required to either explain or furnish the source of the source i.e the details of the purchases made by Padmesh Realtors (P.) Ltd. from various parties however in view of the stand of the department, the assessee has obtained the necessary details and documents from Padmesh Realtors (P.) Ltd. Referring to these details and documents received from said concern which were stated to be filed during the course of the assessment proceedings the assessee claimed that the purchases made by the assesse were genuine. These submissions advanced are found reproduced at page 16 para 5 of the impugned order. For ready-reference they are extracted here under:—
“(5) Genuineness of the Purchases made by Padmesh Realtors (P.) Ltd. from various parties to make supply to the assessee company
Although the assessee company was not required to furnish/explain the source of the source i.e the details of purchases made by Padmesh Realtors (P.) Ltd. from whom the assessee company has made purchases during the financial year 2007–2008. However the assessee company has obtained the details and documents from Padmesh Realtors (P.) Ltd. relating to purchases made by them in financial year 2007–2008 for making supply to the assessee company as well as to other parties, the details & documents received from Padmesh Realtors (P.) Ltd. and filed during the course of assessment proceedings are as under:—
(a) Padmesh Realtors (P.) Ltd. has made purchases amounting to Rs. 24,25,69,850.50 during the financial year 2007–2008. Party wise details of purchases made is enclosed herewith.
(b) Except for the payment of very small amount Padmesh Realtors (P.) Ltd. has made all the payments through account payee cheques/RTGS against purchases made by them during the financial year 2007–2008.”
3.9 Apart from the above in further support of the further claim of purchases made by Padmesh Realtors (P.) Ltd. during the relevant period photocopies of the sale invoices issued to Padmesh Realtors (P.) Ltd. alongwith confirmed copy of account with PAN for financial years 2007–2008 and at times also F.Y 2008–2009 were filed alongwith copy of VAT return etc. wherever made available by the parties were referred to these details of the parties who had sold the material to Padmesh Realtors who thereafter sold the material to the assessee the claim was supported. The relevant details by way of a chart are available at pages 17 to 27 of the impugned order and against the names of these 23 sellers namely Gupta Sons; Ishwer & Sons Timber Trader; Shree Sai Trading Co.; Sai Traders; Siddhi Vinayak Enterprises; Shree G.J Trading Co.; Kamdhenu Industries Ltd.; Rima trading Co.; Shri Krishna Steels; Shiv Trading Co.; Shiv Om Sales Corporation; Shree Murli Enterprises; Sunrise Enterprises; N.P Sales Corporation; Shree Shyam Enterprises; Swastik International; Delhi Trading Company; Kasliwal Enterprises; Shri Ganpati Sales; Daga Trading Company (P.) Ltd.; Northern Steel & General Mills; India Steels; R.V Mercantile (P.) Ltd. the specific documents placed on record were relied upon.
3.10 On the basis of these above details, it was submitted that these documents demonstrated the following facts:—
“(d) The perusal of aforesaid documents shows the following:—
(i) That all the purchases made by Padmesh Realtors (P.) Ltd. were duly supported by invoices issued by respective seller which contains all the details of the respective seller like their name, address, TIN (Sales Tax Regn. No.), date of sale, dispatch detail, description of goods, quantity, rate, amount, Sales Tax (VAT) charged, total amount, terms of payment and address of Padmesh Realtors (P.) Ltd. & its TIN (Sales Tax Regn. No.) etc.
(ii) Except for very small amount, all the payments by Padmesh Realtors (P.) Ltd. to sellers were made through account payee cheques/drafts/RTGS i.e through banking channel only and bank statement of Padmesh Realtors (P.) Ltd. duly shows payment made to various suppliers against purchases made.
(iii) All the parties from whom Padmesh Realtors has made purchases have duly confirmed the transactions by way of confirming the statement of account with their addresses and PAN etc.
(iv) The purchases made by Padmesh Realtors (P.) Ltd. have been duly accounted for by various suppliers of goods in their books of accounts as evidenced by their audited annual accounts, VAT (Sales Tax) returns and I.T returns etc.
(v) Huge amount of Sales Tax/VAT has been paid by Padmesh Realtors (P.) Ltd. on purchases made from various suppliers which were charged by various suppliers in their invoices issued to Padmesh Realtors (P.) Ltd.
(vi) Hence the above facts duly establish the genuineness of purchases made by Padmesh Realtors (P.) Ltd. beyond any doubt.”
3.11 After addressing the facts in support of its claim the record further shows that the assessee also advanced a detailed point-wise reply assailing the conclusions drawn by the AO. Theses submissions are extracted in pages-28 to 36 of the impugned order wherein after referring to the documents available before the AO the factual position as concluded in the assessment order was further assailed vide para 10 of the impugned order wherein the reliance placed upon the judgement of the Delhi High Court in the case of CIT v. La Medica, (2001) 250 ITR 575 (Delhi) by the AO was stated to be distinguishable on facts. The said reply is also extracted hereunder for ready-reference from the impugned order itself:—
“Point wise reply to AO's version
(1) In para 4.3 & 4.4 of the assessment order, the Assessing Officer has wrongly concluded the non existence of Padmesh Realtors (P.) Ltd. on account of the following:—
a) The allegations that assessee could not explain the actual address of Padmesh Realtors (P.) Ltd. is completely baseless. At no point of time, the assessee company expressed its ignorance about the said company. The address of Padmesh Realtors (P.) Ltd. was never sought by the Assessing Officer from the assessee company. In fact, the existence of Padmesh Realtors (P.) Ltd. was not only in the knowledge of the Assessing Officer from the day one but even the same was in the knowledge of Investigation Wing of the I.T Deptt. who during the course of post search investigation made investigation to the subscribing of Compulsorily Convertible Debentures of Padmesh Realtors (P.) Ltd. by Deutsche Bank AG Singapore amounting to Rs. 600 Crores. The Assessing Officer has also examined this issue during the course of assessment proceedings of Padmesh Realtors (P.) Ltd. and found the same to be genuine. Hence, the existence of Padmesh Realtors (P.) Ltd. was not in dispute at any point of time as alleged by the Ld. Assessing Officer.
b) Padmesh Realtors (P.) Ltd. was incorporated on 02.09.2006 vide Corporate Identity No. U-70109DL2006 PTC 152966 issued by ROC, NCT of Delhi & Haryana. During the financial year 2007–2008 relevant to Ass. Yr 2008–2009, the Regd. office of Padmesh Realtors (P.) Ltd. was A-102, Dream Apartments, Plot No. 14, Sector-12, Dwarka New Delhi 110075 and warehouse at 3, Patparganj Indl. Area Delhi-110092. The said Regd. Office of Padmesh Realtors (P.) Ltd. was changed to N-49 (1st Floor) Connaught Place, New Delhi w.e.f 08.09.08 and again changed to 1240 (yd floor) Kucha Mahajani, Chandani Chowk, Delhi-110006 w.e.f 02.03.09 Padmesh Realtors (P.) Ltd. was duly registered with Value Added Tax Deptt (Sales Tax Deptt) vide Regn no.: TIN 07120338063 w.e.f 14.01.08 and also assessed to I. Tax vide PAN: AAAECP00180N. In support of existence of Padmesh Realtors (P.) Ltd., the assessee company has filed following documents during the course of assessment proceedings:—
S. No. Particulars of documents filed during the course of assessment proceedings Refer to Page No. of the Paper Book-A (i) Memorandum & Articles of Association Certificate of Incorporation issued by ROC 1 to 25 (ii) Photocopy of PAN card 26 (iii) Photocopy of Registration Certificate issued by VAT Deptt. (Sales Tax Deptt.) 27 (iv) Photocopy of Form No. 18 filed with ROC & 28 to 31 (v) Photocopy of NOC issued by land lady Mrs. Kamini Gupta for allowing use of business premises at A-102, Dream Apartment, Plot No. - 14, Sector-22, Dwarka, New Delhi-110075 & proof of her ownership. 32 to 37 (vi) Photocopy of NOC issued by Kumar Ice Facto (P.) Ltd. for allowing use of godown premises at Patpar Ganj, Industrial Area, Delhi-110092 alongwith proof of its ownership. 38 to 40 (vii) Photocopy of DVAT 07 regarding addition Godown premises (3, Patparganj Industrial Area, Delhi-110092) in Sales tax Deptt. Records. 41 to 50
A perusal of the above documents duly establish the existence of Padmesh Realtors (P.) Ltd. The assessee company has never concealed the identity and address of Padmesh Realtors (P.) Ltd.
(2) The allegation that Ms. Kamini Gupta, owner of Flat no. A-102, Dream Apartments, Plot No. 14, Sector - 22, Dwarka, New Delhi-110075 has stated in her statement that she has not heard the name of Padmesh Realtors (P.) Ltd. is incorrect. Padmesh Realtors (P.) Ltd. has provided a copy of NOC issued by Ms. Kamini Gupta to Padmesh Realtors (P.) Ltd. for allowing use of Flat No. A-102 Dream Apartment, Plot No. 14, Sector-22, Dwarka, New Delhi for business purpose by them alongwith photocopy of her passport and proof of flat ownership. Photocopy of these documents were duly filed during the course of assessment proceedings [Refer Page 32 to 37 of the Paper Book-A]
A perusal of these documents duly establish the fact that Padmesh Realtors (P.) Ltd. was functioning from Flat No. A-102, Dream Apartments, Plot No. 14, Sector 22, Dwarka, New Delhi-110075 with the consent of the owner of the flat i.e Ms. Kamini Gupta. The Assessing Officer has neither brought to the notice of the assessee company the alleged recording of statement of Ms. Kamini Gupta nor allowed to confront with the same. In view of the same, no negative inference can be drawn against the assessee company on this count on the basis of the said alleged statement of Ms. Kamini Gupta.
(3) Similarly after receiving assessment order, the assessee company came to know about alleged recording of the statement of Mr. Sanjay Aggarwal as stated on Page ‘6’ of the assessment order. On making enquiry from Padmesh Realtors (P.) Ltd., the assessee company was informed that no person known as Sanjay Aggarwal was in employment of Padmesh Realtors (P.) Ltd. Therefore if any statement of Mr. Sanjay Aggarwal was recorded, it was of some unauthorized person and therefore has no relevance to the case of the assessee company. Further, the Assessing Officer has wrongly stated that Godown Premises i.e at Plot No. 3, Patparganj Indl. Area, Delhi-110092 is constructed on a plot measuring 450 sq. meters. Infact the said Godown is constructed on a plot measuring 2000 sq. mtrs. The said premises were used by Padmesh Realtors (P.) Ltd. for Godown purposes. In support of it the assessee company during the course of assessment proceedings has filed photocopy of NOC issued by Kumar Ice Factory (P.) Ltd. to Padmesh Realtors (P.) Ltd. for allowing use of said premises for Godown purposes, photocopy of MCD data relating to the said property showing area of the said premises as 2000 sq. meters, photocopy of Property Tax payment receipt and photocopy of Sales Tax documents (DVAT-07 & its annexures) showing the said premises as Godown of Padmesh Realtors (P.) Ltd. in the records of Sales Tax Deptt. [Refer Page No. 38 to 50 of the Paper Book-A]
A perusal of these documents duly establish the fact that Padrnesh Realtors (P.) Ltd. had warehouse (Godown) at 3, Patparganj Indl Area, Delhi-10092 constructed on a plot admeasuring 2000 sq. Mtrs. and was duly used by it for storage of materials. It seems the Deptt has visited at some wrong address resulting into inspection of some other site having area of 450 sq. Mtrs and recording of statements of some person not related to Padmesh Realtors (P.) Ltd. in any manner whatsoever. Moreover, the Assessing Officer has neither brought to the notice of the assessee company the recording of alleged statement nor allowed any right to confront with the same. Hence, the alleged statement cannot be used against the assessee company i.e, no adverse inference can be drawn on the basis of the said alleged statement against the assessee company.
(4) On Page ‘7’ of the assessment order the Assessing Officer has given his finding relating to RV Mercantile (P.) Ltd. that in Amar colony at Main Rohtak Road, Nangloi, New Delhi, there are blocks like A & B and only no without Blocks like ‘22’ does not exists. The said finding of the Assessing Officer is incorrect. In fact, in Amar Colony at Main Rohtak Road, Nangloi, New Delhi, the address 22, Amar Colony, Main Rohtak Road, Nangloi, New Delhi do exists and in financial year 2007–2008 relevant to Ass. Yr. 2008–2009 R.V Mercantile (P.) Ltd. was functioning from the said address. R.V Mercantile (P.) Ltd. is an incorporated body vide CIN - U65999 TN1999PTC041948 issued by ROC Chennai, Tamil Nadu having paid up capital of Rs. 1.50 Crore, registered with sales tax Deptt. vide TIN 07040340435 and assessed to I. Tax vide PAN AABCR8274R. Photocopy of documents in support of genuineness of purchase made from RV Mercantile (P.) Ltd. which includes photocopy of Invoices, confirmed copy of account for financial year 2007–2008 & 2008–2009, bank statement of Padmesh Realtors (P.) Ltd. from where cheques issued to R.V Mercantile (P.) Ltd. were cleared, audited annual accounts of R.V Mercantile (P.) Ltd. for financial year 2007–2008 and photocopy of DVAT return filed by R.V Mercantile (P.) Ltd. for 4th Quarter of financial year 2007–2008 were duly filed during the course of assessment proceedings (Refer Page 1798 to 1826 of the Paper Book - “B”).
A perusal of these documents duly establishes the existence of R.V Mercantile (P.) Ltd. and genuineness of transactions of Padmesh Realtors (P.) Ltd. with R.V Mercantile (P.) Ltd.
(5) On Page 7 & 8 of the assessment order, the Assessing Officer has given his finding with regards of Shri Ganpati Sales. In these finding it is stated that some Ms. Rekha Sachdeva was residing in premises no. 30/7B, Gali No. 6, Vishwas Nagar, Shahdara, Delhi-32 who has stated that one room on Ground Floor of the said premises was given on rent to Mr. Pramod. She has also given the Mobile No. of Mr. Pramod. On making enquiry on the said mobile number, Mr. Pramod confirmed that Shri Ganpati Sales was carrying on business from the aforesaid premises. Regarding Transfer of Business Premises by Shri Ganpati Sales, it seems that the Assessing Officer has noted the incomplete address, the new address of Shri Ganpati Sales was 110-112,16/3 Abdul Aziz Road, Karol Bagh, New Delhi [Refer to page no. 1686-1688 of the Paper Book-B relating to confirmed copy of account on which new address of Shri Ganpati Sales has been given]. The Assessing officer has Missed to note down 16/3 prior to noting of Abdul Aziz Road. Even otherwise the findings of the Assessing officer himself proved that Mr. Pramod has confirmed that Shri Ganpati Sales was carrying on business from the aforesaid address. Shri Ganpati Sales was registered with VAT (Sales Tax Deptt.) vide TIN 07150310353 and assessed to I. Tax vide PAN BGDPS8184D. In support of genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Shree Ganpati Sales, the assessee company during the course of assessment proceedings has filed photocopy of Invoices, confirmed copy of account for financial year 2007–2008, bank statement of Padmesh Realtors (P.) Ltd. from where cheques issued to Shri Ganpati Sales were cleared, copy of I.T return for assessment year 2008–2009 etc. filed. [Refer Page No. 1652 to 1710 of the Paper Book-B]
A perusal of these documents duly establishes the existence of Shri Ganpati Sales and genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Shri Ganpati Sales.
(6) On Page ‘8’ of the assessment order, the Assessing Officer has given his finding with regards to Sai Traders. The said finding itself shows that Sai Traders carrying on business at E-279, Nag Mandir Road, Shastri Nagar, Delhi-110052 for a very long period till April 2008. Sai Traders was proprietary concern of Mr. Vinay Jain duly registered with VAT (Sales Tax) Deptt. vide TIN 07620277454 and assessed to I. Tax vide PAN AHLPJ8354L. In support of genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Sai Traders, the assessee company has filed photocopy of invoices, confirmed copy of account for financial year 2007–2008 & 2008–2009, bank statement of Padmesh Realtors (P.) Ltd. from where cheques issued to Sai Traders were cleared, IT return copy of Mr. Vinay Jain (Prop. Sai Traders) for Ass. Yr. 2008–2009, copy of audited annual account for financial year 2007–2008 of Sai Traders, copy of VAT (Sales Tax) return for financial year 2007–2008 and photocopy of Sales Tax Regn Certificate of Sai Traders [Refer Page No. 936 to 1009 of the Paper Book B]
A perusal of these documents duly establishes the existence of Sai Traders and genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Sai Traders.
(7) para 4, 5 and 4.6 of the assessment order, the Ld. Assessing Officer has alleged that Padrnesh Realtors (P.) Ltd. has made purchases from paper companies. The said allegation of the Assessing officer is neither based on any substance nor based on any material brought on record. The Assessing Officer has made wrong allegation that Padmesh Realtors (P.) Ltd. has failed to exhibit the mode of transportation of goods and they do not have any godown facility to store the material. In fact mode of transportation has been duly reflected on each & every Invoice issued by Padmesh Realtors (P.) Ltd. to the assessee company and also on the accompanying copy of GR's/Bilty's annexed with each & every invoice, copies of which were duly filed during the course of assessment proceedings [Refer Page 169 to 871 of the Paper Book-A] and also discussed in reply dated 15,12.2010 filed during the course of assessment proceedings [Refer Annexure ‘X’ - Page 1 to 7]. Similarly, Padmesh Realtors (P.) Ltd. had godown at 3, Patpar Ganj Indl, Area, Delhi-110092 which was built on plot admeasuring 2000 sq. mtrs, the relevant supporting documents were duly filed during the course of assessment proceedings. [Refer Page No. 38 to 50 of the Paper Book-A], Hence, the assessee company has duly discharged its onus with respect to discloser of mode of transportation as well as discloser regarding place of warehouse maintained by Padmesh Realtors (P.) Ltd.
(8). In Para 4.7, the Assessing Officer has stated that confirmed copy of accounts of those parties from whom purchases has been made by Padmesh Realtors (P.) Ltd. were not filed. This statement of the Assessing Officer is factually incorrect. Infact, confirmed copy of account of all those parties from whom Padmesh Realtors (P.) Ltd. has made purchases during the financial year 2007–2008 were duly filed during the course of assessment proceedings alongwith reply dated 15.12.2010 For verification of the same, your honour may please refer to the following:—
S. No. Name of the Party from whom Padmesh Realtors (P.) Ltd. has made purchases and whose confirmed copy of Account was filed during the course of assessment proceedings Refer Page No. of Paper Book-B i) Gupta Sons 875 to 876 ii) Ishwar & Sons Timber Traders 880 to 882 iii) Shree Sai Trading Co. 917 & 918 iv) Sai Traders 971 & 972 v) Siddhi Vinayak Enterprises 1034 vi) Shree G.J Trading Co. 1078 & 1079 Vii) Kamdhenu Industries Ltd. 1170 to 1173 viii) Rima Trading Co. 1247 to 1249 ix) Shri Krishna Steels 1324 to 1326 x) Shiv Trading 1367 & 1368 xi) Shiv Om Sales Corporation 1400 & 1401 xii) Shree Murli Enterprises 1441 xiii) Sunrise Enterprises 1477 xiv) N.P Sales Corporation 1516 xv) Shree Shyam Enterprises 1553 to 1555 xvi) Swastik International 1571 xvii) Delhi Trading Company 1591 xviii) Kasliwal Enterprises 1618 xix) Shri Ganpati Sales 1686 xx) Daga Trading Company (P.) Ltd. 1715 xxi) Northern Steel & General Mills 1753 xxii) India Steels 1785 xxiii) R.V Mercantile (P.) Ltd. 1804 & 1805
Further with regards to non production of Managing directors or these companies, it is submitted that the Assessing Officer has never asked the assessee company to produce these persons Moreover, the assessee company has not purchased materials from these companies. The assessee company has not made purchase of materials from these companies rather made purchases from Padmesh Realtors (P.) Ltd. who in turn made purchases from these companies. The assessee company cannot be asked to produce the directors of these companies as the onus to be discharged by the assessee company can be laid to explain the source but not source of the source. Hence, there was no failure on the part of the assessee company to discharge its onus on this account also.
(9) In para 4.8 & 4.9 of the assessment order the Assessing Officer has himself stated that the assessee company has made payment through account payee cheques to Padmesh Realtors (P.) Ltd. The Assessing Officer has without bringing any material on record has termed the actual payment made by Padmesh Realtors (P.) Ltd. to its suppliers as payment made to paper companies. The said observation of the Assessing Officer is not based on any fact or material and therefore untenable at law. Similarly the observation of the Assessing Officer that payment made by Padmesh Realtors (P.) Ltd. to its various suppliers have “again been transferred to some other accounts and after multiple rotations, the ultimate destination of money is not clear” is not based on any material brought on record. The said observation made by the Assessing Officer is purely based on his assumptions, conjectures & surmises. The said observation is not based on any fact or material and completely incorrect. The Assessing Officer has neither divulged any bases for making these observations nor discussed any material to support these observations. In the absence of any supporting material, these observations are purely imaginary, based on assumptions, conjectures & surmises and hence untenable at law.
(10) In para 4.10 & 4.11 the Assessing Officer has cited the judgment of Hon'ble Delhi High Court in the case of CIT v. La Medica (2001) 250 ITR 575 Delhi, [Refer Page 1868 to 1870 of Paper Book-C]. The facts of the case given in the said case are completely different to the facts in the present case as shown below:—
(a) In the cited case the Assessing Officer has brought material on record to prove that the supplier has no means to carry on business and he is in employment with sister concern of the purchaser. No such fact exists in the present case. No material has been brought on record by the Assessing Officer to suggest the suppliers of Padmesh Realtors (P.) Ltd. were its employee.
(b) In the cited case the bank account of the supplier was opened with the introduction of the purchaser whereas it is not so in the present case.
(c) In the cited case the goods were not accepted by the purchaser but was accepted by some irrelevant person whereas it is not so in the present case.
(d) In the cited case supplier has immediately withdrawn the payment from his bank account whereas it is not so in the present case.
(e) In the cited case the statement of the supplier was recorded in which he has stated that he was a petty employee with purchaser's sister concern whereas it is not so in the present case. In the cited case the rate at which purchases were made was high whereas it is not so in the present case.
(f) In the cited case the seller couldn't produce any document in support of purchases of goods by him whereas it is not so in the present case. Infact in the present case the assessee company has obtained and filed all the documents in support of purchases made by its supplier i.e documents relating to purchases made by Padmesh Realtors (P.) Ltd.
In view of the above, it is clear that the facts of the case cited by Ld. Assessing Officer in his order are completely different to the facts of the present case and hence the judgment given in the cited case has no applicability to the present case.”
(Emphasis by bold texting provided by the Bench)
3.12 Apart from the above submissions on facts the legal position based on judicial pronouncements was also referred to for consideration before the CIT(A). For the proposition that in the facts of the present case, the purchases cannot be treated as bogus, reliance was placed upon the following judgements:—
(i) DCIT v. Adinath Industries, (2001) 252 ITR 476 (Guj.);
(ii) CIT v. J.M.D Computers & Communications (P.) Ltd., 20 DTR 317 (Delhi); and
(iii) CIT v. Interseas, (2010) 40 DTR 143 (Ker.).
3.13 It was further canvassed that the AO has ignored the documentary evidence available on record which established beyond doubt that the purchases were genuine and conclusion contrary to the facts before him has been drawn without bringing any material on record to support the conclusion made. The rejection of the documentary evidence on record by the AO it was stated is based on mere suspicions assumptions, conjectures and surmises. It was argued suspicion howsoever strong does not partake the character of evidence. Accordingly it was argued based upon the following judgements that the additions made on suspicions, surmises & conjectures deserve to be deleted:—
(i) Uma Charan Shaw & Bros. v. CIT, (1959) 37 ITR 271 (SC);
(ii) Lal Chand Bhagat Ambica Ram v. CIT, (1959) 37 ITR 288 (SC);
(iv) Commissioner Of Income-Tax v. Kulwant Rai, 291 ITR 36 (Delhi High Court);
(v) Dhakeshwari Cotton Mills Ltd. v. CIT, (1954) 26 ITR 775 (SC);
(vi) Commissioner Of Income-Tax, Delhi (Central-2) v. Mrs. Sunita Vachani., 184 ITR 121 (Delhi High Court);
(vii) Commissioner Of Income-Tax v. Anupam Kapoor, 299 ITR 179 (P&H High Court).
3.14 A perusal of the impugned order further shows that apart from the submissions dated 27.02.2012 on behalf of the assessee, further submissions were also made dated 19.03.2012 which are extracted at pages 38-44 of the impugned order in para 4.1
3.15 A perusal of the same shows that the assessee assailed the action of the AO co-relating the documents seized during the search & Seizure with the documents available in the books of accounts of the assessee and further co-relating the same with the copy of the account of Padmesh Realtors (P.) Ltd. in assessee's books of accounts which could be verified from the detailed documents placed before the AO.
3.16 Apart from that photocopies of the show cause notice issued by the AO were also filed alongwith the replies filed on behalf of the assessee.
3.17 The assessee further addressing the correct address of R.V Mercantile (P.) Ltd. submitted that the addresses at Amar Colony are based on Khasra numbers as well as in Blocks such as “A”, “B”, “C” etc. This fact it was stated can be verified from the Goggle search of the site of Mahanagar Telephone Nigam, New Delhi. Accordingly it was claimed that No. - “22” by itself does not exist and either there should be a Block mentioned or a Khasra Number and in very few cases only number may also be a sufficient address. Accordingly the address given was claimed to be the correct address.
3.19 Further addressing the alleged issuance of summons etc. to the parties from whom Padmesh Realtors had made the purchases it was submitted that the assessee was never informed that summons u/s. 131 were issued to the parties from whom Padmesh Realtors (P.) Ltd. had made purchases nor has this fact been confronted to the assessee that no such company was found at the given address. The inference drawn was assailed on the ground that adverse evidence has been relied upon which was gathered at the back of the assessee which was not confronted. Similarly the recording of statements of Mrs. Kamini Gupta, Sh. Sanjay Aggarwal, Smt. Rekha Sachdeva, Smt. Kamlesh Devi and telephonic conversation with Sh. Pramod was stated to have never been brought to the notice of the assessee as neither the AO has provided any statement of these persons nor has the assessee been confronted with the same. In support of the said assertion, affidavit of the one of the Directors of the assessee company namely Sh. Ram Niwas Bansal was relied upon. In the said background, reliance was placed upon Kishinchand Chellaram v. CIT, (1980) 125 ITR 713 (SC) for the proposition that reliance has been placed upon the statement of the third parties which have not been confronted to the assessee.
3.20 It was further argued that the evidence relied upon are the very same evidence which was available before the AO as such no fresh evidence has been relied upon.
3.21 It was further stated that at no point of time the AO has asked the assessee to produce any Director or Managing Director of Padmesh Realtors (P.) Ltd. For ready-reference, we deem it appropriate to extract the relevant portion from pages 38 to 41 of the impugned order:—
(1) Documents seized durins Search & Seizure Operation at SI No. SCN (AS-3) Page 102 to 109 & 111
As desired, we are enclosing herewith photocopy of documents seized during search & seizure operation on 25.09.2008 at Sl No. SCN-(AS-3) Page 102 to 109 & 111. A perusal of these document shows that Page No. 102 to 109 relates to copy of account of Padmesh Realtors in the books of Odeon Builders (P.) Ltd. for financial year 2007–2008 relating to various work sites of Mis Odeon Builders (P.) Ltd. and Page No. 111 relates to summary of these transactions. The transactions given in these documents were duly recorded in the regular books of accounts of the assessee company for financial year 2007–2008 which can be verified from the documents filed during the course of assessment proceedings [refer to Page No. 51 to 71 of the Paper book ‘A’]. The contents of seized material IS same as shown in the books of accounts of the assessee company for financial year 2007–2008
(2) Show Cause dated 27.08.2010
As desired, we are enclosing herewith photocopy of show cause notice dated 27.08.2010 issued by Assessing Officer, Central Circle-1, New Delhi for Ass. Year 2008–2009 and photocopy of replies filed by the assessee company during the course of assessment proceedings in response to the said show cause notice dated 27-08-2010.
(3) Clarification Regarding correctness of Address of R.V Mercantile (P.) Ltd.
The Assessing Officer in his order dated 24.12.10 has stated that in Amar Colony, premises number are based on Khasra numbers and also in blocks such as ‘A’, ‘B’ etc. He further concluded that simply number 22 does not exists and it appears that company has not given proper address. This conclusion of the Assessing Officer is not correct. In Amar Colony all the three situations exists i.e in some part blocks are given, in some part Khasra No's are given and in some part simple No's are given. This facts can be verified from the google search of the site of Mahanagar Telephone Nigam, ‘New Delhi. A perusal of the same shows that in Amar Colony, Main Rohtak Road of N angloi premises having No's only also exists (i.e without any block or Khasra No. etc.) Hence the assessee company has given the full and right address of R.V Mercantile (P.) Ltd. which was there till the assessment proceedings for Ass. Year 2008–2009 were completed.
(4) Clarification regarding Alleged Issuance of summons & Alleged recording of statements.
a) During the whole assessment proceedings for A.Y 2008–2009, completed uls 143(3) r.w.s 153A of the Income Tax Act, 1961, the Assessing Officer has not brought to the notice of the assessee company regarding issuance of any summons u/s. 131 of the Income Tax Act, 1961 to the parties from whom Padmesh Realtors Pvt. Ltd. had made purchases. He has also not brought to the notice of the assessee company that these summons were received back with the comments that no such company at the given address. Therefore no adverse inference can be drawn against the assessee company on this account. On the other hand the assessee company has filed sufficient documents during the said assessment proceedings which duly establishes the identity of these parties and also the genuineness of transactions of Padmesh Realtors Pvt. Ltd. with these companies.
During the whole assessment proceedings for A.Y 2008–2009 completed u/s. 143(3) r.w.s 153A of the Income T8X Act, 1961, the Assessing Officer has not brought to the notice of the assessee company regarding recording of any statement of Kamini Gupta, Sh. Sanjay Aggarwal, Smt Rekha Sachdeva, Smt Kamlesh Devi and telephonic conversation with Shri Pramod. He has neither provided copy of any such statement nor provided any right to confront with the same to the assessee company (Affidavit of one of the directors of the assessee company namely Sh. Ram Niwas Bansal to this effect is enclosed herewith). In view of these circumstances these statements cannot be relied upon and no adverse inference can be drawn against the assessee company on the basis of alleged statements. The assessee company was neither informed about recording of such alleged statements nor any opportunity was afforded to it to cross examine these persons. Reliance on the statements of third parties who were never examined by the Assessing Officer himself and that too without providing any opportunity to the assessee to cross examine these parties is against the principle of natural justice and cannot be sustained in law. In this connection reliance is placed on the judgement of Hon'ble Supreme Court in the case of Kishinchand Chellaram v. CIT (1980) 125 I.T.R 713 (SC), wherein the Hon'ble Supreme Court has held as under.
“that, according to the ITO, this letter was traced by him and even then it was not shown by him to the assessee but it was forwarded to the Tribunal and it was for the first time at the hearing before the Tribunal in regard to the preparation of the supplemental statement of the case that this letter was shown to the assessee. It will, therefore, be seen that, even if we assume that this letter was in fact addressed by the manager of the Punjab National Bank Ltd. to the ITO, no reliance could be placed on it, since it was not shown to the assessee until at the stage of preparation of supplemental statement of the case and no opportunity to cross-examine the manager of the bank could in the circumstances be sought or availed of by the assessee.”
(5) Declaration regarding evidences filed
The evidences filed with your honour during the appellate proceedings are only those which were filed with the Assessing Officer during the course of assessment proceedings completed u/s. 143(3) r.w.s 153A of the Income Tax Act, 1961, No additional evidence has been filed before your honour.
(6) Producing M.D of padmesh Realtors (P.) Ltd.
During the course of whole assessment proceedings, the Assessing Officer has never asked the assessee company to produce any director or managing director of Padmesh Realtors (P.) Ltd. In fact during the whole assessment proceedings for Ass. Year 2008–2009, the Assessing Officer has not asked the assessee company to produce any person.”
(emphasis provided by bold texting)
3.22 In order to further demonstrate the fallacy in the stand of the AO, the assessee again placed comparative results of the last 4 years which were available on record and it was highlighted that when the same is compared with the calculation arrived at adding the purchases of Rs. 19.39 crore treated by the AO as bogus a fallacious position would emerge as then consumption would be reduced by 15 to 17% for executing the works contract of Rs. 121.92 crore odd and even the Gross Profits would jump up by 17% i.e from 12% to 29% which is practically an impossible situation. It was again reiterated that the stand of the AO consequently becomes untenable as has been held by the P&H High Court in the case of CIT v. Leaders Valves (P.) Ltd. (cited supra). For ready-reference the comparative results from page 41 & 42 para 7 are extracted hereunder:—
7. Comparative Results
The comparative trading results of the assessee company for the last four years are as under:—
S. No. Particulars Ass. Yr. (2008–2009) (Rs.) Ass. Yr. 2007–2008 (Rs.) Ass. Yr. 2006–2007 (Rs.) Ass. Yr. 2005–2006 (Rs.) A(i) Certified contract work 1,12,67,62,111 72,79,62,927 54,44,42,549 38,07,62,152 (ii) Uncertified Contract Work/(Increase or decrease in WIP) 8,75,27,876 - - - (iii) Total value of contract work 1,21,42,89,987 72,79,62,927 54,44,42,549 38,07,62,152 B Material Consumption 84,29,72,332 51,40,88,214 37,46,81,298 26,21,37,200 C % of Material consumption to total value of contract work (% of B to A(iii)) 69.42% 70.62% 68.82% 68.85% D Gross Profit 14,05,64,812 9,43,66,966 6,82,85,678 4,35,83,871 E G.P Rate 12.48% 12.96% 12.54% 11.45%
3.22.1 The adjusted chart where Rs. 19 crore odd is treated as bogus extracted from page 42 of the impugned order is reproduced hereunder:—
S. No. Particulars Ass. Yr. 2008–2009 (Rs.) Ass. Yr. 2007–2008 (Rs.) Ass. Yr. 2006–2007 (Rs.) Ass. Yr. 2005–2006 (Rs.) A(i) Certified contract work 1,12,67,62,111 72,79,62,927 54,44,42,549 38,07,62,152 (ii) Uncertified Contract work/(Increase or decrease in WIP) 8,75,27,876 - - (iii) Total value of contract work 1,21,42,89,987 72,79,62,927 54,44,42,549 38,07,62,152 B Material Consumption 84,29,72,332 51,40,88,214 37,46,81,298 26,21,37,200 C % of Material consumption to total value of contract work (% of B to A(iii) 69.42% 70.62% 68.82% 68.85% D Gross Profit 14,05,64,812 9,43,66,966 6,82,85,678 4,35,83,871 E G.P Rate 12.48% 12.96% 12.54% 11.45%
4. Considering these submissions the CIT(A) came to the following conclusions:—
“5. Finding on Grounds of Appeal:
A. On a careful consideration of the assessment order and submissions filed by the appellant it is observed that the addition to income for Rs. 19,39,60,866/- has been made by the AO treating the entire purchases made by appellant from Padmesh Realtors (P.) Ltd. as bogus on the ground that the parties from whom Padmesh Realtors (P.) Ltd. has made purchases were not in existence. As against the above finding of the A.O the appellant has contested the addition by raising several issues in the submissions filed, which are summarized as under.
(a) That in support of the identity of Padmesh Realtors (P.) Ltd., copy of Memorandum & Articles of Association, PAN Card, VAT Regn. Certificate, F. No. 18 filed with ROC, NOC issued by Mrs. Kamini Gupta for allowing use of business premises, NOC issued by Kumar Ice Factory (P.) Ltd. for allowing use of Godown premises and DVAT 07 Form regarding addition of Godown premises were duly filed during the course of assessment proceedings.
(b) That in support of genuineness of purchases made from Padmesh Realtors (P.) Ltd., confirmed copy of accounts, bank statement of assessee's bank account showing payment made to Padmesh Realtors (P.) Ltd., audited annual accounts of Padmesh Realtors (P.) Ltd., VAT return & I.T returns filed by Padmesh Realtors (P.) Ltd., invoices issued by Padmesh Realtors (P.) Ltd., copies of Bilty/GR's for transportation of goods, photocopies of F. No. 38 issued by Haryana VAT Deptt., Photocopies of F. No. 47 issued by Rajasthan VAT Deptt. and photocopy of national permit of trucks owned by assessee company were duly filed during the course of assessment proceedings.
(c) That though the assessee company was not required to explain the source of the source i.e the details of purchases made by Padmesh Realtors (P.) Ltd., however the assessee company has obtained these details from Padmesh Realtors (P.) Ltd. and filed copies of sales invoices issued by these parties to Padmesh Realtors (P.) Ltd., confirmed copy of accounts of these parties in the books of Padmesh Realtors (P.) Ltd., Bank statement of Padmesh Realtors (P.) Ltd. Showing payment made to these parties and copy of IT returns, VAT returns & audited annual accounts of these parties etc. during the course of assessment proceedings, in support of genuineness of purchases made by Padmesh Realtors (P.) Ltd.
(d) That the allegations that assessee could not explain the actual address of Padmesh Realtors (P.) Ltd. is completely baseless. At no point of time, the assessee company expressed its ignorance about the said Company. The address of Padmesh Realtors (P.) Ltd. was never sought by the Assessing Officer from the assessee company. In fact, the existence of Padmesh Realtors (P.) Ltd. was not only in the knowledge of the Assessing Officer but also within the knowledge of Investigation Wing of the IT. Deptt. who during the course of post search investigation had inquired regarding the subscribing of Compulsorily Convertible Debentures of Padmesh Realtors (P.) Ltd. By Deutsche Bank AG Singapore, amounting to Rs. 600 Crores. The Assessing Officer has also examined this issue during the course of assessment proceedings of Padmesh Realtors (P.) Ltd. and found the same to be accepted, as no adverse inference has been drawn. That therefore the appellant submits that the existence of Padmesh Realtors (P.) Ltd. was not in dispute at any point of time.
(e) That the allegation that Ms. Kamini Gupta, owner of Flat no. A-102, Dream Apartments, Plot No. 14, Sector - 22, Dwarka, New Delhi-110075 has stated in her statement that she has not heard the name of Padmesh Realtors (P.) Ltd. is incorrect. That Padmesh Realtors (P.) Ltd. has provided a copy of NOC issued by Ms. Kamini Gupta to Padmesh Realtors (P.) Ltd. for allowing use of Flat No. A-102 Dream Apartment, Plot No. 14, Sector-22, Dwarka, New Delhi for business purpose by them alongwith photocopy of her passport and proof of flat ownership. Photocopy of these documents were duly filed during the course of assessment proceedings [Refer Page 32 to 37 of the Paper Book-A]
That from a perusal of these documents it is duly established that Padmesh Realtors. (P.) Ltd. was functioning from Flat No. A-I02, Dream Apartments, Plot No. 14, Sector 22, Dwarka, New Delhi-110075 with the consent of the owner of the flat i.e Ms. Kamini Gupta. The Assessing Officer has neither brought to the notice of the assessee company the alleged recording of statement of Ms. Kamini Gupta nor was allowed to confront her with the same. In view of the same, no negative inference can be drawn against the assessee company on this count on the basis of the said un-confronted statement of Ms. Kamini Gupta.
(f) That similarly after receiving assessment order, the assessee company came to know about alleged recording of the statement of Mr. Sanjay Aggarwal as stated on Page ‘6’ of the assessment order. On making enquiry from Padmesh Realtors (P.) Ltd. the assessee company was informed that no person known as Mr. Sanjay Aggarwal was in employment of Padmesh Realtors (P.) Ltd. Therefore if any statement of Mr. Sanjay Aggarwal was recorded, it was of some unauthorized person and therefore has no relevance to the case of the assessee company. Further, the Assessing Officer has wrongly stated that Godown Premises i.e at Plot No. 3, Patparganj Indl. Area, Delhi-110092 is constructed on a plot measuring 450 sq. meters. Infact the said Godown is constructed on a plot measuring 2000 sq. mtrs. The said premises were used by Padmesh Realtors (P.) Ltd. for Godown purposes. In support of it the assessee company during the course of assessment proceedings has filed photocopy of NOC issued by Kumar Ice Factory (P.) Ltd. to Padmesh Realtors (P.) Ltd. for allowing use of said premises for Godown purposes; photocopy of MCD data relating to the said property showing area of the said premises as 2000 sq. meters; photocopy of Property Tax payment receipt and photocopy of Sales Tax documents (DVAT-07 & its annexures) showing the said premises as Godown of Padmesh Realtors (P.) Ltd. in the records of Sales Tax Deptt. [Refer Page No. 38 to 50 of the Paper Book - A]
That a perusal of these documents duly establishes the fact that Padmesh Realtors (P.) Ltd. had in his possession a warehouse (Godown) at 3, Patparganj Indl. Area, Delhi-10092 on a plot admeasuring 2000 sq. Mtrs. which was duly used by it for storage of materials. That it seems the Deptt. has visited at some wrong address resulting into inspection of some other site having area of 450 sq. mtrs. and recording of statements of some person not related to Padmesh Realtors (P.) Ltd. in any manner whatsoever. Moreover, the Assessing Officer has neither brought to the notice of the assessee company the recording of the above statement nor was allowed any opportunity to confront the person who have given such statement. Hence, the said statement cannot be used against the assessee company i.e no adverse inference can be drawn on the basis of the said statement given against the assessee company.
(g) That on Page ‘7’ of the assessment order the Assessing Officer has given his finding relating to RV Mercantile (P.) Ltd. that in Amar colony at Main Rohtak Road, Nangloi, New Delhi, there are blocks like A & B and only no. without Blocks like ‘22’ does not exists. The said finding of the Assessing Officer is incorrect. In fact, in Amar Colony at Main Rohtak Road, Nangloi, New Delhi, the address, 22, A.M ar Colony, Main Rohtak Road. Nangloi, New Delhi does exists and in financial year 2007–2008 relevant to Asst. Yr. 2008–2009 R.V Mercantile (P.) Ltd. was functioning from the said address, RV Mercantile (P.) Ltd. is an incorporated body vide CIN U65999 TNJ999PTC041948 issued by ROC Chennai, Tamil Nadu having paid up capital of Rs. 10.50 Crore, registered with sales Tax Deptt. vide TIN 07040340435 and assessed to I. Tax vide PAN AABCR8274R Photocopy of documents in support of genuineness of purchase made from RV Mercantile (P.) Ltd. which includes photocopy of Invoices, confirmed copy of account for financial year 2007–2008 & 2008–2009, bank statement of Padmesh Realtors (P.) Ltd. from where cheques issued to R.V Mercantile (P.) Ltd. were cleared, audited annual accounts of RV Mercantile (P.) Ltd. for financial year 2007–2008 and photocopy of DVAT return filed by R.V Mercantile (P.) Ltd. for 4th Quarter of financial year 2007–2008 were duly filed during the course of assessment proceedings (Refer Page 1798 to 1826 of the Paper Book - “B”).
A perusal of these documents duly establishes the existence of R.V Mercantile (P.) Ltd. and genuineness of transactions of Padmesh Realtors (P.) Ltd. with R.V Mercantile (P.) Ltd.
(h) That on Page 7 & 8 of the assessment order, the Assessing Officer has given his finding with regard to purchases made by Padmesh Realtors (P.) Ltd. from Shri Ganpati Sales. That in this finding it is stated that some Ms. Rekha Sachdeva was residing in premises no. 30/7B, Gali No. 6, Vishwas Nagar, Shahdara, Delhi-32 who has stated that one room on Ground Floor of the said premises was given on rent to Mr. Pramod. She has also given the Mobile No. of Mr. Pramod. On making enquiry on the said mobile number, Mr. Pramod confirmed that Shri Ganpati Sales was carrying on business from the aforesaid premises. That regarding the transfer of business premises by Shri Ganpati Sales, it seems that the Assessing Officer has noted the incomplete address, the new address of Shri Ganpati Sales was 110-112, 16/3 Abdul Aziz Road, Karol Bagh, New Delhi [Refer to page no. 1686-1688 of the Paper Book - B relating to confirmed copy of account on which new address of Shri Ganpati Sales has been given]. That the Assessing officer has missed to note down 16/3 prior to noting of Abdul Aziz Road. That even otherwise the finding of the Assessing officer himself proved that Mr. Pramod has confirmed that Shri Ganpati Sales was carrying on business from the aforesaid address. Shri Ganpati Sales was registered with VAT (Sales Tax Deptt.) vide TIN 07150310353 and assessed to Income Tax vide PAN BGDPS8184D. In support of genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Shree Ganpati Sales the assessee company during the course of assessment proceedings has filed photocopy of Invoices, confirmed copy of account for financial year 2007–2008 bank statement of Padmesh Realtors (P.) Ltd. from where cheques issued to Shri Ganpati Sales were cleared, copy of I T. return for assessment year 2008–2009 etc. filed. [Refer Page No. 1652 to 1710 of the Paper Book-B]
That a perusal of these documents duly establishes the existence of Sai Traders and genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Sai Traders.
(i) That on Page ‘8’ of the assessment order, the Assessing Officer has given his finding with regards to Sai Traders. That the said finding itself shows that Sai Traders was carrying on business at E-279, Nag Mandir Road, Shastri Nagar, Delhi-110052. Sai Traders was proprietary concern of Mr. Vinay Jain duly registered with VAT (Sales Tax) Deptt. vide TIN 07620277454 and assessed to Tax vide PAN AHLPJ8354L. In support of genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Sai Traders, the assessee company has filed photocopy of invoices, confirmed copy of account for financial year 2007–2008 & 2008–2009, bank statement of Padmesh Realtors (P.) Ltd. from where cheques issued to Sai Traders were cleared, IT return copy of Mr. Vinay Jain (Prop. Sai Traders) for Asst. Yr. 2008–2009, copy of audited annual account for financial year 2007–2008 of Sai Traders, copy of VAT (Sales Tax) return for financial year 2007–2008 and photocopy of Sales Tax Regn. Certificate of Sai Traders. [Refer Page No. 936 to 1009 of the Paper Book - B]
That a perusal of these documents duly establishes the existence of Sai Traders and genuineness of purchases made by Padmesh Realtors (P.) Ltd. from Sai traders.
(j) That in para 4.5 and 4.6 of the assessment order, the Ld. Assessing Officer has alleged that Padmesh Realtors (P.) Ltd. has made purchases from paper companies. The said allegation of the Assessing officer is neither based on any substance nor based on any material brought on record. The Assessing Officer has made wrong allegation that Padmesh Realtors (P.) Ltd. has failed to exhibit the mode of transportation of goods and they do not have any godown facility to store the material. In fact mode of transportation has been duly reflected on each & Invoice issued by padmesh (P.) Ltd. to the assessee company and also on the accompanying copy of GR.'s/Bilty's annexed with each & every invoice, copies of which were duly filed during the course of assessment proceeding [Refer Page 169 to 871 of the Paper Book-A] and also discussed in reply dated 15.12.2010 during the course of assessment proceedings [Refer Annexure ‘X’-Page 1 to 7]. Similarly, Padmesh Realtors (P.) Ltd. had Godown at 3, Patpar Ganj Indl. Area, Delhi-110092 which was built on plot admeasuring 2000 sq. mtrs, the relevant supporting documents were duly filed during the course of assessment proceedings.[Refer Page No. 38 to 50 of the Paper Book-A]. Hence, the assessee company has duly discharged its onus with respect to disclosure of mode of transportation as well as discloser regarding place of warehouse maintained by Padmesh Realtors (P.) Ltd.
(k) That in Para 4.7, the Assessing Officer has stated that confirmed copy of accounts of those parties from whom purchases has been made by Padmesh Realtors (P.) Ltd. were not filed. This statement of the Assessing Officer is factually incorrect in as much as confirmed copy of account of all those parties from whom Padmesh Realtors (P.) Ltd. has made purchases during the financial year 2007–2008 were duly filed during the course of assessment proceedings alongwith reply dated 15.12.2010 Further with regards to non production of Managing directors of these companies, it is submitted that the Assessing Officer has never asked the assessee company to produce these persons. Moreover, the assessee company has not purchased materials from these companies and has rather made purchases from Padmesh Realtors (P.) Ltd. who in turn made purchases from these companies. That the assessee company therefore could not be asked to produce the Directors of these companies as the onus to be discharged by the assessee company can be to the extent of explaining the source of purchases and not the source of the source. That therefore there was no failure on the part of the assessee company to discharge it's onus on this account too.
(l) That in para 4.8 & 4.9 of the assessment order the Assessing Officer has himself stated that the assessee company has made payment through account payee cheques to Padmesh Realtors (P.) Ltd. The Assessing Officer has without bringing any material on record has termed the actual payment made by Padmesh Realtors (P.) Ltd. to its suppliers as payment made to paper companies. The said observation of the Assessing Officer is not based on any fact or material and therefore untenable at law. Similarly the observation of the Assessing Officer that payment made by Padmesh Realtors (P.) Ltd. to its various suppliers have “again been transferred to some other accounts and after multiple rotations, the ultimate destination of money is not clear” is not based on any material brought on record. The said observation made by the Assessing Officer is purely based on his assumption, conjecture & surmises. The said observation is not based on any fact or material and completely
(m) That in para 4.10 that in para 4.10 & 4.11 the Assessing Officer has cited the judgment of Hon'ble Delhi High Court in 61: case of CIT v. La Medica (2001) 250 ITR 575 Delhi, [Refer Page 1868 to 1870 of Paper Book-C). That the facts of the case given in the said case are different from the facts in the present case as detailed below:—
(i) In the cited case the Assessing Officer has brought material on record to prove that the supplier has no means to carryon business and he is in employment with sister concern of the purchaser. No such fact exists in the present case. No material has been brought on record by the Assessing Officer to suggest that the suppliers of Padmesh Realtors (P.) Ltd. were its employee.
(ii) In the cited case the bank account of the supplier was opened with the introduction of the purchaser whereas it is not so in the present case.
(iii) In the cited case the goods were not accepted by the purchaser but was accepted by some irrelevant person whereas it is not so in the present case.
(iv) In the cited case supplier has immediately withdrawn the payment from his bank account whereas it is not so in the present case.
(v) In the cited case the statement of the supplier was recorded in which he has stated that he was a petty employee with purchaser's sister concern whereas it is not so in the present case.
vi) In the cited case the rate at which purchases were made was high whereas it is not so in the present case.
vii) In the cited case the seller couldn't produce any document in support of purchases of goods by him whereas it is not so in the present case. In fact in the present case the assessee company has obtained and filed all the documents in support of purchases made by its supplier i.e documents relating to purchases made by Padmesh Realtors (P.) Ltd.
In view of the above, it is clear that the facts of the case cited by Ld. Assessing Officer in his order are completely different to the facts of the present case and hence the judgment given in the cited case has no applicability to the present case.
(n) That the trading results of the year under appeal are similar to that of the previous years. The GP rate of the year under appeal is 12.48%, as against GP rate of 12.96% in A.Y 2007–2008, 12.54% in AY 2006–2007 and 11.45% in A.Y 2005–2006. No adjustment to declared trading results of the assessee company has ever been made including in the assessment proceedings simultaneously completed u/s. 153A r.w.s 143(3) of the I.T Act from A.Y 2005–2006 to 2007–2008. Therefore, the trading results as declared by the assessee company for the year under appeal should have been accepted.
Thus referring to the above facts the appellant has argued that the AO has not found anything wrong or incorrect in the documents and information submitted by the assessee company. That the assessee company has duly discharged its onus by filing necessary documents substantiating the fact that the purchases made from Padmesh Realtors Pvt. Ltd. were genuine. That the AO has ignored the documentary evidences filed by the appellant without bringing any material on record to the contrary. That the said rejection by the AO is based only on suspicion without any cogent evidence or material on record and therefore it is argued that the addition of Rs. 19,39,60,866/- made by the AO is bad in law and liable to be deleted on merits. For this proposition the appellant inter-alia relied on several decisions of the Honble Supreme Court, the Delhi High Court and other High Courts, which are not being reproduced in order to avoid repetition. The assessee has also relied on the ratio of decision in Kishinchand Chellaram v. CIT (1980) 125 I.T.R 713 (SC), to contend that no adverse inference can be drawn against the assessee company on the basis of alleged recording of statements of third parties recorded at his back, as neither the copy of any such statement was provided nor any right to confront with the same was allowed to the assessee company.
B. From the details filed by the assessee and referred to above it is clear that the assessee has discharged its primary and initial onus to substantiate the genuineness of the purchases made from Padmesh Pvt. Ltd. by filing the various documents as referred above including the documents relating to the purchases made by Padmesh Realtors Pvt. Ltd. from various parties. Further even during the course of search at appellant's premises on 25.09.08 no incriminating document was found with reference to the non-genuineness of the purchases made by the assessee from Padmesh Realtors Ltd. or the parties from whom Padmesh Realtors Pvt. Ltd. has made the corresponding purchases. The AO has also not brought any cogent material on record to controvert the appellant's explanation and to hold that the purchases made by the appellant from Padmesh Realtors Pvt. Ltd. were bogus.
From the observations of the AO in the assessment order it is seen that he has relied on the statements of certain third parties recorded by the Investigation Wing of the Department which is the foundation on which the case for disallowance is based apart from the fact recorded by the A.O that summons issued to the parties from whom Padmesh Realtors P. Ltd. has made the purchases have returned back unserved. When such is the position it was incumbent on part of the A.O that the statements of these persons should have been confronted to the assessee, so that fair opportunity is given to the assessee to explain his position. There is no indication in the AO's order as well as the questionnaire issued by the A.O that copies of statements have been provided to the assessee. It is also observed that “onus” of proving a fact has a changing attribute and it would keep shifting in the facts of a case. Now since the assessee had submitted detailed documentation relating to the purchases, to my mind the burden shifted on the AO to have confronted the assessee with the statements of Ms. Kamini Gupta; Mr. Sanjay Aggarwal; Ms. Rekha Sachdeva; Smt. Kamlesh Devi who were A.O's witness in the facts of the case. The above preposition is supported by the ratio of decision in case of Kishinchand Chellaram v. CIT 125 ITR 713 (SC), wherein the Hon'ble Supreme court has inter-alia held that—
“It is true that the proceedings under the income tax law are not governed by the strict rules of evidence and, therefore it might be said that even without-calling the manager of the bank in evidence to prove this letter, it could be taken into account as evidence. But before the IT authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him.”
The substance of the above observation of the Hon'ble Supreme Court is that right to cross examination is required to be provided to the assessee before an adverse view is taken based on the statements/documents or any other evidence which is sought to be relied upon by the A.O which is against the assessee. From the assessment order it is noted that the A.O has noted that all summons issued to the parties from whom Padmesh Realtors Pvt. Ltd. has made the purchases were received back unserved with the comment that no such company at the given address. However from the assessment order it is observed that this fact has not been confronted to the assessee or Padmesh Realtors Pvt. Ltd. as seen from the assessment order of either of these assessees. Rather when the confirmed copy of accounts of these parties were filed by the assessee it was required on part of the A.O to have asked for the production of the Managing Director or Principal Officers of these entities in case of Padmesh Realtors Pvt. Ltd. if any doubt existed regarding the genuineness of these purchases. No such exercise has apparently been done.
Thus the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted.
The whole issue can also be examined from another perspective too. It is seen that the GP rate/material consumption rate in case of the appellant for immediately previous AYs. are 11.45/68.85% (AY. 2005–2006); 12.54/68.82% (A.Y 2006–2007); 12.96/70.62% (A.Y 2007–2008) respectively & which has been accepted by the department in the assessment orders passed u/s. 143(3) r.w.s 153A for these assessment years on 24.12.2010 itself. If the finding of the AO. for the impugned assessment year are accepted (that is the entire purchases made by the assessee from Padmesh Realtors Pvt. Ltd. are treated as bogus) then it would result in a GP rate of 29.69% & more importantly the material consumption ratio of 53.45% for AY. 2008–2009, which gives an abnormal result as compared to the one which is declared in the books of accounts which is for 12.48% (G.P rate) & 69.42% (material consumption rate) respectively. Keeping in view the consumption pattern in the past years & the fact that the nature of business remained the same there is no reason to disturb the trading results in the present year, which hovers around the same G.P rate and material consumption ratio as in the preceding assessment years. In support of this view the appellant has relied upon the ratio of the decision of the Honble Punjab & Haryana High Court in the case of Commissioner Of Income-Tax v. Kar Valves Ltd. 285 ITR 435). This is an additional reason not to disturb the declared results of the appellant by disallowing the purchases made for Rs. 19,39,60,866/- by the appellant company from Padmesh Realtors Pvt. Ltd., as this would prima facie result in distorted G.P and material consumption figures in appellant's business.
5. Aggrieved by this, the Revenue is in appeal before the Tribunal. The hearing in the facts of the present case took place on two different dates namely 30 Jan. 2014 and 14 Feb. 2014 as both the sides in view of the detailed arguments on facts were required to file a synopsis encompassing the thrust of their respective arguments. The synopsis to be filed was directed to be first exchanged amongst the parties so as to ensure that the synopsis contains only what was argued and also to enable the parties to bring out anything which was either not addressed and referred to therein or anything which was referred to but ignored in the synopsis. Accordingly in terms of the direction the parties filed synopsis on 14/2/2014. The synopsis filed has been duly exchanged between them before 14 Feb. 2014. Whereas the synopsis filed by the Ld. CIT Dr. runs into 4 pages the Ld. AR filed a synopsis running into 34 pages which in lighter humour was referred to by the Ld. CIT Dr. as a compendium instead of a synopsis. The remark was well received by the LD. AR who stated that he has necessarily tried to sum up all necessary facts in an endeavour that nothing salient is missed out.
6. At the time of hearing the Ld. CIT, Dr. inviting attention to the Assessment Order and the submissions advanced by the assessee before the Ld. CIT(A) which it was argued has wrongly been accepted by him submitted that the Revenue is aggrieved by the conclusion drawn by the CIT(A) wherein he has completely ignored relevant facts and has allowed himself to be mislead by the paper trail of the assessee. The finding arrived at in the assessment order it was submitted is based on the investigations carried out at by the department wherein the submissions of the assessee have been considered and the Department has made further enquiries on the responses of the assessee in order to verify the correctness of the assessee's claim and at every step and every stage the enquiries reveal that the assessee's claim is hollow. Based on the detailed findings recorded in the assessment order it was his submission that on facts the impugned order deserves to be set aside and the assessment order be restored. The Ld. CIT Dr. expressing his submissions claimed that once the detailed arguments which he proposed to advance are considered the impugned order would be set aside and the assessment order would be upheld.
6.1 Since the comprehensive and detailed arguments advanced by the Ld. CIT Dr. were subsequently backed by a detailed synopsis which encompassed briefly and succinctly the entire gamut of the departmental stand on facts and law advanced by the Ld. CIT DR, accordingly instead of, referring to his oral arguments we deem it appropriate to reproduce the departmental stand by extracting from the synopsis filed:—
• Assessee is ostensibly engaged in construction activities. Bulk of its customer was the Sun City group to which it belongs who was searched on 25/9/2008.
• It is using the services of one Padmesh Realtors Ltd., which is a paper company, Ltd. to inflate it expenditure.
• Surprisingly, Padmesh Realtors Ltd., was incorporated only on 16/1/2008 wherein in 45 days logged almost 24 crores purchases. Such an exponential growth is not seen in the construction sector.
• During the course of the search operation, a document AS3SCN pages 102109 and another document AS-3, SCN pages 111 were seized from N-49, 1st Floor, Connaught Place, New Delhi, which is the corporate office.
• During the statement recorded the assessee was initially unable to give the precise address of Padmesh Realtors Ltd., with whom it was doing business. Later on the address was given as A-102, Dream Apartment, Plot No. 14, Dwarka, New Delhi.
• Survey launched at the said premise on the same day revealed that it was under the ownership and control of one Mrs. Kamimi Gupta who denied any existence of such a company at the given address. She also stated that she was even unaware that any such company existed (page 4 of AOs. order).
• Godown address was given as Plot No. 3, patparganj Industrial Area, Delhi where a survey was launched. Person at the said premises, Shri Sanjay Agarwal, stated that no osuch company existed.
• Both the above address was given by the assessee during the search operation.
• It was also observed that onward purchases were made by Padmesh Realtors Ltd., from non-existent entities. Summons to all the entities from whom purchase had been made by Padmesh Realtors Ltd., were issued. Each one of them were found non-existent but for one Ishwar and Sons Timber Traders from whom purchase of Rs. 57,200/- only had been made (Page 10 of AOs. order).
• NOC issued by Mrs. Kamini Gupta at Pg 32 of PB does not say that Padmesh Realtors Ltd., was operating from A-102, Dream Apartment, Plot No. 14, Dwarka, New Delhi. In fact page 36 of PB suggests that/s Odean Builders were constructing the said apartment. As per Municipal Law regulators, the said Apartment was being uses for residential purpose and could not have been used for commercial activity.
• Page No. 38 is a NOC dated 16/1/2008 from Kumar Ice Factory (P.) Ltd. allowing Padmesh Realtors to use the said premise as go down. If the said NOC was dated 16/1/2008 then there is no reason why the said document would not have been seized on the date of search on 25/9/2008. Page No. 39 PB is the evidence of e-file return which is over written by hand. It is not possible to tamper with an e-file return.
• No receipt of rent was found from Mrs. Kamini gupta and Kumar Ice Factory if they were landlords of Padmesh Realtors.
• Field enquiry (further) showed that RV Merchantile, Shree Ganpati Sales, Sai Traders also did not exist on the given address.
• The photocopy of VAT return, bank statements, PAN ROC etc. given during assessment proceedings without being specifically called by the AO further suggests there was close proximity between assessee and Padmesh Realtors as listed in the Paper Book. Such evidence is neutral in the view of factual matrix of the case.
• For instance, Shiv Trading Company is one of the ostensible suppliers of Padmesh Realtors Ltd.… the invoice produced has signature discrepancies which have been amply pointed out in the verbal arguments (pages 1355 to 1369 of PB). Similarly is the case of Shri Murli Enterprises etc.
• Submission of PAN, IT Return etc. during assessment clearly manifests that there was more than a proximate relationship between the assessee and the second (tier) parties. And are self serving documents.
• Having proved that Padmesh Realtors or its suppliers did not exist on any address, the AO rejected the books of Account u/s. 145.
• CIT(A) in his order has relied heavily on the paper documents produced by the assessee and has overlooked entire field enquiries. He did not even ask the AO to conduct the enquiries if he thought that they were inadequate.
• He has blindly followed Kishinchand Chellaram v. CIT 125 ITR 713 (SC), for not giving opportunity to the assessee for cross examination. If the AO did not do so the CIT had enough powers of enquiry on his own or ask the AO to do so. Reliance is placed on CIT v. Sonal Construction 260 CTR (Del) 37, (Para 20) and JCIT v. Swarup Vegetable Products Industries 96 ITD 468 (Del) - Para 13.
• CIT(A) has asserted that ‘Source of Source’ should be not be insisted upon by the AO. In fact in CIT v. N.R Oortfolio 96 DTR (Del) 281, the jurisdiction High Court has held that doctrine of “Source of Source” or “Origin of Origin cannot be applied universally without reference to the factual matrix of the case. In the case in hand during the search operation, post search enquiries and in proceedings before the AO, Padmesh Realtors have been found to be non-existent.
• Assessee has relied on Raj Kumar Jain v. ACTU 50 ITD 1 TM, and CIT v. J.M.D Computers & Communication (P.) Ltd. 20 DTR (Del) 317. Both the cases are distinguishable.
• In Raj Kumar Jain the AO did not have any evidence of household express. In the casse in hand, the AO has overwhelming evidence of bogus purchase.
• In J.M.D Computers, the AO had accepted purchases. In the case in hand, purchases have not been accepted.
• Another case relied upon by the AR is Fair Finvest Ltd. 357 ITR 146 (Del). In that case the AO had blindly followed the report of the Intelligence wing and had not done any Investigation. In the case in hand diligent inquiry has been done after getting a lead from the Investigation Wing.
• The case only reflects proper paper work and documentation without any co-relation to ground realities. Filed enquiries, have overwhelming suggested non-existence of padmesh Realtors.
7. The Ld. AR in support of the impugned order also advanced detailed arguments. On the date of hearing taking us through the assessment order emphasis was laid on the specific queries of the AO and referring to the material available on record it was submitted that these were completely replied to. Assailing the inferences drawn by the AO based on enquiries conducted at the back of the assessee and that too it was submitted the enquiries got conducted were done only half heartedly. The material relied upon, it was submitted was collected at the back of the assessee was never confronted and the enquiries made were also given up half way and never carried through to their logical conclusion. As such it was his argument that the impugned order deserves to be upheld on considering the factual and the legal position.
7.1 As noted earlier detailed synopsis was also filed by the Ld. AR. Considering the fact that the synopsis filed on behalf of the assessee is running into 34 pages we deem it appropriate to record the oral arguments advanced and whenever necessary extract from the synopsis filed during the hearing.
7.2 In the course of his arguments the Ld. AR took us comprehensively through the show cause notice issued by the Assessing Officer and also the queries made by the AO in the course of the hearing. Addressing the replies of the assessee qua the queries made it was submitted that all information sought for by the AO was fully replied to by the assessee along with the detailed documents addressing the issues and supporting the replies made. These documents it was submitted are available on record by way of a paper book consisting of documents filed both before the AO and the CIT(A). These documents as such it was emphasized were available even before the AO who instead of passing his order considering them based his finding on his preconceived opinions resorting to some half hearted enquiries made by him and then selectively sharing half information with the assessee which resulted in passing of the assessment order which was challenged in appeal by the assessee. It was argued that before the Ld. CIT(A), it is the very same documentary evidence which has been relied upon by the assessee which has been considered while passing the impugned order.
7.3 It was argued on behalf of the assessee and also has specifically been addressed in the synopsis filed that in the present appeal there are only two issues on the basis of which the department has filed its case.
7.3.1 The first issue which has been raised by the department based on the assessment order is the identity of Padmesh Realtors P. Ltd. and the second issue is the genuineness of the purchases made by the assessee from Padmesh Realtors P. Ltd. which in turn has made purchases from various suppliers which has been doubted by the AO. It has been argued by the Ld. AR that the AO has based his order on the adverse inferences drawn on these two issues which the CIT(A) has discussed, addressed and considered at length on which reliance is being placed.
7.4 On behalf of the assessee addressing the first issue namely the allegation that Padmesh Realtors P. Ltd. is a paper company Ld. AR assailing the said inference referred to the various material on record brought to the notice of the AO submitted that facts have been ignored by the AO. Referral was made to page 5 & 6 of the Assessment Order wherein the AO addresses this allegation and considers the assessee's response on the basis of statement not confronted to the assessee and ignoring the documents executed by the very same person namely Mrs. K. Gupta in regard to the Registered officer of Padmesh Realtors Pvt. Ltd. as A-102, Dwarka and Go-down 3 Industrial Area, Patparganj, Delhi. Assailing the conclusions, of the AO attention was invited to the Statement of facts filed before the CIT(A) specific para 6 on the basis of which it was submitted vide para 3.1 of the synopsis filed that the conclusion drawn by the AO was an incorrect conclusion on facts and instead was based on preconceived suspicions. The relevant extract from the statement of facts filed before the CIT(A) is extracted hereunder for ready reference:—
“6) During the course of the assessment proceedings the assessee company has filed all details including that of purchases made from Padmesh Realtors Pvt. Ltd. The assessee company has been executing contracts for various clients including Suncity Group of Companies. Padmesh Realtors Pvt. Ltd. is a subsidiary Company of Suncity Projects Pvt. Ltd. Since the assessee company was executing contracts for Suncity Projects Pvt. Ltd. and its other group companies, under the contract arrangement material supply was made to the assessee company by Padmesh Realtors Pvt. Ltd. All the documents/explanation were duly filed in support of the functioning of Padmesh Realtors Pvt. Ltd. and also relating to purchases made by Padmesh Realtors Pvt. Ltd. for supplies made to assessee company. All the purchases were made by Padmesh Realtors Pvt. Ltd. from dealers who were registered with VAT, all the payments were made by Padmesh Realtors Pvt. Ltd. to these parties were through account payee cheques only. Copy of all the documents relating to purchases made by Padmesh Realtors Pvt. Ltd. and payments thereof were duly filed during the course of assessment proceedings. In spite of the facts that all the purchases made were genuine and the assessee company has discharged its onus, the Ld. Assessing Officer has treated these purchases as bogus without any reason whatsoever. There was no valid/legal reason for treating these purchases as bogus by the Ld. Assessing Officer.
7.5 A perusal of page two of the synopsis filed shows that in support of the impugned order it was submitted that the existence of Padmesh Realtors P. Ltd. is evidenced by the financial statements of Padmesh Realtors P. Ltd. for the assessment year under consideration specific page 196 to 194 were referred to for the said purpose. For ready reference, we extract these submissions from the synopsis filed hereunder:—
“It will also be important to refer to the financial statements of Padmesh Realtors Pvt. Ltd. for the assessment year under consideration which are placed at paper book pages 196 to 1994. Page 1984 is the balance sheet of this company which shows that it has raised money to the extent of Rs. 600 Crores by way of Compulsory Convertible Debentures from Deutsche Bank. Page 1981 is the profit and loss account which shows that besides making sales of Rs. 24,34,11,036/- (which includes sales to the assessee company of Rs. 19,39,60,866/-) it has earned interest income of Rs. 17,66,20,450/-. It has filed its return of income placed at paper book page 1962 showing taxable income of Rs. 2,34,42,494/- and paid taxes of Rs. 86,17,635/-. The address in the return filed is A-102, Dream Apartment, Plot No. 14, Sector 22, Dwaraka, New Delhi. Thus the issue of existence of this company stands established beyond doubt.
3.2 The AO's observation on page 5 and 6 have been duly explained by the assessee vide letter dated 15/12/2010, placed at paper book pages 1924–1926 and letter dated 23/12/2010 placed at paper book pages 1931–1932. In this regard it is important to note that all these documents were before the AO and the AO has nowhere rebutted any of these contentions or has found fault in any of these documents.”
(emphasis provided by the Bench)
7.6 Inviting attention to Page 45 and 46 of the impugned order specific paras (d) to (f) of the same, it was his submission that firstly it has never been claimed on behalf of the assessee that they were not aware of the address of the said company as the address of Padmesh Realtors P. Ltd. was never sought for by the Assessing Officer from the assessee company. Referring to the material on record it was his argument that infact the AO was very well aware of the existence and the address of the said company and so was the Investigation Wing of the department who during the course of the post search investigation had enquired regarding the subscribing of Compulsory Convertible Debentures of Padmesh Realtors (P.) Ltd. by Deutsche Bank AG Singapore amounting to Rs. 600 crore. Apart from this it was argued that in regard to Padmesh Realtors AO has examined this issue and found no adverse material. However, in the facts of the present case it was argued ignoring these material facts on record available with the department itself inferences on half carried out enquiries are relied upon by the department. Accordingly it was his submission that the existence of Padmesh Realtors was never in dispute.
7.7 Addressing the issues one by one assailing the reliance placed on the statement of Mrs. Kamini Gupta owner of Flat No. A-102 Dream apartments, Dwarka the copy of NOC issued by the said lady to Padmesh Realtors permitting the said concern to use the premises for business purposes was relied upon. It was submitted that the same has not been assailed by the Revenue. It was submitted that the statement of Mrs. Kamini Gupta was never confronted to the assessee by the AO. Similarly opportunity to confront her for crossexamination was also never provided.
7.8 Referring to the statement of Shri Sanjay Agarwal recorded by the AO it was submitted has no relevance as he is an unconcerned person and there is no need for him to know Padmesh Realtors P. Ltd. and Padmesh Realtors also do not know him.
7.9 Addressing the location of the go-down it was submitted was actually a plot measuring 2000 square meters which is evidenced by photocopy of NOC issued by Kumar Ice Factory Pvt. Ltd. to Padmesh Realtors P. Ltd. which is available on record before the AO as well as the CIT(A) and the very same Paper Book has been placed before the Bench. Assailing the action of the AO it was argued that if the address recorded by the AO was wrongly recorded then how can the assessee be penalized for it. It was contended that in the facts of the case NOC of Kumar Ice Factory, Sales Tax documents and ownership of the said concern of the plot of 2000 sq. meters which has been allowed to be used by Padmesh Realtors is on record which cannot be ignored without any contrary evidence. The basis for ignoring the same based on the enquiry from a wrong person which was half-hearted and incomplete cannot be given a precedence. Accordingly the documentary evidence in the face of these half hearted enquiries it was submitted cannot be ignored.
7.10 Assailing the arguments advanced by the Ld. CIT Dr. that from the residential Flat No. A-102 Dream Apartments, Dwarka belonging to Mrs. Kamini Gupta the office of Padmesh Realtors P. Ltd. could not function it was argued is based on presumptions. It was his submission that the specific address is registered with VAT authorities as well as Registrar of Companies and is also with the Income Tax Deptt as would be evident from the Income Tax Return filed by the said concern. As such it was argued if under some law the commercial functioning was not permitted then action if maintainable can be taken under that law by a duly constituted authority under those laws as far as the income tax proceedings are concerned income has been returned. Similarly addressing the godown at Patparganj, it was vehemently stated that enquiries have been conducted at the wrong place and from the wrong person, accordingly documents available on record and filed in the assessment proceedings that the go-down belonged to Kumar Ice Factory Pvt. Ltd. cannot be ignored. The same was evidenced by photocopy of MCD data relating to the said property demonstrating that it had 2000 square meters available to it which was used by Padmesh Realtors P. Ltd. on receiving the NOC from Kumar Ice Factory Pvt. Ltd. The Sales Tax Registration Documents (DAVT)-07) it was submitted clearly demonstrates that the said premises was a go-down of Padmesh Realtors P. Ltd. was at Patparganj Industrial Area. These evidences in the face of the suspicion of the Department it was submitted cannot be ignored as they demonstrate the identity and existence of Padmesh Realtors P. Ltd.
7.11 Addressing the issue of purchases made by Padmesh Realtors P. Ltd. it was vehemently argued that the assessee during the course of the assessment has led all possible evidences in support of its claim. Referring to the manner in which the AO has proceeded attention was invited to page 3 & 5 of the Assessment Order wherein the AO has made a mention of 23 parties from whom Padmesh Realtors P. Ltd. had made purchases. Inviting attention to page 7 & 8 of the assessment order it was submitted that the AO has discussed the enquiry conducted by the Investigation Wing in respect of only 3 parties out of 23 namely:—
(i) R.V Mercantile Pvt. Ltd.
(ii) Shri Ganpati Sales and
(iii) Sai Traders.
7.12 Referring to the discussion of the AO qua R.V Mercantile Pvt. Ltd. it was submitted that the AO observes that it appears that the company had not given proper address”. It was argued this observation has been interpreted by the AO as an adverse observation to hold that R.V Mercantile does not exist. The interpretation by the AO, it was submitted is not correct. It was his submission that if the address was not proper (correct address) then what stopped the AO to complete the enquiry. Inviting attention to paper book page 1930 which is a letter address to the AO dated 15/12/2010 where all the details about Padmesh Realtors P. Ltd. were provided it was submitted that the assessee in that letter had also stated that in case any other information/explanation is required the same would be furnished on hearing from the AO. Despite this clear submission where the assessee had furnished all leading evidences no enquiry was made by the AO. Inviting attention to letter dated 23/12/2010 copy of which is placed at page 1931 wherein reference is made to the some questionnaire in post such enquiries attention was invited to the fact that the assessee had stated that no details or material gathered by the Deptt has been provided to the assessee. It was submitted that the assessee had requested that copies of such queries reports so obtained be provided. It was emphasize that as far as the assessee was concerned all documents in support of the genuineness of the purchases made by it from Padmesh Realtors P. Ltd. were provided which duly established the genuineness of the purchases. Despite this it was submitted nothing has been done by the AO and this fact is specifically addressed by the Ld. CIT(A) in his finding recorded at page 6 para (g).
7.13 Similarly, in the context of purchases made by Padmesh Realtors P. Ltd. from Shri Ganpati Sale attention was invited to the assessment order para 7. Referring to the same it was submitted that the AO as per the report obtained by him found that in the said premises Smt. Rekha Sachdeva was residing who had stated that one room of the premises on the ground floor was given on rent to Shri Pramod who no longer resided there, however, his specific Mobile No. 9873006951 was provided. Shri Pramod was stated to be a tenant from June 2006 to June 2007. The said Shri Pramod it was submitted even as per to the assessment order had responded on that phone and had stated that his company had shifted to 110-112, Abdul Aziz Road, Karol Bagh. The said address as per the assessment order it was submitted was found to be an incomplete address. Referring to the assessment order in the context of the factual findings recorded therein, it was submitted that the enquiries demonstrate that the said premises was rented to Mr. Pramod whose mobile no was provided to the department. The assessment order also shows that the Mobile Number provided was responded to by Sh. Pramod who had provided the latest address to the department. It was submitted that no doubt the address was found to be incomplete however this fact does not lead to the conclusion that the said concern was not in existence and in-fact affirms the conclusion that the concern was in existence, only it could not be located the address was found to be incomplete. Referring to the assessment order it was submitted that no effort was made to get the complete address from Shri. Pramod. The complete details of the said concern it was submitted are available at Page 1652 to 1710 of the paper book. It was submitted that in the course of the hearing the assessee has made a written request seeking to be informed of the information with the department which is being relied upon to hold that the firm was not in existence. The said request it was submitted has not been responded to by the AO and the CIT(A) has taken note of this fact at page 47 para (h). Referring to the same it was pointed out that the Assessing Officer missed to note to down “16/3” prior to Abdul Aziz Road, Karol Bagh. The said concern it was pointed out was registered with VAT (Sales Tax Department's) whose specific TIN and PAN details had been provided to the AO in order to establish its genuineness. Photocopy of its invoices confirmed copy of accounts for the specific period were filed. Copy of Bank Statements of Padmesh Realtors from where cheques were issued to Ganpati Sales it was stated were filed along with copy of Income Tax Return for 2008–2009 assessment year of the proprietor of the said concern was Mr. Amit Sharma. These evidences in support of the genuineness of transactions of Padmesh Realtors P. Ltd. who purchased the goods from said Ganpati Sales it was submitted has not been rebutted by any documentary evidence by the Revenue.
7.14 Addressing the facts of Sai Traders attention was invited to the specific observations in the assessment order wherein as per the finding of the Assessing Officer in the said premises Smt. Kamlesh Devi w/o Sh. Vani Singh was found residing who stated that the property belonged to her mother-in-law and also further confirmed the fact that one part of the premises was given on rent to Sai Traders about 16 years ago and on the date when the Inspector visited the said premises the said concern had already left whose current address was not known to her.
7.15 It was his submission that these observations recorded in the assessment order proved the fact that Sai Traders was definitely in existence for about 16 years and had rented the said premises and only current address was not known to her. It was submitted that in the course of the hearing the assessee had submitted the current address. These facts are available at paper book pages 936 to 1009 which included not only the copy of the Income Tax Return etc. but also the Sales Tax Registration and the copy of the Audited accounts of Sai Traders. None of these evidences it was submitted has been rebutted by the Revenue. Cognizance of these facts it was submitted has been taken by the CIT(A) at page 48 and it is only after taking these documents into consideration the issue of genuineness of purchases made by Padmesh Realtors P. Ltd. and Sai Traders has been accepted. In these circumstances it was his submission that the assessee has fully discharged its onus and there is no material available on record in support of the inferences drawn by the AO who has merely referred to enquiries conducted during the search and made no effort to further enquire after receiving the reply and evidences of the assessee.
7.16 Addressing the issue of transportation of goods in regard to which Ld. CIT Dr. has made oral arguments it was submitted that the said issue has been discussed at length by the CIT(A) himself in para (j). Referring to the said para it was submitted that the AO has inferred that Padmesh Realtors do not have their godown facility to store the material and have failed to exhibit the mode of transport of goods. Referring to the finding of the impugned order it was submitted that the mode of transportation has been duly reflected on each & every invoice issued by Padmesh Realtors to the assessee company and is accompanied by copy of GR/bilties attached with each and every invoice. These copies it was submitted were filed in the course of the assessment proceedings and were available to the authorities and also form part of the Paper Book filed at pages 169-871 of the Paper Book. These are the same copies which were filed before the AO in reply dated 15.12.2012 Addressing the concern of storage of the material by Padmesh Realtors it was reiterated that it was stored at godown at 3, Patparganj Industrial Area which was a plot measuring 2000 sq. meters. Accordingly it was argued the assessee had fully discharged onus with respect to mode of transportation as well as place of storage godown.
7.17 Assailing the allegation of the AO addressed at page 10 para 4.7 that the assessee had not filed confirmations from these parties, heavy reliance was placed upon the finding of the CIT(A) recorded in para (k). A perusal of the same it was submitted would show that the AO has been found to record incorrectly. It was submitted that confirmed copy of account was filed in the reply dated 15/12/2010 before the AO during the assessment proceedings of all the parties from whom Padmesh Realtors had made the purchases during the relevant period. Apart from this it was argued that the allegation of the AO qua the non-production of the Managing Directors of these companies have been considered by the CIT(A) who has found that the assessee was never asked to produce these persons. Reliance was also placed on the finding of the CIT(A) who has held that since the assessee had purchased material from Padmesh Realtors and not from these companies accordingly the occasion to ask the assessee even otherwise to produce the Directors of the Companies from whom Padmesh Realtors had purchased did not arise. Heavy reliance was placed therein.
7.18 It was further argued that the allegations of the AO that the ultimate destination of the money is not known found recorded in para 4.8 & 4.9 of the assessment order was assailed and the finding arrived at by the CIT(A) was relied upon. Referring to the same it was submitted that the CIT(A) has held that these observations of the AO are based on no material on record and is purely based on conjectures, assumptions and surmises. It was submitted that infact the observations of the AO confirmed the existence of the claim of genuine supplies and the genuineness of the transaction. A perusal of the observations of the AO it was argued shows that the AO has made inquiries from the bank accounts of the suppliers wherein the bank accounts were found to be correct and in the absence of any adverse fact the payments made by the assessee to Padmesh Realtors who further made payment to their suppliers whose accounts have also been seen and who too have further paid other parties wherein nothing adverse has been found. It was argued clearly shows that there is no cash movement and all the payments have been made through cheques. This very fact noted by the AO it was argued proves the existence of the suppliers who were all genuine.
7.19 Addressing the observation that summons have been issued and not been served. The Ld. AR through his submissions in the synopsis submitted that firstly no such material was confronted to the assessee at any point of time through out the assessment proceedings and infact in the order sheet there is no reference to any such requirement and the AO has just made this remark in the assessment order. It was argued that nothing has been brought on record as to what happened after the summons were received which as per the assessment order were stated to be issued on 21.09.2010 It was argued that the assessee has along been appearing appeared as would evident from the assessment proceedings and at no stage this issue was brought to the notice of the assessee by the AO. On the contrary it was submitted the assessee has led sufficient evidence in support of its purchases. Referring to the material available on record it was submitted that infact vide letter dated 23.12.2010 the assessee had specifically asked the AO to provide copies of the enquiry or reports available if any so that the assessee company can reply to the same. It was submitted that ignoring these facts the AO has drawn inference contrary to the evidence of the suppliers which are placed in the Paper Book-874 to 1026. Specific attention was invited to page 39 of the impugned order para 4(a) of the same and it was argued that no adverse evidence has been led by the AO or the department to rebut this in the present proceedings.
7.20 Addressing the para-wise reply to the synopsis of the department it was submitted that it is a fact on record that the assessee is engaged in the construction activities and Suncity is one of its major customers. Padmesh Realtors, it was submitted is a subsidiary company of Sun City Group and as per arrangement it has supplied material purchased from Padmesh Realtors.
7.20.1 Addressing the specific allegation of the department that Padmesh Realtors is a paper company, it was stated that its existence cannot be doubted as it is incorporated under the Companies Act and has raised capital CCD to the extend of Rs. 600 crores from Deutsche Bank which has been investigated into by the AO and the Investigation Wing and nothing adverse has been found. The said concern has made actual purchases from reputed suppliers and received payment from the assessee the same and in turn has made payment to its suppliers. The payments have been made are supported by the copy of the accounts of the suppliers; payments have been made through the bank and the AO in fact has looked into the bank accounts not only of Padmesh Realtors but also of the its suppliers and further down the trail even the accounts of the parties to whom these suppliers have made payments by cheques have been examined and nothing adverse has been found. As such the departmental claim it was argued is based on presumption.
7.20.2 Addressing the so called exponential growth in 45 days it was argued that there is nothing abnormal in making purchases of Rs. 24 crore between 16 Jan. to 31 March the period is about 75 days and not 45 days as Padmesh Realtors Company is a subsidiary of Sun City Group in the construction business and as per arrangements the goods had been purchased by the assessee from it. It was submitted that it is not an exponential growth in the construction sector as it is a question of construction material purchased by the assessee company which was engaged in the execution of projects which it constructed.
7.20.3 Addressing the document found in the search it was submitted that infact it demonstrated that the transaction was genuine and the document was a document which could be found in the ordinary course of the business from its premises and it no way shows that any cash has been paid or received or any accommodation entry has been entered into. It was argued adverse inferences have been drawn without any documentary evidence. As the document found in the course of the search is a normal document wherein nothing incriminating has been referred.
7.20.4 Addressing the allegation that the assessee has not been able to give the precise address of Padmesh Realtors it was submitted that this observation is incorrect as all along assessee has stated that the address of the Padmesh Realtors is A-102, Dream Apartment, Plot No-14, Sector-22, Dwarka, Delhi. This fact is evident as spot verification was also carried out by the department. The ownership of the said flat was with Mrs. Kamini Gupta which also is a fact and the various documents available on record demonstrate that the said address was the registered office of Padmesh Realtors.
7.20.5 It was argued that the allegation that the claim of godown was wrong was based on the statement of Mr. Sanjay Aggarwal who had no occasion to speak for Padmesh Realtors or Kumar Ice Factory and the link with them has not been established by the department. On the contrary the godown facilities utilised were Plot No. 3, Patparganj Industrial Area in the name of Kumar Ice Factory whose documents were made available before the AO and have not been contradicted. The enquiry it was argued was conducted on the wrong address by the department and also on the wrong person as such there is no reason why the evidence on record in support of the claim of godown facilities can be ignored.
7.20.6 Addressing the allegation that summons were issued it was submitted that nothing is available on record as to at which address summons were issued and under what circumstances it was returned. The information sought from the AO vide letter dated 23.12.2010 copy placed at pages 1931 it was stated remains unreplied to and infact the confirmations received from Ishwar & Sons Timber Trader however small a supplier infact shows and confirms that Padmesh Realtors was in existence and was engaged in the construction material business and has made purchases and in turn made supplies to the assessee company. The single confirmation available in response to AO's efforts rebuts the allegation of the AO. It was also argued that verification from the bank accounts of each of the suppliers of Padmesh Realtors who were paid by cheque for the supplies made has been found to be credited in the bank accounts of these suppliers which further proves the existence of the companies and the transaction being genuine as there is no allegation that any cash has been withdrawn from the bank.
7.20.7 Addressing the allegations of the AO in regard to the existence of registered office of Padmesh Realtors at residential addresses in regard to which NOC had been issued by the owner of the flat Mrs. Kamini Devi to Padmesh Realtors which has been ignored by the Revenue. It was submitted that the NOC was a requirement of the Sales Tax Authorities which has to be met before Registration is granted taking note of the premises from which the entity seeking Registration would operate consequently after filing this document an inspection is carried out by VAT Inspector who visits the premises and reports the statement of the persons therein and only on the confirmation that the applicant is operating from that address the registration is granted. In the facts, it was argued Padmesh Realtors has got VAT Registration evidenced from Registration Certificate placed at page 27 issued by the said Statutory Authority wherein the address is A-102, Dream Apartment, Plot No-14, Sector-22, Dwarka, Delhi.
7.20.8 Addressing the carrying out of commercial activity from residential premises which may be restricted under Municipal Laws it was argued cannot be a ground for suspecting that business has not been carried out and infact in Delhi most of the companies have registered offices set out in posh residential colonies such as Greater Kailaish, Gold Links, Grand Park, Hauj Khas, Pitampura etc. It was submitted that if the business is running from the DDA Apartment it cannot be said that the business was not genuine.
7.20.9 Addressing the departmental objection to the user of godown of Kumar Ice Factory it was submitted the claim is supported by the NOC available on record given at the time of VAT registration which is a statutorily required by the VAT authorities. The objections of the Revenue that it was a tampered document were assailed on the ground that it was filed only in support of the claim that the area of the plot was 2000 sq. meters and the arguments that why it was not found in the course of this search it was submitted is for the search party to decide and it is not the fault of the assessee to get every document seized in the course of the search. It was emphasized that VAT registration is handled by VAT advocate/consultant. The ownership of these premises by Mrs. Kamini Gupta i.e the office address and Kumar Ice Factory i.e the godown is not in any doubt. The fact that they were not found in the course of the search cannot by the assessee's fault the assessee's claim is demonstrated by documents of statutory authorities namely VAT registration and nothing adverse has been brought on record by the AO in urged to any further inquiries qua these documents have been carried out. In the absence of any adverse material the documentary evidence cannot be disregarded based on suspiciion.
7.20.10 Addressing the inquiry in the case of R.V Mercantile, Shri Ganpati Sales and Sai Traders. It was submitted the documents available on record confirmed their existence. The Full inquiry from their banks have been carried out by the AO himself and nothing adverse has been found and infact it shows that the firms are in existence. The allegations of the department that the assessee had close approximity with Padmesh Realtors, it was submitted because of the nature of evidence led by the assessee to support its claim was assailed as when admittedly the assessee is being penalized by the AO based on presumption that its suppliers were not inexistence then what is wrong if the assessee seeks the help of its supplier and asks it to make the documents and evidences to demonstrate that these purchases were genuine available to it. These documents it was argued are substantive documents and merely on suspicion they cannot be disregarded. The claim it was submitted has been supported by copies of returns filed documents of registration of the concerns with Registry of Companies; filing of return with the VAT Authorities, etc. It was contended that the AO has not brought any evidence to support the conclusion that the suppliers were not in existence. It was argued that investigation was made only in regard to three suppliers by the Investigation team and not by the AO and these too were also incomplete enquiries and were fully rebutted by the assessee by way documents on record which have not been assailed.
7.20.11 It has further been contended vide para 16 of the synopsis that the issuance of summons recorded by the AO has never been confronted to the assessee. Reliance was placed upon the letter dated 23.12.2010 filed before the AO.
7.20.12 Vide para 17, the rejection of assessee's books of accounts was assailed and reliance was placed upon the arguments advanced on the impossibility of performing the works contract without the supplies. Accordingly vide para 18, it is stated that the allegation of the Ld. CIT Dr. that the CIT(A) has overlooked these enquiries is incorrect as the CIT(A) it has been submitted has dealt with them at length and also considered the documents and the explanation as such it was stated that it was not incumbent upon him to carry out any further inquiry.
7.20.13 Vide para 19 the allegation of the department that the assessee is blindly following the principle laid down in Kishan Chand Cellaram is assailed. It is stated in the synopsis that the CIT(A) has dealt with the evidence which was before the AO and on that basis of the same has reached a satisfaction that the purchases were genuine.
7.20.14 Reliance placed by the department on CIT v. Sonal Construction, 260 CTR (Del) 37 (para 20) and JCIT v. Swarup Vegetable Products Industries, 96 ITD 468 (Del) (para 13) was stated to be misplaced as the facts were entirely distinguishable. For ready reference we reproduce the distinction drawn in Ld. AR's own words from the synopsis filed:—
As regards the judgment of CIT v. Sonal Construction 260 CTR (Del) 37, the issue was the addition made by the AO on the basis of the seized documents and the material which indicated that assessee has made investments in various properties. There was many documents which showed that the assessee has made investment. The additions were deleted by giving a finding of procedural irregularities about these documents. Further the addition was deleted by the Tribunal holding that presumption in respect of a document seized under Section 132(4A) will not be applicable while making assessment. The High Court has held firstly that the contention of the Tribunal that presumption will not be available under Section 132(4A) is wrong in view of the amendment made by the Finance Act, 2007 whereby Section 292C was introduced as regards the presumption as to the assets and the books of accounts found during the course of the search. The High Court has further questioned the rejection of these documents and the evidences by the ITAT. It was in these facts it was thought fit that matter be set asided for further examination of these documents and also the statement recorded during search. It was a case where any positive material was led by the assessee in support of its contention. In the present case, the assessee has led positive material about genuineness of the purchases about which no fault has been found. As against the evidences referred by the AO in the assessment order the assessee has rebutted each and every allegation and CIT(A) having considered the same has given a finding in favour of the assessee. Thus it is not a case where the assessee has not led evidence in support of its contention. The CIT(A) has given a finding based on the documents and evidences submitted by the assessee, which the AO could not rebut or find any fault with it. Thus this judgment is also not relevant for the issue.
21. As regards the judgment of JCIT v. Swarup Vegetable Products Industries 96 ITD 468 (Del) relied upon it is submitted that the facts of that case were entirely different. In that case assessee has sold machinery for a sum of Rs. 20 Lacs to one AS. Engineering Works. The written down value of such machinery was only Rs. 42,350/-. The AO asked the assessee to produce A.S
Engineering Works, the alleged buyer of the machinery. The Inspector report also stated that there was no such concern at the given address. The AO further gave opportunity to the assessee to produce AS. Engineering Works. The assessee showed its inability about the present whereabouts of AS. Engineering Works. The AO made further enquiry from the bank account of the A.S Engineering Works and it transpired that there was no other transaction except the so called receipt of Rs. 20 Lacs.
The CIT(A) has deleted the addition on the ground that the assessee has not shown the capital gain. The receipt of Rs. 20 Lacs could not be considered as unexplained cash credit. It was in this background that the Tribunal has stated that merely because the amount of capital gain has been shown by the assessee cannot be a ground for deleting the addition and the CIT(A) was supposed to give a positive finding of fact regarding the sale of the machinery and the alleged receipt of Rs. 20 Lacs from A.S Engineering Works. The allegation levied by the AO was not rebutted by the assessee at any stage and even by the CIT(A) and there was negative finding of the CIT(A) that assessee having shown the sale proceeds as capital gain the same cannot be taxed under Section 68. Thus there was an issue of a positive finding about the actual nature of the amount received which the CIT(A) has not given a finding and that is why the matter was referred back to the CIT(A). In the present case there was no dispute to the fact that assessee has led sufficient evidences in support of its contention. The AO has not been able to rebut the same. The CIT(A) has considered the allegation of the AO and the evidences which were before the AO and has given a positive finding of fact about the genuineness of the transaction. There is no negative finding or an alternative finding. There is a direct positive finding of fact recorded by the CIT(A) after evaluating all the facts. In the case referred to, the AO has specifically asked the whereabouts about A.S Engineering Works and also gave a finding about the bank account which the assessee could not rebut and the CIT(A) has also not dealt with that issue. As against this, in the present case, the assessee has given the complete particulars, name, address and evidences which the AO has not been able to contradict, even the bank account got verified and nothing adverse was found.”
7.20.15 Similarly reliance upon CIT v. N.R Portfolio, 96 DTR 281 (Del.) by the Revenue was also stated to be misplaced on the following grounds:—
22. “Reference to the judgment of the Delhi High Court in the case of CIT v. NR Portfolio 96 DTR 281 (Del), is also misplaced and irrelevant. In the said case the assessee has not at all co-operated in the assessment proceedings and in fact the assessment proceedings were completed exparte under Section 144 of the Act. In this background the Court has observed that assessee has blocked the investigation at each and every stage and on that basis drawn adverse inference. The facts of the present case are entirely different. The assessee has co-operated during assessment proceedings and in fact has led all evidences as called for by the AO. It is not the case of the AO and the revenue that assessee has failed to file any document or information which was called for from it Further it is not a case where even the AO has verified source of source as is evident from para 4.8 of the assessment order where the AO has examined the bank account of the supplier and further bank account to whom further payment has been made by these suppliers and nothing adverse come out. Thus even source of source has been examined by the AO and that is why COIT(A) has given a finding that purchases cannot be doubted.”
7.20.16 The reliance placed on the principle decided in the case of Raj Kumar Jain v. ACIT, 50 ITD 1 and ACIT v. Anima Investments Ltd., 73 ITD 125 was relied upon and the distinction drawn by the Revenue was stated to be of no relevance on the following grounds:—
23. “The judgment of Raj Kumar Jain v. ACIT 50 ITD 1TM and ACIT v. Investments Ltd. 73 ITD 125, are in support of the contention that the Revenue is seeking a second innings to make out a case having failed make in the first innings. In Raj Kumar Jain case also the plea of the revenue was that looking to the standards and the facts and circumstances has gathered during the course of the search, the drawing are very low and that is why the additions were made and this explanation given by the assessee regarding the drawings, the revenue wanted the matter to be set asided for further examination. It was in this context the Tribunal has refused to set aside the matter for further examination. This exactly is the case here also. The AO in the assessment order has not made any adverse observation or comment about the documents and evidences submitted by the assessee during the course of the hearing. Having failed to do so, he cannot ask for a second innings to examine these documents and to make out a case against the assessee.”
7.20.17 Similarly the distinction sought to be drawn by the Revenue in the case of J.M.D Computers & Communication (P.) Ltd., 20 DTR 317 (Del) relied upon by the assessee was stated to be not relevant on the following reasoning:—
24. In the case of J.M.D Computers & Communication (P.) Ltd. 20 DTR 317 (Del), that the purchases were accepted. The purchases were disallowed on the basis of the sales tax number quoted on the invoices (purchase bills) as two out of these suppliers investigated did not exist while the sales tax numbers of the two other suppliers have been cancelled because they had seized business. In this case the High Court has given a categorical finding that the assessee having made complete account, purchase book, sale book, all payments for purchase having been made by cheques no adverse inference can be drawn about the purchases being made by the assessee. It was the case of purchases as is the case of the assessee company.
7.20.18 In the synopsis filed the distinction drawn by the Revenue in the case of Fair Finvest Ltd., 357 ITR 146 (Del) was assailed on the reasoning that field enquiries therein were carried out by the AO and in the facts of the present case have been carried out by the Investigation Wing.
7.20.19 It has also been submitted vide paras 26 & 27 of the synopsis that the allegation that only proper paper work and documentation has been done comes infact to support the case of the assessee as none of the field enquiries prove that the purchases were not genuine and infact the evidence clearly establishes the case of the assessee. None of the material and evidence have been rebutted as not only Padmesh Realtors is in existence but it also filed by way of its return substantial income which has been accepted. Each supplier of Padmesh Realtors as per evidence not rebutted is in building line. It has been further reiterated that even when examined from the perspective of Gross Profit declared and accepted in the preceding years ranging between 11 to 12% it has been argued and considered by the CIT(A) that it would result in abnormally enhancing the Gross Report to 30% if the AO's version is accepted which is quiet an impossible G.P rate in the nature of trade. Cognizance of this fact has been taken of by the CIT(A) in his order. On the basis of these facts evidences and arguments it has been submitted vide para 27 of the synopsis that it is a case where search has been carried out on the premises of the assessee and nothing incriminating qua these purchases made has been found in the absence of any incriminating material adverse inference cannot be drawn on the basis of the documents relied upon by the Revenue.
8. We have heard the rival submissions and perused the material available on record. The decision and judicial precedents relied upon by the parties have been taken into consideration. In the facts of the present case it is seen that the assessee admittedly has been carrying out development activity for Sun city Group of Companies and has on the basis of most of the receipts received from the Sun city Group returned an income of Rs. 6.16 crore odd on 13/9/2008. In view of the fact that the assessee along with Sun city Group of cases was subjected to search u/s. 132 on 25/9/2008 proceedings u/s. 153A were initiated and in response to notice u/s. 153A, the same income was returned by the assessee on 7/9/2009. Based on the sezied document AS-3 party SCN Page 111 which contained a summary of purchases made by the assessee from Padmesh Realtors, the AO after considering the reply of the assessee and taking into the consideration enquiries conducted post search came to the conclusion that Padmesh Realtors was a bogus company. This specific document giving the names and amounts of purchases made by Padmesh Realtors from 23 companies is found reproduced at page 3 to 5 of the assessment order and has also been reproduced in the earlier part of this order. Another document AS-3 Party SCN Pages 102-109 also seized from the Cannaught Place, New Delhi premises of the Sun city Group was also relied upon by the AO to conclude the issue against the assessee. The said document has been described as a “Core Document” by the AO and the contents of its showed that it was a ledger account of Padmesh Realtors in the books of the assessee. The said document showed that sales had been made by the said concern to the assessee on various dates for which payments had been received. Copy of the document has also been reproduced at page 2 of the AO and has been extracted in the earlier part of this order. It is seen that as a result of the enquiries made at the office address and go-down premises of Padmesh Realtors the AO not only doubted the existence of the company but also doubted the transactions of the assessee with Padmesh Realtors as further enquiries made from three specific companies led him to the conclusion that the companies were formed with the motive to provide accommodation bills. Specifically R.V Mercantile Pvt. Ltd. Shri Ganpati Sales & Sai Traders were enquired into as no replies were stated to be received from the 23 Companies except one i.e Ishwar & Sons Timber Traders. Accordingly he was of the view that neither the purchases made by Padmesh Realtors is correct nor has anything been sold to the assessee. He further took into consideration the fact that the mode of transportation of the goods had also not been shown. The companies were held to be non-existent as summons issued u/s. 131 to the companies were stated to be received back with the comments that no such company at the given address and only Ishwar and Sons Timber Traders confirmed the purchase amounting to about Rs. 55,000/-. Placing reliance on CIT v. La Medica, cited supra the AO concluded that the assessee had made a fictitious arrangement to inflate the purchase. The record shows and as has been addresssed at great length in the earlier part of this order that in the course of the arguments advanced by the Revenue the action of the CIT(A) in accepting the assessee's claim has been assailed on the reasoning that the assessee was unable to give the correct address of Padmesh Realtors and at the address given it was revealed that Mrs. Kamini Gupta owner of the said premises has denied any knowledge of the existence of the such company at the given address. The Ld. CIT Dr. has also stated that the said concern had no godown facilities for storage and reliance has been placed upon the statement of Shri Sanjay Agrawal who stated that there was no such company. The Ld. CIT Dr. has further assailed the action of the CIT(A) on the ground that the purchases made by Padmesh Realtors were also from non-existent companies as summons to all the entities from whom purchases are stated to be made have returned back unserved. The exponential growth in lodging sales of Rs. 24 crore odd within 45 days by a company incorporated only on 16/1/2008 was also contended to be a fact which supports the Revenue's stand. The documents relied upon namely NOC by Mrs. Kamini Gupta and NOC by Kumar Ice Factory in support of the claim that office and godown storage facilities were available to Padmesh Realtors was stated to be not of any relevance as these documents were not found on the date of the search and the user of residential premises for commercial purposes was not permissible under the Municipal Laws. He has also assailed the action of the CIT(A) on the ground that there was no receipt of rent from Mrs. Kamini Gupta and Kumar Ice Factory found in the course of the search. Addressing the field enquiry made post search from R.V Mercantile Pvt. Ltd., Shri Ganpati Sales and Sai Traders it was submitted they further demonstrated the hollowness of the assessee's claim as none of these were found at the address given. The fact that photocopy of VAT return filed, Bank Statements PAN return of income ROC etc. for the 23 entities filed during the assessment proceedings without being specifically called for by the AO it has been argued suggests close proximity between the assessee and Padmesh Realtors as such it was stated to be a neutral evidence as such of no relevance. The signatures appearing in the paper book in the case of the suppliers of Padmesh Realtors specifically Shiv Trading Comapny also did not inspire any confidence and the capability of the assessee in submitting these various details of these 23 concerns from whom the alleged purchases were made by Padmesh Realtors showed that there was more than proximate relationship between the assessee and the second tiered party. The reliance placed by the CIT(A) on these paper documents accordingly it has been argued is misplaced as he has over looked the entire field enquiries which demonstrated that all the suppliers were bogus suppliers.
8.1 As opposed to these submissions of the Department the assessee has placed heavy reliance on the documents available on record on the basis of the same it has been contended that the Assessing Officer has proceeded on suspicions and surmises ignoring the documentary evidences and has instead relied on half hearted enquiries carried out through the Investigation Wing which were never carried through to their logical conclusion. It has been vehemently argued that based on suspicions and surmises the claim of the assessee based on documentary evidence on record which remains unrebutted by any evidence cannot be set aside and the issue restored for causing another set of enquiries in the absence of any material warranting such a decision. Apart from reiterating the arguments made before the CIT(A) which have been addressed at length in the earlier part of this order the arguments of the Ld. CIT Dr. casting doubts on the assessee's claim by advancing arguments to cause doubts by suggesting that Padmesh Realtors incorporated on 16/1/2008 has shown exponential growth in 45 days in order to only cause doubts as the statement even if correct does not prove that the entity's existence and transactions are bogus. The assertion has been assailed as having been based on incorrect facts and suspicions. It has been stated that the period is 75 days and not 45 days and Padmesh Realtors being a subsidiary of the Suncity Group for whom the assessee was largely carrying out construction activity; the purchases as per arrangements were made from Padmesh Realtors as such the volume of sales made by Padmesh Realtors may create a suspicion in the mind but the volume of sale cannot be said to be leading to a conclusion that the sales are bogus. The arguments that the existence of the Padmesh Realtors itself was doubtful as the address of a flat at Dwarka was a residential address and the godown address was wrongly taken from some Sanjay Aggrawal it has been argued may again cause some doubt but in the face of the evidence relied upon by the assessee most of which consists of documents of various Statutory Authorities authenticating the assessee's claim cannot be disregarded on suspicions and half hearted enquiries. These evidences it has been argued lead too the conclusion that Padmesh Realtors was in existence and the addresses at the relevant point of time of head office and godown were correct and these documents remain unassailed on record and consequently the unconfronted alleged statement of Mr. Kamini Gupta owner of Dwarka flat and of., Sanjay Aggarwal a stranger were stated to be of no relevance. It has also been argued that at no point of time the assessee company expressed its ignorance about the address of Padmesh Realtors as the said address was known to the Assessing Officer himself from day one and was also in the knowledge of the Investigation wing who in the course of the post search investigations investigated the subscribing of CCD of Padmesh Realtors by Deutsche Bank amounting to Rs. 600 crore. It has been stated that the issue has been examined in the course of the assessment proceedings by the Assessing Officer and found to be genuine as such the existence of the said concern has never been in dispute at any point of time. These submissions are found recorded in the impugned order and from part of the synopsis filed before the Bench and it is seen that these have not been assailed by the Revenue. In support of the existence of the said concern reliance has been placed upon Memorandum of article of association; Certificate of incorporation issued by ROC, photocopy of PAN Card; photocopy of registration of certificate issued by VAT Department along with NOC issued by land lady Mrs. Kamini Gupta for allowing the use of business premises at Flat No. A-102 Dream apartments, Plot No. 14, Sector 22 Dwarka. Padmesh Realtors it has been argued had available 2000 sq. meter godown for storage of construction material sold to the assessee. In support of the said claim photo copy of NOC issued by Kumar Ice Factory for allowing use of go-down premises at Patparganj along with PAN, IT Return etc. various other documents relied are found reproduced at pages 10 to 12 in para 4 of the impugned order and on the basis of these arguments and evidences the conclusion arrived at has been heavily relied upon in the course of the hearing by the Ld. AR and none of these documents it has been repeatedly emphasized have been assailed by the Revenue. In the facts as they stand as far as the existence of Padmesh Realtors and the transactions recorded in the normal course of business being genuine it has been argued the Revenue's case has no merit.
8.2 It is seen that the Department has built its case on the statement of Mrs. Kamini Gupta the owner of Flat No. A-102 Dream apartments, Plot No. 14, Sector 22 Dwarka who is known to have stated that she does not know Padmesh Realtors. As opposed to this statement not confronted to the assessee there is on record the NOC issued by the very same land lady for allowing the use of the very same flat for the business purposes of Padmesh Realtors; on the basis of which NOC VAT Registration has been issued to Padmesh Realtors; copy of the same is available at page 27 of the paper book mentions this specific addresses. The existence and functioning of Padmesh Realtors at the relevant point of time from Flat No. A-102 Dream apartments, Plot No. 14, Sector 22 Dwarka to our minds cannot be doubted only on the basis of the alleged statement of Mrs. Kamini Gupta which was never confronted to the assessee. It is also seen that nothing has been placed on record by the Department before us to show that in these peculiar facts and circumstances why the documentary evidence should be ignored and precedence be given to an alleged statement which has never been confronted. A perusal of Para 4(b) would show that the registered office of Padmesh Realtors was changed to N49, 1 Floor, Cannought Place, New Delhi w.e.f 8/9/2008 and was again changed to 1240 (3 Floor), Kachcha Mahajni, Chandni Chowk, 110006 w.e.f 2/3/2009 at the said concern as per sub para of para 4 has been described as a subsidiary company of Sun City Projects w.e.f 22/11/2007 in these facts, the statement not confronted of Mrs. Kamini Gupta has no relevance in the absence of any evidence to the contrary. It is also seen that the factum of Padmesh Realtors having been examined in the content of CCD of Rs. 600 crore Deutsche Bank, Singapore has already been in the knowledge of the AO and Investigation Wing. This fact cannot be ignored as the existence was in the know of the department all along the fact coupled with documents of Statutory Authorities; coupled with NOC filed for Registration purposes of Mrs. Kamini Gupta conclude this issue against the Revenue in the absence of any rebuttal on facts and evidence. In the circumstances, being satisfied by the findings of the CIT(A) and the reasoning for coming to the said conclusion the same is upheld.
8.3 Coming to the next issue namely the availability of go-down facilities to Padmesh Realtors for the purposes of storage of its material, it is seen that the only evidence on record is the statement of an unconcerned person Mr. Sanjay Aggrawal who has given the wrong address and has also stated that Padmesh Realtors is not known to him. It is seen that nothing has been placed before us to show that the said person was closely linked either to Kumar Ice Factory or Padmesh Realtors and on the contrary has consistently been described as a stranger by the assessee who has instead placed on record before the AO the correct address of Kumar Ice Factory who had 2000 square meters of area which was allowed by the owner to be used as godown by Padmesh Realtors for their storage of material. Since the statement of an unconcerned person and enquiry at the wrong address is the only basis of the allegation that Padmesh Realtors did not have godown facilities the same has no relevance in the face of documents issued by Statutory Authorities listed in the impugned order and discussed at length in the earlier part of this order. In the absence of any contrary evidence, we find ourselves unable to come any other conclusion than the conclusion arrived at by the CIT(A). Being satisfied by the reasoning and fining on consideration of the material available on record the departmental arguments are rejected.
8.4 The Revenue in the course of the arguments has also placed heavy emphasis reliance on the allegations of the AO that how the goods were moved from the go-down facilities of Padmesh Realtors to the assessee has not been addressed. It is seen that the allegation has no basis as the same have been dealt with by the CIT(A) in para (j) page 48 and 49 of his order at great length. The said finding has been extracted in the earlier part of this order and has not been rebutted by way of any evidence led to the contrary, merely reliance has been placed on paras 4.5 and 4.6 of the assessment order. The facts taken into consideration by Ld. CIT(A) we find are supported by the relevant documents filed in the paper book and are not assailed and on examination have been found to be correctly relied upon by the CIT(A) in arriving at the finding as all necessary details of transportation are found mentioned in the invoices accompanied by GRs/Bilty's annexed and also the availability of assessee's own trucks bearing Registration no. HR 38J 2599, HR 634567; HR 634568; HR 38F2405; HR 38F 2409 & HR 38 J2600. We have gone through the invoices filed in the paper book and find that they include the necessary details of address, TIN; date of sales; dispatch detail i.e mode of transportation; dispatch no., bilty no; description of goods; quantity rate etc. sales tax charged, freight/carriage charge etc. Cognizance of this fact has been taken note of by the CIT(A) and on a perusal of the documents filed in the paper book we find that the allegation of the revenue is without any basis.
8.5 It is a matter of record that the assessee and the Sun city Group of companies were subjected to search and nothing incriminating except these two documents qua the assessee have been found. Whereas the “Core document” described is a ledger account of Padmesh Realtors in the books of the accounts of the assessee it is seen it merely reflects the sales made by the said concern to the assessee on various dates for which payments have been made, we do not see how this document creates any doubt that the transaction is bogus in the face of the evidences and the enquiries and the responses available on record. Coming to the other document i.e AS-3 party SCN Page 111 which again discloses that purchases of 24.25 crore odd were made by Padmesh Realtors from these 23 odd parties. The document per se can not in any way can be described as an incriminating document as it merely refers to facts fully accepted by the Padmesh Realtors. The document becomes incriminating in the eyes of the Revenue because summons allegedly issued to these 23 parties except for Ishwar Sons Timbers return unserved as only Ishwar Sons from whom purchases of about Rs. 50,000 were made only confirmed the transaction directly to the department. The confirmed copies of all these 23 entities filed by the assessee before the AO alongwith their addresses copies of Revenue filed invoices; the payments received through cheque; VAT, Sales Tax Registration PAN, TIN number have all been ingorned on the plea that these 22 entities out of 23 did not respond to the summons issued as they were returned with the comment that no such company/entity found. Further the filing of these documents by the assessee without the AO specifically calling forth for the same it has been aruged suggested close proximity with assessee as such the documents were “neutral”. As opposed to the said arguments the assessee has consistently assailed the stand of the Assessing Officer on the ground that the summons stated to be issued to the entities which allegedly came back unserved with the comment no such concern found may not have much relevance as nothing has been brought on record by the Revenue to show that at what addresses the alleged summons were addressed; Secondly, reliance placed on this alleged fact has been argued to be misplaced as this fact was not confronted to the assessee, thirdly, it has been argued that it is not correct that no one responded as the AO himself records that one party has responded and confirmed which fact itself shows that Padmesh Realtors was making purchases in the normal course. The assessee in order to support the claim has also placed detailed evidences for each of these 23 parties on the basis of which it is argued that the evidences demonstrate that the said concerns were genuine concerns engaged in construction material sale etc. the action of the revenue has also been assailed on the ground that the so-called enquiries allegedly relied upon are in the case of only 3 parties namely R.V Mercantile Pvt. Ltd., Sai Traders and Shri Ganpati Sales. It has been the assessee's stands that the documents in support of its claim cannot be disregarded on the basis that at the premise where enquiries were carried out for Shri Ganpati Sales and Sai Traders the ladies found in occupation of the premises namely Smt. Rekha Sachdeva and Smt. Kamlesh Devi both have agreed that the respective firms had functioned from the said premises but now had moved to some other location. As such the existence of the firms was confirmed by the AO's evidence itself whereas in the case of Shri Ganpati Sales, Mobile No. of Shri Pramod was given as the lady had the number available which was called and responded to by the said person. In the cases of Sai Traders it was stated that the said premises was given on rent to Sai Traders about 16 years ago and the present address was not known. It has been argued what stopped the Revenue for calling Pramod Kumar once again for a full and correct address if the initial noting of the address was incomplete and in the case of Sai Traders it was argued that there is no duty of the landlord to necessarily know where a tenant firm has shifted and even otherwise in the case of Sai Traders the assessee has placed on record copy of the income tax return for 2008–2009 assessment year filed by Mr. Vinay Jain along with copy of VAT return, photocopy of Central Sales Tax, Registration Certificate etc. where complete address and particulars were available. The evidence not assailed cannot be lightly ignored. In the case of Shri Ganpati Sales, income tax return on Mr. Amit Sharma proprietor of the said concern for 2008–2009 assessment year along with confirmed copy of account PAN ledger account, bank statement of Padmesh Realtors etc. has been filed as such all necessary particulars were available. Coming to the third entity enquired namely R.V Mercantile Pvt. Ltd., the address of the said concern as per the assessment could not be located in regard to the same the assessee has contended that the AO has disbelieved the existence of the said concern on the belief that the company has not given proper address but no efforts as per record were made to obtain the correct address on the contrary the assessee has been petitioning the Assessing Officer that in case any further evidence is required, he may be called upon to do so which fact has not been assailed by the Revenue. It is seen that in support of the claim that it is a genuine concern a copy of VAT return financial year 2007–2008 has been filed; sale invoices issued to Padmesh Realtors along with confirmed copy of account with PAN for F.Y 2007–2008, 2008–2009 have been filed; along with bank statement of Padmesh Realtors showing payment of purchases. Similarly, it is seen that for each of the other remaining 20 concerns documents in support of the existence of the same have been brought out in the impugned order from pages 17 to 27 none of these have been assailed by the Revenue and no argument has been advanced to show as to show how the income returned by the said concerns in the face through PAN and VAT details along with confirmed copy of accounts sales invoices issued to Padmesh Realtors etc. can be disregarded. In-fact perusal of the assessment order itself shows that the AO has gone to examine the bank accounts not only of Padmesh Realtors and the bank account of these 23 concerns to whom payments were made by Padmesh Realtors but even of the concerns to whom payment by cheques were made by these 23 companies and has given no adverse finding except observing that the ultimate source of the money could not be found. This fact infact leads to the conclusion that the purchases made by Padmesh Realtors were genuine and from genuine concerns. The CIT(A) takes note of the fact that there is no allegation that money has come back to the assessee and nothing contrary to the same has been brought on record by the Ld. CIT DR. As such, we find no good reason to interfere with the impugned order in this regard. It is seen that the documents available on record before the AO filed in assessee's letter dated 15/12/2010 stands unassailed. The same have been stated to have been considered by the AO in para 4.6 however inordinate reliance has been placed on post search record enquiries carried out half heartedly by the department and the documents relied upon by the assessee and considered by the CIT(A) cannot be dismissed as neutral documents only on the ground that they were never specifically called forth by the AO and having been filed before the AO suggests close proximity. The documents it is seen are positive document demonstrating the genuineness of assessee's claim as such cannot be described as neutral only because the assessee filed them suo motu. Addressing the allegation of close proximity we see no merit in the departmental argument as there is nothing suspicious per se where in the face of AO's suspicions the assessee makes the efforts to obtain these documents from its suppliers. This exercise in no way detracts from the authenticity of the evidence which stands unrebutted. Being satisfied by the reasoning and the finding on considering the material available on record the finding of the CIT(A) is confirmed. The arguments that signatures in invoices apper to be different is not backed by any document in support of the claim. Similarly the arguments that non-production of the directors of 23 entities from whom goods were purchased by Padmesh Realtors which were further sold to the assessee cannot be a ground to ignore the evidence available on record as not only the assessee has successfully demonstrated that no such requirement was ever communicated to it but even otherwise the occasion to call the assessee to produce the suppliers of the supplier does not arise. The onus placed upon the assessee stands discharged. The departmental arguments why certain documents were not found during the search has no merit and stands responded to as it is not for the assessee to suggest which documents should be seized. Similarly the functioning of Padmesh Realtors from a residential address for a certain period of time authenticated by Statutory documentation whatever it may lead to most definitely does not lead to the conclusion that the concern was not genuine as there is more than sufficient evidence on record which we have addressed which demonstrated its genuineness while arriving at the conclusion. The decisions relied upon by the parties have been taken into consideration however they have not been referred to specifically since the issues are purely factual. The decisions considered in the orders of the tax authorities and the response of the parties thereon discussed at length in the earlier part of this order have all been taken into consideration however since the finding arrived at revolves on facts peculiar to the case at hand the same have not been referred to. No authority is required to be mentioned to address the settled legal position that a decision is an authority specifically on what it is called upon to decide on the facts available on record as such referring to decisions in order to hold that remand is not warranted in the peculiar facts and circumstances of the case is not necessary as before the said discretion is exercised in revenue's favour there must be some argument or fact on record warranting such a decision. In the facts of the present case apart from basing arguments on suspicions and surmises no fact or evidence has been placed on record in order to canvass that facts have not been in correctly appreciated. The documents available on record remain unrebutted. Accordingly for the detailed reasons gives hereinabove being satisfied by the reasoning and the conclusion arrived at in the impugned order on the facts available on record considering the arguments of the parties before the Bench we find ourselves unable to come to a contrary finding then the one arrived at in the impugned order. Accordingly the same is upheld.
9. In the result the appeal of the Revenue is dismissed.
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