DCIT Vs Amrapali Eden Park Developers Pvt. Ltd. (ITAT Delhi)
AO observed that the assessee has claimed expenditure on account of purchase from certain parties who are involved in merely issue of purchase bills (Bogus Purchase) and effecting payments through banking channels for commission and not actually supported with the physical transfer of goods. Furthermore, from para 5.2 of first appellate order, we observe that the ld.CIT(A) concluded the issue in favour of the assessee by observing and directing the AO to make available all adverse material and to allow opportunity to the assessee to explain/rebut the evidence and this may be undertaken during AY 2012-13 and subsequent years when the said expenditures embedded in the work-in-progress will be considered for computing the income of the assessee as per POC method and also directed the AO to take action as per law. The CIT(A) passed impugned order on 11.07.2014, much water have flown till today including conclusion of assessment proceedings for the several assessment years to AY 2011-12, including AY 2012-13 and outcome of these orders has to be taken care by the authorities below in view of controversy arose during AY 2011-12. Therefore, we find it appropriate and necessary to restore the issue to the file of the CIT(A) to consider the adjudication of the issue in AY 2012-13 and relevant subsequent assessment years and, thereafter re-adjudicate the issue after allowing due opportunity of hearing to the assessee. The Cross Objection of the assessee being supportive of the order of the ld.CIT(A) is also restored to the file of the CIT(A).
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal and the Cross Objection filed by the Revenue and the assessee, respectively, are directed against the order dated 11.07.2014 of the CIT(A)-1, New Delhi, relating to Assessment Year 2011-12.
2. The grounds of appeal raised by the Revenue read as under:-
“1. The order of ld.CIT(A) is not correct in law and facts.
2. On the facts and circumstances of the case the ld. CIT(A) has erred in deleting the addition of disallowance of Rs.2,00,07,633/-made by the Assessing Officer on account of ‘Bogus Purchase’ which were capitalized.
3. The appellant craves leave to add, amend any/all the grounds of appeal before or during the course of hearing of the appeal.”
3. The ground of Cross Objection taken by the assessee reads as under:-
“1. On the facts and circumstances of the case and in law, the initiation of assessment proceedings and issue/service of notices by the Assessing Officer is not in accordance with the provisions of law and accordingly the assessment order passed is liable to be quashed.
The appellant craves leave to add, alter, modify or delete one or more ground before or at the time of hearing of appeal.”
4. None appeared on behalf of the assessee despite of service of notice. Since we find that this matter could be disposed in the absence of representation from the assessee’s side, we proceeded to adjudicate the matter after hearing the ld. Sr. DR.
5. The ld. Sr. DR submitted that the AO has made additions with right observations and findings. He drew our attention to para 5.6 to 5.8 of the assessment order and submitted that the transactions of purchase of building materials/steels alleged to be sourced from the parties remained unverified and treated as ‘bogus and unexplained expenditure.’ The ld. Sr. DR submitted that the purchases from all four parties were rightly treated as ‘bogus.’ The ld.CIT(A) is not correct and justified in granting relief to the assessee, therefore, the order of the ld.CIT(A) may kindly be set aside by restoring that of the AO.
6. We have carefully considered the arguments of the ld. Sr. DR and perused the material available on record. We find, the ld. CIT(A) has rightly considered the submissions of the assessee before him and deleted the additions on reasonable ground, and, therefore, the order of the ld.CIT(A) deserves to be affirmed. On careful perusal of the assessment order, we find the AO made the following observations and findings:-
“5.6 The assessee vide order sheet entry dated 07.03.2013 was apprised as to the enquiries conducted in terms of issue of summon u/s. 131 and physical enquiry conducted by the Inspector which reveals that these parties are not genuine business entity but mainly entry providers indulging in issue of bills but not effecting true sales. Therefore, A.R. of the assessee was finally asked to produce the above parties along with books of accounts & ITR to prove the genuineness of the party and the transactions and failure to which the purchase transactions will be treated as bogus. The case was adjourned to 11.03.2013. However, none attended nor any party was produce to prove the genuineness of the transaction of purchase of material from the above mentioned parties. This shows that the assessee has nothing to produce and offered to substantiate the genuineness of the transaction of purchase of goods.
5.7 In view of the above facts, the identity & existence of the above mentioned parties and genuineness of transactions of purchases of raw material by the assessee remained un-verifiable, as:
a) The existence of the parties on the given business as well as residential addresses were not verifiable.
b) The location of the premises from which business is purport to be carried is such from which operation of business alleged to be carried out is not possible.
c) The level of transactions routed through the bank account of these parties are such voluminous and big, which person of status of these parties in no manner can match.
d) Money routed through the bank accounts are at first stage transferred to other accounts and at second stage these are withdrawn mostly in cash, which is repatriated to the beneficiary i.e. the assessee company and its associates in cash.
e) Moreover, failure on the part of the assessee to produce such parties inspite of the repeated opportunity given to them conclusively prove that no such party actual exist which can stand and own-up the transactions alleged to be routed through their bank accounts and issue of purchase bills.
5.8 Therefore, the transactions of purchase of building materials/steels alleged to be sourced from these parties are remained unverified and treaded as “Bogus & Unexplained Expenditure”. Accordingly, the purchases claimed by the assessee from M/s. Shiv Sales Corporation total amounting to Rs. 58,40,153/-, M/s. Om Enterprises amounting to Rs.46,40,000/-, M/s. Paras Enterprises amounting to Rs. 53,67,480/- & M/s. Balaji Enterprises amounting to Rs.41,60,000/- are not genuine and to be treated as “Bogus”. Therefore, the purchase expenses to the extent of Rs.2,00,07,633/- is added to the income of the assessee on account of “Bogus Purchases””
7. The ld.CIT(A) granted relief with the following observations:-
“5.1 In the sixth ground of appeal, the appellant has objected to the treatment of purchases of Rs.2,00,07,633/- as bogus and its reduction from the closing work in progress. The submissions made by the appellant in this regard are as under:
“3. Ground No. 6 (disallowance on A/c of alleged bogus purchases Rs.20007633/-)
The disallowance of Rs.20007633/- made by the A.O. as alleged bogus purchases is totally erroneous. The A.O. has made the addition of purchases in respect of following parties:-
