China Construction Sausum (I) Pvt. Ltd. Vs DCIT (ITAT Delhi)
Summary: The Income Tax Appellate Tribunal, Delhi Bench “E”, considered appeals filed by M/s China Construction Sausum (I) Pvt. Ltd. for Assessment Years 2020-21 and 2021-22 against orders of the Commissioner of Income Tax (Appeals)-27, New Delhi. The appeals arose from assessments framed under section 143(3) read with section 153A of the Income Tax Act, 1961. Since identical issues were involved, both appeals were heard together and disposed of by a common order.
The assessee was engaged in civil and industrial construction contracts and had executed projects including the OPPO Mobile Manufacturing Centre Phase-II Project, Haier North India Industrial Park Project, Chenfeng Technology factory EPC Project and “The Icon” project. For Financial Years 2019-20 and 2020-21, its operational revenue was stated at Rs 509.40 crores and Rs 685.69 crores respectively. The books of account had been audited and accepted by the Revenue.
Following a survey and thereafter a search and seizure operation, the Revenue alleged that the assessee had made suspicious or bogus purchases and booked bogus expenses through accommodation entries. In Assessment Year 2020-21, the principal disputed additions concerned purchases from Dethat Trading Pvt. Ltd. of Rs 95,76,70,592, purchases from Bhagwati Enterprises of Rs 1,01,53,673, and purchases from Shaurya Enterprises, Hwbat Trading Pvt. Ltd. and Amplec Power Solutions aggregating to Rs 58,19,555.
In relation to Dethat Trading Pvt. Ltd., the Assessing Officer treated the entire purchases as bogus on the basis that the supplier was allegedly non-existent, had not carried on genuine business, its GST registration had subsequently been cancelled, and funds had allegedly been transferred by the supplier to other entities. The CIT(A) upheld the addition.
The Tribunal, however, examined the statements relied upon by the Assessing Officer and found that the statements of the assessee’s employees did not establish that purchases from Dethat Trading Pvt. Ltd. were bogus. The Tribunal noted, among other things, that the project manager was not responsible for procurement, the site manager was not responsible for the procurement process, and the material manager at the OPPO site was not concerned with purchases made at other construction sites. The Tribunal also found that limited extracts of the statement of the assessee’s translator could not properly be relied upon without furnishing the complete statement. The same principle was applied to the statements of other persons relied upon by the Assessing Officer where the statements did not specifically refer to the assessee or its transactions.
The assessee had also furnished contracts, tax invoices, ledger accounts, project documents, delivery challans, purchase orders, evidence of physical movement of goods, labour-related documents and bank statements showing payments through regular banking channels. The Tribunal noted that the materials and labour services had been utilised in the construction activity and that the assessee had actually executed the relevant contracts and generated sales. It further noted that the books of account had not been rejected and the provisions of section 145(3) had not been invoked.
The Tribunal also found no nexus between the alleged siphoning of funds by Dethat Trading Pvt. Ltd. and the assessee. According to the Tribunal, the subsequent conduct of the supplier with the funds received through banking channels could not, in the absence of evidence linking the ultimate beneficiaries to the assessee, make the assessee’s purchases bogus.
The assessee had relied upon CIT Vs. Orissa Corporation (P) Ltd., 159 ITR 78 (SC). The case was referred to by the assessee in support of its contention concerning the evidentiary burden where the supplier did not respond to departmental enquiries. A TaxGuru article reproducing and discussing the principle is available at CIT Vs. Orissa Corporation (P) Ltd..
As regards Bhagwati Enterprises, the Assessing Officer had relied upon cancellation of GST registration, alleged absence of the supplier at the stated premises and discrepancies in vehicle numbers. The Tribunal found that payments had been made through regular banking channels and that the assessee had furnished purchase orders, material requisition sheets, invoices, e-way bills and other supporting documents. It also considered the fact that the transactions had taken place from November 2019 to February 2020 whereas the Inspector’s visit occurred in May 2022. The Tribunal held that the subsequent non-availability of the supplier at the address did not make the earlier transactions ingenuine and held the purchases to be genuine.
For Shaurya Enterprises, Hwbat Trading Pvt. Ltd. and Amplec Power Solutions, the Tribunal considered the supporting documents and the circumstances surrounding GST registration, cancellation, invoices, delivery documents and banking payments. It held the purchases from each of these suppliers to be genuine.
For Assessment Year 2021-22, the Tribunal applied its observations concerning Dethat Trading Pvt. Ltd. and Shaurya Enterprises mutatis mutandis. It separately considered purchases from K L Enterprises of Rs 38,20,390. The Tribunal noted that the supplier’s GST registration had been cancelled on 19-01-2021, after the transactions with the assessee had concluded, and considered the tax invoices, e-way bills, bank statements and GST portal extracts. It held the purchases to be genuine. The Tribunal also deleted an addition of Rs 11,59,636 relating to Radhey Shyam Enterprises because the assessee had denied carrying out any transaction with that vendor during Assessment Year 2021-22 and the Assessing Officer had not provided a basis for the figure or cross-verified the matter with the vendor.
The Tribunal accordingly allowed the relevant grounds concerning the disputed purchase additions. The grounds that were not pressed were dismissed as not pressed, while general grounds did not require specific adjudication. The appeal for Assessment Year 2020-21 was partly allowed, the appeal for Assessment Year 2021-22 was partly allowed, and both appeals were ultimately partly allowed.
Cases Discussed
- CIT Vs. Orissa Corporation (P) Ltd., 159 ITR 78 (SC) — referred to in the assessee’s submissions concerning the evidentiary burden and the consequences of non-response by a third party to departmental enquiries.
FULL TEXT OF THE ORDER OF ITAT DELHI
These appeals of the assessee arises out of the orders passed by the Commissioner of Income Tax (Appeals)-27, New Delhi [hereinafter referred to as ‘ld. CIT(A)’, in short] in Appeal Nos. 7866 & 7867/Del/2025 for A.Ys. 2020-21 & 2021-22 even dated 08.09.2025 which in turn arises out of the order passed by the Assessing Officer, DCIT, Central Circle-17, New Delhi (hereinafter referred to as ‘ld. AO’) passed u/s 143(3) r.w.s. 153A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) dated 31.05.2022. Identical issues are involved in both these appeals and hence they are taken up together and disposed of by this common order for the sake of convenience.
2. The Ground Nos. 4 & 5 raised by the assessee were stated to be not pressed by the learned AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed.
3. The Ground Nos. 1 and 21 raised by the assessee are general in nature and does not require any specific adjudication.
4. The assessee company is engaged in the execution of civil and industrial construction contracts. During the relevant years under consideration, it executed, inter alia, the OPPO Mobile Manufacturing Centre Phase –II Project and the Haier North India Industrial Park Project at Greater Noida, the Chenfeng Technology factory EPC Project, “The Icon” project at Thane, and worked for Foxconn and ATL. The operational revenue was Rs 509.40 crores for Financial Year 2019-20 and Rs 685.69 crores for Financial Year 2020-21 on which net profit of 0.54% and 0.57% was earned respectively. The books of accounts of the assessee were duly subjected to audit and the same were accepted by the revenue. The assessee filed its original return of income on 31-03-2021 declaring total income of Rs 9,93,41,780. Subsequently, a revised return was filed on 31-05-2021 declaring total income of Rs 14,24,96,040. Notice under section 143(2) stood issued to the assessee dated 29-6-2021. The case of the assessee was centralized with DCIT Central Circle-17, New Delhi vide order under Section 127 of the Act passed by Learned Principal Commissioner of Income Tax-6, Mumbai dated 30-3-2021. A survey operation was carried out on the assessee company 20-11-2020 at 701, The Capital, Level 7, Bandra Kurla Complex, Bandra (East), Mumbai – 400051. Thereafter, a search and seizure operation under Section 132 of the Act was conducted upon the assessee on 23-11-2020. During the course of such operation, number of incriminating documents and digital data were found and seized and it was gathered that the assessee company have made suspicious / bogus purchases and booked bogus expenses by obtaining accommodation entries from the entities controlled by Shri Charlie Peng and its associates. Consequently, proceedings under Section 153A of the Act stood initiated and notice under Section 153A of the Act stood issued to the assessee on 19-11-2021. In the meantime, the assessee filed a writ petition before the Hon’ble Bombay High Court and challenged the order under Section 127 of the Act passed by Learned PCIT, Mumbai dated 30-3-2021. The Hon’ble Bombay High Court vide its order dated 15-2-2022, set aside the transfer order and directed to pass a fresh order under Section 127 of the Act after following due procedure. Thereafter, the case of the assessee was centralized again with DCIT Central Circle – 17 New Delhi vide order under Section 127 of the Act passed by Learned PCIT -6, Mumbai dated 23-3-2022 after following the due procedure. Accordingly, notice under Section 153A of the Act was again issued on 24-3-2022. In compliance to the said notice, the assessee company filed its return of income on 26-3-2022 declaring the income of Rs. 14,24,96,050 which is the same as was originally declared in the revised return. In the meantime, vide order dated 25-3-2022, the Hon’ble Court also directed the revenue to complete assessment proceedings on or before 31-5-2022. Notice under Section 143(2) of the Act was issued again on 10-5-2022 and duly served upon the assessee. During the assessment proceedings, notice under Section 142(1) of the Act stood issued to the assessee along with detailed questionnaire.
5. The disputed issues before us on merits of the additions are as under:-
a) Bogus purchases (Dethat Trading Pvt Ltd) – Rs 95,76,70,592
b) Suspicious purchases (Bhagwati Enterprises) – Rs 1,01,53,673
c) Purchases made from parties who are non-filers / cancelled GSTIN entities such as Shaurya Enterprises (Rs 10,20,503), Hwbat Trading Pvt Ltd (Rs 46,58,712) and Amplec Power Solutions (Rs 1,31,340) – Rs 58,19,555
6. We have heard the rival submissions and perused the materials available on record. During the course of search proceedings, it was found that assessee has made purchases amounting to Rs. 95,76,70,592 from M/s Dethat Trading Pvt. Ltd in assessment year 2020-21. The said party M/s Dethat Trading Pvt. Ltd was also covered in the search operation on 18-11-2020. However, no entity was found existing on the known address. The Learned AO noted that subsequently, ample evidences were gathered during post-search enquiries that M/s Dethat Trading Pvt. Ltd. had siphoned off the amount to the account of bunch of shell entities / companies controlled by Mr Charlie Peng and his associates given as under:-
M/s Jumpmonkey Promotions – Rs. 36,35,42,884
M/s Radhe Shyam Enterprises – Rs. 5,66,33,849
M/s Om Enterprises – Rs. 1,06,20,679
6.1. With regard to the siphoning off of funds by Dethat Trading Pvt. Ltd. to the aforesaid entities, the Learned AO observed that M/s Jump Monkey Promotions was a suspicious entity and was involved in fraud as investigated by GST Department. The funds received by M/s Radhe Shyam Enterprises from Dethat Trading Pvt. Ltd. was further transferred to M/s OTA New Delhi Pvt. Ltd., wherein the director of that company was Shri Charlie Peng, known Hawala Entry Operator; M/s Kumar Trading Company; and M/s Inferma Tradex Pvt. Ltd. It was observed that all these entities are used for providing accommodation entries which was unearthed in search on Mr. Charlie Peng group on 11-08-2020. With regard to siphoning of funds to M/s Om Enterprises, the Learned AO noted that it was found that narration in the receiving bank accounts which belongs to K B Enterprises clearly reflect the name of transacting party as M/s Dethat Trading Pvt. Ltd. that substantiates the funds were wrongly shown to be paid to Om Enterprises whereas payments were given to K B Enterprises which substantiates that the transactions of M/s Dethat Trading Pvt. Ltd. with Om Enterprises was bogus.
6.2. The learned AO by placing reliance on statements of various persons came to the conclusion that the materials were never supplied by Dethad Trading Pvt Ltd to the assessee herein, which eventually lead to disallowance of the entire purchases made from the said supplier in the sum of Rs 95,76,70,592 in the assessment. The Learned AO noted that the said supplier was found to be non-existent and bogus entity not carrying on any business operations. The assessee on its part had furnished various documents to prove the genuineness of purchases from Dethad Trading Pvt Ltd.
6.3. Before the Learned CITA, the assessee filed additional evidences and the same were duly admitted and a remand report was called for from the Learned AO. The learned AO submitted the remand report dated 9.5.2025 enclosed in Pages 448 to 450 of the Paper Book objecting to the admission of additional evidences and observed that the additional evidences submitted by the assessee before the learned CITA include copy of invoices, ledger accounts, work orders and payment details, payment details, compliance check from the income tax portal qua the supplier. The learned AO commented that mere submission of these documents do not rebut or address the fundamental findings established during the course of search and post search investigation of M/s Dethat Trading Pvt Ltd and these documents are self-generated and they do not establish the actual movement of goods or rendering of services. No corroborative evidence such as transportation documents, e-way bills, stock registers, delivery challans or confirmation from the supplier has been furnished during assessment proceedings. Crucially, the assessee failed to produce the principal officer or director of M/s Dethat Trading Private Limited either during assessment proceedings or in response to notice under section 133(6) of the Act to verify the genuineness of the transactions. Further, M/s Dethat Trading Private Limited was found to be non-existent at all known addresses, its GST registration was suo moto cancelled and it had not filed any income tax return or conducted any genuine business activity. Accordingly, the learned AO concluded that the transactions of the assessee with Dethat Trading Private Limited are sham and accommodation entries.
6.4. The assessee filed rejoinder to the remand report before the learned CITA reiterating the fact that the transactions of purchases made from Dethat Trading Private Limited were carried out in the normal course of business duly recorded in the regular books of accounts maintained by the assessee which are also supported by tax invoices, ledger entries, work orders and payments made through regular banking channels. The assessee submitted that it had placed on record all commercially available documents including compliance status via the income tax portal at the relevant point in time of Dethat Trading Private Limited evidencing the supplier’s existence and GST registration. The materials purportedly received from the said vendor were duly consumed in the contract execution as evident from corresponding project progress reports and billing thus confirming actual supply and service. The assessee has discharged the initial burden by furnishing the complete documentation and payment trail. The inability of the supplier to respond to the notice under section 133(6) of the Act or its subsequent deregistration under GST cannot automatically be held against the assessee in the absence of any material proving non-delivery or circular transactions. The learned AO had not brought any direct evidence to establish that no goods were received or that the transaction was fictitious. The presumption of bogus nature based solely on later developments of non-filing of return or deregistration under GST is legally unsustainable without linkage to any benefit derived by the assessee. The assessee was not in control of the supplier’s operations post-transaction and cannot be expected to produce the principal officer or director of the supplier particularly when all contractual obligations were met and payments were duly made and accounts are fully settled thereon. Reliance in this regard was placed on the decision of the Hon’ble Supreme Court in the case of Orissa Corporation reported in 159 ITR 78 (SC). Accordingly, it was pleaded that the commercial substance of the transaction has been duly established and no adverse inference is warranted merely on presumptive grounds or non-response from a third party.
6.5. The learned CITA by appreciating the circumstances that prevented the assessee from furnishing of the requisite evidences before the learned AO at the time of assessment proceedings, admitted the additional evidences filed by the assessee. However, the learned CITA noted that the assessee has not furnished any corroborative evidence such as transportation documents, e-way bills, stock registers, delivery challans or confirmation from the supplier. Further, the supplier was found to be non-existent at all known addresses, its GST registration was suo moto cancelled and it had not filed any income tax return or conducted any genuine business activity and mere submission of accounting entries and invoices in the absence of supporting third party verification and credible documentation cannot be accepted as valid evidence in the light of overwhelming material on record indicating that the transactions with M/s Dethat Trading Private limited are sham and accommodation entries. Furthermore the nature of assessee’s business is such where the different kinds of inputs in the shape of materials and labour / manpower are required to produce the saleable output in the shape of execution of construction contract which analogically can be compared with manufacturing business where certain fixed inputs are required to produce unit output. The learned CITA noted that in the instant case, the assessee has failed to provide any details of ratio analysis of input of materials / labour / manpower etc consumed to produce /convert them into final outcome against such consumption of material hence the inflation of expenses i.e. inputs cannot be ruled out by taking entries to reduce the taxable profit and tax liability . Therefore, the contention of the assessee was not found tenable. The learned CITA observed that the assessee company had used this dummy supplier to obtain accommodation entry of bogus purchases to reduce its taxable income. The statement of office bearers of assessee company recorded during the course of search also corroborate the allegations of the revenue.
6.6. At the outset, we find that the learned AO had relied on statement of officials of the assessee company to draw an adverse conclusion against the assessee. With regard to statement of Shri Gagan Tyagi, project manager of the assessee’s construction site at “OPPO manufacturing unit” is concerned, he had clearly responded in question number 13 asked from him that he does not know anything about the suppliers of the assessee and when specifically asked in question number 15 regarding M/s Dethat Trading Pvt. Ltd., he again confirmed his stand that he has heard of this vendor but not confirmed of what materials are procured from it. There is nothing adverse to be inferred from these statements. Since Shri Gagan Tyagi is responsible for successful execution of the project, being the project manager and is not concerned about from whom the assessee is sourcing its materials and labour from. The sourcing of material and labour and ensuring adequacy of the same is responsibility of the stores and purchase managers. Therefore, the learned AO cannot draw any adverse inference from the statement of Shri Gagan Tyagi against the assessee to state that the procurements from this vendor are bogus. Since Shri Gagan Tyagi had already confirmed that he does not know anything about any of the suppliers of the assessee and merely because he did not know specifically anything for this vendor, it does not mean that the transactions with this vendor are bogus in nature.
6.7. With regard to the statement of Shri Gorachand Mandal, who is the Indian director of the assessee company and who looks after Companies Act compliances of the company and works in the capacity as site manager for the company, when specifically asked from him in question number 18 for sharing details of parties from whom assessee has made purchases from, he has clarified that he does not know the purchase parties and yet provided the details as appearing in Tally data. This clarifies the position of the assessee that Shri Gorachand Mandal was the site manager and was not responsible to look after the procurement process of the assessee, which was the responsibility of the stores and purchase department. Therefore, the learned AO cannot draw any adverse inference from the answers of Shri Gorachand Mandal when asked specifically for M/s Dethat Trading Pvt. Ltd., when he answered that he does not have knowledge of the same, since he does not have knowledge of not only this particular vendor, but for the entire procurement process of the assessee and hence no adverse inference could be drawn from such statements.
6.8. With regard to statement of Shri Kapil Kumar, the material manager of the assessee for site OPPO, he had categorically stated and explained in his statement that his role with the assessee was in the capacity of material manager except stores for the OPPO site and there was a separate stores manager Shri Mukesh who handled procurements from vendors like Dethat Trading Pvt. Ltd. He has clarified in answer to question number 17 that he had taken over supervision even for the stores department very recently that too because of lockdown imposed as on the date of the statement and that details of transactions with this vendor would be available with Shri Mukesh. Further, Shri Kapil Kumar had clearly stated in response to question number 13 that he had known about the vendor M/s Dethat Trading Pvt. Ltd as he had supplied materials at other construction sites of the assessee. This explanation clearly proves the factual non-involvement of Shri Kapil Kumar with the transactions undertaken with M/s Dethat Trading Pvt. Ltd. since the materials were supplied by this vendor mainly to other construction sites of the assessee which was not under management of Shri Kapil Kumar. This position gets further clarified from the ledger statement of M/s Dethat Trading Pvt. Ltd. which on careful perusal of the same would reveal that the materials procured from this vendor have been received at other sites of the assessee namely Cheng Fang Tech, Haier, etc. and only supply of labour has been done at OPPO site. Hence, Shri Kapil Kumar who was a material manager at OPPO site and had handled the stores only recently as on the date of search could not know about the material procurements being made by the assessee from this vendor at other sites of the assessee. Hence, the statement of Shri Kapil Kumar, in our considered opinion, cannot be used as an adverse weapon by the Learned AO against the assessee to form a belief that transactions undertaken with this vendor are bogus in nature as it has very clearly been spelt out above that Shri Kapil Kumar was not at all concerned with the transactions undertaken with this vendor and that he was not even supposed to know about them. Hence it could be safely concluded that from the statement of Shri Kapil Kumar, the material manager of the assessee for site OPPO, there cannot be any adverse inference that could be drawn from the answers given by him.
6.9. With regard to statement of Shri Nitish Kumar, the then translator for the assessee company, it was submitted that the copy of complete statement provided by Shri Nitish Kumar has not been provided by the learned AO to the assessee and hence no adverse inference could be drawn from certain extracts therefrom reproduced by the learned AO in the assessment order and in the show-cause notice. We are in complete agreement with this contention of the assessee as unless the complete statement of a person is provided to the assessee, the assessee cannot be expected to give a comprehensive reply on the questions posed and that the same could be given only after having a holistic understanding of the statement recorded behind the back of the assessee by the department. Further, we find that the assessee had sought to explain on perusal of the specific extracts reproduced by the learned AO in the show-cause notice that Shri Nitish Kumar who worked in capacity as translator for the assessee has very clearly stated that he had knowledge of procurements made from this vendor M/s Dethat Trading Pvt. Ltd. and can also produce the invoices and other documents for the same. The Learned AO had exceeded his jurisdiction by placing reliance on his response to a completely unrelated question put up to him as to whether he has checked the raw material supplied with this vendor. In this regard, it was submitted that a translator’s job is to ensure proper communication between the assessee’s personnel and other stakeholders. He is not supposed to check and inspect each and every procurement made from all vendors of the assessee at all sites. That to make such a practical expectation is completely baseless and devoid of any human probabilities on the part of the learned AO. We are in agreement with this contention of the learned AR. Hence, we hold that there cannot be any adverse inference that could be drawn from the limited extracts of the statements given by Shri Nitish Kumar.
6.10. Hence it could be seen that none of the statements given by the office bearers of the assessee company actually stand adverse to the assessee company and rather they actually support the genuineness of the purchases made from Dethat Trading Private Limited as some of these employees had also confirmed the fact of material supply made by that concerned supplier at other construction sites and some of the employees had also stated that their job profile does not involve supply of raw materials by any of the suppliers to the assessee company. We find that no attempt has been made by the revenue to record the statements of the relevant personnel who actually look after such procurement transactions at the relevant sites. Hence, no statements could be relied upon by the revenue at all to doubt the genuineness of the purchase transaction from Dethat Trading Private Limited. Similarly, with regard to statement from Smt Radha Kashyap, it is seen that the learned AO had reproduced certain extracts of the statement of Smt Radha Kashyap in the show-cause notice wherein it can be seen that she claimed to have fraudulently been appointed as director by CA Praveen Murarka in M/s Dethat Trading Private Limited and that her documents and signature have been supposedly misused by the CA and that resultantly she claimed that she was not aware about the business operations or whereabouts of M/s Dethat Trading Private Limited. We find that nowhere she had made any reference to the assessee company herein or even to the nature of transactions undertaken by Dethat Trading Private Limited with the assessee company. Hence, in our considered opinion, even the statement of Smt Radha Kashyap does not come to the rescue of the revenue in the instant case.
6.11. With regard to reliance placed on the statement of CA Praveen Murarka, we find that the learned AO had not reproduced the extracts of the statements of Shri Praveen Murarka and had only produced his interpretation of the statements given by him. Either way, without handing over the complete statement of Shri Praveen Murarka to the assessee, using the said statement against the assessee would be against the law and against the general principles of tax jurisprudence. Even in the interpretation given by the learned AO on the statement of Shri Praveen Murarka, there was no question asked concerning the assessee or the transactions undertaken by the assessee with Dethat Trading Private Limited. Hence, in our considered opinion, the reliance placed on the statement of Shri Praveen Murarka is totally misconceived and hence no adverse inference could be drawn against the assessee from that statement.
6.12. With regard to certain chats of Mr. Charlie Peng and Gu Peng, the learned AO had reproduced certain extracts of “We-chats” in the show-cause notice. At the outset, we find that none of the chat is legible, nor the learned AO had provided the assessee with the complete documentary set so relied upon by him. Yet, we find that there is no adverse finding drawn, even from the inferences drawn therefrom by the learned AO which affects the transactions of the assessee. Nowhere in the entire analysis of the chats stated by the learned AO in the show-cause notice has any reference been made to the name of the assessee or any transaction undertaken by Dethat Trading Pvt. Ltd. with the assessee. On the contrary, the case of the assessee only strengthens from the fact that despite the learned AO having complete extracts of the “We-chats” of the alleged entry operator Mr. Charlie Peng, there is not even a single chat wherein the name of the assessee was discussed or any chat from any of the official of the company was found. This shows that all the transactions undertaken by the assessee with the company Dethat Trading Pvt. Ltd. were rather genuine and had nothing to do with the alleged entry operators Mr. Charlie Peng and his network.
6.13. With regard to statement of Shri Manoj Dudeja relied upon by the learned AO, we find that there is no complete extraction of the statement of Shri Manoj Dudeja provided anywhere in the show-cause notice nor provided separately to the assessee. Yet from the inferences drawn by the learned AO, it could be seen that there is no reference to any of the transactions carried out by the assessee in any of the findings or statement given by Shri Manoj Dudeja. It is pertinent to note that even the vendor Dethat Trading Pvt. Ltd. is not a company which is controlled by Shri Manoj Dudeja or Mr Charlie Peng Group solely for providing accommodation entries. It was submitted that in the list of entities alleged in the show-cause notice which are controlled by Shri Manoj Dudeja for providing accommodation entries, the vendor M/s. Dethat Trading Pvt. Ltd. does not feature at all. Hence, the reliance on the statement of Shri Manoj Dudeja is of absolutely no relevance and transactions with Dethat Trading Pvt. Ltd. of the assessee could not be faulted at all.
6.14. Next, coming to the alleged siphoning of funds by Dethat Trading Pvt Ltd by transfer of funds to various other entities, we find that the learned AO had nowhere brought any nexus of that transaction of the supplier Dethat Trading Pvt Ltd with the assessee. Either way, the assessee had purchased materials from Dethat Trading Pvt Ltd and had made payments to the said supplier. Thereafter, what the supplier does with those funds is not the look out of the assessee herein. No evidence whatsoever has been brought on record by the revenue in the instant case linking the ultimate beneficiaries of the funds from Dethat Trading Pvt Ltd with the assessee herein. Hence, in the absence of such nexus, there could not be any adverse inference that could be drawn against the assessee with regard to alleged siphoning of funds by Dethat Trading Pvt Ltd to some other entities. In any event, if at all the siphoning of funds by Dethat Trading Pvt Ltd had been proved, then it has to be looked and considered in the assessment of Dethat Trading Pvt Ltd and assessee cannot be held anyway responsible for the said transactions. It is not the case of the revenue that Dethat Trading Ltd after receipt of monies from the assessee by regular banking channels had sought to withdraw cash and had given back that cash to the assessee. Hence, the purchases made from Dethat Trading Pvt Ltd cannot be held to be bogus qua the assessee.
6.15. We find that the assessee in the instant case had even clarified the discrepancies in GST registration of the supplier addressed by the learned AO. It was submitted that that any person under the GST law is required to state any 5 HSN codes related to the business intended to be carried out by the concerned taxpayer at the time of registration. However, there is absolutely no bar anywhere in the GST law which restricts a person to only sell the stipulated 5 HSN codes in its business. Any taxpayer can undertake numerous businesses under the single GST number varying from different HSN yet there shall be only 5 HSN mentioned in its registration certificate. Therefore merely because a supplier has mentioned a different HSN code in its registration certificate and the material being supplied to the assessee is different, it does not have any implication for the genuineness of the transactions undertaken by the assessee.
It was submitted that learned AO has at numerous occasions in the impugned order had mentioned that M/s Dethat Trading Private Limited was registered with GST department for trading in discs, tapes, solid state non-volatile storage devices etc. and thus the supply of construction material and labour supply done to the assessee are non-genuine in nature. In this regard, it was reiterated that there was no requirement in the GST law for the assessee to verify or for the vendor Dethat Trading Private Limited to update the HSN codes of the material being supplied to the assessee on GST registration. Hence, no adverse inference could be drawn therefrom against the transactions undertaken with the assessee. Further with regard to cancellation of GST registration subsequently, it was submitted that there could be several reasons under GST law due to which the registration of a taxpayer could get cancelled. Hence, no inference could be drawn that the GST registration stood cancelled for Dethat Trading Pvt. Ltd. because the said vendor was bogus or non-existent. No cross-verification was made by the Learned AO with the GST department to understand this fact. Further, the effective date of cancellation mentioned on the GST portal was 28-01-2021, which is after the period when the transactions with the assessee had concluded. Generally, when any registration is cancelled on grounds of bogus dealer by GST department, the same is cancelled retrospectively from the date of registration by the department. In this case, the registration is cancelled only from a subsequent date when transactions with assessee had concluded. This itself proves that the transactions undertaken by the assessee with this vendor Dethat Trading Pvt. Ltd upto the date of cancellation were genuine on which due taxes have been paid by the vendor to the GST department.
6.16. With regard to non-filing of income tax return by Dethat Trading Pvt. Ltd. referred to by the Learned AO in the assessment order multiple times, the assessee cannot be held responsible for the same as assessee does not have any control over the said vendor income tax compliances. Even if it be so, the action need to be taken on Dethat Trading Pvt Ltd for the same and not on the assessee. Hence, the adverse observation made in this regard by the Learned AO is without any basis and has to be construed as an irrelevant consideration to draw adverse inference against the assessee.
6.17. The assessee on its part had furnished the transaction wise documents in support of the genuineness of the claim of the assessee as under:-
a) Detailed Contract provided
The detailed “labour subcontracting contract” entered into with the vendor Dethat Trading Pvt Ltd was enclosed. The subcontract is worded in both English language and Chinese language and is duly signed and stamped by both the counterparts. The subcontract summarily contains the following terms:-
A) Project name – General contracting work for OPPO India manufacturing center phase- 2 project, Greater Noida, India.
B) Project Overview – Total construction area of 265847 square meters divided into separate buildings and markings of each building.
C) Detailed Scope of Work wherein the vendor is supposed to complete foundation, main building, interior works and other sporadic works in accordance with shop drawings and design specified by the assessee
D) Construction Period specified from 16-2-2019 to 3-3-2021
E) Total subcontracted project cost executed at Rs 102,42,02,157 including GST
F) The quality standards to be maintained and manner of measurement and payments to be released in terms of warranty.
G) Rights and obligations of both the parties along with penal provisions for delay in work or inferior quality of work along with many other terms and conditions.
b) Further a detailed labour sub-contracting contract generally executed for the construction business and nature of work was also provided. It is in accordance with this contract that the vendor Dethat Trading Pvt Ltd had raised labour charges invoices for the works executed on the project to the assessee and for which payments have been made by the assessee.
c) The learned AO had not disputed the execution of works done by the assessee at construction site OPPO, UP and the sales charged by the assessee from its customers. Hence the learned AO cannot simply brush aside and question the genuineness of this contract reproduced before him wherein the parts of the project work was sub-contracted to the vendor Dethat Trading Pvt Ltd. No infirmities whatsoever had been brought on record by the revenue on the contract placed before the revenue.
d) Complete set of labour invoices were enclosed before the lower authorities. It was submitted that periodic tax invoices were raised by the vendor Dethat Trading Pvt Ltd along with detailed break up of the invoice amount contained in the “Sub-contractor project payment application form” prepared as per formats of the assessee. The tax invoices are calculated and raised in the manner of “Running / RA bills” as is generally prevalent in the construction industry. The correlation of these documents along with the manner of continuity of billings so made by the vendor as per sub-contracting works completed by it and as per the terms of the overall contract entered; it gets established beyond doubt that the labour sub-contracting charges paid to this vendor are completely genuine and valid for which no addition is warranted. The assessee in this regard even provided the sample documents for labour expenditure for the period April 2019 to August 2019 before the learned CITA as additional evidences which were duly admitted by the learned CITA.
e) Complete set of documents for material supply by this vendor were provided in the form of tax invoices, material purchase statement evidencing physical receipt of material with the assessee and the delivery challans wise breakup of the amount charged in the tax invoice by the vendor, individual delivery challans specifying the exact description of goods along with quantity and also containing vehicle number by which the goods have been transported, purchase orders raised to the vendor etc. All these documents prove the physical movement of goods and physical delivery of goods from the vendor to the assessee’s site.
f) Bank statements of the assessee duly highlighting the payments made to the vendor Dethat Trading Pvt Ltd.
6.18. The aforesaid documents duly prove the physical receipt of materials from the vendor and the rendition of labour services by the vendor to the assesse. It is not in dispute that the said materials and labour services were indeed utilized in the construction activity of the assessee as ultimately the assessee had indeed executed the allotted contract at the relevant site and had generated sales from its customers. Further the books of accounts submitted before the lower authorities had not been rejected. The provisions of section 145(3) of the Act were not invoked by the revenue in the instant case.
6.19. We find that the assessee also submitted on, without prejudice basis, that the addition has been wrongly made in the sum of Rs 95,76,70,592 by taking the wrong figures in the assessment. The learned AO picked up the aggregate of debit balances appearing in the ledger account of M/s. Dethat Trading Pvt. Ltd. and has reproduced in the show cause notice. The debit balance posted in the vendor ledger is the amount of payments made to the vendor which also includes GST amount charged by the vendor, but since input tax credit of the GST amount is availed by the assessee, hence the entire amount is not claimed as expenditure by the assessee under the Income Tax Act. It is only the taxable value part excluding GST of the expenditure booked which is charged to the profits of the assessee and if at all, on without prejudice basis, any addition is to be made on account of bogus transactions as alleged, it can only be limited to the tune of expenditure claimed by the assessee which should be excluding the GST balance. The assessee had submitted the bill wise breakup of all the invoices pertaining to Dethat Trading Pvt. Ltd. recorded as expenditure during the year under consideration vide its reply dated 24-05-2022, wherein the bifurcation of bill value into taxable portion and GST portion was clearly indicated. The said figures can also be cross verified from the invoices submitted by the assessee in its reply dated 19-05-2022. The total amount of taxable value excluding GST recorded for the year in the books of accounts of the assessee from this vendor aggregate to Rs. 80,14,81,386 only. Further it was submitted that out of the said balance of taxable value, the assessee had capitalized the value of Rs. 4,41,246 in its books of accounts and hence no expenditure has been claimed on the same and only depreciation has been claimed in the books and in the return. Factually, the assessee had claimed expenditure only to the tune of Rs. 80,10,40,140 for the procurements made from this vendor in the Profit and Loss account. Hence, on without prejudice basis, it was submitted that in any event, only a sum of Rs. 80,10,40,140 could be disallowed as against Rs.95,76,70,592. Further the assessee on its own had made suo moto disallowance of Rs 8,37,60,544 under section 40(a)(ia) of the Act in the return and the said fact is also mentioned in the tax audit report filed along with the return. Hence in any event, it was submitted on without prejudice basis that only a sum of Rs 71,72,79,596 could be added as against Rs 95,76,70,592. This aspect of the argument would be of no relevance as we have already held that the entire purchases made from Dethat Trading Pvt Ltd to be genuine and no addition is warranted thereon.
7. Purchases from Bhagwati Enterprises – Rs 1,01,53,673
The assessee has booked purchases of Rs 1,01,53,673 from M/s. Bhagwati Enterprises (Proprietor Mr Gulshan) towards office expenses, housekeeping and living consumables for the project establishments which are evidenced by six purchase orders. The Learned AO noted that assessee furnished only copy of ledger accounts and copy of invoices which were not found to be satisfactory. On perusal of the GST details of the Proprietor of M/s. Bhagwati Enterprises, it was noticed that the said Proprietor has three GST numbers in the name of different proprietorship concerns. Further, it has been noticed that all the GST numbers were inactive. Further on perusal of GST number of M/s. Bhagwati Enterprises, it was noticed that the said number has been cancelled by the GST department with effect from 2-6-2020. The Learned AO noted that the inspector of his office was deputed to visit the business premises of M/s. Bhagwati Enterprises. On his visit, it was noticed that no such address exists and on inquiry from nearby people, it was gathered that no such company had operated from Vardhaman Plaza. The inquiry was made by the learned AO about the details of vehicle number mentioned in the invoice and other documents. On verification of the same on eParivahan website, it was noticed that most of the vehicle numbers mentioned were invalid. In most of the invoices, it was also noticed that the vehicle number was not even mentioned and wherever it was mentioned, it was found to be non-existent. Accordingly, the Learned AO concluded that the alleged materials stated to be delivered through the vehicle numbers were considered as invalid and bogus transaction. Hence the Learned AO proceeded to treat the purchase transactions from M/s Bhagwati Enterprises in the sum of Rs. 1,01,53,673 as bogus and added the same to the total income. This action of the learned AO was upheld by the learned CITA.
7.1. We have heard the rival submissions and perused the materials available on record. At the outset, we find that the assessee had furnished the complete set of purchase invoices from this supplier before the learned AO. All the payments made to this supplier were through regular banking channels traceable to disclosed bank account against each invoice. The assessee had furnished the ledger account copies before the learned AO. Under the GST law, any person is required to state any five HSN codes related to the business intended to be carried out by the concerned taxpayer at the time of registration. However, there is absolutely no bar anywhere in the GST law which restricts a person to only sell the stipulated five HSN codes in its business. Any taxpayer can undertake numerous businesses under the single GST number varying from different HSN, yet there shall be only five HSN codes mentioned in its registration certificate. Therefore, merely because a supplier has mentioned a different HSN code in its registration certificate and the material being supplied to the assessee is different, it does not have any implication for the genuineness of the transactions undertaken by the assessee. With regard to the cancellation of GST registration of the supplier, it was submitted that there could be several reasons under GST law due to which the registration of a taxpayer could be cancelled by the GST department. Hence, no inference could be drawn that the GST registration stood cancelled for Bhagwati Enterprises, because the said vendor was bogus or non-existent. No cross-verification was made by the Learned AO with the GST department to understand this fact. Further, the effective date of cancellation mentioned on the GST portal was 02-06-2020, which is after the period when the transactions with the assessee had concluded. Generally, when any registration is cancelled on grounds of bogus dealer by GST department, the same is cancelled retrospectively from the date of registration by the department. In this case, the registration is cancelled only from a subsequent date when transactions with assessee had concluded. This itself proves that the transactions undertaken by the assessee with this vendor M/s Bhagwati Enterprises upto the date of cancellation were genuine on which due taxes have been paid by the vendor to the GST department. Further we find that the said vendor had duly filed all his income tax returns and therefore cannot be termed as a bogus entity by the learned AO. The assessee vide its reply letter dated 19-5-2022 had submitted all the relevant documents to prove the genuineness of purchases / rendering of services by this vendor. The assesee had also furnished therein all its purchase orders issued and accepted by the vendor, material requisition sheets raied for the items supplied by the vendor, ledger account of vendor, tax invoices, e-way bills, etc. With regard to the discrepancies noticed in the vehicle numbers by way of lack of mentioning of vehicle numbers on invoices or incorrect mention of vehicle numbers, it was submitted that the same would not treat the supply of materials and rendition of services to the assessee bogus. It was submitted that as per the terms and conditions of engagement of the assessee with the said vendor, the responsibility for transportation of goods lied solely and strictly with the vendor. This fact is also evident in the purchase order placed on record. Hence, there cannot be any reason for the assessee to even check or ensure the manner of transportation of goods by the vendor to the assessee. The invoice is generated from the side of the vendor and not by the assessee herein. Hence, if there is any discrepancy in the said invoice generated from the side of the vendor, then the action should be taken on the vendor and not on the assessee in the manner known to law. The purchases made from the said vendor cannot be termed as bogus. Further, the assessee had even placed certain photographs for the material received from this vendor and had enclosed the sample of the same as additional evidences before the Learned CITA which were duly admitted by the learned CITA. This also proves the actual receipt of goods from the vendor by the assessee.
7.2. We find from the invoices placed on record in the paper book that the transactions with this vendor had happened during the period of November 2019 to February 2020. Hence the non-availability of the said vendor at the address mentioned in the invoice at the time of Inspector’s personal visit at the time of assessment proceedings in May 2022 (which is after a period of two years from the conclusion of the transaction) would not make the transactions carried out by the assessee as ingenuine. Hence the purchases made from this vendor M/s Bhagwati Enterprises in the sum of Rs 1,03,53,673 cannot be subjected to any disallowance and cannot be termed as bogus.
7.3. It was also submitted that the Learned AO while making the addition had made an incorrect amount of addition. The Learned AO had picked the aggregate of credit balance appearing in the ledger account of M/s. Bhagwati Enterprises reproduced by him in the show cause notice. It was submitted that the credit balance posted in the vendor ledger was including the GST amount charged by the vendor, but since input tax credit of the GST amount is availed by the assessee, the expenditure that was claimed was excluding GST portion. Hence, on without prejudice basis, it was submitted that even if the addition is to be made on account of bogus transaction, the same shall be limited only to the extent of expenditure actually debited in the profit and loss account and claimed as deduction in the return of income which is excluding GST portion. Accordingly, the assessee furnished the bill wise breakup of the same, duly mentioning the actual bill value, GST portion and the total invoice value. On perusal of the same, it was noticed that only a sum of Rs. 86,04,807 could be subjected to disallowance even on without prejudice basis as against Rs. 1,01,53,673. This aspect of the argument would be of no relevance as we have already held that the entire purchases made from M/s Bhagwati Enterprises to be genuine and no addition is warranted thereon.
8. Purchases from certain non-filers / suo moto cancelled GSTIN parties such as M/s Shaurya Enterprises for Rs 10,29,503 ; M/s Hwbat Trading Pvt Ltd for Rs 46,58,712 ; and M/s Amplex Power Solutions for Rs 1,31,340 – Rs 58,19,555
The Learned AO noted that assessee had shown some purchases from M/s. Shaurya Enterprises, Prop. Smt Pinky for Rs 10,29,502.90. The Learned AO commented that the said entity was providing invoices for manpower outsourcing services. It was gathered from GSTIN registration details of Smt Pinky, Proprietor of M/s Shaurya Enterprises that registration of M/s. Shaurya Enterprises was cancelled by the GST department suo moto. The suo moto cancellation was done by GST department in case of fraud being done by entities. From GSTIN registration it was also gathered that Smt Pinky had neither done Aadhaar authentication nor it is e-KYC verified. It was also observed that it deals in other employment, labour supply, construction services and services involving repair etc.
8.1. With respect to purchases from Hwbat Trading Private Limited for Rs 46,58,711.80, the learned AO noted that the said entity had not filed income tax return. It was also gathered from GSTIN registration details that registration was cancelled by the GST department suo moto. It was also observed that the said entity deals in port and water operation services such as operation services of ports, docks, lighthouse, lightships, construction services of residential buildings such as old age homes, homeless shelters, hotels etc. The said entity was also registered at the same shop where M/s. Dethat Trading Private Limited was registered which clearly proved that the transaction of the said entity was ingenuine.
8.2. With regard to purchases made from M/s Amplec Power Solutions for Rs 1,31,340, the learned AO noted that on perusal of the e-filing portal that the said entity did not file any income tax return. It was also gathered from the GSTIN registration details that registration of the said entity was cancelled suo moto by the GSTIN department. It was also observed that it deals in electrical installation services including electrical wiring and fitting services, burglar alarm system installation services.
8.3. The learned AO noted that no proper clarification was given by the assessee to prove the genuineness of purchases and transactions made with the aforesaid parties. An inspector of the office of learned AO was asked to make field inquiries in respect of these three parties. The inspector on his visit on some entities reported that no such address exists and on inquiry from nearby people, no such entity had ever existed at the given address. Accordingly, the learned AO proceeded to disallow the entire purchase transactions from the aforesaid three parties totaling to Rs 58,19,555 as bogus and added the same to the total income of the assessee. This action of the learned AO was upheld by the learned CITA.
8.4. It was submitted that this vendor had provided housekeeping manpower and canteen supplies at the Haier site to the assessee. The learned AO had stated that due to fraud committed by the vendors, the GST registration had been suo moto cancelled by the GST department. But the assessee had placed the GST portal printouts which shows that the GST registration of M/s Shaurya Enterprises as Active with GSTR -1 and GSTR-3B filed continuously upto December 2023 / January 2024. The evidences in this regard are enclosed in Pages 1010 to 1015 of the Paper Book. Hence the observation of the learned AO that GST registration of this vendor was suo moto cancelled is factually incorrect and wrong. Hence the entire consequential observation made qua this vendor by the learned AO becomes totally flawed. The assessee on its part had furnished the following documents as additional evidences before the learned CITA which were duly admitted :-
a) Summary of invoices raised by the vendor along with sample set of invoices
b) Employee wise working for arriving at the billing amount
c) Manual attendance register for each employee maintained by the vendor
d) Extracts of GST portal wherein the said invoice has been uploaded by the vendor against GST number of the assessee, thus, satisfying conditions of third party confirmation.
e) Bank statements evidencing the payment made by the assessee to the concerned vendor.
Accordingly we hold that the purchases made from M/s Shaurya Enterprises is to be construed as genuine and no addition is warranted thereon.
8.5. With regard to M/s Hwbat Trading Pvt Ltd, the assessee had entered into a contract for purchase of various hardware items such as screw, fasteners, PVC plugs etc with this vendor. Pursuant to the supply of these goods, invoices were raised by the vendor on the assessee. The date of cancellation of registration of this vendor as per GST portal was 27-1-2021, which is after the period when the transactions with the assessee had concluded. Generally, when any registration is cancelled on grounds of bogus dealer by GST department, the same is cancelled retrospectively from the date of registration by the department. In this case, the registration is cancelled only from a subsequent date when transactions with assessee had concluded. This itself proves that the transactions undertaken by the assessee with this vendor M/s Hwbat Trading Pvt Ltd upto the date of cancellation were genuine on which due taxes have been paid by the vendor to the GST department. The payments were made by the assessee to the said vendor through regular banking channels. The same observations that were made hereinabove with regard to cancellation of GST registration would apply to these cases also. Admittedly, the learned AO had not made any cross verification from the GST department to ascertain the correct status of the GST registration of the vendors and their GST law compliances thereon. The observation made by the learned AO that the GST registration is suo moto cancelled by the GST department due to fraud committed by the vendors, is totally baseless. It was submitted that section 29 of CGST Act 2017 takes care of circumstances under which registration of any dealer could be cancelled on suo moto basis. The assessee on its part had furnished the following documents as additional evidences before the learned CITA which were duly admitted, to prove the genuineness of purchases made from this vendor:-
a) Tax invoice raised by the vendor containing details of item description supplied
b) Copy of sample delivery challans based on which materials transported by the vendor
c) Extracts of GST portal wherein the said invoice has been uploaded by the vendor against GST number of the assessee, thus, satisfying conditions of third party confirmation and confirming payment of taxes to Government by the vendor.
d) Bank statements evidencing the payment made to this vendor through regular banking channels.
Accordingly we hold that the purchases made from M/s Hwbat Trading Pvt Ltd is to be construed as genuine.
8.6. With regard to M/s Amplec Power Solutions, the assessee had entered into a contract with this vendor for lightening protection and grounding system and all other works subsequent to other contractor works leading to grounding wires for Icon, Mumbai project and in accordance of which only the periodic invoices were raised by the vendor. The assessee had furnished the invoice dated 03-05-2019 for Rs 1,31,340 (excluding GST) and the same is reflected in GSTR-2A enclosed in Pages 1073 to 1074 of the Paper Book. The assessee had also furnished the relevant e-way bill for the same which is enclosed in Pages 1075 to 1076 of the Paper Book. The GST of Rs 23,641.20 has been collected in the said invoice by the vendor from the assessee. The transportation details evidencing the proof of delivery of goods by the vendor is also mentioned in e-way bill. The assessee also furnished the Sub-contractor project progress audit process containing verifications and approval of various departments of assessee company. The payments were made by the assessee to the said vendor through regular banking channels. If at all the said vendor had not filed his income tax returns, then suitable action need to be taken on the said vendor and no adverse inference could be drawn on the assessee herein for effecting purchases from the said vendor. The assessee had furnished all the relevant documents to prove the genuineness of purchases. Accordingly we hold that the purchases made from M/s Amplec Power Solutions is to be construed as genuine.
9. In view of the above observations, the Ground Nos. 6 to 20 raised by the assessee are allowed.
10. No arguments were advanced by the learned AR with regard to the Ground Nos. 2 & 3 raised by the assessee. Accordingly, the same are hereby dismissed as not pressed.
11. In the result, the appeal of the assessee in ITA No. 7866/Del/2025 for Assessment Year 2020-21 is partly allowed.
ITA No. 7867/Del/2025 – Asst Year 2021-22- Assessee Appeal
12. The Ground Nos. 4 & 5 raised by the assessee were stated to be not pressed by the learned AR at the time of hearing. The same is reckoned as a statement made from the Bar and accordingly dismissed as not pressed.
13. The Ground Nos. 1 and 18 raised by the assessee are general in nature and does not require any specific adjudication.
14. With regard to additions made on account of purchases from M/s Dethat Trading Pvt Ltd and M/s Shaurya Enterprises in the sums of Rs 21,00,18,854 and Rs 36,29,694 respectively are concerned, the observations made hereinabove for Assessment Year 2020-21 qua the said vendor shall apply mutatis mutandis for this assessment year also, except with variance in figures.
15. With regard to the addition made on account of purchases from M/s K L Enterprises in the sum of Rs 38,20,390, the assessee had entered into a contract with this vendor for purchase of cement and in accordance of which only the periodic invoices were raised by the vendor on the assessee. This purchases was considered as bogus by the learned AO and addition was made in the assessment on the same grounds that were made in Assessment Year 2020-21 that vendor’s GST registration had been cancelled by GST authorities and vendors had not filed their income tax returns. This action of the learned AO was upheld by the learned CITA.
15.1. We find that the date of cancellation of registration of this vendor as per GST portal was 19-1-2021, which is after the period when the transactions with the assessee had concluded. Generally, when any registration is cancelled on grounds of bogus dealer by GST department, the same is cancelled retrospectively from the date of registration by the department. In this case, the registration is cancelled only from a subsequent date when transactions with assessee had concluded. This itself proves that the transactions undertaken by the assessee with this vendor M/s K L Enterprises upto the date of cancellation were genuine on which due taxes have been paid by the vendor to the GST department. The assessee on its part had furnished the following documents as additional evidences before the learned CITA which were duly admitted by the learned CITA:-
a) Tax invoices raised by the vendor containing transport details along with item description
b) e-way bills generated by the vendor for facilitating movement of goods
c) Extract of bank statements evidencing the payment made to the vendor through regular banking channels.
d) Extracts of GST portal wherein the said invoice has been uploaded by the vendor against GST number of the assessee, thus, satisfying conditions of third party confirmation.
15.2. Yet another observation made by the learned AO is that the vendor had not filed his income tax returns. In this regard, we find that if at all the said vendor had not filed his income tax returns, then suitable action need to be taken on the said vendor and no adverse inference could be drawn on the assessee herein for effecting purchases from the said vendor. The assessee had furnished all the relevant documents to prove the genuineness of purchases. Accordingly we hold that the purchases made from M/s K L Enterprises is to be construed as genuine.
16. With regard to the addition made on account of purchases from M/s Radhey Shyam Enterprises in the sum of Rs 11,59,636, the assessee had not carried out any transaction with this vendor in Assessment Year 2021-22. This fact was very clearly mentioned by the assessee in its reply dated 27-05-2022 filed before the learned AO. Further no basis was given by the learned AO as to how the figure of Rs 11,59,636 was arrived by the learned AO for framing the addition in the hands of the assessee. The assessee on its part had categorically denied having made any transaction with the said vendor. This fact could have been cross verified by the learned AO with the concerned vendor which was not done by the learned AO. The assessee cannot be asked to prove the negative. Hence the addition made in the hands of the assessee in this regard is hereby deleted.
17. In view of the above observations, the Ground Nos. 6 to 17 raised by the assessee are allowed.
18. No arguments were advanced by the learned AR with regard to the Ground Nos. 2 & 3 raised by the assessee. Accordingly, the same are hereby dismissed as not pressed.
19. In the result, the appeal of the assessee in ITA No. 7867/Del/2025 for Assessment Year 2021-22 is partly allowed.
20. To sum up, both the appeals of the assessee are partly allowed.
Order pronounced in the open court on 19/08/2026
