IN INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH G NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER & SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA No. 2893/Del./2011 Asstt. Year : 2007-08 Scantec (India) Pvt. Ltd., vs. Addl. CIT, (Presently known as Teracom Ltd.), Noida Range. B-84, Sector-60, Noida. (PAN: AAHCS 4330H) (Appellant) (Respondent) Appellant by : Sh. Yogesh K. Jagia, Advocate Respondent by : Sh. B. Ramanjaneyula, Sr. DR Date of hearing : 23.08.2016 Date of pronouncement : 16.09.2016 ORDER Per L.P. Sahu, Accountant Member: This is appeal filed by assessee against order of ld. CIT(A), Ghaziabad dated 28.03.2011 for assessment year 2007-08 on following grounds : 1. That in facts and circumstances of case and in law Ld. CIT(A) erred in upholding part of purchases as bogus because of non-receipt of confirmation by ignoring substantial evidence placed on record. 2. That in facts and circumstances of case and in law Ld. CIT(A) erred in upholding addition of Rs.2,84,660/- on account of alleged difference in confirmation received by Shri 2 ITA No.2893/Del./2011 Gaurav Arora, supplier, vis- -vis amount recorded by appellant in its books of account and justification given there for. 2. brief facts of case are that assessee company is engaged in business of electro-mechanical and civil engineering contractor and carried out erection of Extra High Voltage Overhead transmission lines, installation of underground EHV power cables, Microbe and telecom towers, repair and maintenance of EHV transmission and distribution equipments for electrification. assessee filed its return of income, declaring income of Rs.66,22,630/-, which was processed u/s. 143(1) and was selected for scrutiny through CASS. Statutory notices were issued and served upon assessee. During assessment proceedings, Assessing Officer noticed that total gross receipts for financial year are at Rs. 10,43,73,272/- and total expenditure claimed by assessee is Rs. 9,72,65,878/-. Assessing Officer during assessment proceedings issued notices u/s. 133(6) to 23 parties on addresses provided by assessee from whom materials were purchased by assessee company. Out of above, some notices u/s. 133(6) were received back or /and in some cases, confirmations were not received by Assessing Officer till date of assessment order nor assessee was able to file any confirmations. details of such parties are as under : 3 ITA No.2893/Del./2011 Sl. No. Name Address of party Remark Amount received 1 M/s. Khan Traders, Nighasan Road, Near Incomplete address 524885 Masjid, akhimpur (UP) 2 M/s. Marshal Engineering Works, Railway Incomplete address 489462 Station Road, Raj Chambers, Bhinmal (U.P.) 3 M/s. Ambica Traders, Kisanni Road, No such assessee 365679 Mainpuri 4 M/s Agarhari Agencies No confirmation 813385 5 M/s. Balaji Traders No confirmation 306773 6 M/s. Gayatri Building Material, Aligarh No confirmation 1257493 7 M/s. Guleria Chinni Mills No confirmation 353404 8 M/s. Mahalaxmi Marbles No confirmation 499365 9 M/s. Ram Pratap & Company No confirmation 346700 10 Sh.Subhash Chand Gupta No confirmation 508877 Total 5466023 3. Opportunities were granted by AO to assessee for filing confirmations from above parties. assessee submitted purchase bills/bills raised by creditors. payments were also made by cash/cheques/DDs. Copy of ledger accounts of creditors were also submitted before Assessing Officer as stated above. On 24.12.2009, AR of assessee submitted that assessee undertakes projects at various places, sites which are scattered all over and most of projects/sites are located in remote areas. nature of assessee s business demands that purchases at projects be made locally and once work got completed at particular project, no further contact is maintained or available with local supplier. Therefore, neither assessee is in possession of their present whereabouts nor has any power or authority to compel them to comply with above said notices served by Assessing Officer. 4 ITA No.2893/Del./2011 4. Assessing Officer noted that onus is on assessee to establish identity of parties and genuineness of transactions, which has actually not been done by assessee. assessee was given ample opportunity for providing confirmations from above creditors but assessee did not submit confirmations. finding of Assessing Officer is reproduced as under : Since now days it has become modus operandi by many assessees to inflate their purchases from parties who are actually not doing any such business, but operate on paper to provide bills and take payments in cheque. Such payments are then withdrawn same day and returned back to party through circuitous route. In this background when assessee has not been able to furnish even basic confirmation from parties from whom substantial purchases are made, genuineness of such purchases made is not proved. Though assessee has taken stand that purchases were made from locally available parties. But fact remains that in light of substantial amount of business done by those parties, they should have been able to respond to independent confirmation. Any party doing such substantial business would not just change their whereabouts and even if there is any change in address, same is always in knowledge of local postal authorities. Keeping in view fact and circumstance of case, purchases shown from above parties for year under consideration are treated as bogus purchases including payment made/shown through cheque because same has not been confirmed to have received by them in connection with business activities carried out by assessee. Accordingly, purchases made with above parties amounting to Rs. 54,66,023/- are disallowed and added to income of assessee out of expenses claimed under head purchases. 5 ITA No.2893/Del./2011 AO, accordingly, made disallowance of Rs.54,66,023/-. 5. Further, Assessing Officer noted details from confirmations received from creditors from whom purchases were made by assessee as under : SI. No. Name of party Amount of Amount as per Difference purchases shown confirmation by assessee 1 M/s Chander Kala Enterprises 1108453.00 850000.00 258453.00 2. M/S Banwari Lal Baij Nath 1193291.00 1083305.00 109986.00 3. Sh. Gaurav Aorra 2582999.00 2298339.00 284660.00 4. M/S Kuchhal Steels 2773430.00 2534949.00 238481.00 5 M/S M.K.Agencies 3 178611.00 140000.00 177861.00 6 M/s. Deepak Traders 1870011.00 1864799.00 5212.00 Total 9846045.00 8771392.00 1074653.00 From above table, AO noted that there is net difference of Rs.10,74,653/- between amount of purchases shown by assessee and that confirmed by above sellers and, therefore, it was observed that assessee is inflating expenses and reducing profits to that extent. Accordingly, inflated bogus purchases made from above parties amounting to Rs.10,74,653/- was disallowed and added to total income of assessee. 6 ITA No.2893/Del./2011 6. Aggrieved by above two additions, assessee appealed before first appellate authority and submitted additional evidences before ld. CIT(A) which were forwarded to AO for his comments. ld. AO furnished remand report, categorically stating that additional evidences should not be accepted because assessee does not fall in any of conditions laid down u/r 46A of IT Rules. Copy of remand report was provided to assessee and assessee also submitted its rejoinder. ld. CIT(A) considering nature of works and difficulties faced by assessee, accepted additional evidence and restricted additions to Rs.21,95,676/- as against Rs.54,66,023/- made by AO. In respect of second addition of Rs.10,74,653/- made on account of difference between amount of purchase shown by assessee and that confirmed by sellers, ld. CIT(A) after considering additional evidences, sustained addition of Rs.2,84,660/- with respect to difference in case of Garav Arora. Aggrieved by order of ld. CIT(A), assessee has preferred this appeal before Tribunal. 7. ld. AR of assessee submitted that all information were submitted before Assessing Officer as required, viz., copy of ledger 7 ITA No.2893/Del./2011 accounts, bills raised by creditors, complete postal address etc. Only three summons were not served out of 23 summons issues. assessee has no control over them. He cannot compel to anybody for giving information to Assessing Officer. Revenue has wide powers which may be exercised as per Act. assessee has executed works at various places and some materials were purchased locally. After completion of works, site is closed and there is no relation with creditors. Payments have been made through cash/cheques/drafts. AO could depute Inspector for verification or he can exercise his powers regarding verification of payments which were made by cheques/drafts, but he did not do so. As such, once onus is discharged by assessee by submitting all details required by AO, onus is shifted upon Assessing Officer to prove payments made by cheques/drafts was only for bogus purchases and amount paid has been received back in cash or by any other mode by appellant. Assessing Officer preferred to label allegations without any basis and justify additions on whims and fancies so much so that not even iota of evidence has been placed on record to demonstrate bogus transactions like receiving cash back from those parties. ld. AR placed reliance on following decisions : (i). CIT vs. Fancy International, 166 Taxman 183 (ii). ACIT vs. Amar Mining Co. 121 ITD-273 (Ahd. Tribunal) 8 ITA No.2893/Del./2011 (iii). DCIT vs. Allied Leather Finisher Pvt. Ltd. (32) SOT 549 (Lko Bench) (iv). C.B. Gautam vs. UOI, 199 ITR 530 (SC) (v). State of Kerala vs. K.T. Shaduli Yusuf, 39 STC 478 (SC) (vi). Raghuvir Harihar (1957) ZSTC 770(SC) (vii). Dhakeshwari Cotton Mills Ltd. vs. CIT, 26 ITR 775. 8. ld. DR relied on order of lower authorities. 9. After hearing both parties and perusing materials available on record, we find that ld. AO and CIT(A) has examined in detail appellant s submissions, but both of them have failed to examine bank transactions undertaken by assessee. Both authorities below could have verified payments from concerned banks. ld. CIT(A) has accepted additional evidences and allowed appeal partly with respect to such parties whose confirmations were received, but in case of following five parties from whom no response were received from creditors, ld. CIT(A) sustained addition. details of such creditors are placed in paper book as under : (i). M/s. Khan Traders - paper book pages 94 150 (ii). M/s. Marshal Engineering - paper book pages 151 165 (iii). M/s. Ambica Traders - paper book pages 166 172 (iv). M/s. Balaji Traders - paper book pages 173 192 (v). Shri Subhash Chand Gupta - paper book pages 193 - 199 above parties ledger accounts show that payments have been made through cash/cheques/DD and assessee has submitted bills raised by 9 ITA No.2893/Del./2011 above creditors, but lower authorities have not examined transactions debited /credited in their ledger accounts. AO could also verify genuineness of payments from concerned banks where payments were made against purchases by way of account payee cheques or demand drafts, as are reflected in ledger accounts of above five parties whose confirmations were not brought on record or notices u/s. 133(6) stood un-responded. In such state of affairs, and in peculiar facts of present case, we deem it expedient in interest of justice to restore matter to file of AO for deciding issue afresh in view of observations made above after giving reasonable opportunity of being heard. Accordingly, this ground of appeal is allowed for statistical purposes. 10. Adverting to next addition of Rs.2,84,660/-, on perusal of ledger accounts maintained by assessee (Paper book pages 200 & 201) and that maintained by M/s. Gaurav Arora (Paper book page 246), we find that bill Nos. 15, 16 and 14 dated 20.02.2007, 21.02.2007 and 31.03.2007 for Rs.76,962/-, Rs.1,03,710/- & Rs.1,05,200/- respectively are found credited in ledger account of assessee, but same are not found debited in ledger account of Gaurav Arora. Since, admittedly, this party is traceable and has filed confirmation, it was necessary on part of authorities below to 10 ITA No.2893/Del./2011 verify above three bills from this party as to whether these bills have been issued by Gaurav Arora or not. However, no such steps have been taken by authorities below. We, therefore, deem it proper to remand this issue also to file of AO for deciding same afresh after making due verification as observed above. Needless to say, assessee shall be given reasonable opportunity of being heard. Accordingly, this ground of appeal is also allowed for statistical purposes. 11. In result, appeal of assessee is allowed for statistical purposes. Order pronounced in open court on 16.09.2016. Sd/- Sd/- (I.C. SUDHIR) (L.P. SAHU) Judicial Member Accountant Member Dated :16.09.2016 *aks/- Copy of order forwarded to: (1) appellant (2) respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order Assistant. Registrar Income Tax Appellate Tribunal Delhi Benches, New Delhi Scantec (India) Pvt. Ltd., (Presently known as Teracom Ltd.) v. Addl. CIT, Noida Range