THE ITO, WARD-7(3),, SURAT vs. SHRI RAJKUMAR GOYAL, SURAT

आयकर अपील�य अ�धकरण, सुरत �यायपीठ, सुरत INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, Hon'ble JUDICIAL MEMBER AND Dr. SHRI ARJUN LAL SAINI, Hon'ble ACCOUNTANT MEMBER (Virtual Hearing) आ.अ.सं./I.T.A No.1487/AHD/2012 �नधा�रण वष�/Assessment Year: 2005-06 The Income Tax Officer, Vs. Shri Rajkumar Goyal, Ward-7(3), Surat. Prop. of Balaji Corporation, 201, Keshri Nandan Apartment, Bhothia Sheri, Rughnathpura, Surat – 395003. [PAN: ADTPJ 2924 Q] अपीलाथ� / Appellant ��यथ�/Respondent �नधा�रतीक�ओर से /Assessee by Shri P.M.Jagasheth - CA राज�वक�ओर से /Revenue by Shri Ritesh Mishra – CIT-DR सुनवाई की तारीख/ Date of hearing: 18.03.2021 उ�घोषणा क� तार�ख/Pronouncement on: 17.05.2021 आदेश /O R D E R PER PAWAN SINGH, JUDICIAL MEMEBER: 1. This appeal by the Revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-V, Surat hereinafter referred as “Ld. CIT(A)” dated 29.03.2012 for the assessment year (AY) 2005-06. The Revenue has raised following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition on account of unverifiable purchase amounting to Rs. 7,91,01,863/-. 2. On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition on account of in difference in closing balance of Rs.8,05,11,522/-. 3. It is therefore prayed that the order of the Ld. CIT (A) be set aside and the assessing officer ‘s order be restored.”

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 2. Brief facts of the case as gathered form the orders of the lower authorities are that the assessee is proprietor of M/s Balaji Corporation and engaged in the business of rough and polished diamonds. The assessee filed his return of income for assessment year 2005-06 on 31.10.2005 declaring total income of Rs. 1,05,248/-. The case was selected for scrutiny and assessment was completed under section 143(3) on 28.11.2007, assessing total income of Rs. 1,90,260/-. The case was again reopened under section 147. Notice under section 148 was issued to the assessee on 23.04.2010. The assessee vide his application dated 11.05.2010, requested for reasons recorded. The reasons recorded were supplied to the assessee on 26.05.2010. The assessee vide his application dated 15.12.2011, stated that return of income filed on 31.10.2005 may be treated as return of income in response to the notice under section 148. The assessing officer after serving statutory notices under section 142(1) and 143(2) completed the assessment under section 143(3) read with section 147 on 29.12.2011. The assessing officer while passing the assessment order besides the other additions, made addition of Rs. 7,91,01,863/- by taking view that the assessee has shown purchases of Rs. 31.64 Crore from Sagun Impex, Nakoda Gems and Sunrise Impex. The assessing officer issued notice under section 133(6) to all three parties which were return back unserved. The assessing officer by relying on the decision of in Tribunal Vijay Proteins (55 TTJ

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 76), disallowed 25% of purchases from all three parties and worked out disallowances at Rs. 7.91 Crore (being 25% of Rs.31.64). 3. The assessing officer further made an addition of Rs. 8.05 Crore by taking view that there was difference of closing balance of one of the party namely ‘Frost International Ltd’. The assessee in his balance has shown closing balance of Rs. 34.05 Crore of Frost International Ltd and that the said party has given confirmation of Rs. 26.00 Crore only. On show cause the assessee explained that the difference is due to typing mistake, the typist has erroneously taken balance of Ratan Export instead of Frost International Ltd and vice-versa. The filed confirmations of the parties including of Ratan Export. The assessing officer in order to verify the transaction with Ratan Export at its Mumbai address, issued notice under section 133(6), the notice returned back unserved. The assessing officer rejected the books of account of assessee and made addition of Rs. 8.05 Crore on account of closing stock. 4. On appeal before learned CIT(A), the assessee filed detailed written submissions on both the additions, as recorded in the para 6 & 7 of the impugned order. The learned CIT(A) after considering the submissions of the assessee deleted both the additions. Thus, aggrieved by the order of learned CIT(A), the revenue has filed this appeal before Tribunal.

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 5. The assessee has also filed an application under Rule 27of Income Tax (Appellate Tribunal) Rules 1963 by raising ground that the Ld. CIT(A) erred in confirming the action of assessing officer in re-opening the assessment order and issuing notice under section 148 of the Act. 6. We have heard the submissions of Sh. Riteesh Mishra learned Commissioner of income tax- departmental representative (ld. CIT-DR) for the revenue and learned authorised representative (ld. AR) for the assessee and with their assistance gone through the orders of the lower authorities. Ground No. 1 relates to deleting the disallowance of alleged unverifiable purchases. The ld. DR for the revenue submits that during the reassessment proceedings the assessing officer noted that the assessee has shown purchases from three parties namely Sagun Impex of Rs. 29.36 Crore, Nakoda Gems of Rs. 1.27 Crore and Sunrise Impex of Rs. 99.67 Lacs, total of Rs. 31.64 Crore. In order to verify the genuineness of the expenses of purchases, the assessing officer sent notices to all the three parties under section 133(6). The notices sent to all three parties could not be served. Postal authorities and the Inspector reported that none of the parties exist at the given address. The assessee was asked to produce the parties with their books of account and the bank statement for verification. The assessee failed to produce the parties or their confirmation, therefore, the assessing officer made disallowance @ 25% of total purchases by following the order of

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 Tribunal in Vijay Proteins Vs CIT (55 TTJ 76). The assessing officer worked out the disallowance of Rs. 7.91 Crore. The Ld. CIT(A) deleted the entire additions by accepting the submissions of the assessee that after eight years of gap the additions cannot be made merely for non-production of the parties. The Ld. DR for the revenue prayed for restoring the order of the assessing officer. 7. On the other hand the ld. AR for the assessee supported the order of ld. CIT(A). The ld. AR for the assessee further submits that during the assessment the assesse furnished all the documents, which includes the confirmations of the parties, copy of the bank statements of the parties at Surat as well as Mumbai. The assessee expressed his inability to produce the parties after a gap of eight years. The assessee furnished name, address and payments proof through the banking channel and further stated that the assessee has disconnected his business dealings with those parties. The case law relied by assessing officer in Vijay Proteins (supra) is not applicable on the facts of the case of assessee. The assessee is a trader and the assessee in case of Vijay proteins was manufacturer. No defects have been pointed out in the books of accounts of the assessee, by assessing officer. The books of accounts are duly audited. The sales of the assessee were not disputed by the assessing officer. The sale is not possible in absence of purchase. On the basis of the aforementioned submissions the Ld. AR for the assessee

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 supported the order of Ld. CIT(A). To buttress his submissions the ld. AR for the assessee relied on the following decisions;  PCIT Vs Tejua Rohit Kumar Kapadia (Tax Appeal No. 691/2017, Gujarat High Court),  CIT Vs Kashiram Textile Mills (P) Ltd (IT Ref No. 39/1995, Gujarat High Court)  DCIT Vs Adinath Industries (ITA No.116 to 169 of 1999, Gujarat High Court),  Gold Star Finevest (P) Ltd Vs ITO (ITA No. 4625 & 5000/Mum/2005, 8. The Ld. AR for the assessee further submits that he has filed an application under Rule 27 of Income tax (Appellate Tribunal) Rules. In support of his application under Rule 27 the Ld. AR for the assesse submits that the assessee filed objection before the assessing officer. The assessing officer not disposed off the objection as per the mandate of decisions of various High Court and the Hon'ble Supreme Court in GKN Driveshaft’s Ltd (259 ITR 19 SC). To support his contention the Ld. AR for the assessee also relied on the decisions of Gujarat High Court in Dahod Sahakari Kharid Vechan Sangh Vs CIT (282 ITR 321 Guj) and Vahiwatdars of Ambaji Temple Cs CIT (58 ITR 675 Guj). The ld AR for the assessee further submits that case was reopened after four year from the end of assessment year. The assessee has disclosed all information while filing return of income, no new information or tangible material came to the notice to the assessing officer and / or there was no reference in the reasons for reopening that any new tangible material came to the notice

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 of the assessing officer or the assessee has not disclosed all information fully and truly at the time of filing the return of income. The reopening is clearly based on the change of opinion. To support his submissions he relied on the decisions of Gujarat High Court in P.C Patel & Co (379 ITR 151 Guj) and Arvind Mills ( 270 ITR 469 Guj) and decisions of Tribunal in ITO Vs Smt Gurinder Kaur ( 2006) ITD 189/105 TTJ 198 and ACIT Vs Raj Kumar Jain [IT(SS) A No. 28/Del/2012] dated 08.07.2015. 9. In rejoinder submissions the Ld. CIT-DR for the revenue submits that the assessee never raised objections against the reopening during the reassessment before the assessing officer. The assessee was served with the notice under section 148 on 11.05.2010. No compliance was made by the assessee to the notice under section 148 within 30 days. The assessee filed his letter on 15.12.2011 stating therein that the return filed originally may be treated as return in response to the notice under section 148. Thus, no return of income was filed within stipulated time of 30 days, the return filed beyond the time period is non-est. As per section 124(3) the assessee has not right to challenge the jurisdiction of the assessing officer. The assessing officer followed all the provisions of the reassessment proceedings. In support of his submissions the ld CIT-DR relied on the following decisions;  Mega Corporation Ltd ITA No. 128 of 2016 dated 23.02.2017 (Delhi High Court),

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06  Vishwanath Gopal Oil Mills ( 32 ITR 344 Bom),  Rasuji Buxji Kanthawala (32 ITR 592 Raj)and  Dhrangadhra Trading Co.(P) Ltd (60 ITR 674 Guj) 10. We have considered the submissions of both the parties and have gone through the orders of the lower authorities. We have also deliberated on the case laws relied by the lower authorities as well as by ld. AR for the assessee and the ld DR for the revenue. The assessing officer made additions by holding that purchases shown by the assessee are unverifiable. The assessing failed to produce the parties for verification of the purchases. The assessing officer disallowed the 25% of the purchases by relying on the decision in Vijay Proteins Ltd (supra). Before the Ld. CIT(A), the assessee filed detailed written submissions as recorded in para 6.2 of the impugned order. The ld. Commissioner (Appeals) deleted the additions by taking view that the assessing officer accepted the sales and stock as genuine therefore, the production of the parties for verification was unjustifiable. The assessee fully co-operated during the assessment and showed his inability to produce the parties due to ling gap of period. It was also held that the assesse filed confirmations of the parties; payments were made through the account payee cheque. On the basis of his above stated observation the Ld. CIT(A) deleted the entire additions of bogus purchases.

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 11. We have also noted that before Ld. CIT(A), as well as before us the Ld. AR of the assessee stated that he has filed sufficient evidences, which includes the confirmations of the parties, copy of the bank statements of the parties at Surat as well as Mumbai. We have seen that no findings on these evidences were given by assessing officer. The assessing officer disallowed the 25% of the purchases merely on the ground that the assesse failed to produce the parties for verification by relying on the decision of Vijay Proteins (supra). The assessee filed the copy of bank statement of the parties. The assessing officer has not investigated if the amount paid by the assessee was recycled back to the assessee. 12. The ld AR for the assessee has relied on the decision of Hon’ble Jurisdictional High Court in PCIT Vs Tejua Rohit Kumar Kapadia (supra), wherein the appeal of revenue was dismissed by High Court. In the said appeal, the revenue assailed the order of Tribunal on deleting the partial disallowances of the purchases. The Hon'ble High Court held that when the assessee is trader and have shown the sales out of the purchases, which have been accepted by revenue and there was no evidence to show that the amount was recycled back to the assessee. Therefore, considering the decision of High Court of similar set of facts, we do not find any merit in the grounds of appeal raised by the revenue. No contrary fact or law is brought to our notice to take

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 other view. Hence, we affirms the order passed by ld. CIT(A). In the result this ground of appeal raised by the revenue is rejected. 13. Considering the facts that we have uphold the order of Ld. CIT(A) and rejected the ground of appeal raised by the revenue, the application under Rule 27 of Income Tax (Appellate Tribunal)Rules 1963, would be considered at the time of adjudication of other ground of appeal raised by the revenue. 14. Ground No. 2 relates to deleting the addition of Rs. 8.05 Crore. The ld. DR for the revenue supported the order of assessing officer. The ld DR for the revenue submits that during the reassessment the assessing officer noted that there was debit balance of Rs. 34,05,12,848/- shown in the name of Frost International Ltd. whereas the confirmation filed by the assessee shows the debit balance of Rs. 26,00,01,326/-. The assessee was asked to explain the difference of Rs. 8,05,11,522/-. The assessee in his reply stated that the typist by mistake added outstanding amount of Ratan Export of Rs. 8,05,11,522/- along with the outstanding of Frost International. The reply of the assessee was not accepted by assessing officer. The assessing officer issued notice under section 133(6) to Frost International, who confirmed the outstanding of Rs. 26,00,01,326/- vide its reply dated 03.08.2010. The ld. DR for the revenue submits that the ld. CIT(A) deleted the additions by accepting the submissions of assessee in a very short order. There is no reasoning in the order of ld CIT(A).

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 15. On the other hand the ld. AR for the assessee supported the order of ld. CIT(A). The ld. AR for the assessee further submits that during the assessment the assessee explained the details of the discrepancy in its reply. The assessee explained the difference of Rs. 8,05,11,522/-. The assessee in his reply stated that the typist by mistake added outstanding amount of Ratan Export of Rs. 8,05,11,522/- along with the outstanding of Frost International. The assessee filed confirmation of the parties. The assessing officer not considered the confirmation of Ratan Export. Ratan Export has three offices, one at Mumbai and another two addresses at Surat. The assessing officer has not issued notice at the addresses of Surat. The assessee filed confirmation, PAN and address of Ratan Export and discharge his onus. In fact the assessing officer accepted that all the confirmations of Ratan Export bears signature of same person. No investigation was made by the assessing officer at Surat addresses. The ld CIT(A) appreciated the submissions of assessee and deleted the addition. Hence, the ld AR for the assessee supported the order of ld CIT(A). 16. We have considered the submissions of both the parties and have perused the record carefully. The assessing officer made additions by holding that there was difference of closing balance of one of the party namely Frost International Ltd of Rs. 8.05 Crore. The assessing officer also rejected the books of accounts before making such addition. No specific reason for rejecting the

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 books of account was recorded by the assessing officer. The ld. CIT(A) deleted the additions by taking view that the assessee filed confirmation of Ratan Export during the assessment. The assessing officer has not made investigation at Surat addresses, if he has any doubt regarding the existence of the party; the assessing officer ought to have made further investigation. It was further held that after knowing the fact that the party was having the same PAN, the assessing officer could have re- confirmed about the party. 17. We have further noted that despite filing the confirmation of Ratan Export the assessing officer has not referred the same in his order. The assessing officer simply held that the assessee filed its explanation only when the issue was brought to his notice and rejected the books of accounts and simply made addition of the difference, without considering the confirmation. No ground for rejection of books of account is recorded by assessing officer. In our view the ld CIT(A) has considered the facts and held that no addition on account of differential amount can be made. No contrary fact is brought to our notice to take other view. Hence, we affirm the order of ld CIT(A). In the result this ground of appeal is also rejected. 18. Considering the facts that we have affirmed the order of ld CIT(A) on merit on both the grounds of appeal therefore, further consideration and adjudication on the application of assessee

. Shri Rajkumar Goyal ITA No.1487/AHD/2012 for A.Y. 2005-06 under Rule 27 of Income Tax (Appellate Tribunal) Rules-1963 have become academic. 19. In the result the appeal of the revenue is dismissed. Order pronounced on 17 May 2021 by placing result on notice board. Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) (लेखा सद�य/ACCOUNTANT MEMBER) (�याियक सद�य/JUDICIAL MEMBER) सुरत/ Surat, �दनांक Dated: 17 May 2021 Self Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR) Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat