SHOVAN GHOSH,KOLKATA vs. ITO, WARD 26(1), KOLKATA

There is note by the Registry of delay of 597 days in filing of both appeals. Two separate applications for condonation of delay has been filed, wherein, it has been pointed out that the delay period was pertaining to Covid-2019 Pandemic period. In view of the directions of the Hon’ble Supreme Court in suo moto Writ Petition (C) No. 3 of 2020 dated 10.01.2022, the appeal is treated as filed within the limitation period.

2 & 612/Kol/2021 Shovan Ghosh A.Y. 2015-16 & 2016-17 3. First we take up ITA 611/Kol/2021 pertaining to A.Y. 2015-16 as lead case where the assessee has raised following grounds of appeal: “i. For that on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in confirming the addition of Rs. 31,12,016/- made by the AO on account of imported purchases treating the same as unexplained and undisclosed expenditure u/s 69C of the Income Tax Act. ii. The appellant craves leave to add further grounds of appeal or alter the grounds at the time of hearing.”

Brief facts of the case are that the assessee during the year had imported goods worth Rs. 55,06,503/- which included import duty amounting to Rs. 23,38,697/- and import inward expenses of Rs. 55,790/- and same had been debited in the profit and loss account by showing sundry creditors during the year under consideration. During the assessment proceeding, the ld. AO required the assessee to submit documentary evidence relating to import purchases made by the assessee vide notice issued u/s 142(1) but assessee failed to produce any details by taking plea that regular books of accounts were not maintained as asked by the AO. Further, the ld. AO found that none of the expenses were disclosed by the assessee in ITR filed for the A.Y. 2015-16. Ultimately, the ld. AO issued a final notice requiring the assessee to show cause as to why the amount of Rs. 55,06,503/- should not be treated as undisclosed expenditure and added to the income of the assessee. In response to the notice, the assessee stated that since the goods were purchased through import agent and the payment was to be given only on the sale of all imported goods. He also stated that since the goods reached to the assessee in damage condition therefore the assessee could not sold the goods and payment to the import agent was not made. During the assessment proceedings, the ld. AO had issued notice u/s 133(6) of the Act to the import agent by deputing departmental inspector to serve the notice but it could not be served. Ultimately, the ld. AO could not convince to the submission

Dissatisfied with the above order, assessee went into appeal before the ld. CIT(A) where the appeal of the assessee was dismissed.

Aggrieved by the above order, assessee is in appeal before this Tribunal.

Ground no. 1 of the instant appeal is against confirming the addition of Rs. 31,12,016/- made by the AO on account of import goods purchased by the assessee and treating the same as unexplained and undisclosed expenditure u/s 69C of the Act. At the time of hearing, ld. AR submitted before the bench that the assessee incurred expenditure on the import purchased amounting to Rs. 31,12,016/- during the F.Y. 2014-15 and which was clearly evident from the copy of trading, profit & loss account and balance sheet for the F.Y. 2014-15 submitted during the course of hearing. However, the view taken by the AO considering the import of Rs. 31,12,016/- as unexplained import goods purchased and adding back to the income of the assessee merely on the ground that address of the importing agent was not accessible and importing agent failed to appear before the AO. In this context, the ld. AR submitted various decisions rendered by the Tribunals brought to our notice that ITAT Delhi Bench decision in the case of Kesha Appliances Pvt. Ltd. vs ITO where the Tribunal specifically laid down that the assessee cannot be penalized merely on the ground that the third parties failed to reply to the notices issued to them u/s 133(6) of the Act. On this issue, he further relied on the decision in the case of M.R. Ruia-HUF, Mumbai vs ITO 20(2)(2), it was held that purchase cannot be treated as bogus and unexplained u/s 69C of the Act. The ld.

On the other hand, ld. DR relied on the decision of the authorities below.

We after hearing the rival submission of the parties and going through the facts of the case and find that alleged documents are produced before us by the ld. AR of the assessee which were never produced before the AO while framing the assessment order to prove the fact in favour of assessee. Besides that the assessee completely failed to produce any other important document like confirmation, invoices and other related documents to show evidence that the importer facilitate such payment during the import of goods in favour of assessee. In such circumstances, we feel it necessary to remand back the whole issue to the file of AO to decide the matter afresh and direct the ld. AO to adjudicate the issue involved in accordance with law. While doing so, the ld. AO should give necessary opportunity to the assessee to furnish all such necessary documents in order to substantiate its claim before him at the time of hearing.

Now we take up A.Y. 2016-17 wherein the assessee has raised following grounds of appeal. “i. For that on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in confirming the addition of Rs. 22,23,661/- made by the ii. For that on the facts and in the circumstances of the case, the ld. CIT(A) grossly erred in confirming the addition of notional expenses of Rs. 8,41,845/- on account of freight, Rs. 25,879/- on account of insurance and Rs. 42,342/- on account of landing charges as undisclosed and unexplained expenditure.

In the result, both the appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on 11.10.2023