INCOME TAX OFFICER, WARD-4(2)(3), AHMEDABAD, AHMEDABAD vs. VAJUBHAI HARJIBHAI PANCHAL, AHMEDABAD

The grounds of appeal are as under:- “Ground 1. The Ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 24,00,000/- u/c. 69C of the Income Tax Act on account of bogus/unexplained purchases from M/s. S.K. Enterprises, despite the fact that M/s. S.K. Enterprise was engaged in organized tax evasion by providing accommodation entries Ground 2. The Appellant craves leave to add, alter and/0R to amend all OR any the ground before the final hearing of the appeal

The assessee, an Individual, had filed his return of income u/s. 139(1) of the Act for the A.Y.2018-19 on 31.10.2018 declaring total income of Rs. 8,93,540. As per the information available with the department, during the year, the assessee had entered into certain transaction with M/s. S. K. Enterprises for Rs.24,00,000. As per the information of DDIT (Inv) Uni-1(1) Ahmedabad in Insight Portal flagged by Risk Management, M/s. S. K. Enterprises is a dummy concern and was created to defraud and to provide bogus invoices/bills to the buyers. As the assessee had entered into transaction with this party, vide notice u/s. 148A(b) dated 14.03.2022, the assessee was given opportunity to furnish relevant details in support of the above transaction, which the assessee failed to avail. Hence with the prior approval of the Pr.CIT Ahmedabad-3, the case was reopened u/s. 147 and notice u/s.148 of the Act was issued on 31.03.2022. In the course of assessment proceedings, the assessee was called upon to explain the nature of transaction with M/s S.K. Enterprises and to prove its genuineness. In response to this the assessee submitted that considering his nature of business, he was in requirement of Automatic Hydraulic Machine with motherboard control of upto 250 Tonnes- HSN 8462. Thus, in the course of his business activities he purchased the said machine from M/s. S. K. Enterprises for Rs.28,32,000 (i.e. Rs.24,00,000 + 18% GST). In support of the said transaction, the assessee furnished a copy of delivery note issued by M/s. S. K. Enterprises alongwith a copy of his bank statement showing the payment made for purchase of this machinery. As the assessee did not furnish installation details of the said machine, e-way bill for transportation of the said machine from originator/seller to the destination, bank statement did not reveal payment and that the notice issued to the said M/s S.K. Enterprises u/s 133(6) of the Act remained uncompiled with/un-responded to, the A.O. issued a show cause notice to the assessee requesting him to show cause as to why the amount of Rs. 24,00,000 be not treated as unexplained expenditure u/s 69C of the Act and be added to his total income. In response to the show cause notice the assessee proved the truck number mentioned on the sale invoice issued by S. K. Enteprises and submitted a copy of the current status of the truck and further stated that the delivery vehicle also exists in real life and is also registered with Goods Permit with the Vehicle 3 registration authority. As regards installation of the machinery, the assessee submitted that the machinery purchased by him was not big or huge which required specialised installation and that it was a small machine which can be easily started without any installation process. In support of payment made for purchase of machinery, the assessee furnished copy of his bank statement of Yes Bank and Central Bank showing the payment made on 28.06.2018. In support of the use of machinery, the assessee submitted that the said machine was used for converting bullion into gold/silver coins and furnished copies of sample invoices for purchase of bullion and copies of invoices for the subsequent sale of coins. The assessee further submitted that the above supporting documents be considered for genuineness of the purchase transaction and that involvement of M/s S. K. Enterprises in bogus billing issue should not affect the genuineness of the transaction undertaken by him with this party. Unconvinced by the explanations of the assessee, the A.O. brought to tax this Rs. 24,00,000 u/s 69C of the Act treating it to be unexplained expenditure. Accordingly, addition of Rs. 24,00,000 was made to the total income of the assessee u/s 69C of the Act. Penalty proceedings were also initiated u/s 271AAC of the Act.

Being aggrieved by the assessment order, the assessee filed appeal before the CIT(A). The CIT(A) allowed the appeal of the assessee.

The ld. D.R. submitted that the CIT(A) erred in deleting the addition of Rs. 24 lakhs u/s. 69 of the Income Tax Act on account of bogus/unexplained purchase from S.K. Enterprises.

Heard both the parties and perused all the relevant material available on record. As regards the evidences produced before the Tribunal in connection with the payment of aggregate purchase consideration of machinery of Rs. 28,32,000/- to S.K. Enterprises, the supplier including the GST of Rs. 4,32,000/-, the party i.e. M/s. S.K. Enterprises was involved in the bogus claim of GST. The assessee has shown the payment through its bank accounts/bank statement issued by Yes Bank containing debit in respect of Rs. 8,32,000/- made to M/s. S.K. Enterprises dated 28-06-2016 and certificate of Central Bank of India in respect of the two payments of Rs. 10,00,000/- each made to S.K. Enterprises on 28-06-2018 totaling to Rs. 20,00,000/-. The perusal of these documents needs proper verification as there is an entry of Central Bank which categorically mentions that there was a cheque deposit on 28-06-2018 amounting to Rs. 5 20,00,000/- and on the very same day, the assessee has issued two chqeues of Rs. 10,00,000/- each. Therefore, this requires proper verification and adjudication. The matter is remanded back to the file of the Assessing Officer for proper verification of these documents submitted before the Tribunal. As relates to the issue of depreciation, the same also needs verified. After verifying the documents and the claims of the assessee, the Assessing Officer will adjudicate these issues as per Income Tax Act.

In the result, the appeal filed by the Revenue is partly allowed for statistical purposes and the CO filed by the assessee is partly allowed for statistical purposes.