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Income Tax Appellate Tribunal, Hyderabad B Bench, Hyderabad
Before: SHRI LALIET KUMAR & SHRI MADHUSUDAN SAWDIA
(निर्धारण वर्ा/Assessment Year:2016-17) M/s. S.P.Y. Agro Industries Limited, Hyderabad. ….Appellant. Vs. Dy. Commissioner of Income Tax, Circle-3(1), Hyderabad. ….Respondent. निर्धाररती द्वधरध/Assessee by: Shri T.Rajendra Prasad, C.A. & Shri P. Rosi Reddy, Advocate रधजस् व द्वधरध/Revenue by:: Ms. M. Narmada, CIT-DR सुिवधई की तधरीख/Date of hearing: 09/01/2025 घोर्णध की तधरीख/Pronouncement: 24/02/2025 आदेश/ORDER PER MADHUSUDAN SAWDIA, A.M.: These cross appeals are filed by revenue and M/s. S.P.Y. Agro Industries Limited (“the assessee”), feeling aggrieved by the order passed by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (“Ld. CIT(A)”), dated 06.08.2024 for the A.Y. 2016-17.
The brief facts of the case are that, the assessee is engaged in the business of manufacturing and selling alcoholic products. The assessee filed Return of Income for the Assessment Year 2016-17 on 31.03.2018 declaring total income at Rs. 2,13,55,280/-. The Learned Assessing Officer (“Ld. AO”) was in possession of information that the assessee had entered into transaction of Rs.23,31,50,077/- with M/s Shri Sawariya Seth Traders (“SSST”), a concern being used for providing accommodation entries. Accordingly, the case of the assessee was reopened u/s.147 of the Income Tax Act,1961(“the Act”) and notice under section 148 of the Act was issued on 30.03.2021. In response, the assessee made a submission dated 13.10.2021, stating that the original return of income filed on 31.03.2018 may be treated as return filed in response to the said notice. Statutory notices under section 142(1) were issued to the assessee on various dates, which were partly complied. Assessment was completed the Ld. AO u/s.147 r.w.s. 144B of the Act on 31.03.2022, determining total income at Rs.29,99,52,791/-, after making the following additions : (i) Rs.4,54,47,500/- on account of unexplained share capital and (ii) Rs.23,31,50,007/- on account of bogus purchases.
2.1 Aggrieved with the order of Ld. AO, the assessee filed an appeal before the Ld. CIT(A). The Ld. CIT(A) partly allowed the appeal of the assessee. 2.2 Aggrieved with order of Ld. CIT(A), the revenue and the assessee are in appeal before us.
(Revenue’s Appeal) 3. The Revenue has raised the following grounds : “ i) The Ld. CIT(A), NFAC has erred in law and facts by upholding capital introduction to the assessee company as genuine whereas assessee company could not substantiate creditworthiness of majority share subscribers during the assessment proceedings for capital introduction of 54,54,47,500/- ii) The Ld. CIT(A). NFAC has erred in law and facts by upholding purchase transaction of 2331,50,007/- from M/s. Shri Sawariya Seth Enterprises (SSSE) as genuine by ignoring the tailed report submitted by DDIT(Inv), Raipur wherein it was mentioned that it's a paper entity accommodation entries and layering of transactions. iii) The CIT(A) did not consider the statement of Sri Jitender Sahoo (owner of SSSE) who has mitted that he is unaware of any such entity in his statement before DDIT (Inv) and the fact amount credited in account of SSSE were immediately withdrawn in cash on the same day. iv) The Ld. CIT(A) ignored the fact that assessee submitted only few sample bills which were ad made during assessment proceedings which were not enough to determine authenticity of impugned transaction. v) Any other grounds that may arise during the hearing will be submitted before Hon'ble ITAT kind permission.”
The Learned Department Representative (“Ld. DR”) submitted that mainly two issues are involved out of their grounds of appeal
which are as under : a) The first issue arises out of the addition made by Ld. AO for Rs.4,54,47,500/- u/s.68 of the Act towards share application money, which is deleted by the Ld. CIT(A). b) The second issue arises out of the addition of Rs.23,31,50,007/- made by the Ld. AO on account of bogus purchases and the addition has been restricted to 8% of Rs.23,31,50,007/- by Ld. CIT(A).
5. With regard to the first issue, the Ld. DR submitted that, during the year under consideration, there was an increase in share capital by Rs.4,56,47,500/-. Accordingly, the Ld. AO called for the explanation from the assessee to substantiate the identity as well as credit worthiness of the share holders and genuineness of the transactions in accordance with section 68 of the Act. The Ld. DR invited our attention to page nos.2 to 5 of the order of Ld. AO, wherein the details of 11 subscribers to whom the share were allotted during the year under consideration has been provided. With regard to two subscribers to whom shares for Rs.2 lakhs each were allotted were found to be satisfactory by the Ld. AO. However, with regard to 5 subscribers, the Ld. AO found that the amount of investment made by the subscribers were not matching with their income, hence the Ld. AO was not satisfied with regard to the creditworthiness of such 5 subscribers. With regard to other 4 subscribers, no details including PAN were furnished by the assessee. Consequently, the Ld. AO made the addition of Rs.4,54,47,500/- u/s.68 of the Act i.e. the amount received from the 9 subscribers, to the total income of the assessee. The Ld. CIT(A) on the basis of the documents filed by the assessee for the first time, without calling for any remand report from the Ld. AO, deleted the addition made by the Ld. AO. Before us, the Ld. DR further submitted that, the assessee was failed to substantiate the identity as well as credit worthiness of the subscribers and the genuineness of the transaction before the Ld. AO. The documents on the basis of which the Ld. CIT(A) deleted the addition were not filed before the Ld. AO for verification. The Ld. CIT(A) also failed to call remand report from the Ld. AO qua such documents / evidences. Therefore, there was no occasion for the Ld. AO to verify the documents / evidences submitted by the assessee before the Ld. CIT(A) to substantiate the identity as well as credit worthiness of the subscribers and the genuineness of the transactions in accordance with section 68 of the Act. Therefore, the Ld. DR prayed before the bench to set aside the order of Ld. CIT(A) with a direction to call for a remand report from the Ld. AO.
6. Per contra, the Ld. AR relied on the order of Ld. CIT(A). The Ld. AR invited our attention to para no.1 of the order of Ld. CIT(A), wherein the Ld. CIT(A) has mentioned that, he had called the remand report from the Ld. AO. However, the Ld. AO did not make any response to the remand report called by the Ld. CIT(A). Accordingly, on the basis of the documents filed by the assessee, the Ld. CIT(A) found the documents in order and deleted the addition. Finally, the Ld. AR prayed before the bench to uphold the order of Ld. CIT(A).
We have heard the rival contentions and also gone through the records in the light of the submissions made by either side. There is no dispute about the facts that all the documents / evidences on the basis of which the Ld. CIT(A) was satisfied about the identity and creditworthiness of the subscriber as well as the genuineness of the transactions were not produced by the assessee before the Ld. AO during the assessment proceedings. However, on perusal of para no.1 of the order of Ld. CIT(A), we found that the Ld. CIT(A) had called for the remand report from the Ld. AO. The Ld. CIT(A) has also mentioned in his order that the Ld. AO did not make any response to the said remand report. However, the Ld. CIT(A) failed to mention in his order about the details of remand report i.e. what are the contents of remand report and when the remand report was sent to the Ld. AO. Further, during the course of proceedings before us, the Ld. AR submitted that the amount was actually received in F.Ys. 2013-14 and 2008-09. However, when it was asked to the Ld. AR about the bifurcation of the amount received separately in both the years and why the share application money were kept pending for allotment since F.Y. 2008-09, the Ld. AR could not provide any satisfactory reply. Considering the facts of the case and the principle of natural justice, we deem it proper to set aside the issue to the file of Ld. CIT(A) with a direction to call for a remand report from the Ld. AO and pass the order as per law after considering the remand report of Ld. AO. Accordingly, the grounds related to first issue are disposed.
With regard to next issue, the Ld. DR submitted that during the year under consideration, the assessee had shown purchase of broken rice of Rs.23,31,50,007/- from SSST. The statement of Shri Jiten Kumar Sahu, proprietor of SSST was taken on oath by Ld. AO during the assessment proceedings, in which Shri Jiten Kumar Sahu denied all the transactions with the assessee. Shri Jiten Kumar Sahu even denied his proprietorship of SSST. The Ld. AO also found from the bank statement that on the date of deposit of cheque in the bank account of SSST, the same amount of cash was got withdrawn from the bank account. The Ld. AO also found that no purchases had been made by the assessee from SSST, neither prior to this year nor after this year. The purchases have been made by the assessee from SSST only for a part of the year under consideration. Further, the assessee was able to produce only the documents corresponding to purchases on sample basis before the Ld. AO. The assessee did not produce the complete details of all the purchases before the Ld. AO. Accordingly, the Ld. AO did not convince with the genuinity of the purchases and accordingly added the total amount of purchases of Rs.23,31,50,007/- as income in the hands of the assessee. However, the Ld. CIT(A) brushing aside all the deficiencies pointed out by the Ld. AO restricted the addition to 8% of the purchase amount in the hands of the assessee without calling remand report from the Ld. AO. Finally, the Ld. DR prayed before the bench to set aside the order of Ld. CIT(A) with a direction to call for a remand report from the Ld. AO.
Per contra, relying on the order of Ld. CIT(A), the Ld. AR submitted that, the Ld. AO without considering the facts of their case, merely relying on the statement of Mr. Jiten Kumar Sahu, added the total amount of purchases of Rs.23,31,50,007/-. The Ld. AR further submitted that, the assessee's books of accounts were audited and the audit report was filed before the Ld. AO. The auditor has not commented about any discrepancy in the books of account of the assessee. The Ld. AO also did not point out any irregularity in their books of accounts, and in the details/evidences filed with regard to sales / purchases. He also submitted that the case of the assessee are under physical supervision of central excise authority where the physical movement of raw material as well as the finished products are under the direct supervision of central excise authority. Therefore, the addition made by the Ld. AO is merely on the basis of suspicion and surmise. The Ld. AR finally prayed before the bench to delete the addition made by the Ld. AO.
We have heard the rival contentions and also gone through the record in the light of the submissions made by either side. On perusal of record, we found that the Ld. CIT(A) has restricted the addition made by the Ld. AO to 8% of the purchases amount without considering the facts that the assessee was failed to produce before the Ld. AO the corresponding documents in support of all the purchases made by the assessee from SSST. Further, the Ld. CIT(A) also failed to consider the facts that the assessee had a business dealing with SSST only for part of the year under consideration and the proprietor of SSST in his statement under oath have completely denied the business transactions recorded in the books of SSST. However, we found that although the Ld. CIT(A) called a remand report from the Ld. AO, the Ld. CIT(A) failed to mention in his order about the details of remand report i.e. what are the contents of remand report and when the remand report was sent to the Ld. AO. Considering the facts of the case and the principle of natural justice, we deem it proper to set aside the issue to the file of Ld. CIT(A) with a direction to call for a fresh remand report from the Ld. AO and pass the order as per law after considering the remand report of Ld. AO.
In the result, the appeal of the revenue is allowed for statistical purposes.
(Assessee's Appeal) 12. The appeal of the assessee is related to the addition made by the Ld. AO on account of bogus purchases for Rs.23,31,50,007/- and the same was restricted to 8% of the purchases amount by the Ld. CIT(A). The same issue has been decided by us in where we have remanded the issue to the file of Ld. CIT(A) for fresh adjudication after calling a remand report from the Ld. AO. Therefore, the appeal of the assessee is also remanded back to the file of Ld. CIT(A) with a direction to call for a fresh remand report from the Ld. AO and pass the order as per law after considering the remand report of Ld. AO. In the result, the appeal of the assessee is allowed for statistical purposes.
To sum up, both the appeal of revenue and assessee are allowed for statistical purposes.
Order pronounced in the open Court on 24th Feb., 2025.