DCIT, CIRCLE - 5(1), KOLKATA vs. M/S. KESORAM INDUSTRIES LTD., KOLKATA

In the appellate proceedings, the Ld. CIT(A) allowed the appeal of the assessee by observing and holding as under:

After carefully examining 'the documents and evidences, I find that the only ground on which the Ld. AO made the addition u/s 68 is apparently unsustainable. In the first place I agree with the contention of the Ld. AR that the realization of Rs.63,50,000/- upon sale of scrap had already been credited to the Profit & Loss Account and formed part of the income offered to tax in the relevant AY 2014-15 and therefore no further addition on this count was warranted. When the sum in question had already been offered to tax by’the appellant company; the action of Ld, AO again adding the same amount to the total income was clearly unsustainable and ex-facie amounted to double addition. On this score alone the impugned addition is directed to be set aside.

It is further noted that the Ld. AO has principally referred to certain information received from Investigation Wing based on which he alleged that the transaction involving sale of scrap to M/s Sai Kripa Enterprises was bogus. It is however observed, that at no point of time did the Ld. AO disclose the specifics of the information or the basis on which he arrived at such conclusion. Even the repeated requests of the appellant seeking the details of such information were ignored. In the circumstances I find that the adverse inference drawn by the Ld. AO solely on the basis of alleged information received from Investigation Wing, details of which were never disclosed either to the appellant or in the impugned order; was unsustainable. 4. Per contra I find that when called upon to explain the identity, creditworthiness and genuineness of the transaction, the appellant had furnished before the Ld. AO numerous documentary evidences to establish, three limbs of Section 68 of the Act. From the documents placed before me, it was found that the appellant had furnished the copy of the invoice, details of receipt of payment, details of payment of VAT and collection of tax at source. From these documentary evidences it therefore appeared that the appellant had furnished all relevant documentary evidences, which were required to establish the veracity of the transaction. Even though these material evidences was brought on Ld. AO's record, he did not bring any adverse material to prove that the explanation furnished by the appellant was false or there was any material infirmity therein. Since the appellant had proved that the genuineness of sale of scrap and also offered the same to tax and there being no contrary material brought on record by the Ld. AO, in my opinion the impugned addition of Rs,63,50,000/-was unjustified. The Ld.AO is accordingly directed to delete the same in full. This ground therefore stands allowed.”

After hearing the rival parties and perusing the material on record, we find that the assessee has received Rs. 63,50,000/- from Sri Sai Kripa Enterprises on account of sale of scrap of tyres at its Laksar Plant, Uttarakhand and has duly shown the said income as part of sales and thus offered the same to tax. The AO , on the basis of information from Investigation Wing, held that the said transactions were bogus. We note that since the assessee has shown this receipt as income and therefore any further addition would amount to double addition of the same amount which is not permissible under the Act and the Ld. CIT(A) has given a finding a fact to this effect in para 2 above. We also note that the Ld. CIT(A) has given a finding of fact that the Assessment Year: 2014-15 M/s Kesoram Industries Ltd. AO has treated the amount as bogus on the basis of report from Investigation Wing which has not been supplied to the assessee despite repeated requests made to the AO which itself is bad in law and is against the principles of natural justice as no information can be used against the assessee to make addition without confronting the same to the assessee. We also observe that the Ld. CIT(A) has also recorded a finding that the assessee has furnished all the documentary evidences and fully established three limbs of Section 68 of the Act by furnishing copies of invoices, details of receipts, details of payment of VAT and collection of tax at source etc. on which the AO has not commented at all and also that the AO has not brought on record any evidences or materially to the contrary. Under the circumstances, we do not find any infirmity in the order of the Ld. CIT(A) and consequently ground no. 5 of the revenue is dismissed by upholding the order of Ld. CIT(A) on this issue.

In the result, the appeal of the Revenue is dismissed as discussed above.