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Income Tax Appellate Tribunal, “B”
Before: Sri J. Sudhakar Reddy & Sri A. T. Varkey
IN THE INCOME TAX APPELLATE TRIBUNAL “B” (Virtual Court Hearing), BENCH KOLKATA
Before Sri J. Sudhakar Reddy, Accountant Member & Sri A. T. Varkey, Judicial Member
I.T.A. No.1129,1130&1131/KOL/2018 (Assessment Years: 2009-10, 2010-11 & 2011-12) Mrs. Premlata Tekriwal........................……….........………………………………..………Appellant 110, Southern Avenue, Kolkata-700029. [PAN : ABSPT5997N] PCIT-10, Kolkata….………………………………………………...........…………………...Respondent I.T.A. No.1132&1133/KOL/2018 (Assessment Years: 2010-11 & 2011-12) Binod Kumar Tekriwal........................……….........………………………………..………Appellant 110, Southern Avenue, Kolkata-700029. [PAN : ABVPT7683E] PCIT-10, Kolkata….………………………………………………...........…………………...Respondent Appearances by: Shri Pramod Himatsinghka, A/R, appeared on behalf of the Appellant. Shri Imokaba Jamir, CIT, appeared on behalf of the Respondent.
Date of concluding the hearing : December 17, 2020 Date of pronouncing the order : January 14, 2020 ORDER Per J. Sudhakar Reddy :- All these appeals are filed by the assessees and directed against separate orders of Principal Commissioner of Income Tax-10, Kolkata (hereinafter the ‘ld. CIT(A)’) passed u/s 263 of the Income Tax Act, 1961 (the ‘Act’). 2. In the case of Mrs. Premlata Tekriwal in ITA No.1129/Kol/2018, there is a delay of 10 days in filing of the appeal. In the case of Mrs. Premlata Tekriwal in ITA Nos.1130&1131/Kol/2018 and in the case of Binod Kumar Tekriwal in ITA Nos.1132&1133/Kol/2018, there is a delay of 2 days in filing of the appeal. Condonation petitions have been filed by these assessees in each of the appeals
2 I.T.A. No.1129,1130&1131/KOL/2018 Mrs. Premlata Tekriwal I.T.A. No.1132&1133/KOL/2018 Binod Kumar Tekriwal requesting for condonation of delay. After perusing the same, we are convinced that the assessees were prevented by sufficient cause from filing these appeals in time. Hence, we condone the delay and admit all these five appeals.
The assessees in these cases had derived income from business. They have filed their return of income u/s 139 of the Act. The Assessing Officer received information from DGIT(Inv.) that each of these assessees have made fictitious purchases. Based on this information The assessment of each of these assessments under appeal were reopened u/s 147 of the Act. The assessees were given a show- cause notice stating that a search was carried out by Maharashtra Sales Tax Department on various entities/persons and it was found that these entities and persons were involved issuance of bogus accommodation bills. The information was passed on DGIT(Inv.), Mumbai and from this information, the DGIT(Inv.) found that the names of the assessee was found in the list as a beneficiary of such accommodation bills. After giving the assessee adequate opportunity of being heard, the Assessing Officer came to the conclusion as follows:
“It is crystal clear that the assessee did not purchase the goods from the parties mentioned in the purchases bills. At the same time it did purchase the goods from some other suppliers, may be without bill.”
Thereafter, the ld. A.O held that under these circumstances the purchase rate mentioned in the bills, cannot be accepted. He further held that any person indulging in the practice of purchase of goods from the grey market and had obtained bogus bills of some other parties would do so for getting some benefit. However, on the principles of natural justice, the whole amount of such purchase is not to be added, as corresponding sales have been shown in sales tax return and IT return also. The Assessing Officer further observed as follows:
The A/ R 1n his Submission has stated that "It is pertinent to add as the cases are pertaining to the AY.2009-10, they are seven to eight years old. The entities may have shifted and we are sorry to say that we are not aware of their present existence. We are not in a position to present the parties. Hence
3 I.T.A. No.1129,1130&1131/KOL/2018 Mrs. Premlata Tekriwal I.T.A. No.1132&1133/KOL/2018 Binod Kumar Tekriwal in order to come to a solution it is requested to treat 2% of the purported bogus purchase of Rs.54,13,476/-to be added with the total income for the said years". The submission furnished by A/R of the assessee is not acceptable. As the assessee got some benefit of such bogus purchase there would be no denial of the fact that assessee's estimated income will increase to certain extent. Considering the fact of the case and on given circumstances, there should be logical conclusion in increasing the income by way of estimated addition of 3% of bogus purchases of Rs.54,13,476/-. Hence 3% is added on estimate on the bogus purchase. Accordingly, Rs.1,62,405/- is added to total income of the assessee. Penalty proceedings u/s 271(1)(c) are initiated for furnishing inaccurate particulars.” 4. The ld. Principal CIT-10, Kolkata issued a notice u/s 263 of the Act proposing to review and revise the assessment order passed by the Assessing Officer u/s 143(3) of the Act on the ground that there is an error in so far as it is prejudicial to the interest of the Revenue. He was of the view that the Assessing Officer should have made a disallowance of the entire fictitious purchases made through accommodation bills and not simply making a disallowance to the extent of 3% of the bogus purchases. He was of the view that as per section 69C of the Act there is no scope for partial disallowance under the said provision. After considering the reply of the assessee at para 10 of this order he ordered as follows:
Accordingly, in view of the facts and circumstances of the case as stated above, and also respectfully following the judgments cited above particularly that in the case of N.K. Proteins vs. DCIT [2017] 84 taxmann.com 195(SC), I am of the considered view that it is deemed fit and appropriate in the interest of justice to disallow the entire expenses claimed as purchases by the assessee, amounting to Rs.54,13,476/- being bogus purchases. Accordingly, I direct the A.O to reassess the income of the assessee for the relevant A.Y 2009-10 on the issue as discussed above.” 5. Aggrieved the assessee is in appeal before us.
After hearing rival contentions, we find that the issue is no more res integra. The ITAT Kolkata “B” Bench in the case of Om Foregoing & Engineering P Ltd. vs. PCIT in ITA Nos.509&510/Kol/2017 assessment years 2010-11 & 2011-12 order dated 13.12.2017 on the identical circumstances held as follows:
“21. We have given a very careful consideration to the rival submissions. First aspect which we need to see is as to what was the enquiry made by the AO while completing the order of assessments for A.Y.2010-11 and 2011-12 which assessments were reopened based on the information received from DGIT (Mumbai) about the assessee having obtained bogus receipts from parties in Mumbai evidencing purchases. In a Notice dated 22/07/2014 for A.Y.2011-12 (copy at page 22 to 23 of paper book) the AO called upon the assessee to give quantitative details of purchases and sales and details of opening and closing stock. In A.Y. 2010-11 and 2011-12 the AO has acknowledged in the order of Assessment that during the course of assessment proceedings the assessee filed various submissions ad account statements including copy of bills etc showing purchases from the four parties which according to the information received from DGIT(Mumbai) were bogus. The assessee also filed details of corresponding
4 I.T.A. No.1129,1130&1131/KOL/2018 Mrs. Premlata Tekriwal I.T.A. No.1132&1133/KOL/2018 Binod Kumar Tekriwal sales against purchases from the aforesaid four parties. These details are placed at page 46 to 48 and 57-60 of the assessee's paper book for A.Y.2010-11 and 2011-12 respectively. The assessee also filed confirmation from the four parties the purchases from whom it was alleged by the revenue to be bogus. These confirmations are placed at pages 40 to 45 and 41 to 56 of the assesse's paper book for A.Y.2010-11 and 2011-12. The assessee also filed all copies of sales bills of all sales effected by it during the previous year relevant to A.Y.2010-11 and 2011-12. These details are available at page 69- 153 and 91-203 of assessee's paper book for A.Y.2010-11 and 2011-12 respectively. The statement showing the source of funds and the mode of payment for the purchases which were claimed by the revenue to be bogus were also furnished. These details are given as Annexure -I and Annexure-II respectively for A.Y.2010-11 and 2011-12 to this order.
In the light of the information received from DGIT (Investigation), Mumbai, and the evidence filed by the assessee claiming that purchases from the aforesaid four parties were genuine, the AO concluded that the purchases from the four parties were not genuine.. This conclusion was based only on the information received by the AO from the DGIT (Investigation), Mumbai. After drawing the above conclusion the issue before the AO was as to whether the entire value of purchases should be added to the total income. Towards this objective the AO examined the sales and found that the quantity of purchases and corresponding sales matched. The Stock Register for A.,Y.2010-11 and 2011-12 filed by the assessee before the AO are at pages 33 to 39 and 36 to 40 of the paper book filed by the assessee for A.Y.2010-11 and 2011-12 respectively.
On examination of the details the AO found that the sales were made to Government and reputed parties and therefore the sales as claimed by the assessee were genuine. Once the sales are genuine corresponding purchases also cannot be denied. The only possibility in the given circumstances was to proceed on the theory that the purchases were made by the assessee in the grey market at a lesser price and the bogus bills were obtained to show higher purchase price and reduce the profit margin as per the books of accounts. The AO adopted this course and estimated the possible suppression of Revenue. The course adopted by the AO was therefore a possible view in law.
In the impugned order the CIT is of the opinion that the AO ought to have invoked the provisions of sec.69C of the Act and ought to have added the entire value of bogus purchases and that he failed to make enquiries while completing the assessment on the applicability of the provisions of Sec.69C of the Act to the facts and circumstances of the assessee's case . Section 69C of the Act provides that where, in any financial year, the assessee has incurred an expenditure and he offers no explanation about the source of such expenditure or part thereof or the explanation, if it is offered by him, is not, in the opinion of the AO, satisfactory., the amount covered by that expenditure or part thereof, may be deemed to be income of the assessee for such financial year. In the present case, the assessee has shown the expenditure on purchases in the books of accounts and explained the source of payment through banking channels. In such circumstances, there was no basis to say that applicability of the provisions of sec.69C of the Act were not enquired into by the AO while concluding the assessment. The Hon'ble Allahabad High Court in the case of Pr. CIT vs Ram Shankar Yadav (supra) held that provisions of Sec.69C of the Act are not mandatory and the AO has discretion to add or not to add unexplained expenditure based on sound judicial principles.
In the impugned order, the CIT has observed that the AO ought to have made enquiries from the alleged bogus purchase bill/entry providers and held that purchases were bogus. The AO has already held that the purchases were bogus and the only question before him was as to whether the entire purchases ought to be added as income or only a portion of the purchases towards inflated cost.
The CIT has made reference to Explanation-2 to Sec.263 of the Act introduced by the Finance Act, 2015. Explanattion-2 so introduced sets out cases in which order of the AO can be deemed as erroneous. The said explanation does not dispense with compliance or existence of (i) there being no enquiry made by the AO; (ii) the AO's conclusion being contrary to CBDT Circular or (iii) against decision of Jurisdictional High Court or Supreme Court. In the present case the CIT in the impugned order has not brought facts to show the existence of absence of enquiry especially when the AO has
5 I.T.A. No.1129,1130&1131/KOL/2018 Mrs. Premlata Tekriwal I.T.A. No.1132&1133/KOL/2018 Binod Kumar Tekriwal already concluded that the purchases by the assessee from four parties mentioned by the DGIT(Investigation) Mumbai in its report were bogus. The decision of the Mumbai and Delhi ITAT in the case of M/s. Shri Narayan Tatu Rane (supra) and M/s. Amira Pure Foods (P) Ltd (supra) cited by the ld. AR clearly supports the view that Explanation - 2 to sec.263 of the Act will not be of any assistance to the plea of the revenue unless the facts and circumstances set out therein exists in a given case. 27. For the reasons given above, we hold that the orders of the AO were not erroneous and prejudicial to the interest of the revenue for failure to make enquiry on the applicability of Sec.69C of the Act. We, therefore, quash the orders u/s 263 of the Act and allow the appeals of the assessee.” 7. The ld. DR could not distinguish the facts and issues of the cases on hand from the facts and issue in the case of Om Foregoing & Engineering P Ltd (supra). Thus, consistent with the view taken therein, we hold that there is no error, in so far as it is prejudicial to the interest of the revenue in all these assessment orders so as to empower the ld. PCIT to invoke his power u/s 263 of the Act. There is no failure to make enquiry on the applicability of section 69C of the Act. In fact the view taken by the ld. Assessing Officer is supported by the judgment of the Hon’ble Calcutta High Court in the case of PCIT vs. M/s Subarna Rice Mill ITAT 196 of 2015 GA 4047 of 2015 judgment dated 20th June 2018 whereas it was held as follows:
“According to the Appellate Tribunal the value of the entire quantity of additional stocks that were discovered in course of the survey operation could not be regarded as the additional income of the assessee and amenable to tax. There was a specific ground taken before the Appellate Tribunal, which was a legal question, as to whether the undisclosed purchase could be taken as the additional income without reference to the possible sale of the paddy when converted. The assessee refers to a judgment of the Gujarat High Court reported at 388 ITR 377. The principle enunciated in such judgment is that when undisclosed purchases of such nature are discovered, it is only the profit embedded in the transaction which can be added to the total income. The Gujarat High Court relied on some of its previous judgments to hold that "not the entire purchase price but only the profit element embedded in such purchases can be added to the income of the assessee." In the circumstances and particularly since the factual findings rendered by the Commissioner (Appeals) as to the quantum of additional stocks have now been restored, the order impugned on the methodology for the ascertainment of the income which escaped assessment would pass muster. The Appellate Tribunal merely directed the gross profit that the additional purchase was capable of generating to be regarded as the additional income for tax to be assessed on such basis. Such view of the Appellate Tribunal does not call for any interference.” 8. The view taken by the Assessing Officer was a plausible view after considering and examining the documents and record. Hence, we hold that these orders passed u/s
6 I.T.A. No.1129,1130&1131/KOL/2018 Mrs. Premlata Tekriwal I.T.A. No.1132&1133/KOL/2018 Binod Kumar Tekriwal 263 of the Act are bad in law and all the orders passed by the PCIT u/s 263 are hereby quashed. 9. In the result, all the appeals of these assessees are allowed. Kolkata, the 14th January, 2021.
Sd/- Sd/- [A. T. Varkey] [J. Sudhakar Reddy] Judicial Member Accountant Member Dated : 14.01.2021 RS Copy of the order forwarded to: 1. (i) Mrs. Premlata Tekriwal (ii) Binod Kumar Tekriwal 2. PCIT-10, Kolkata 3. CIT(A)- 4. CIT- , 5. CIT(DR),