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Income Tax Appellate Tribunal, “A-SMC”BENCH: KOLKATA
Before: Shri A. T. Varkey, JM ]
PER SHRI A.T. VARKEY, JM These appeals are preferred by the assessee against the separate orders of Ld. CIT (A), 14, Kolkata dated 02-05-2019 for the assessment year 2011-12. Since the facts and issues are identical and similar in nature, A.Y 2011-12 is taken as the lead case and result will be followed for the A.Y 2012-13.
The main grievance of the assessee is against the action of the ld. CIT(A) in sustaining the addition to the tune of 8% of alleged disputed purchase by applying the G.P ratio of 8%.
The brief facts as noted by the AO for the A.Y 2011-12 is that the assessee had declared in e- return of income total income of Rs.3,438/-. Subsequently, the case was selected for scrutiny after re-opening u/s. 147 of the Income-tax Act, 1961 ( in short, the ‘Act’) on the basis of specific information received from Pr. DIT (Inv.), Kolkata that the assessee had shown to have made bogus purchase from eight (8) different concerns of Shri Sanjiv Kr. Singh, who when searched by the department gave statement that he and his concerns are providing accommodation entries in lieu of commission. The AO noted that the assessee purchased goods from Shri Sanjiv Kr. Singh and his 8 (eight) concerns total amounting to Rs.34,71,094/-. Thereafter, the AO reproduces the statements of Shri Sanjiv Kr. Singh and he
2 A.Y 2011- Howrah Shckle Centre was of the opinion that said purchases from eight concerns are bogus and added 8% profit ( i.e. Rs. 2,77,688/-) of total purchases of Rs.34,71,094/-. Aggrieved, the assessee preferred an appeal before the ld. CIT(A), who was pleased to confirm the same. Aggrieved, the assessee is before us.
I have heard both the parties and perused the record. It is noted that the AO has noted that the assessee was engaged in the manufacturing of engineering goods and its income were from said business as well as interest income. The AO based on an information received from the Investigation Wing, that Shri Sanjiv Kr. Singh and his group concerns were indulged in providing accommodation entries through his eight (8) concerns and taking note that the assessee had made purchase transaction with these concerns to the tune of Rs.34,71,094/- made the addition of G.P @ 8% of total un-disclosed purchase from these concerns (i.e. Rs.2,77,688/-) . When the AO confronted the assessee with the information and the statements of Sri Sanjiv Kr. Singh recorded during search, the assessee had brought to the notice of AO that it has purchased goods from the parties through banking transaction and the purchases were supported by proper bills, VAt returns and purchase inputs, which, according to assessee, could go to show that the purchases are genuine. However, according to Ld. AR, the AO has not given any credence to the documents/evidences placed before him by the assessee to substantiate the genuineness of purchase made by the assessee. In order to substantiate the genuineness of the transaction, the ld. AR took me through the copies of various purchase bills, available from pages 4-34 of the paper book. From the bill placed at page-4 of the P/B, I note that the assessee had purchased M.S. Round 316 Kgs @ 31/- i.e. Rs. 98,084/- from M/s. Jay Shree Sales Corporation and paid VAT @ 4% i.e Rs.3,923.36 and has paid delivery charges amounting to Rs. 1,00,879/- respectively. In the Bill, I note Tax Invoice No. 7/10-11 dt. 12.4.10, Challan No. 7/10-11 dt. 12.4.10, VAT No. 19533274024/C.S.T No. 19533274024 (page-5 of the paper book) I also note Buyer’s VAT No. 19705945082 (page-5 of the P/B). My attention was also drawn to bank statement placed at pages 35-45 of the paper book, wherein the assessee has placed the statement of bank A/c for the periods 01-04-2010 to 31-03-2011 (pages 25-44 of the paper book), wherein the details of Cheque Nos./Withdrawals/Deposits is seen and pages 46-48 of paper book acknowledgement slip of VAT Return-14 is found placed. I also note the paper book pages 49-58 of paper book reg: purchase (Input). I note that the AO in his assessment order had reproduced the statement of Shri Sanjiv Kr. Singh, but the AO had not given any opportunity to cross examine him. And not only that deficiency, the AO has neither given any credence to 3 A.Y 2011- Howrah Shckle Centre the documents (supra) as filed before him nor has found any fault of it. In such circumstances, I note the decision of the Hon’ble Supreme Court of India, in the case of CIT, New Delhi V/s. M/s. Oden Builders P.Ltd [Review Petition ( C ) Diary No. 22394 of 2019 in Civil Appeal Nos. 9604-9605 of 2018], wherein it has been held by the Apex Court as under:-
ORDER
Delay condoned.
We have perused the review petition and find that the tax effect in this case is above RS.1 crore, that is, RS.6,59,27,298/-. Ordinarily, therefore, we would have recalled our order dated 17th September, 2018, since the order was passed only on the basis that the tax effect in this case is less than Rs.1crore.
However, on going through the judgments of the CIT, ITAT and the High Court, we find that on merits a disallowance of Rs.19,39,60,866/- was based solely on third party information, which was not subjected to any further scrutiny. Thus, the CIT (Appeals) allowed the appeal of the assessee stating: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view Of the above discussion in totality, the purchases made by the appellant from M/s Pad mesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for RS.19,39,60,866/-, is directed to be deleted."
The ITAT by its judgment dated 16th May, 2014 relied on the self- same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT.
In these circumstances, the Review Petitions are dismissed.”
In view of the above order of Hon’ble Supreme Court in the case of M/s. Oden Builders P. Ltd. (supra), I find that in the present case since the entire addition has been made based on an information gathered from the Investigation Wing of the Department and admittedly since the statements were recorded behind back of the assessee and the AO has made the addition without giving any opportunity to cross examine according to me cannot
4 A.Y 2011- Howrah Shckle Centre be the basis of an addition, when the fact is that assessee has produced all the relevant documents like purchase bills, VAT registration of the sellers, C.S.T, bank transaction details etc., which are available in the paper book, therefore the addition is not warranted and cannot be sustained. Therefore, I allow both the appeal(s) of assessee and direct the AO to delete the addition(s) made by the AO and confirmed by the ld. CIT(A).
In the result, both the appeals of the assessee succeeds and are allowed.
Order Pronounced in the Open Court on 20th December, 2019