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Income Tax Appellate Tribunal, KOLKATA ‘A’ BENCH, KOLKATA
Before: Shri P.M. Jagtap, Vice- & Shri A.T. Varkey
Per Shri P.M. Jagtap, Vice-President:- These two appeals filed by the assessee are directed against a common order of ld. Commissioner of Income Tax (Appeals)-7, Kolkata dated 20.02.2017 for assessment years 2009-10 and 2010-11 and since the issues involved therein are common, the same have been heard together and are being disposed of along with the Cross Objection filed by the Revenue for assessment year 2010-11 being C.O. No. 21/KOL/2019 for the sake of convenience.
2. The assessee in the present case is a partnership firm, which is engaged in the business of dealing in electrical and electronics goods and gadgets. The returns of income for the years under consideration were filed by it on 29.09.2009 declaring total income of Rs.23,75,351/- and Rs.41,18,748/- for assessment years 2009-10 and 2010-11 respectively. The return filed by the assessee for assessment year 2009-10 was initially processed by the Assessing Officer under section 143(1) of the Act, while the assessment for assessment year 2010-11 was completed under section 143(3) vide an order dated 26.11.2012 determining the total income at Rs.1,06,09,936/-. Thereafter the information was received by the Assessing Officer that M/s. Latest Publicity House to whom advertisement charges of Rs.10,65,000/- and Rs.15,75,000/- were claimed to be paid by the assessee for assessment year 2009-10 and 2010-11 was a sham entity as its existence was not traceable. On the basis of the said information, assessments for both the years under consideration were reopened by the Assessing Officer after recording the reasons and notices under section 148 were issued by him to the assessee on 13.03.2015. In reply, a letter was filed by the assessee on 25.03.2015 stating therein that the returns originally filed on 29.09.2009 and & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South)
29.09.2010 be treated as the returns filed in response to the notices under section 148 for A.Y. 2009-10 and 2010-11 respectively. During the course of assessment proceedings, summons under section 131 was issued by the Assessing Officer to M/s. Latest Publicity House at the address given by the assessee to verify the genuineness of the relevant transactions through Departmental Inspector, who reported that the said party was not inexistence at the address given in the corresponding bills. The assessee also failed to produce the said party for verification before the Assessing Officer and made the following submissions in writing before the Assessing Officer in this regard:- “1. That our client is expressing their inability to produce the party of M/s. Latest Publicity House. Prop. Shn Prakash Agarwala. Since our client has no business transactions at present with the said party. As such our client is not aware of their present where about.
2. That the above said party was assessed to Income-tax by the I.T.O. Ward 35(1), Kolkata.
3. That the party was having his Bank A/c. where he has encased the Cheque. issued by our client.
4. The I.T. Department has issued PAN No. to the said party with his photo identity, 5. We understand from the I.T.O. Ward 35(1) that refund voucher was issued to the said party who has encased the refund. 6, The I.T. Act has conferred vide power to your honour. Your honour may use the same. 7, That our client has transactions a few years back. The party may have changed their address or might have shifted elsewhere in Kolkata &/ or in West Bengal or outside West Bengal.
8. That our client does not agreed about the non-existence of the said party. The party might have avoided appearance before the I.T. Authorities.
ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in Assessment year: 2010-2011 Sales Emporium (South)
9. It will not be out of place to mention here that the said party deputed his lawyer Mr. Manoj Bhudhia, Advocate in the case of M/s. Sales Emporium (ULG), a sister/associate concern whom filed his Vakalatnama. That one Mr. Manoj Budhia, Advocate with Vakalatnama appeared before the 1.T. O. Ward 41(2) in the case of Sales Emporium (ULG). This leads to the inference being drawn that Shri Prakash Agarwala is no non-existence person but he was very much there in Kolkata carrying on his business. He has not only worked for Sales Emporium (Garia) but he has also worked for many other parties. He filed before his I.T.O. Audited accounts duly audited by M/ s. Jajoo & Associates, Chartered Accountants, Prop. Shri A.K. Jajoo. The Ld. A.O. Ward 35(1) should have enquired from M/s. Jaioo & Associates, C.A. who have audited his accounts.
Under the circumstances, our client does not accept the non- existence of the party. He might be avoiding the service of notices &/ or appearance before the authorities &/ or he might have changed the place of his business”.
3. The above submission made by the assessee was not found acceptable by the Assessing Officer for the following reasons given in the assessment order:- “1. The assessee vide this office letter No. ACIT/CIR- 26/148/A.Y.2009-10/2C15-16 dated l19.01.2016 was requested to produce the said party i.e. M/s. Latest Publicity House Prop. Shri Prakash Agarwala 9, Old China Bazar Street, 6th Floor, Kolkata-700001 on 22.01.2016 but in response to which the assessee failed to produce the said party. The assessee has already been already informed/intimated that the said party is non- existent. Now, the onus was upon the assessee to produce the said party before the undersigned but it failed to do so. The assessee was expressing its inability to produce the said party as it has made bogus transaction. Such party has never been its existence. Hence, the contention of the assessee is not acceptable and hence rejected.
M/s. Latest Publicity House Prop. Shri Prakash Agarwala 9, Old China Bazar Street, 6th Floor, Kolkata-700001 has no tangible asset in the Balance sheet though it is claimed that he is running a huge advertisement business and after the matter was detected by the department there is no business transaction in the accounts of Sri Prakash Agarwala and he is not even filing any return. So, the 4 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in Assessment year: 2010-2011 Sales Emporium (South)
assessment of Shri Prakash Agarwala was of the type of Protective Assessment by IT.O. Ward 35(1). The assessee should know that demand may be recovered from only existent entity and not from the party which is non- existent. M/ s. Latest Publicity House is "sham' and all the transactions entered with this party are bogus. Hence, the contention of the assessee is not acceptable and hence rejected.
From the KYC received from Bank it is found that while opening Bank account, the identity was given copy of "PAN Card" and for address proof "an old Bank statement". So, the assessee is frequently changing the Bank accounts after completion of sham transactions in a Bank account and close it to open a new Bank account. It is also found from the Bank accounts that nature of transaction in Bank A/c's is deposit by cheque and immediate withdrawal of similar amount by cheques. It appears that the receipts in the Bank accounts are expenses debited by various parties- The amounts credited in the Bank account of Sri Prakash Agarwal were forthwith transferred to the accounts of the various companies. All these expenses are not genuine expenses. There are plethora of cases to show that payments made by cheques are not allowed as true expenditure. So, mere the fact that the party has encased your cheque, does not prove that the expenses are genuine. Having, Bank a/c and encashment of cheque does not mean that transactions are genuine. Hence, the contention of the assessee is not acceptable and hence rejected.
Merely Issuing of PAN Card by I.T. Department is not proof of establishing identity of the party and onus lies on the assessee to proof that the said party is not a fictitious entity. In this regard, the Hon'ble Supreme Court in the case of Navodaya Castle Pvt. Ltd. v/s Commissioner of Income Tax [Special leave to Appeal No. C(C374 of 2015) dated 16.01.2015 has upheld the order of Hon'ble High Court of Delhi in of 2012 dated 25.08.2014 that Merely possession of PAN Card issued by Income Tax Department is not proof of establishing identity of the party and onus lies on the assessee to proof that the said party is not a fictitious entity.
There is not any existence of any advertising agency namely M/s. Latest Publicity prop. Shri Prakash Agarwala. From various sources like KMC and others, it has been proved that M/s. Latest Publicity is 'sham'. Hence, encashment of refund vouchers does not proof that your ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in Assessment year: 2010-2011 Sales Emporium (South)
transaction is genuine. Hence, the contention of the assessee is not acceptable and hence rejected.
The assessee vide this office letter No. ACIT/CIR- 26/148/A.Y.2009-l0/20l5-16 dated 19.01.2016 has already informed that M/s. Latest Publicity House Prop. Shri Prakash Agarwala is non-existent and fake. It was the onus of the assessee to produce the party but the assessee failed to discharge its onus. The I.T. Department has already conferred that the said party is 'non-existent'. Hence, the contention of the assessee is not acceptable and hence rejected.
Onus to state the whereabouts of the party was on the assessee. But, the assessee failed to discharge its onus. Hence, transactions made with the said party are treated as bogus and the contention of the assessee is not acceptable and hence rejected.
The persons associated with the advertisement market also informed that there is no existence of any advertising agency namely M/s. Latest Publicity House From the records of Kolkata Municipal Corporation, it is also found that no KMC tax was ever been paid/ deposited by M/s. Latest Publicity House. Income Tax Department has made enquiries and it is revealed that the said party has never been any existence. Hence, it is concluded that existence and activities of M/ s. Latest Publicity are fake. Hence, the contention of the assessee is not acceptable and hence rejected.
9. As claimed by the assessee that the said party has deputed his lawyer Mr. Manoj Bhudhia. In this regard, the assessee has been informed that in the said Vakalatnama, no address was provided. On request, the A/R mentioned his address as 10A, Hospital Street, Kolkata-700012. Thereafter he also vanished. The advocate was also not traceable at that address and the letter was returned by post as 'Not Known'. At the time of assessment proceedings in the case of Shri Prakash Agarwala it was revealed and proved that the said party is "fake" and. all the transactions entered with the said parties are bogus. Hence, the contention of the assessee is not acceptable and hence rejected”.
4. For the reasons given above, the advertisement charges of Rs.10,65,000/- and Rs.15,75,000/- claimed to be paid by the assessee to 6 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South)
M/s. Latest Publicity House were treated as bogus by the Assessing Officer and additions to that extent were made by him to the total income of the assessee for A.Ys. 2009-10 and 2010-11 in the assessments completed under section 147/143(3) of the Act vide orders dated 28.01.2016.
5. Against the order passed by the Assessing Officer under section 147 read with section 143(3) for both the years under consideration, appeals were preferred by the assessee before the ld. CIT(Appeals) challenging, inter alia, the additions of Rs.10,65,000/- and Rs.15,75,000/- made by the Assessing Officer on account of disallowance of advertisement charges paid to M/s. Latest Publicity House. However, keeping in view the failure of the assessee to produce any further evidence to corroborate its claim on account of advertisement charges paid to M/s. Latest Publicity House, the ld. CIT(Appeals) dismissed the case of the assessee on this issue and confirmed the disallowance made by the Assessing Officer for both the years under consideration. Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred these appeals before the Tribunal.
6. We have heard the arguments of both the sides and also perused the relevant material available on record. As submitted by the ld. Counsel for the assessee, a similar issue relating to the disallowance made on account of advertisement charges paid to M/s. Latest Publicity House was also involved in the case of assessee’s sister concern M/s. Sales Emporium (ULG) and vide its order dated January 10, 2018 passed in the ‘SMC’ Bench of this Tribunal decided the said issue in favour of the assessee and deleted the disallowance made by the Assessing Officer on account of advertisement charges paid to M/s. Latest Publicity House. He has also placed a copy of the said order and perusal 7 ITA Nos. 808 & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) of the same shows that a similar issue was decided by the Tribunal in favour of the assessee for the following reasons given in paragraph no. 6:- “I have heard the arguments of both the sides and also perused the relevant material available on record. It is observed that copies of bills raised by Latest Publicity House for hoarding charges (copies at page no 1, 2 & 3 of the assessee's Paper Book no. 3) were filed by the assessee before the authorities below. As claimed by the assessee before the authorities below as well as before the Tribunal, payments against the said bills were made by account payee cheques after deduction of tax at source. A confirmation letter of M/s. Latest Publicity House (copy at page 44 of Paper Book no 1) was also filed by the assessee before the A.D. giving permanent account number of the said party as well as other income tax particulars including the copy of acknowledgement of IT return. for the year under consideration. Having regard to this documentary evidence placed on record, I find merit in the contention of the learned counsel for the assessee that the claim of the assessee for deduction of at least the hoarding charges of Rs. 11,25,000/- paid to M/s. Latest Publicity House was duly supported and substantiated by the relevant documentary evidence and the authorities below were not justified in disallowing the same merely on the ground that the same was not verifiable in the absence of correct address of the said party given by the assessee. In my opinion, when the permanent account number as well as other particulars of the income tax assessment of the said party were placed on record before the A.D., he could have easily verified the claim of the assessee directly with the said party instead of harping on the failure of the assessee to give the correct address or produce the said party for verification”.
7. At the time of hearing before us, no case has been made out by the ld. D.R. to point out any distinction in the material facts involved in the present case as compared to the case of M/s. Sales Emporium (ULG) decided by this Tribunal vide its order dated January 10, 2018. We, therefore, respectfully follow the said order of the Tribunal passed in the case of the sister concern of the assessee on a similar issue involving similar facts and delete the disallowance made by the Assessing Officer and confirmed by the ld. CIT(Appeals) on account of advertisement & 809/KOL/2017 Assessment Years:2009-2010 & 2010-2011 & C.O. No. 21/KOL/2019 (in ITA No. 809/KOL/2017) Assessment year: 2010-2011 Sales Emporium (South) charges paid to M/s. Latest Publicity House for both the years under consideration.
8. As a result of the aforesaid decision rendered by us deleting the disallowance made on account of advertisement charges paid to M/s. Latest Publicity House for both the years under consideration, the other issues raised by the assessee in its appeals as well as by the Revenue in its Cross Objection relating to the validity of the assessments made by the Assessing Officer under section 147 read with section 143(3) have become infructuous or academic and we do not consider it necessary or expedient to decide the same.
In the result, both the appeals of the assessee are allowed, while the Cross Objection of the Revenue is dismissed. Order pronounced in the open Court on December 11, 2019.