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Income Tax Appellate Tribunal, CHANDIGARH BENCHES, “SMC” CHANDIGARH
Before: SHRI. VIKRAM SINGH YADAV, AM
आदेश/Order
PER VIKRAM SINGH YADAV, AM:
This is an appeal filed by the assessee against the order of Learned Commissioner of Income Tax (Appeals)-1, Chandigarh [in short the ‘Ld. CIT(A)’] passed u/s 250(6) of the Income Tax Act, 1961 (in short ‘the Act’) dated 26/11/2019 for assessment year 2011-12, wherein the assessee has taken the following grounds of appeal: “1. The learned CIT(A) is not justified in upholding the reassessment u/s 148 of the Act, when admittedly the notice u/s 148 is without jurisdiction and without application of independent mind by the AO and totally based on generalized borrowed information. 2. That the learned CIT(A) is not justified in upholding the assessment order passed by the Ld. AO, which was passed without giving opportunity of cross examination, in gross violation of principles of natural justice and against the well settled law. 3. That the Learned CIT(A), is not justified in sustaining the addition of Rs. 9,92,656/- only on flimsy grounds, by brushing aside the genuine purchases of appellant duly supported by impeccable and concrete evidences.
That the Learned CIT(A), is not justified in sustaining the addition of Rs. 9,92,656/- that too without disputing the sales out of purchase of such raw material, which was accounted for and duly accepted. 5. Without prejudice to the aforesaid grounds of appeal and strictly in the alternative, the Ld. CIT(A) is not justified in taxing the entire alleged bogus purchases of Rs. 9,92,656/- inspite of at best taxing only the profit embedded in such alleged bogus purchases as per well settled law. 6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard and disposed off.
Briefly the facts of the case are that the assessee firm has filed its return of income on 19/08/2011 declaring total income of Rs. 9,37,357/-. Subsequently the case of the assessee was selected for scrutiny and notice under section 148 of the Act and thereafter the assessee filed the return of income as originally returned and subsequently, notices u/s 143(2) and 142(1) were issued and information called for from time to time including information called for under section 133(6) of the Act. During the course of assessment proceedings, the assessee was asked to prove the genuineness of the purchases made from M/s Kamna Overseas. Further to ascertain the genuineness of the purchases, the AO also called for information under section 133(6) from M/s Panipat Elevated Corridor Limited, Toll Plaza for details of vehicle through which the wheat was claimed to be transported from Delhi to Chandigarh. Further the assessee was asked to produce the books of accounts, cash book, ledger, Gate keeper register, daily in and out register and stock register. In response, the assessee submitted print out of cash book, bank account statement, purchase register print out, copy of day book and copy of stock register, however, the assessee didn’t produce the gate keeper register. As per the AO, the assessee submitted all these registers which are maintained on computer and which can easily be modified, however, the gate keeper register which is manually maintained by the gate keeper and which tracks the daily movement of goods was not produced which shows the denial on part of the assessee to produce such register for verification. As per the AO, the information was received from DDIT (Investigation) Karnal that the assessee entered into bogus purchases from M/s
Kamna Overseas Narela, Delhi, as per information received from Toll Plaza, the vehicles were not entered in the records of Toll Plaza. The online payments shown to have been made for such purchases are not genuine transactions but sham transactions as accepted by bill givers during their statements recorded under section 131(1A) before the DDIT(Inv.). The assessee could not prove where about or failed to produce its suppliers from whom it has made purchases to the tune of Rs. 9,92,656/-. As per the AO, in view of these facts and circumstantial evidence, the assessee has made false credit entries in its books of account and has created false liability on account of so called purchases. It was accordingly hold by the AO that the sums so credited is in the nature of unexplained expenditure in the form of bogus purchases which have been purported to have been made through RTGS during the year under consideration and an addition of Rs. 9,92,656/- was made in the hands of the assessee and the assessed income was determined at Rs. 19,30,013/-.
Being aggrieved, the assessee carried the matter in appeal before the Ld. CIT(A) wherein the action of the AO was challenged both on legality as well as on merits of the case which were dismissed by the Ld. CIT(A) and against the said findings, the assessee is in appeal before us.
During the course of hearing, the ld AR submitted that the notice under section 148 has been issued by the AO without independent application of mind and based on generalized borrowed information. It was submitted that it is only the AO who has to arrive at prima facie findings that the income chargeable to tax has escaped assessment. However in this case, the AO merely on the basis of information received from DDIT(Inv.), Karnal has recorded the reasons and notice under section 148 has been issued and in support, reliance was placed on the decision of Coordinate Jaipur Benches in case of Shri Shujaat Ali Khan Vs. ITO (ITA No. 170/JP/2019 dated 5/01/2021).
Per contra, the Ld. Sr. DR vehemently supported the issuance of notice u/s 148 and it was submitted that the AO had received credible and cogent information that the assessee has obtained accommodation entry by way of bogus bills from M/s Kamna Overseas and therefore basis the said information, the AO carried out further enquiries and a letter dt. 28/02/2018 was issued to the assessee requesting it to furnish further details regarding the purchases made from M/s Kamna Overseas during the financial year relevant to the impugned assessment year. It was submitted that basis the details so received by the AO from DDIT(Inv) and information so submitted by the assessee in response to letter dt. 28/02/2018, the facts are clearly emerging that the assessee had made bogus purchases from M/s Kamna Overseas amounting to Rs. 9,77,896/- and has made payment through RTGS. It was submitted that the Proprietor of M/s Kamna Overseas has stated in his statement that they have not made any sale or purchase and have only issued bogus sale bills to different parties and payment was received in their bank accounts from these parties, later on they withdrew these payments from their bank accounts and return the same to these parties after receiving the commission and basis credible information so received and analyzed by the AO, the reasons were recorded and notice under section 148 was issued. It was accordingly submitted that the contention so advanced by the ld AR deserve to be rejected.
Coming to the merits of the case, the Ld. AR contended that all relevant documentation have been submitted during the course of assessment proceedings and without finding any defect therein and relying on the statement of a third party which has not been confronted to the assessee , the AO has made the additions which has been confirmed by the ld CIT(A) without appreciating the submissions made before him and our reference was drawn to the said submissions which read as under:
The case was selected for scrutiny under Section 148/143(2) read with Section 147 & 142(1) and return declaring the same income as it was
in the original return was filed vide E-acknowledgement no. 160805231240818 on 24.08.2018. We submitted various submissions for the queries raised by the Assessing Officer from time to time during assessment proceedings u/s 148. During the course of Assessment proceedings, the assessing officer has disallowed the purchases made for Rs. 9,92,656/-treating the same as bogus purchases on the basis of surmises and conjectures and purely arbitrarily on the alleged statement of seller given during the survey proceedings conducted by DI Investigation, Karnal without appreciating the true facts and figures submitted during the course of assessment proceedings.
The show cause notice given to us in respect to addition to be made by considering our genuine purchases amounting to Rs. 9,77,896/- from Kamna Overseas as detailed below as bogus purchases is totally incorrect and without appreciating the documents submitted during the assessment proceedings.
Sr. no. Bill No./dated GR Transporter Truck No. Amount (Rs.) No./dated 1. 1112/ 662/ Rishi Tpt Co. 2,65,500 HR-60-0417 04/06/2010 04/06/2010 2. 1121/ 678/ Rishi Tpt Co. HR-37B-1327 3,65,240 10/06/2010 10/06/2010 3. 1122/ 1233/ Raju Tpt Co. RJ-13IG-0305 3,61,866 11/06/2010 11/06/2010 The appellant vide their reply dated 03.09.2018, submitted to the Assessing Officer, has stated that the firm has made purchases of 800 Qtls. of wheat for Rs. 9,77,896/- during the quarter ended 30th June, 2010 from Kamna Overseas and the payment for the same has been made through account payee cheques. As per submissions made in respect to purchases made from Kamna Overseas, we have submitted the entire records to substantiate our genuine purchases as under:
(a) copies of purchase bill, (b) copy of GRs, (c) banking statements from which payments are made, (d) copy of accounts of Kamna Overseas in our books of accounts, (e) copy of statutory records like sales tax returns, (f) copy of stock records, (g) copy of weighment slips of weigh bridge where the trucks were weighed with wheat ,called as dharam kanta parchi.
However, the AO has referred about the report from investigation wing of income tax department, Karnal where by the statement of Sh. Rajesh Mittal states he has not made any sales to us. Neither any report is shown to us nor we are shared with the documents based upon which the AO has given an opinion and show caused us that these purchases are bogus.
Sir, the AO further in his assessment order emphasized on the report of Panipat Elevated corridor, which states details of these vehicles have not been found in their toll plaza records and for Derrabassi toll plaza the data is available for 15 days.
Sir the AO either is not aware of routes without toll plaza or has purely on the basis of surmises and conjectures concluded that these purchases are bogus as per report of DI wing, Karnal.
We have submitted the entire records in respect to purchases i.e. original purchase bills, goods receipt notes, weigh slips, sales tax returns where details of purchases were submitted to Chandigarh Sales tax authorities, bank statement, wheat stock register and all related books of accounts and vouchers during the assessment proceedings. The AO did not point out any iota of discrepancy in our books of accounts. The AO also did not make any query either with
(a) Punjab National Bank from where payments were made to Kamna Overseas, (b) Shiv Shankar Kanta situated at Plot No. 95, Industrial area, Phase I where wheat loaded trucks were weighed vide slip No. 8360 and 8414. (c) Rishi Transport Co., Samaypur, Gurudwara Road, New Delhi who have transported the goods from Narela Mandi to our premises vide GR No. 662 dated 04/06/2010 and 678 dated 10/06/2010, (d) Raju Transport Co., C-48/3, Lawrence Road, Industrial Area, New Delhi who have transported from Nerela Mandi to our premises vide GR 01233 dated 11/06/2010, (e) Sales tax authorities where return has been filed for the respective quarter on 22/07/2010 The AO have relied upon the statement of seller which is made during the investigation proceedings and vague report of Panipat Elevated Corridor and concluded that the purchases are bogus and did not put his mind to cross verify the genuineness of purchases from any other authorities/agencies to substantiate contrary facts.
The AO during the assessment proceedings could not substantiate any sales as bogus sales or any case of money laundering of cash. It is a case of declaring the genuine purchases as bogus purely on the basis of surmises and conjectures and statement of third party without giving any opportunity to cross verify . In fact all the data, books of accounts, sales tax returns and supporting documents of transport and weigh bridge proves the purchases are genuine and not bogus.
We have received the goods and produced the wheat products and sold the same and have realized the sales proceeds. Sir, there is not an iota of discrepancy in our books of accounts in respect to purchases, sales and stock records and all the purchases are genuine and correct. It is also a matter of record that truck carriers usually follow the internal routes to avoid toll barriers and save cost. The genuine purchases cannot be treated as bogus purely on the report of toll barrier and statement
of third party without giving opportunity to cross verify. The payments are made by banking channels, sales tax returns are filed where the purchases are declared on 22/07/2010. No proof of money laundering of cash is established. The AO did not investigate any other agency /office. Sir, declaring our purchases as bogus purely on the basis of surmises and conjectures and without appreciating the genuine purchases and payment thereof by banking channels and supporting records, is not correct. We request you, in the interest of justice, the genuine purchases be not treated as bogus purely on the statement of toll barrier and internal report of department without giving any opportunity to cross verify. We request you not to draw any adverse view in the light of above submissions.” 7. In support of his contentions, the ld AR placed reliance on the decision of Hon’ble Supreme Court in case of CIT Vs. Odeon Builders Pvt. Ltd. [2019] 110 taxmann.com 64 (SC) where the review petition filed by the Revenue was dismissed and our reference was drawn to the findings of the Hon’ble Supreme Court at para 3 which read as under:
“3. 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 assesee 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 though 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 Padmesh 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.” 8. Per contra, the Ld. Sr. DR submitted that mere preparation of documents for purchases cannot controvert overwhelming evidence that the provider of these bills are bogus and they have admitted the same in their statement recorded on oath under section 131(1A) of the Act. Further the assessee has not been able to produce the Gate Keeper Register which was a cogent evidence of incoming and outgoing of vehicles carrying goods and therefore the purchase bills from M/s Kamna Overseas and weigh slips, bank statement etc
submitted by the assessee cannot be taken as cogent evidence of purchase. It was submitted that in the present case, the assessee wants that the unassailable fact that the suppliers are non-existent and thus the bogus purchases should be ignored and only the documents produced should be considered is totally unsustainable in light of various settled judicial precedent such as Sumati Dayal 214 ITR 801 and Durga Prasad More 82 ITR 540. She accordingly supported the order and findings of the ld CIT(A) and submitted that the appeal so filed by the assessee be dismissed and the order of the ld CIT(A) be sustained.
I have heard the rival contentions and purused the material available on record. I find that the purchases so made by the assessee are supported by purchase bills, goods receipt notes, weighing slips, wheat account maintained by the assessee showing the purchases and final produce, sales tax returns where details of purchases and sales were submitted to Sales tax authorities and the payments towards such purchases made through RTGS as reflected in its bank statement and all these documents were furnished during the course of assessment proceedings. On perusal of these documentation, it is noted that the purchase bills are issued by the supplier of wheat M/s Kamna Overseas, good receipt notes issued by the Transporters M/s Rishi Transport Co. and M/s Raju Transport Co and weighing slips are issued by Shiv Shankar Kanta where details of the goods in terms of quantity, rate, month of purchase, supply, truck number through which these goods were transported and supplier/transporter/weighing agency’s complete details and addresses are thus available with the Assessing officer. In the case in hand, I therefore find that the assessee produced all the relevant documentary evidence to establish the genuineness of the transaction. Even if the AO doubted the transaction, then to establish that the transaction is bogus, the AO is required to produce the contrary material evidence so that the evidence produced by the assessee can be controverted. There is however nothing on record that on receipt of these documentation which are clearly not computer self-generated print outs of
records maintained by the assessee and are thus independently maintained by non-related entities and are verifiable, any examination of these documentation or any further enquiry/action was taken by the Assessing officer during the course of assessment proceedings except for a solitary action by way of issuance of notices u/s 133(6) to the Toll Plaza, Karnal, Panipat and Ambala. In response to notices u/s 133(6), it is noted that the Toll Plaza authority at Panipat submitted that details of the vehicles have not been found in their toll plaza records and another Toll Plaza authority at Ambala submitted that CCTV Footage is saved for last fifteen days only and thus, effectively, no CCTV Footage of the vehicles are available on record. The question is whether the response so received from the Toll Plaza authorities is sufficient enough to controvert the documentation so submitted by the assessee and thus hold against the assessee or the response so received would have required the AO to carry out further examination and verification from supplier/transporter/weighing agency’s whose complete details and addresses are available with the Assessing officer. I find that out of three Toll Plaza authorities, one choose to remain quiet, another doesn’t maintain CCTV records beyond 15 days and thus, cannot confirm and the solitary third authority said, it doesn’t have the records of the specified vehicles. Thus, basis a solitary response from one of the Toll Plaza authorities, a suspicion about actual movement of vehicles through that particular route might have arisen in the mind of the AO however, in our considered view, suspicion however strong as contemplated by the AO cannot substitute credible demonstrable evidence and is thus not sufficient enough and the AO should have carried out further examination which apparently has not happened in the instant case. There is nothing on record to the effect that any further enquiry or investigation has been carried out by the AO with the supplier/transporter/weighing agency during the course of assessment proceedings.
Further, I find that it is the claim of the assessee before the lower authorities that the wheat so received has been processed and the wheat product has since been sold and the sale proceeds have been realized which has been duly accounted for in books of accounts and I find that there is no adverse finding recorded by either of the authorities below.
I therefore find that the case of the Revenue solely rests on the statement of Shri Rajesh Mittal, Prop of M/s Kamna Overseas, the supplier of wheat which was recorded on oath u/s 131(IA) during the course of proceedings before the DDIT (Investigation), Karnal and not during the course of assessment proceedings. The statement so recorded and received by the AO could be a basis for initiating the investigation and examination of documentation and other evidences collected during the course of assessment proceedings. In the instant case, I find that without finding any defect or inaccuracies in the documentation so submitted by the assessee during the course of assessment proceedings and relying solely on the statement, the assessment proceedings have been initiated and completed by the AO. Further, even where the AO is of the belief that contents of the statement are clear and specific and goes against the assessee, the question is whether the statement has been supplied to the assessee and whether the assessee has been allowed an opportunity to cross-examine Shri Rajesh Mittal especially where the assessee has requested for the same as evident from the submissions made before the lower authorities. I find that the answer to the same is in negative and the assessee has thus been charged with an offence without even confronting the statement so used as an solitary evidence against it by the Revenue which is clearly in violation of the settled legal principle of natural justice as held by the Hon’ble Supreme Court in case of Andaman Timber Industries vs CIT (2015) 127 DTR 241(SC). It is thus a case where the disallowance by way of bogus purchases has been made by AO solely based on statement of Shri Rajesh Mittal which was not subjected to further examination and cross-examination during the course of assessment
proceedings and the facts of the case are thus at par with the facts in case of Odeon Builders Ltd (supra) where the SLP filed by the Revenue has been dismissed by the Hon’ble Supreme Court.
In light of aforesaid discussions and in the facts and circumstances of the present case, the addition so made by the AO and sustained by the ld CIT(A) is hereby set-aside and the same is hereby directed to be deleted.
In light of above, other contentions raised by the ld AR challenging the legality of the proceedings u/s 147 have become academic and the same are dismissed as infructious.
In the result, appeal of the assessee is allowed.
Order pronounced in the open Court on 26/10/2022.
Sd/- �व�म �संह यादव (VIKRAM SINGH YADAV) लेखा सद�य / ACCOUNTANT MEMBER AG Date: 26/10/2022
आदेश क� ��त�ल�प अ�े�षत/ Copy of the order forwarded to : अपीलाथ�/ The Appellant 1. ��यथ�/ The Respondent 2. आयकर आयु�त/ CIT 3. आयकर आयु�त (अपील)/ The CIT(A) 4. �वभागीय ��त�न�ध, आयकर अपील�य आ�धकरण, च�डीगढ़/ DR, ITAT, CHANDIGARH 5. गाड� फाईल/ Guard File 6.
आदेशानुसार/ By order, सहायक पंजीकार/ Assistant Registrar