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Income Tax Appellate Tribunal, “A” BENCH: KOLKATA
Before: Shri P. M. Jagtap & Shri S.S. Viswanethra Ravi
ITO, Ward-2(4), Siliguri Appellant Vs Shri Navin Kumar Agarwal Respondent [PAN:AEAPA5782R] For the Appellant : Shri Raja Sengupta, JCIT For the Respondent : Shri Harsh Vardhan Bharthaj, FCA Date of hearing : 18.07.2019 Date of pronouncement : 01.10.2019 ORDER Shri S.S. Viswanethra Ravi, JM:
This appeal by the Revenue against the order dated 12.04.2017 passed by the Commissioner of Income Tax (Appeals), Siliguri [‘CIT(A)’] for Assessment Year 2013-14.
The only issue to be decided is as to whether the CIT(A) is justified in deleting the addition made by the Assessing Officer on account of non-reflection of goods purchased in the books of accounts for the year under-consideration.
Heard both parties and perused the material available on record. According to Assessing Officer, the assessee purchased goods value of Rs.3,15,07,272/- and shown only Rs.1,21,07,231/-. For non- reflection of goods valuing Rs.1,94,00,041/- (Rs.3,15,07,272/- - Rs.1,21,07,231/-) in the books and added above-said amount to the total income of the assessee for the reasons as under:
“b) During the course of scrutiny proceedings, the assessee as well as A/R was asked to explain the same. A show-caused letter vide this office No. 1105 dated 29.01.2016 was issued to the assessee asking to explain as to why Rs. 1,94,00,041/- should not be treated as undisclosed purchased and add back to the total income. In response to the show-cause reply, the assessee filed a submission on dated 15.02.2016 stating with “with reference to your letter dated 29.01.2016 and asked by your honour that purchases related to invoice No. SE/2013/870 dated 26.12.2012 amount to Rs. 1,94,00,041/- was not booked during that financial year. The said container coming from China as detained by the Custom Department on the ground that the said container contained some undisclosed goods. Later on after proper investigation we came to know that the said undisclosed goods coming from China were supposed to be shipped to Bangladesh but where wrongly shipped to India under our name. The said container was not accounted in the FY 2012-13 but after release of goods in the next financial year by making payment of requisite custom duty and penalty by us it was properly taken into our accounts in the next financial year. Further, you have stated that your honour is requested to drop the case as the consignment was properly accounted in our books of accounts after the dispute of wrong consignment was sold and the consignee has admitted to the said case and goods were released by the department.” The claim of the assessee as made in his submission in regard to the goods “contained in container under invoice No. SE/2013/870 dated 26.12.2012 were supposed to be shipped to Bangladesh wrongly shipped to India under our name” is not found to be satisfactory. Since, during the financial year 2012-13 relevant to assessment year 2013-14 the goods of Rs. 1,94,00,041/- was purchased by the assessee under invoice No. SE/2013/870 dated 26.12.2012 from Selex Technologies Limited, Hongkong (China). On perusal of the invoice filed during the course of scrutiny hearing, the invoice was found to be generated by Selex Technologies Limited under the proprietorship firm’s name M/s. Om Shakti 219/179, Ritik Plaza, 1st Floor, Seth Srilal Market, Siliguri – 743 001.Hence, assessee’s claim that goods contained under invoice No. SE/2013/870 dated 26.12.2012 was wrongly shipped to assessee is not acceptable. c. Therefore, the goods amounting to Rs. 1,94,00,041/- purchased by the assessee under invoice No. SE/2013/870 dated 26.12.2012 during the financial year 2012-13 pertaining to the assessment year 2013-14 should have been reflected in your books of accounts in the financial year 2012-13. However, during the course of scrutiny hearing, on examination of books of account for the relevant year under scrutiny i.e. (financial year 2012-13 pertaining to the assessment year 2013-14), the goods purchased amounting to Rs. 1,94,00,041/- not found to be reflected in the books of account.”
Aggrieved by the order of Assessing Officer, the assessee challenged the impugned addition before the CIT(A) in the First Appellate Proceedings. The assessee made submissions involving the addition as under:
“The said container was coming from China and detained by the customs department for more than six (6) months which created doubts in our mind whether the goods which we actually bought will be considered by the department and released to us. Later on after proper consultation with Selex Technologies Limited and customs department, we jointly with Selex Technologies decided to take the delivery of goods from customs department and pay the requisite duty, fine and penalty. This is when the matter was settled and finally the goods were released by the customs department during the financial year 2013-14 on receipt of duty and penalty and at this point, we came into position of receiving physical delivery of the goods and we recognize the same as our purchase.”
The CIT(A), on considering the record and submissions made hereinabove by the assessee held that the addition made by the Assessing Officer is not maintainable, as the transaction in dispute was complete in the immediate Assessment Year 2014-15 (F.Y 2013- 14) as the assessee booked the profit in its accounts involving purchase as found by the Assessing Officer in the year under consideration and deleted the addition made by the Assessing Officer for the reasons stated hereunder:
“Para 5. I have persued the assessment order, submission of the assessee, P&L A/c and Balance sheet of the assessee for F.Y 12-13 and F.Y 13-14. First issue would be whether any addition can be made if the assessee has wrongly debited the purchase in next year. In case it is held that the purchase should have been booked in Assessment Year 2-13-14 in that case the figure of purchase as shown by the assessee would increase by Rs.1,94,00,041/- and the closing stock of the assessee would also increase by same amount. Therefore there would be no impact on the P&L A/c. of the assessee and there would be no impact on taxable income. Therefore the addition u/s 68 for the inaccurate purchase cannot be made. The 2nd issue would be whether the assessee can show this purchase in F.Y 2013-14 or not. Purchase can be said to be complete when the contract for purchase is complete in all respect. Assessee has made following submission: The said container was coming from China and detained by the customs department for more than six (6) months which created doubts in our mind whether the goods which we actually bought will be considered by the department and released to us. Later on after proper consultation with Selex Technologies Limited and customs department, we jointly with Selex Technologies decided to take the delivery of goods from customs department and pay the requisite duty, fine and penalty. This is when the matter was settled and finally the goods were released by the customs department during the financial year 2013-14 on receipt of duty and penalty and at this point, we came into position of receiving physical delivery of the goods and we recognize the same as our purchase. Since the purchase transaction was under dispute, as to whether the goods belong to the assessee or not, therefore transaction of the purchase cannot be said to be complete and assessee is well within its rights to treat the purchase as complete in FY 2013-14. Therefore the treatment given by the assessee of booking the purchase in the next year is justified. It is also seen that the assessee has shown the purchase in F.Y. 2013-14 and has shown a net profit Rs. 10,30,283/- in its accounts in F.Y. 2013-14. In view of the above discussion addition of Rs. 1,94,00,041/- does not survive. Therefore, the grounds raised related to this are allowed.”
According to CIT(A), the assessee booked purchase on 26.12.2012 relevant to year under consideration, but however the said transaction was completed in the immediate Assessment Year i.e. Assessment Year 2014-15 and shown profit on such purchase, therefore, we completely agree with the reasons recorded by the CIT(A) in his order which is reproduced hereinabove. Thus only ground raised
by the Revenue is dismissed.
7. In the result, the appeal of the Revenue is dismissed. Order pronounced in the open court on 01.10.2019.
Sd/- Sd/- [P. M. JAGTAP] [S.S. Viswanethra Ravi] Vice President Judicial Member Dated : 01.10.2019 Place : Kolkata RS, Sr.PS Copy of the order forwarded to:
1. 1. Appellant –ITO, Ward-2(4), Siliguri 2 Respondent – Shri Navin Kumar Agarwal, C/o Om Shanti, Ritika Plaza, Seth Srilal Market, Siliguri-734001.
3. The CIT(A), Kolkata 4. CIT , Kolkata 5. DR, Kolkata Benches, Kolkata