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Income Tax Appellate Tribunal, ‘A’ BENCH : CHENNAI
Before: SHRI ABRAHAM P. GEORGE & SHRI DUVVURU RL REDDY]
आदेश / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER These are appeals filed by the assessee directed against an orders dated 26.10.2016 and 24.10.2016 of ld. Commissioner of Income Tax (Appeals)-4, Chennai.
Grounds taken by the assessee for the above years assails 2. addition made for purchases which were considered by the ld. Assessing
ITA Nos. 309 to 311 /2017 :- 2 -:
Officer as bogus, based on certain information received from Maharashtra VAT Department, apart from a challenge to the reopening done for the impugned assessment years.
Facts apropos are that assessee running a proprietorship 3. concern called ‘’M/s. Bharath Trading Company’’ in plastic granules, had filed returns for assessment year 2009-2010 declaring income of �17,00,060/-, for assessment year 2010-2011 declaring income of �25,83,966/- and for assessment year 2011-12 declaring income of �15,48,695/-. These returns were originally processed u/s.143(1) of the Income Tax Act, 1961 (in short ‘’the Act’’). However, thereafter the assessments for the impugned assessment years were reopened citing a reason that some of the purchases claimed by the assessee were bogus.
Though the assessee objected to the reopening, it seems such objections were rejected. Ld. Assessing Officer based on a report forwarded by DGIT (Investigation, Mumbai) which in turn had it’s moorings on certain details obtained from Maharashtra VAT Department, required the assessee to explain why the following purchases claimed by it should not be considered bogus.
ITA Nos. 309 to 311 /2017 :- 3 -:
Sl. Hawala Hawala TIN Hawala Pan Particulars of transactions No name 08-09 Amount 09-10 Amount 10-11 Amount 1 Naman 27450524228V AQEPK5024G 20,24,880 enterprises 2 Krish corporation 27890606533V AWAPS3678L 21,72,560 3 Sagar 27920363580V ACTPS9740C 27,67,908 enterprises 4 K C 27220658554V AJWPD9140R 77,48,341 enterprises 5 R K 27980667157V AGVPS7835C 30,23,020 enterprises 6 Global Trade 27400628967V AMRPB2286L 21,03,140 Impex 7 Shree enterprises 27760618778V AARPU1851E 29,08,360 8 Hiten 27880265244V AABPP2740H 13,89,232 enterprises 9 Shubbam 27790690881V AJAPM6393F 55,30,714 enterprises 10 Amee enterprises 27270692331V AZPPP4568E 3,55,01,784 37,16,265 11 Nirmal 27740692331V AAJHM4684H 39,70,148 40,54,260 Trading Co 12 Rajshree 27360671572V AQGPB7825G 55,51,962 33,95,920 enterprises 13 R K 27980667157V AGVPS7835C 36,71,200 enterprises 14 Darshat 27020712790V AADCC1270D 1,28,18,400 Trading Pvt. Ltd TOTAL 69,65,348 6,77,26,701 2,76,56,045 Assessee thereupon submitted these bills for the purchases. However, it seems assessees could not furnish the details on the transportation of the goods. Ld. Assessing Officer thereupon issued notices u/s.133(6) of the Act to the above parties, but all such notices were returned unserved. Ld.
ITA Nos. 309 to 311 /2017 :- 4 -:
Assessing Officer came to a conclusion that the above purchases were bogus and completed the assessment for the impugned assessment years making additions of �69,65,348/-, �6,77,26,701/- and �2,76,56,045/- respectively.
Aggrieved, assessee moved in appeal before ld. Commissioner of Income Tax (Appeals) for all the impugned assessment years. Argument of assessee before ld. Commissioner of Income Tax (Appeals) was that these purchases were all genuine and supported by invoices, delivery challans and VAT payments. According to the assessee, payments for all these purchases were made though banking channels and the goods so purchased were subsequently sold. As per the assessee, the stock was properly accounted.
Contention of the assessee before ld. Commissioner of Income Tax (Appeals) was that sales having not been disbelieved or questioned, purchases alone could not have been ignored. Apart from the merits of the disallowances, assessee also assailed the reopening done for these assessment years. For assessment year 2010-2011, assessee had one other ground stating that actual purchase amount from M/s.Amee enterprises was �35,50,178/- and not �3,55,01,784/-.
However, ld. Commissioner of Income Tax (Appeals) was not 5. fully impressed by the above arguments. According to him, the original
ITA Nos. 309 to 311 /2017 :- 5 -: assessments having been done u/s.143(1) of the Act, reopening done for the impugned assessment years were in accordance with law. On the question of purchase being considered bogus, conclusion of the ld. Commissioner of Income Tax (Appeals) was that these were only accommodation entries. According to him, the fact of making payments through account payee cheques, would not be sufficient to claim the transactions as genuine. Ld. Commissioner of Income Tax (Appeals), was of the opinion that assessee could not produce necessary evidence for substantiating the purchases.
6. Vis-à-vis the claim of the assessee that sales also should be reduced if purchases were disbelieved, ld. Commissioner of Income Tax (Appeals) was of the opinion that assessee was accounting its unaccounted money as sales and such claim could not be entertained.
Ld. Commissioner of Income Tax (Appeals) relied on the judgment of Hon’ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (2013)
356 ITR 451 and that of Hon’ble Apex Court in the case of Mc Dowell and Co. Ltd vs. Commercial Tax Officer, 154 ITR 148, while confirming the disallowances made for all the impugned assessment years. Nevertheless, for assessment year 2010-11, ld. Commissioner of Income Tax (Appeals) directed the ld. Assessing Officer to verify the claim of the assessee that ITA Nos. 309 to 311 /2017 :- 6 -: purchase from M/s.Amee enterprises was erroneously considered as �3,55,01,784/- against the actual figure of �35,50,178/-.
Now before us, ld. Authorised Representative strongly assailing the orders of the lower authorities submitted that assessee had effected payments for these purchases only through bank. According to the ld. Authorised Representative, all the vendors had VAT registration and the audit report issued u/s.61 of the Maharashtra Value Added Tax Act, 2002 clearly indicated this position. Relying on paper book pages No.115 to 133, ld. Authorised Representative submitted that tax Audit report in form 3CD, clearly gave the stock particulars. According to him, if purchases were disbelieved assessee’s sales should also be reduced correspondingly.
As per the ld. Authorised Representative, the purchases were genuine.
Relying on a decision of Mumbai Tribunal in the case of M/s. Imperial Imp & Exp vs. ITO (2016) 46 CCH 0358, ld. Authorised Representative submitted that when sales were accepted, purchases could not have been rejected. Reliance was also placed on the judgment of Hon’ble Bombay High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd, (2015)
372 ITR 619. Ld. Authorised Representative also submitted that ld. Assessing Officer had passed a rectification order for A.Y. 2010-2011, reducing the disallowance to �3,57,75,095/- from the original amount of ITA Nos. 309 to 311 /2017 :- 7 -:
�6,77,26,701/-, considering the error in the purchase from M/s.Amee enterprises.
Per contra, ld. Departmental Representative strongly supporting 8.
the orders of the lower authorities submitted that assessee miserably failed to provide any records for purchase of plastic granules. According to him, there were no details about the goods purchased and mode of transportation. Notices u/s.133(6) of the Act were all returned unserved.
Thus, according to him, purchases were bogus. As per the ld. Departmental Representative, assessee was bringing in his unaccounted money as sales and the disallowances were therefore justified.
We have considered the rival contentions and perused the 9. orders of the authorities below. It is not disputed that assessee had produced bills for purchases. However, these purchases were disbelieved for a reason that notices issued u/s.133(6) of the Act to these parties were returned unserved. Ld. Commissioner of Income Tax (Appeals) also states that assessee had failed to bring in sufficient evidence to prove the purchases. Nevertheless what we find from the assessment orders for the impugned assessment years is that ld. Assessing Officer had not found any defects in the books of accounts produced by the assessee, nor rejected it. Assessments were completed u/s.143(3) of the Act after verifying the books of accounts produced by the assessee. In the tax
ITA Nos. 309 to 311 /2017 :- 8 -:
Audit report for the impugned assessment years filed by the assessee in Form 3CD, quantitative details have been given at Sl. No. 28(a) as under:-
Assessment year 2009-10 :
(a) In the case of a trading Plastic Granules & Oil concern, give quantitative (Qty in Kg) details of principal items of goods traded (i) Opening Stock : 113370.000 (ii) Purchases during the previous year : 4967237.000 (iii) Sales during the previous year : 4609134.000 (iv) Closing Stock : 471473.000 (v) Shortage/excess, if any : 0.000 Assessment year 2010-11 :
(a) In the case of a trading Plastic Granules & Oil concern, give quantitative (Qty in Kg) details of principal items of goods traded (i) Opening Stock : 471473.000 (ii) Purchases during the previous year : 2615725.920 (iii) Sales during the previous year : 2710986.000 (iv) Closing Stock : 376212.920 (v) Shortage/excess, if any : 0.000
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Assessment year 2011-12:-
(a) In the case of a trading Plastic Granules & Oil concern, give quantitative (Qty in Kg) details of principal items of goods traded (i) Opening Stock : 376212.920 3(ii) Purchases during the previous year : 1972992.000 (iii) Sales during the previous year : 1983006.000 (iv) Closing Stock : 366198.920 (v) Shortage/excess, if any : 0.000 The above quantity particulars were not found to be incorrect by ld. Assessing Officer. It is clear from the above, that assessee had maintained records which gave the quantity of granules in stock , its purchases and its sales. As mentioned by the ld. Authorised Representative, the sales made by the assessee were never disbelieved. In our opinion, assessee could not have effected the sales without corresponding purchases. If the Revenue disbelieved the purchases the corresponding quantity ought have been reduced from the sales also. In our opinion, the ld. Assessing Officer fell in error in disbelieving the purchases while accepting the quantity of plastic granules sold by the assessee, that too without rejecting the books of the assessee. It is not disputed that assessee had to 311 /2017 :- 10 -: produced the bills for all purchases and these were paid through banking channel. Just because the notices to vendors of the assessee came back unservd, the purchases could not have been disbelieved. A businessman who purchases goods in the normal course of his business is not expected to keep a track of the address of all the vendors who supplied goods to him. There is nothing on record to substantiate the inference drawn by the lower authorities that part of the sales accounted by the assessee was only to bring in his unaccounted income to the main stream. The existence of unaccounted income was not evidenced by any record. In a similar situation where a part of the purchases were disbelieved, the Mumbai Bench of the Tribunal in the case of M/s. Imperial Imp & Exp (supra) had held as under at para 5 & 6 of its orders.
‘’5. On the other hand, the Ld. Departmental Representative supported the orders of the authorities below by pointing out that the addition has been made on account of the enquiries conducted by the Sales Tax Department of the Government of Maharashtra and no effort has been made by the assessee to controvert such information.
We have carefully considered the rival submissions. The entire discussion in the assessment order reveals that purchases from four parties namely Dhruv sales Corporation - Rs.13,67,640/-; Subhlaxmi Sales Corp. - Rs.20,20,800/-; Dharshan Sales Corporation - Rs.9,64,656/-; and Paras (India)- Rs.33,98,400, totalling to Rs.77,51,496/- have been treated to be bogus based on the purported enquiries conducted by the Sales Tax Department of the Government of Maharashtra. Ostensibly, the Assessing Officer ought to have brought on record material which is relevant to the transactions of the assessee with the aforesaid four parties instead of making a general observation about the information received from the Sales to 311 /2017 :- 11 -:
Tax Department of the Government of Maharashtra. Quite clearly, the Assessing Officer as well as CIT(Appeals) have taken note of the fact that no sales could have been effected by the assessee without purchases. In the present case, assessee has explained that all its sales are by way of exports. The books of account maintained by the assessee show payment for effecting such purchases by account payee cheques and also the vouchers for sale and purchase of goods, etc. Notably, no independent enquiries have been conducted by the Assessing Officer. Under identical circumstances, our Co-ordinate Benches in the cases of Deepak Popatwala Gal (supra), Shri Rajeev G. Kalathil(supra)and Ramesh Kumar and Co.(supra) have held that the Assessing Officer was not justified in making additions merely on the basis of information obtained from the Sales Tax Department of the Government of Maharashtra without conducting any independent enquiries. Before the CIT(Appeals), one of the points raised by the assessee was with respect to an opportunity to cross examine the four parties, but we find that no such opportunity have been allowed. Considering the entirety of facts and circumstances of the case and the aforesaid precedents, which have been rendered under identical circumstances, in our view, the CIT(Appeals) erred in sustaining the addition to the extent of Rs.4,19,356/- instead of deleting the entire addition of Rs.9,68,937/- made by the Assessing Officer. We direct accordingly’’.
Considering the facts and circumstances of the case, we are of the opinion that purchases could not have been considered as bogus.
Disallowances made for the impugned assessment years stand deleted.
Related grounds are allowed.
Ld. Counsel for the assessee did not press any of the grounds assailing the reopening. Related grounds are dismissed as not pressed. to 311 /2017 :- 12 -:
In the result, the appeals of the assessee for all the years are partly allowed.
Order pronounced on Wednesday, the 12th day of September, 2018, at Chennai.