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Facts
Anil Kumar Agarwal, a grocery shop owner, faced an addition for alleged large mustard oil purchases (Rs. 3.59 crore) from two companies, based on information under Section 133(6). The assessee denied these transactions, asserting that a broker used his name as consignee and a third party, Shri Ram Bahadur Singh, made the payments. The AO's initial 8% addition was reduced to 4% by the CIT(A).
Held
The Tribunal noted that the AO failed to properly investigate Shri Ram Bahadur Singh, who was identified as the actual payer, and lacked corroborative evidence linking the purchases to the assessee. Despite invoices being in the assessee's name, the Tribunal ruled that insufficient verification of the actual transaction and the undisputed denial by the assessee meant the liability could not be placed on him. Therefore, the addition was deleted.
Key Issues
Whether an addition for disputed purchases can be sustained without proper investigation of the actual transacting party and corroborative evidence, when the assessee denies involvement.
Sections Cited
133(6)
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Income Tax Appellate Tribunal, “SMCBENCH”, RANCHI
ĮċĊĭŊįēćıकीओरसे/Assessee by : Shr iAkshay Ringasia, AR �ȡ�è��ȧj � ȯ/Revenue by : Shri Khubchand Pandya, Sr.DR Ǖ��ȡ_�ȧ�ȡ�ȣ�/ Date of Hearing : 07/05/2025 �Ȫ��ȡ�ȧ�ȡ�ȣ�/Date of Pronouncement : 07/05/2025 आदेश/ O R D E R PerBench: Thisis an appeal filed by the assessee against the order dated 03.03.2023of the ld. CIT(A), National Faceless Appeal Centre (NFAC), Delhi, passed in ITBA/NFAC/S/250/2022-23/1050370304(1) for the assessment year 2012-2013.
Shri AkshayRingasia, AR appeared on behalf of the assessee. Shri Khubchand Pandya, Sr. DR appeared on behalf of the revenue.
It was submitted by the ld. AR that the assesse is an individual who is running a small grocery shop at Mayurbhanj, Odisha. It was the submission that in the course of assessment, the AO had received information that certain purchases of mustard oil had been made from M/s Shri Seco Pvt. Ltd., Rajasthan and from M/s Shri Ashoka Oil Industries, Newai, Rajasthan. It was the submission that information u/s.133(6) of the Act have been called for from the above two suppliers, who have confirmed that RTGS payments/DD payments were received by them and they used to dispatch the goods along with the driver who came with the vehicle. It was the submission that the broker had given the name of the assesse as the consignee. It was the submission that the assesse has never dealt with mustard oil. It was the submission that the purchases from the two companies was to an extent of Rs.3,59,57,000/-, which was never done by the assesse. It was the submission that the AO had disbelieved the claim of the assesse and had estimated the income of the assessee at the rate 8% of the said purchases. It was the submission that on appeal, ld. CIT(A) had reduced the addition to 4%. It was the submission that the assesse has denied the transactions and the AO has also in page 2 of his order recognized that the person who has paid for the said mustard oil to both the companies, was one Shri Ram Bahadur Singh. The payments were made through Kotak Mahindra Bank, Bistupur, Indusind Bank, Bistupur and IDBI Bank Bistupur. It was the submission that Shri Ram Bahadur Singh had also not been questioned nor examined but an addition has been made in the hands of the assesse. It was the prayer that the addition has been made by the AO and confirmed by the ld. CIT(A) deserves to be deleted.
In reply, ld.Sr. DR vehemently supported the order of the AO and ld. CIT(A). It was the submission that the ld. CIT(A) has confirmed 4% of the turnover and the same is liable to be upheld.
5. We have considered the rival submissions. A perusal of the facts and circumstances of the case clearly shows that in para 2.1 of the assessment order in page 2, the AO recognizes the person who had made the payment for the purchase of mustard oil from the two companies. Just because the invoices are made in the name of the assesse, it does not mean that the transaction belonged to the assesse. The AO ought to have examined Shri Ram Bahadur Singh to track the transaction. It would also be worthwhile to mention here that the AO has mentioned that the funds must have been used by Shri Ram Bahadur Singh as substantial cash profits. Instead of tracking the transaction, the AO adopted a shortcut of placing the liability on the assesse who has categorically claimed that he has not done the transaction. Other than the ledger copies of the supplier of the material, there is no evidence available with the AO show that the assesse has done the purchases and sale of the said mustard oil with the said two companies. It would also worthwhile to mention here that the delivery challans also mentions the delivery numbers. Even this has not been examined by the AO. These are inter-state transaction and even CST has been levied on transaction. Obviously there is adequate information available for doing verification by the AO. Unfortunately no verification, whatsoever, has been done by the AO. In the absence of corroborative evidence linking the purchases to the assessee, the addition as made by the AO and as confirmed by the ld. CIT(A) stands deleted.