MINI IRON & ALLOYS (P) LTD.,KOLKATA vs. ITO, WARD-3(4), KOLKATA, KOLKATA

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ITA 1103/KOL/2017Status: DisposedITAT Kolkata27 June 2018AY 2005-063 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that non-service of notice to the seller and the inability to produce the seller are not sufficient grounds to treat purchases as bogus, especially when payments are by cheque and the seller is a registered dealer. The Tribunal also found the rent payment to be genuine as confirmed by the trust and supported by documentary evidence.

What were the facts?

The assessee company's appeal concerned additions made by the AO for purchase of trading goods and rent paid to a trust. The AO's addition for purchases was based on the seller's address being unserved and the seller not being produced. The rent payment was disallowed as a sham transaction.

What were the issues?

Whether purchases are genuine when the seller cannot be produced and notices are unserved. Whether rent payments are genuine when confirmed by the recipient and supported by evidence.

Which sections of the Income-tax Act were involved?

Section 133(6),Section 143(3)(ii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH : KOLKATA

Before: Hon’ble Shri J.Sudhakar Reddy, AM]

Hearing: 07.04.2018Pronounced: 27.06.2018

This appeal by the Assessee arises out of the order of the Learned Commissioner of Income Tax (Appeals)-17, Kolkata [ in short the ld CITA] dated 30.11.2016 against the order passed by the I.T.O, Ward-3(4), Kolkata [ in short the ld AO] under section 143(3)(ii) of the Income Tax Act, 1961 (in short “the Act”) dated 28.12.2007 for the Assessment Year 2005-06.

2.

The assessee is a company and is in the business of trading and iron in steel.

3.

Though the assessee has raised in all 12 grounds of appeal

, the ld. Counsel for the assessee argued only grounds no. 5 and 6 which are extracted below:

5. For that the learned Commissioner of Income Tax has failed to consider that the Income Tax Officer has erred in adding back the amount of Rs. 4,25,550/- as Income which is actually the purchase price of trading goods on February 24,

M/s Mini Iron & Alloys P Ltd. A.Yr.2005-06 2005 from M/s Trade Well Concern through account payee cheque and not any fictitious transaction.

6. For that the learned Commissioner of Income tax has failed to consider that the Income Tax Officer has erred in holding the payment of Rs. 42,000/- made to Shlok Trust through cheque as sham transaction despite proper rent being produced at the time of hearing, which in itself was a conclusive proof of authenticity.

All the other grounds were not pressed. Hence they are dismissed as not pressed.

4.

We have heard Mr. Anup Kr. Sinha, the ld. Counsel for the assessee and Smt. Ranu Biswas, the ld. DR on behalf of the revenue.

5.

After hearing rival submissions and on a careful consideration of the facts and circumstances of the case, a perusal of papers on record and orders of the lower authorities below as well as case law cited, I hold as follows.

6.

The first issue is an addition of Rs. 4,25,550/- which was a purchase of trading goods. The goods were purchased from M/s Trade Well Concern on 24.02.2005, and payment was made through a/c payee cheques. The ld. AO made an addition on the ground that, a notice issued to the seller u/s 133(6) of the Act was returned unserved and the assessee could not produce the said party before him. In my view, this is not a correct legal ground for making an addition. The ITAT “E” Bench of Mumbai Tribunal in the case of Prabhat Gupta vs. ITO in and 1797/Mum/2017 held that non-service of notice cannot be a ground for making an addition of a purchase, by treating it as a bogus purchase. For this proposition the Bench relied on the judgment of the Hon’ble Bombay High Court in the case of CIT vs. Nikunj Exim Enterprises Pvt. Ltd. (2016) Taxman.com 171 (Bomb.). As the assessee has discharged the burden of proof that lay on it and as the same seller is a registered dealer under State Sales Tax, VAT and CST and as the payments have been made through a/c payee cheques, I hold 2

M/s Mini Iron & Alloys P Ltd. A.Yr.2005-06 that the purchases are genuine and delete the addition. Hence this ground of the assessee is allowed.

7.

Ground no. 5 is on the disallowance of Rs. 42,000/- being rent paid to Shlok Trust. On a perusal of the papers, I find that Shlok Trust had confirmed the payment of rent. The assessee is carrying on the business at these premises since 2002. Hence the disallowance is unjustified. Accordingly, I delete the same and allow this ground of the assessee.

8.

In the result, the appeal of the assessee is allowed in part.

Order pronounced in the Court on 27 .06.2018

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