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Income Tax Appellate Tribunal, KOLKATA ‘SMC’ BENCH, KOLKATA
Before: Sri J. Sudhakar Reddy]
order : May 16th, 2018 O R D E R Per J. Sudhakar Reddy :- This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-2, Kolkata, (hereinafter the ‘Ld. CIT(A)’), dt. 04/05/2017, passed u/s 250 of the Income Tax Act, 1961 (hereinafter the ‘Act’), relating to Assessment Year 2008-09. 2. The assessee is a company and is in the business of manufacturing of HDPE/PP non-woven fabric. Though the assessee has taken ten grounds of appeal
, there are only two issues that arise for my adjudication.
3. The first issue is validity of the re-opening of the assessment and the second issue is challenging the action of the ld. CIT(A) is upholding the order of the Assessing Officer and confirming the addition of Rs.22,87,502/-. Ground No. 1 to 5, which are on the issue of re-opening of the assessment and grounds of natural justice are dismissed as not pressed.
4. On the issue of addition of Rs.22,87,502/-, the ld. Counsel for the assessee submitted that, the entire addition was based on an alleged statement recorded from Shri Vikash Agarwal, Director of M/s. Vikash Iron & Steel Pvt. Ltd.. During the course of survey operation u/s 133A of the Act, which was conducted on Assessment Year: 2008-09 M/s. Harsh Polyfabric Pvt. Ltd 26/02/2008 at the business premises of M/s Vikash Iron & Steel Pvt. Ltd. In the statement Shri Vikash Agarwal stated that he did not carry out any activity in iron & steel and has no factory or godown premises and it has also been admitted by him that all the bills raised by him are vague. On the ground that the assessee had received four bills amount to Rs.23, 34,186/-, as accommodation entries from Mr. Vikash Agarwal, after paying certain amount of commission, the Assessing Officer issued a showcause as to why the same should not be added to the income of the assessee. In response, the assessee submitted copies of the relevant bills, copies of the bank statements evidencing payments made through banking channels, copies of documents evidencing delivery of material through different trucks. It was submitted that material so supplied was used for building and steel construction. It was further submitted that the project of the assessee was finance by Oriental Bank of Commerce and that they have made payments by account payee cheques directly in favour of M/s Vikash Iron & Steel Pvt. Ltd. Audited books of account, sales tax returns and VAT returns wherein input credit has been claimed were filed as evidence. The same was rejected by the Assessing Officer. The request of the assessee for cross-examination of Shri Vikash Agarwal, was not granted. The ld. First Appellate Authority, confirmed the order of the Assessing Officer.
5. I find that the Kolkata ‘C’ Bench of the Tribunal in the case of DCIT vs. M/s. Lalwani Ferro Alloys Pvt. Ltd. in order dt. 14/09/2012 has deleted the addition made by the revenue authorities based on the very same statement made by Shri Vikash Agarwal, during the above stated survey operation. At para 7.1. of that order it is held as follows:- “7.1 In any case, the ld. D.R. having argued the issue against the deletion of the addition, we proceed to adjudicate on such submission. Admittedly, the statement recorded from Shri Vikash Agarwal is a statement recorded in the course of survey on M/s. VISPL. Admittedly, in view of the decision of the Hon'ble Kerala High Assessment Year: 2007-08 Court and the Madras High Court referred to supra in the case of Paul Mathews & Sons and S. Khader Khan & Sons respectively would clearly show that such a statement recorded from Shri Vikash Agarwal would not have evidenciary value in the case of M/s. VISPL itself, then such statement cannot be given any credence in framing the assessment in the case of the assessees. No corroborating evidence in any manner whatsoever has been found in the course of survey of M/s. VISPL to corroborate the confession of the Director of VISPL, Shri Vikash Agarwal. Another angle that comes up for consideration is that in the confession, Shri Vikash Agarwal claims that he is provided accommodation entries. In the present case, the payment to M/s. VISPL by the assessees herein for the purchase of TMT bars is not by cash but through banking channels and cheques. Now, if this statement is to be accepted that Shri Vikash Agarwal was giving the accommodation entries, then this would be a case where accounted money is being converted into unaccounted money. Further, Shri Vikash Agarwal having not been given to the assessees for cross-examination, his statement cannot be used against the assessees. In the course of the proceedings before the ld. CIT(A), the assessee Assessment Year: 2008-09 M/s. Harsh Polyfabric Pvt. Ltd had produced the copies of the purchase bills, etc. which have been sent by the ld. CIT(A), after admission, to the AO for his remand report. These details are found in page nos. 5,6 and 7 of the order of the ld. CIT(A) wherein the ld. CIT(A) has extracted the written submission of the assessee dated 21.12.2009. In the remand report dated 14.05.2010, which has been found at pages 14,15 and 16 of the order of the ld. CIT(A), it is noticed that the AO has challenged the action of the ld. CIT(A) in admitting the additional evidence itself. However, a perusal of the order of the AO dated 31.12.2009 shows that in para 2.e at page 3 of his order, the AO mentions that the explanation and evidences were filed only on 21.12.2009 when sufficient time was not available for verification of the contentions and he has further mentioned that the assessee has not furnished all the details. Under these circumstances, as he has himself mentioned that he did not have adequate time to verify the contention of the assessee, the AO could not have successfully Assessment Year: 2007-08 challenged the admission of the evidences by the ld. CIT(A). Admittedly, the AO then proceeded to examine the evidences. Other than saying there is requirement of further evidence, no defect in the evidences produced has been recorded by the AO. A perusal of the bills for purchase of the TMT bars, sample of which has been verified, shows that the bills contain the quantity, dispatch verification and the lorry number as also the VAT amount in respect of each of the transactions. Thus, what is noticed is that in respect of purchases by the assessees from M/s. VISPL other than the allegation of fake and ingenuine purchases and a statement from the Director of VISPL, which remained uncorroborated, there is no evidence contrary to the claim of the purchases by the assessees herein. In the circumstances, we are of the view that the submission of the ld. D.R. on this issue does not hold water and consequently the same stands rejected.”
Similarly in the case of DCIT vs. M/s. Jai Balaji Jyoti Steels Ltd., to 1882/Kol/2010 & other cases, order dt. 13/04/2012, similar additions made based on the statement of Shri Vikash Agarwal of M/s. Vikash Iron & Steel Pvt. Ltd. (VISPL) were deleted by the Tribunal. The Hon’ble Jurisdictional High Court in ITAT No. 64 of 2013 in the case of CIT vs. M/s. Lalwani Metallices Pvt. Ltd. order dt. 30th April, 2013, upheld the order of the Tribunal.
As the facts and circumstances of the case on hand are the same and as the assessee, in my view, has discharged the burden of proof that lay on him, we delete this addition as sustained by the ld. CIT(A) and allow Ground Nos. 6, 7 & 8 of the assessee. Ground No. 9 and 10 are general in nature.
In the result, appeal of the assessee is allowed in part.
Kolkata, the 16th day of May, 2018. Sd/- [J. Sudhakar Reddy] Accountant Member Dated: 16.05.2018 {SC SPS} Assessment Year: 2008-09 M/s. Harsh Polyfabric Pvt. Ltd Copy of the order forwarded to: 1. M/s. Harsh Polyfabric Pvt. Ltd Room No. 759 Marshall House 25, Strand Road Kolkata – 700 001 2. I.T.O. Ward-5 (4), Kolkata Kolkata – 700 069 3. CIT(A)- 4. CIT- , 5. CIT(DR), Kolkata Benches, Kolkata.