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Income Tax Appellate Tribunal, “A” BENCH : KOLKATA
Before: Hon’ble Shri S.S. Godara, JM & Shri M.Balaganesh, AM ]
ORDER Per M.Balaganesh, AM
This appeal by the Revenue arises out of the order of the Learned Commissioner of Income Tax(Appeals)-4, Kolkata [in short the ld CIT(A)] in Appeal No. 1114/CIT(A)- 4/Ward-12(1)/Kol/14-15 dated 08.06.2016 against the order passed by the ITO, Ward- 12(1), Kolkata [ in short the ld AO] under section 143(3) of the Income Tax Act, 1961 (in short “the Act”) dated 12.03.2014 for the Assessment Year 2011-12.
The only issue to be decided in this appeal is as to whether the Ld. CIT(A) was justified in deleting the addition of Rs. 1,49,31,977/- on account of purchases, in the facts and circumstances of the case.
Shri Falguni Mukherjee A.Yr. 2011-12 3. The brief facts of this issue is that the assessee is an individual and is a proprietor of M/s K. M. Udyog engaged in trading in leather and chemicals. The assessee had filed his return of income for the assessment year 2011-12 on 27.09.2011 declaring total income of Rs. 6,55,911/-. The ld. AO observed in his assessment order that the assessee filed various details that were called for but did not produce the books of accounts despite giving several opportunities for the same. The ld. AO stated that the assessee had however produced the stock register before him. The ld. AO observed from the profit and loss account for the financial year 2010-11 that the assessee had made total purchases from the following parties:
The ld. AO sought to verify the veracity of the purchases in respect of JCI Chemicals India Pvt. Ltd, among others, wherein the assessee had shown the total amount of purchases made from such party to the extent of Rs. 1,34,86,552/- and balance outstanding as on 31.03.2011 in respect of such party was Rs. 55,83,916/-. The ld. AO observed that on analysis of account statement issued by the assessee and confirmed by JCI Chemicals India Pvt. Ltd. depict the transactions with the assessee as under:
Shri Falguni Mukherjee A.Yr. 2011-12 From the above table, the ld. AO observed that the total purchases made by the assessee during the year from JCI Chemicals India Pvt. Ltd. was Rs. 2,84,18,529/- whereas the assessee had shown purchase only to the tune of Rs. 1,34,86,552/- thereby resulting in a difference in purchases of Rs. 1,49,31,977/- (28418529 – 13486552). The assessee expressed his inability to produce the books of accounts including the ledgers as the same were misplaced in support of which the assessee filed a copy of G.D. dated 19.02.2014 addressed to the O.C. , Mogra Police Station. The assessee produced the stock register of leather. The ld. AO added the difference of Rs. 1,49,31,977/- as purchases made outside the books of the assessee and brought the same to tax while completing the assessment.
3.1. The assessee explained the difference on account of purchases by stating that the difference is that the accounts confirmation produced by the assessee in the letter pad of M/s K. M. Udyog was details of transactions of M/s K. M. Udyog with JCI Chemicals India Pvt. Ltd. as appearing in the books of JCI Chemicals India Pvt. Ltd., instead of as appearing in the books of M/s K. M. Udyog. As a result, the purchases of M/s K.M. Udyog were considered as sales and sales were considered as purchases. The payments made by M/s K. M. Udyog were considered as payment receipts and payments receipts were considered as payments made. This happened due to wrong presentation of accounting entries of transaction in the confirmation of account submitted during the course of scrutiny which was actually a copy of account confirmation as per books of JCI Chemicals India Pvt. Ltd. Accordingly, the correct picture of the transaction with JCI Chemicals India Pvt. Ltd. were stated as under:
Purchases Rs. 1,85,98,086/- Sales Rs. 2,84,18,529/- Payments receipt Rs. 10,94,42,000/- Payments made Rs. 2,99,50,000/- 3
Shri Falguni Mukherjee A.Yr. 2011-12 The purchases with JCI Chemicals India Pvt. Ltd. was shown as Rs. 1,34,86,552/- in the details of purchases submitted by the assessee before the ld. AO, whereas the purchases shown in the accounts confirmation as mentioned above is Rs. 1,85,98,086/-. The difference of Rs. 51,11,534/- (18598086-13486552) is due to the fact that there were certain purchase returns for which some debit notes were raised by M/s K. M. Udyog at the end of the year on 31.03.2011 which were recorded in the books of the JCI Chemicals India Pvt. Ltd. in the next financial year i.e. financial year 2011-12. In other words, it was pointed out that the debit notes were raised by the assessee to the tune of Rs. 51,11,534/-, were not responded by the JCI Chemicals India Pvt. Ltd. in its books during this year and instead the same were responded by them in the next financial year 2011-12. The assessee also produced the bank statement of Punjab National Bank, C.R. Avenue, Kolkata Branch which clearly shows the details of payments received and payments made from which to JCI Chemicals India Pvt. Ltd. Confirmation of account was also filed from JCI Chemicals India Pvt. Ltd. to substantiate the entire transaction.
The Ld. CIT(A) deleted the addition by observing as under: “I have considered the submission of the AR of the appellant in the light of the supporting documents and written submissions filed by the AR of the appellant as well as the assessment order on the issue at hand. On a total analysis of the matter, I find that the AO resorted to the impugned addition on the premise that ledger account of M/s JCI Chemicals India Pvt. Ltd.’s was not tallying with the appellant’s ledger account and the AO observed that there was a difference between the two ledger accounts by a sum of Rs. 1,49,31,977/-. The AO has treated the said difference of unexplained purchases of the appellant. I find from the submission of the AR of the appellant filed during the appellate proceedings that there was clear misunderstanding in reading the ledgers accounts between the parties on the part of the AO. In course of the assessment proceedings, pursuant to the faulty representation of facts made by the AR of the appellant, it led to the belief that the appellant had indulged in unexplained purchases to the tune of Rs. 1,49,31,977/-. On perusal of the documentary details available on record with regard to the issue at hand. I find that what was construed by the AO does not have the backing of material evidences available on record insofar as there were interpolations of facts to the AO, which would not stand the test of appeal on scrutiny . As could be interpreted from the submission filed with documentary evidences by the AR, there is an obvious case of error insofar as the debit of the appellate vis-à- vis the sundry creditor was taken as the appellant’s dues from the creditor. Considering the facts of the matter. I find that the impugned addition was made on a wrong notion 4
Shri Falguni Mukherjee A.Yr. 2011-12 by the AO on the basis of a feeble representation made by the AR of the assessee at the assessment stage. I find that the difference is for the reason that the accounts confirmation produced by appellant was on a letter pad of K.M Udyog wherein details of transactions of K. M. Udyod with JCI Chemicals India Pvt. Ltd. were reflected interchanged, as if the transaction appearing in the books of JCI Chemical India Pvt. Ltd. on account of K.M. Udyog were shown as sales and sales were shown as purchases. I further find that the payments made by K. M. Udyog were shown as receipts and receipts were shown as payments made. This happened due to wrong presentation of accounting entries of transactions in the confirmations of accounts submitted during the course of scrutiny, which was actually a copy of account confirmation as per books of JCI Chemical India Pvt. Ltd. I further find from the copy of debit note filed by the AR before me, that a differential sum to the extent of Rs. 51,11,534/- is on account of debit note issued by K. M. Udyog during the financial year 2010-11 which was recorded by JCI Chemicals India Pvt. Ltd. in Financial year 2011- 12. In view of the above, I direct the AO to delete the addition of Rs. 1,49,31,977/- made as undisclosed income which is based on wrong accounts confirmation and on surmise and presumptions. These grounds of appeal are allowed.”
Aggrieved the revenue is in appeal before us.
None appeared on behalf of the assessee.
We have heard the ld. DR. We find that the entire confusion had happened due to the fact that the ld. AO had misunderstood the purchases made by the assessee from JCI Chemicals India Pvt. Ltd. by comparing the same with purchase made by JCI Chemicals India Pvt. Ltd. Actually the ld. AO should have compared the purchases from JCI Chemicals India Pvt. Ltd. by the assessee with the sales shown in the account confirmation by JCI Chemicals India Pvt. Ltd. When this is compared, there is a difference of only Rs. 51,11,534/- which has been properly explained by the assessee to be the debit notes raised by the assessee towards purchase returns on JCI Chemicals India Pvt. Ltd. on 31.03.2011 which has been responded by JCI Chemicals India Pvt. Ltd. in the next financial year i.e. financial year 2011-12. The Ld. CIT(A) had categorically observed that the entire payments received from JCI Chemicals India Pvt. Ltd. and payments made to JCI Chemicals India Pvt. Ltd. were duly matching with the bank statements available on record. Hence, there cannot be any purchases made 5
Shri Falguni Mukherjee A.Yr. 2011-12 outside the books as wrongly alleged by the ld. AO. In these facts and circumstances, we hold that the Ld. CIT(A) had rightly deleted the addition made in the sum of Rs. 1,49,31,977/- on account of purchases and his order does not call for any interference. Accordingly, grounds raised by the revenue are dismissed.
In the result, the appeal of the revenue is dismissed.
Order pronounced in the Court on 09.05.2018