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Income Tax Appellate Tribunal, “B” BENCH: KOLKATA
Before: Shri P. M. Jagtap, AM & Shri A. T. Varkey, JM]
ORDER
Per Shri A.T.Varkey, JM
This is appeal preferred by the assessee against the order of the Ld. CIT(Appeals) – 13, Kolkata dated 30.11.2015 for A.Y. 2011-12.
The main grievance of the assessee is against the action of the Ld. CIT(A) in confirming the addition of Rs. 2,85,81,227/- on account of alleged bogus purchases. At the outset itself it has been brought to our notice by the learned counsel for the assessee that the impugned addition was based on a survey conducted in the business premise of the assessee on 26.03.2010 which was for the preceding assessment year i.e. 2010-11. During the survey, it was found that in respect of purchases and job work from certain parties, bills amount was not mentioned on the bills and was later self-entered / mentioned after some days. In the A.Y. 2010-11 (preceding assessment year), the A.O. classified the same as blank bills. Thereafter, the A.O. listed out parties from whom such purchases ( blank bills) were made by the assessee has been found to be that of 11 parties. The A.O. asked the assessee to produce 3 parties namely National Enterprises, Priyanka Enterprises and Shivam Enterprises and since the 3 parties could not be produced by the assessee, the amount in respect of these 3 parties amounting to Rs. 1,67,13,174/- was added by the A.O, which was deleted by the Ld. CIT(A). When the matter travelled for adjudication before this Tribunal, the Tribunal by order dated 08.12.2017in for assessment year 2010-11 in ACTI, Circle – 45, Kolkata vs Sanjib Bothra was pleased to confirm the action of the Ld. CIT(A) by holding as under:
2 Sanjit Bothra, AY 2011-12 7. We have heard the rival submissions and perused the materials available on record including the paper book of the assessee comprising of pages 1 to 138 thereon. We find that at the time of survey, the survey team found certain bills for purchases from certain parties, wherein the quantity was duly reflected and the same has been taken in the stock register and there is absolutely no dispute with regard to the quantity. The assessee had duly explained that the rates would be entered in the said bills found for the period January to March 2010 after due negotiations with the said three suppliers after satisfactory verification of the quantity delivered and after carrying out the quality check of the same. Hence this goes to prove, that at the outset, there is absolutely no case made out by the revenue to disbelieve the purchases made from National Enterprises, Priyanka Enterprises and Shivam Enterprises for purchases made upto Dec 2009. It was also explained that the survey team had taken out individual item wise stock of all godowns of the assesse which were in conformity with the stock register. The inventory as taken by the survey team showed that the same articles as supplied under the questioned bills were in the stock and the rate of individual article as mentioned in those bills were also similar with the inventory rate. These facts go to prove that the purchases were genuine although the final complete bills were not submitted by the said suppliers due to circumstances stated above. We find that the assessee had also duly explained the reasons for reduction in gross profit rate by way of reduction in export turnover by way of lesser sale prices and huge fluctuations in export proceeds realization due to foreign exchange variations with specific reference to invoices when compared to that of earlier year.
7.1. We find that the ld CITA had directed the ld AO to make verification of only three parties viz National Enterprises, Shivam Enterprises and Priyanka Enterprises. The ld AO chose to verify M/s National Enterprises and obtained statement from him and also allowed cross examination of the said party to the assessee. We find that both during examination by the ld AO and also cross examination by the assessee, Shri Milan Maity, Proprietor of National Enterprises confirmed having sold goods to the assessee and payments for the same were received by account payee cheques. It also stood established beyond doubt from the said cross examination that the said party had not done any fabrication work for the assessee as stated by the ld AO. We find that the ld AO for reasons best known to him did not chose to verify the other two parties viz Shivam Enterprises and Priyanka Enterprises in the remand proceedings. In these circumstances, the only inference that could be drawn is there is no adverse comment on the part of the ld AO with regard to purchases done from them. Hence there is absolutely no case for making any addition towards bogus purchases made from these two parties in the sums of Rs 43,00,960 and Rs 47,97,072/- .
7.2. We find that the ld AO in the course of assessment proceedings for the Asst Year 2011-12 had made further enquiries as per the business address and also as per the addresses as per bank accounts as called by the ld AO from the respective banks of the parties. The ld AO after enquiry concluded that the parties were carrying on 2 3 Sanjit Bothra, AY 2011-12 fabrication work as given by the assessee and not supplied any finished goods to the assessee but received payments by cheques from the assessee. In this regard, the assessee sought for cross examination of such parties and the same was granted. The following facts emanated out of such cross examination of the parties :- i) The ld AO had called the bank statement from the respective bankers of the parties and verified the same in details and found that all the account payee cheques issued by the assessee for purchase of finished gloves has been reflected in the party’s bank accounts. He has also observed that said parties has issued several cheques to their purchasing parties from the said bank accounts. Such observation, he has not stated anywhere in his findings and in his conclusion in the remand report. ii) That the ld AO disbelieved the existence and transaction ofhte parties which proved baseless. The cross examination and the physical oath of the parties proves that the parties were genuine and made indisputable transactions with the assessee during Asst Year 2010-11. iii) The assessee further explained that he cannot be held responsible if the parties have not maintained any books of accounts or not in possession of any record in support of their sale. iv) The contention of the ld AO that the copies of the bills remained with the assessee is baseless, as it was no where stated by the parties in the course of their statement given on oath. However, there are certain bills impounded during the course of survey wherein rate / amount was not written. This has been already elaborated with proper reasons by the assessee. v) The assessee narrated that he being an exporter cannot accept anything which is not as per specification of the foreign buyer. As such, whenever the suppliers deliver the goods, the same cannot be accepted without detail checking. Only after thorough checking of quantity, goods are accepted at the godown with a remark on the challan that the ‘Quantity OK’ . In many occasion, all the goods as supplied are not accepted as some of the goods are rejected. Hence the actual quantity as accepted in the godown mentioned on the challans by the suppliers and the same are recorded in the daily stock register. Only after the challans are accepted, the supplier raised their bills. vi) It was stated that nowhere in the oath during the course of cross-examination, the statement as given in the parties was in English. It was all through given in Bengali and subsequently translated and written in English by one departmental staff under the guidance of the ld AO. The Authorised Representative in no circumstances intervened or guided the parties to state incorrect statement as alleged by the ld AO. vii) The overall finding and conclusion of the ld AO was not based on fact as there is no doubt about the existence and transaction of the parties. All payment received by the parties through account payee cheques as reflected in their bank statements. Hence the question of genuineness of parties does not arise and it is clear that the transactions with the parties are also genuine as the same is proved in the course of cross- examiantion and hence the ld AO’s finding is not based on facts as well as not in conformity of the spirit of law.
4 Sanjit Bothra, AY 2011-12 7.4. We find that the ld CITA had recorded an incorrect finding that the ld AO in the remand proceedings had examined two out of the three parties which were the subject matter of addition. Factually the ld AO had verified / examined only one such party i.e National Enterprises (Proprietor Shri Milan Maity). In addition to this, he had examined Deep Enterprises which was not directed to be verified by the ld CITA . We also find that the ld CITA had given a categorical finding that there was no quantitative discrepancy that was found in the purchases recorded in the stock register. It is not in dispute that even on the date of survey, the alleged blank bills did contain the quantity duly received by the assessee. Only the rates were not mentioned in those bills at the time of survey , the reasons for which had already been elaborated hereinabove. The ld AR placed before us a summary sheet wherein if the alleged purchases are considered as ingenuine, the same are to be removed from purchases, then the same would result in negative stocks for the assessee, which is not the case of the revenue at all. All these purchases are duly backed by corresponding exports. On the contrary, we find that the survey team only found excess stock at the time of survey. Hence there is no question of disbelieving the purchases made from National Enterprises by the assessee.
7.5. In view of aforesaid facts and our findings , we hold that the ld CITA had rightly deleted the addition on account of ingenuine purchases in the sum of Rs 1,67,13,174/- from three parties. Accordingly we do not find any infirmity in the said order of the ld CITA. Accordingly, the grounds raised by the revenue are dismissed.
We note from a perusal of the aforesaid order of the Tribunal that Tribunal has also taken note of the enquiries conducted by AO in the course of assessment proceedings for A.Y. 2011-12 which is the relevant assessment year before us. We note that the A.O in the assessment year has not said about the cross-examination conducted by the assessee of Mr. Milan Maity who represented M/s. S.K. Enterprises and M/s. National Enterprises and Shri Samir Pal of M/s. Deep Enterprises wherein both the parties representing 3 the aforesaid parties had confirmed that they were in fact supplying goods to the assessee. We note that the official records in respect of cross-examination of these individuals were sent to the Ld. CIT(A) vide letter 14.11.2014 by the A.O. for A.Y. 2010-11 (preceding year) during the appellate proceedings for that assessment year before ld CIT(A). We note that there is no whisper about the cross-examination conducted in respect of these 3 parties in the impugned assessment order passed by the A.O. We note that the Tribunal in the A.Y. 2010-11has already made a finding of fact that there was no quantitative discrepancy that was found in the purchases recorded in the stock register when the survey was conducted on 4 5 Sanjit Bothra, AY 2011-12 26.03.2010. The assessee being an exporter of leather goods has explained the reason why bills from some parties were blank and later filled up, which has been accepted by the Tribunal since there was no quantitative discrepancy as held by the Ld. CIT(A). The Ld. CIT(A) in A.Y. 2010-11 has taken note of the fact that even on the date of survey, the alleged blank bills did contain the quantity duly received by the assessee and only the rates were not mentioned in those bills at the time of survey and the reasons have been furnished elaborately by the assessee which has been found to be justifiable by the Tribunal and by Ld. CIT(A). Since all the purchases made by the assessee are duly backed by the corresponding export and the sales figures have been accepted, then purchase cannot be discarded. Therefore, we taking note of the Tribunal’s decision for the preceding assessment year is inclined to allow the appeal of the assessee and direct the A.O. to delete the addition.
In the result, appeal of assessee is allowed.
Order is pronounced in the open court on 01.05.2018 Sd/- Sd/- (P.M. Jagtap) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 1st May, 2018 Biswajit.(Sr.P.S.) Copy of the order forwarded to: Appellant – Shri Sanjib Bothra, 8/1, Middleton Row, 5th Floor, Kolkata – 1. 700 071. 2 Respondent – ACIT, Circle - 45, 3, Govt. Place (West), Ground Floor, Kolkata – 700 001. 3. The CIT(A) Kolkata.