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Income Tax Appellate Tribunal, DELHI BENCH ‘B’, NEW DELHI
Before: BEFORE SHRI J. SUDHAKAR REDDY & SMT. BEENA A PILLAI
PER J. SUDHAKAR REDDY, ACCOUNTANT MEMBER
The present appeal has been filed by the assessee against the order dated 19.03.2012 passed by Ld.CIT(A), Faridabad for assessment year (A.Y.) 2007-08.
The assessee is an individual and is in the business of manufacturing of press parts of steel and allied products. He filed his return of income on 29.10.2008 declaring income of Rs.6,85,519/-. The Assessing Officer (A.O.) completed the assessment u/s 143(3) of the Income Tax Act, 1961 (the Act) on 30.12.2009 determining the total income at Rs.46,20,140/- inter alia making an addition of Rs.32,38,401/- being purchases from one M/s Maa Durga Trading Company being disallowed and added as bogus purchases. Aggrieved the assessee carried the matter in appeal. The First Appellate Authority agreed with the finding of the A.O. and confirmed the addition. Further aggrieved the assessee is before us.
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The Ld.Counsel for the assessee reiterated the contentions taken before the Ld.CIT(A) and A.O. and submitted that, it was a case of purchases made by the assessee, for which an invoice was issued by M/s Maa Durga Trading Company, a copy of their bank statements evidencing payments to banks was filed, the purchases from the above party were reflected in the VAT return. He submitted that the sales made by the assessee was accepted and the trading results not disturbed nor books rejected, and, under those circumstances, the assessee has discharged the onus that lay on it. He relied on certain case laws which are mentioned in the written note filed before us.
4. The Ld.D.R. relied upon the order of the A.O. as well as the Ld.CIT(A) and submitted that quantitative details were not filed by the assessee and the PAN number furnished as that of Maa Durga Trading Company was found to be wrong. He submitted that the party M/s Maa Durga Trading Company was not produced for examination by the A.O. even during remand proceedings. He relied on the order of the A.O. as well as CIT(A).
In reply the Ld.Counsel for the assessee distinguished the judgements relied upon by the Ld.CIT(A) and submitted that, the case of CIT vs. Mohan Kala (S.C.) 291 ITR 278, was on S.68 of the Act.
After hearing rival contentions, we find that the First Appellate Authority had at page 16, places his finding on the preponderance of probabilities. The assessee in this case has filed the VAT details of M/s Maa Durga Trading Com from whom the purchases were made. He has also furnished confirmation letters and account statements from M/s Maa Durga Trading Company. The transactions were of the year 2006 during the Financial Year 2006-07. The payments in question are undisputedly made by account payee cheques. The Trading and Profit and Loss a/c of the assessee have not been disturbed by the A.O. The books of accounts have not been rejected. The sales made by the assessee was accepted by the A.O. Under these circumstances we are of the considered opinion that the ~ 2 ~ assessee had discharged the burden that lay on it in proving that the purchases are genuine. The A.O. has not made any effort to verify the VAT details of the supplier. The PAN number being wrong cannot lead to a conclusion that the assessee has made a false claim. When payments are made through crossed account payee cheques, the A.O. should have made efforts to verify the same with bank authorities. The purchases and sales quantity have been tallied in this case.
6.1. The Hon’ble Gujarat High Court in CIT-1 vs. M/s Nangalia Fabrics Pvt.Ltd. in dt. 22.4.2013, 2013 (8) TMI 80 wherein it has been held as under.
“3. The question pertains to the purchases made by the assessee- respondent. On account of unverifiable purchases, the Assessing Officer made additions to the tune of Rs. 1.27 crores. He was of the opinion that none of the parties could be located and therefore, such purchases were held to be bogus. When it was challenged before the CIT(A), the CIT(A) was of the opinion that they could not be held bogus as the corresponding sales had been effected by the respondent in the next year. In subsequent year also and in the past, such purchases were made which were never questioned. When challenged before the Tribunal on the basis of the facts presented before us, it held that these purchases could not be held bogus by holding thus: "13. We have considered the rival submissions and the materials placed on record. The purchases are supported by bills, entries in the books of account, payment by cheque and quantitative details. Assessing Officer did not find any inflation in purchase price or inflation in consumption or suppression the production. The addition had been made only on the ground that the parties are not traceable. Assessee had made payment through crossed cheques and assessing officer did not find that payment made came back to assessee. Assessing Officer has made addition in respect to the outstanding amount as on 31.3.2001 which has been cleared in the succeeding years. The ratio of the creditor to the purchases is normal considering the past records of the assessee. The creditors were outstanding
~ 3 ~ owing to liquidity as assessee is also required to get credit in respect of sales also. Even otherwise provision of section 68 is not attracted to amounts representing purchases made on credit as held in the case of Panchan Oass Jain cited supra. The addition for bogus purchases cannot also be sustained in full or in part in view of the various cases laws cited by the assessee and in view of the facts that the decision of Vijay Proteins Ltd. and Sanjay Oil Cake Industries are not applicable to the facts of the assessee's case. Assessee's case is covered by the decision of Hon'ble Gujarat High Court in case of Kashiram Textile Mills. In view of the matter, addition made by the assessing officer is deleted. Ground No.1 of Assessee's appeal is allowed and ground No.1 of Revenue's appeal is dismissed."
The issue is essentially based on facts. The Tribunal, having been satisfied by genuineness of the purchases as also specially considering the payments made through the cheques, was of the opinion that such addition could not be sustained. Issue, essentially and pre-dominantly based on facts, requires no consideration as no question of law arises.”
6.2. Applying the propositions laid down in the above case law to the facts of the case on hand, we delete this disallowance and allow the appeal of the assessee.
In the result, the appeal by the assessee stands allowed. Order pronounced in the open court on 24th January, 2017.