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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri Waseem Ahmed & Shri S.S.Viswanethra Ravi
आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- This appeal by the assessee is against the order of Commissioner of Income Tax (Appeals)-14, Kolkata dated 26.11.2015. Assessment was framed by ITO Ward- 46(4), Kolkata u/s 143(3)/263 of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide his order dated 28.03.2014 for assessment year 2008-09. The grounds raised
by the assessee per its appeal are as under:- “1. For that the order of the Ld. CIT is arbitrary, illegal and bad in law.
2. For that the Ld. CIT(A) erred in confirming the addition of Rs.25,39,514/- is difference in purchase figures without properly appreciating the reasons for S.Sadhukhan vs. ITO Wd-46(4) Kol. Page 2 such difference which was properly explained with reference to the books of account, payment made to the parties and the purchase bills.
For that the Ld. CIT(A) even otherwise erred in confirming the disallowance of the entire difference and could have added only the net profits on the unreconciled purchase if not satisfied with the explanation of the assessee.
4. For that on the fact and circumstances of the case the Ld. CIT(A) was not justified in confirming the addition of Rs.2539514/-.
For that the assessee craves leave to add, alter or mend any ground before or at the time of hearing.”
In this appeal various grounds have been raised by assessee, out of which Ground No. 1 and 5 are general in nature and do not require any separate adjudication. Ground No. 2 to 4 are inter-related and therefore being taken up together for the sake of convenience.
3. The inter-related issue raised by assessee in this appeal is that Ld. CIT(A) erred in confirming the order of Assessing Officer by sustaining the disallowance of ₹25,39,514/- on account of difference in the amount of purchases from the parties.
Briefly stated facts are that assessee is an individual and engaged in business of purchase & sale of medicines, drugs and pharmaceutical products. During the course of assessment proceedings, AO observed certain differences in the amount of purchases shown by the assessee vis-à-vis information received from the parties u/s 133(6) of the Act. The necessary details stand under:- Sl.No. Name of the party Purchase Discrepancy As per purchase As per list provided by confirmation by the assessee the party u/s 133(6) of the Act 1 Ghosh Medical 73,80,486 56,54,552 17,25,934 agencies 2 S.N. Distributors 24,15,438 16,01,858 8,13,580 Accordingly, AO sought for an explanation from the assessee for the discrepancies as discussed above. In compliance thereto it was submitted that he inadvertently furnished wrong information during assessment proceedings. The assessee further filed the revised details of the purchases from the parties as detailed under:-
S.Sadhukhan vs. ITO Wd-46(4) Kol. Page 3 The actual break up of purchase of Rs. 73,80,486.00 shown in the name of Ghosh Medical Agency stands as under :-
Purchase form Ghosh Medical Agency 56,54,557.00 Purchase form Sonali Enterprise 17,25,929.00 Total 73,80,486.00 Similarly the actual break up of purchase of Rs. 24,15,438.00 shown in the name of S.N. Distributors stands as under :-
S.N. Distributor 16,01,858.00 Sun Pharma 3,94,966.00 Sonali Enterprise 4,33,209.00 24,30,033.00 Accordingly the assessee prayed to the AO that under such circumstances no addition is called for as discussed above on account of discrepancy in the amount of purchases. However, the AO disregarded the contention of the assessee and added the amount of difference in purchase to the total income of assessee.
5. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that if purchase are treated false then the corresponding sales should also be treated as bogus. However, Ld. CIT(A) disregarded the contention of assessee and confirmed the order of AO by observing as under:- “In my opinion, the appellant has completely failed to grasp the provisions of law in this respect. The fact of the matter is that there were glaring and very large discrepancies in the purchase figures as obtained by the AO and those declared by the appellant to which the appellant had very unconvincing explanations besides himself admitting to huge errors committed by him. He nowhere attempted to reconcile the figures or offer cogent explanations for them. In view of this I cannot find myself finding any fault with the action of the AO in adding the said amounts as undisclosed purchases.” Aggrieved, by this, the assessee has come up in appeal before us.
Ld. AR for the assessee before us filed a paper book which is running from pages 1 to 73 and submitted that the addition was made by the AO on account of S.Sadhukhan vs. ITO Wd-46(4) Kol. Page 4 mismatch observed in the amount of purchases in respect of certain parties but without pointing out any defect in the books of account of assessee. The Ld. AR also stated that all the parties from whom the purchases were made by assessee have duly confirmed in response to the notices issued to them u/s 133(6) of the Act. Ld. AR in support of assessee’s claim drew our attention to the confirmation issued by the parties u/s.133(6) of the Act which are placed on pages 8 to 16 and 23 to 63 of the paper book. On the other hand, Ld. DR vehemently relied on the order of Authorities Below.
We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, the addition was made by the AO on account of mismatch as observed by AO in the amount of purchases from certain parties as discussed above. The action taken by the AO was subsequently confirmed by the ld. CIT-A. However, we note that the difference in the purchases as discussed above has been duly reconciled by the assessee during the course of hearing before Authorities Below. All the parties from whom the purchases were made by the assessee duly confirmed the transactions in response to the notice issued u/s 133(6) of the Act. 7.1 We also find that no defect in the books of account / audited financial statement was pointed out by the Authorities Below. In view of the above, we observe that the AO has confirmed the addition merely on the basis of mismatch observed in the purchase during the course of assessment proceedings. None of the Authorities Below has challenged the confirmation received from the parties in response to the notice issued u/s 133(6) of the Act. We also note that the total purchase claimed by assessee in its audited profit and loss account has not been challenged. Moreover we also note that the assessee has shown less purchase from the parties as discussed above in its books of accounts. Now the issue arises whether the amount of less purchase shown by the assessee represents his income. In the given facts & circumstances we are of the considered view that if the assessee has shown less purchases then its income will increase. It is because there is no allegation of the lower authorities that the assessee has made the sale of undisclosed purchases outside