ITO, WARD 33(1), KOLKATA, KOLKATA vs. SARAF JEWELS & CO., KOLKATA

The assessee in the present case is a partnership firm, which is carrying on the business as a jeweller. The return of income for the year under consideration was filed by it originally on 31.10.2007 declaring total income of Rs.2,92,100/-. The said return was initially processed by the Assessing Officer under section 143(1). Thereafter a search and seizure operation was conducted in the cases belonging to Bhanwarlal Jain Group. During the course of the said action, information was gathered by the Department about the accommodation entry of Rs.12,98,396/- given to the assessee. On the basis of the said information, the Assessing Officer formed a belief that the income of Rs.12,98,396/- of the assessee has escaped assessment and after recording the reasons, he reopened the assessment for the year under consideration. In response to notice issued by the Assessing Officer under section 148 on 28.03.2014, a letter was filed by the assessee stating that the return originally filed by it on 31.10.2007 may be treated as return filed in response to the notice under section 148. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to produce the relevant details and documents to prove that the purchases claimed to be made by it from M/s. Little Diam of Rs.12,98,396/-, M/s. Vintage Jewells of Rs.19,42,368/- and M/s. Sun Diam of Rs.5,49,968/- were genuine and it was not a case of accommodation entry obtained by the assessee. According to the Assessing Officer, neither the assessee nor his Authorized Representative, however, appeared before him with any documents to prove the genuineness of purchases made from the said ./2016 Assessment year: 2007-2008 & C.O. No. 52/KOL/2016 (in I.T.A. No. 1581/KOL./2016) Assessment year: 2007-2008 Page 3 of 7 parties and kept on challenging the validity of reopening on one pretext or the other. He, therefore, treated the purchases claimed to be made by the assessee from the said three parties as bogus and added the amount of Rs.37,90,732/- to the total income of the assessee in the assessment completed under section 143(3)/147 vide an order dated 27.03.2015.

Aggrieved by the order of the Assessing Officer passed under section 143(3)/147, an appeal was filed by the assessee before the ld. CIT(Appeals) and after considering the submissions made by the assessee as well as the material available on record, the ld. CIT(Appeals) deleted the addition of Rs.37,90,732/- made by the Assessing Officer on account of alleged bogus purchases for the following reasons given in paragraph no. 4.2 of his impugned order:- “4.2 In ground no. 3 to 5 the assessee has disputed the addition on merits. As per the AO the assesee has made bogus purchases for which bogus bills were issued by Bhawarlal Jain Group. The AO in the course of scrutiny further found that the assessee's total purchase from Bhawarlal Jain group was of Rs.37,90,732/- and asked the assessee to explain the same. The assessee in reply to the queries raised by the AO submitted that the purchases were made against valid bills for which payments were made by account payee cheques. The assessee also submitted that the they were not aware of any Bhawarlal Jain group and from the bills of the sellers produced before the AO there was no name of Bhawarlal Jain. The assessee submitted and it cannot be presumed that the sellers belonged to Bhawarlal Jain group. It was further submitted that the purchase were all entered into day to day stock register and were identifiable by the sale of the material with reference to such purchase and the remaining material which was not sold was identifiable in the closing stock. It was further submitted that day to day stock register was produced before the AO and the AO has not disputed the same. The assessee has cited a number of judgements on the issue that when no sale was possible unless purchase was made! no addition can be made.

I have considered the submissions. I find that the all the bills for purchase were produced before the AO and the payment was also made by the assessee by account payee cheque. The ./2016 Assessment year: 2007-2008 & C.O. No. 52/KOL/2016 (in I.T.A. No. 1581/KOL./2016) Assessment year: 2007-2008 Page 4 of 7 sellers were all assessed to CST /VAT. Moreover the assessee has been able to prove that sale would not have been possible unless the purchase which has been treated by the AO as bogus was made. The case of the assessee is covered by the judgements in the case of Cannon Industries reported in 167 TTJ page 82(Adinath Industries reported in 252 ITR page 476 and Kashiram Textiles reported in 284 ITR page 61. Therefore the addition is deleted”.

Aggrieved by the order of the ld. CIT(Appeals), the Revenue has preferred this appeal before the Tribunal on the following grounds:- “(1) Ld. CIT(A)-9, Kolkata failed to consider the fact that the assessee never during assessment proceeding appeared before the AO nor complied with the show cause notices as called for by the AO to file details of purchases as per format written in the fact of the assessment order.

I have heard the arguments of both the sides and also perused the relevant material available on record. The ld. D.R. has submitted that sufficient opportunity was specifically given by the Assessing Officer to the assessee during the course of assessment proceedings to establish the genuineness of the purchases claimed to be made from the three parties by producing relevant bills, etc., but the assessee failed to do so. He has invited my attention to the relevant portion of the assessment order to point out that neither the assessee nor his authorized representative even appeared before the Assessing Officer during the course of assessment proceedings. He contended that the ld. CIT(Appeals), however, allowed the claim of the assessee regarding the genuineness of the relevant purchases and deleted the addition made by the Assessing Officer by treating the said purchases as bogus by relying on the bills of ./2016 Assessment year: 2007-2008 & C.O. No. 52/KOL/2016 (in I.T.A. No. 1581/KOL./2016) Assessment year: 2007-2008 Page 5 of 7 the concerned parties ignoring the fact that the said bills were never produced by the assessee for verification before the Assessing Officer. He has contended that the said bills clearly constituted additional evidence filed by the assessee for the first time before the ld. CIT(Appeals) and there is a clear violation of Rule 46A of the Income Tax Act, 1962 by the ld. CIT(Appeals) in giving relief to the assessee by relying on the said additional evidence without giving any opportunity to the Assessing Officer to verify the same.

The ld. counsel for the assessee, on the other hand, has submitted that even though there was no personal appearance on behalf of the assessee before the Assessing Officer during the course of assessment proceedings, the details and documents called for by the Assessing Officer were duly furnished by the assessee along with the written submission filed before the Assessing Officer from time to time. In this regard, he has referred to the copy of reasons recorded placed at page 1A of the paper book to point out that the information received by the Assessing Officer was only relating to the alleged accommodation entry of purchases taken by the assessee to the tune of Rs.12,98,396/-. He has submitted that the said purchase was made by the assessee from M/s. Little Dian and bills for the same were submitted before the Assessing Officer on 18.03.2015 under letter dated 17.03.2015 (page 13 to 16 of the paper book). He has also pointed out from the copy of the said letter placed at pages no. 13 to 16 of the paper book that the said party was duly having GST and CST no. and even the copy of Bank statement was filed by the assessee showing that the payments to the said parties were made by account payee cheques. He has then invited my attention to the copy of letter dated 25.03.2015 issued by the Assessing Officer placed at page no. 40 of the paper book and submitted that the information regarding purchases made from other two parties, namely M/s. Vintage Jewells and M/s. Sun Diam was called for by the Assessing Officer only at the fag end of the ./2016 Assessment year: 2007-2008 & C.O. No. 52/KOL/2016 (in I.T.A. No. 1581/KOL./2016) Assessment year: 2007-2008 Page 6 of 7 assessment proceedings and the same was immediately furnished by the assessee under letter dated 26.03.2015. He has taken through the copy of the said letter duly acknowledged by the Office of the Assessing Officer placed at pages 41 to 45 of the paper book to point out that the copies of bills showing relevant purchases made by the assessee from M/s. Vintage Jewells and M/s. Sun Diam were submitted by the assessee. He has pointed out that the said two parties were also having their own GST and CST no. and the copy of relevant Bank statement showing payments made by the assessee to them by account payee cheques was also filed before the Assessing Officer.

Keeping in view all the submissions made by the ld. counsel for the assessee as above, which are duly supported by the copies of submissions made by the assessee during the course of assessment proceedings before the Assessing officer and which are duly acknowledged by the Office of the Assessing Officer, I find that the bills of the concerned three parties in support of its claim for purchases made from the said parties were duly produced/filed by the assessee during the course of assessment proceedings before the Assessing Officer and the same did not constitute additional evidence filed by the assessee before the ld. CIT(Appeals) for the first time as alleged by the ld. D.R. I, therefore, find no merit in this appeal of the Revenue and dismiss the same.