INCOME TAX OFFICER-4(1), RAIPUR, CENTRAL REVENUE BUILDING vs. MOHAMMAD IBRAHIM, PROP JANTA SANITATION

1 During the course of assessment proceedings, the Ld. AO provided many opportunities of being heard to the assessee to explain the genuineness of the transaction of Rs.1,01,47,216/-. However, no compliance was ensured by the assessee in this regard as evident from paragraphs 8.1, 8.2 and 9 of the assessment order. In such facts and circumstances, the Ld. A had no other option except to complete the assessement. Accordingly, the AO held the said purchases of Rs.1,01,47,216/- as unexplained and taxed the same under section 69C r.w.s. 115BBE of the Act. Aggrieved with the assessment order, the assessee filed appeal before the Ld. CIT(A), who allowed the appeal as under:

Aggrieved with the order of Ld. CIT(A), the Revenue filed this appeal.

At the outset, Dr. Priyanka Patel, Senior Departmental Representative (‘Sr. DR’) drew our attention to the Search & Seizure operations carried out, in the month of December, 2022, on various assessees of Praveen Rastogi Group of cases at Sambhal, UP. She submitted that the provisions of section 153C which was omitted with from 01.04.2021 was not applicable on the case in hand. Therefore, the said

The Ld. Sr. DR contended that the assessee had failed to demonstrate that the statement of Shri Praveen Rastogi recorded under section 132(4) of the Act was incorrect or Shri Praveen Rastogi had retracted his statement. Thus, the presumption drawn by the Ld. AO could not be doubted unless the purchases were established to be genuine. The statement of Shri Praveen Rastogi recorded under section 132(4) of the Act could not be brushed aside. The assessee had failed to file confirmation and other documents from M/s Continental Seeds & Chemical Ltd. from whom the said purchases of Rs.1,01,47,216/- claimed to have been done.

The Ld. Sr. DR, emphasizing on the impugned order, submitted that the Ld. CIT(A) had erred in holding that the purchases of Rs.1,01,47,216/- were genuine by placing emphasis on the self-serving documents of the assessee such as (i) Assessee’s purchase register, (ii) Ledger account of M/s Continental Seeds & Chemical Ltd. in Assessee’s books of account, (iii) Audited books of accounts of the Assessee and (iv) Assessee’s bank account statement showing the payments for such purchases. She drew our attention to the fact that the assessee had not brought the confirmation of purchases by M/s Continental Seeds & Chemical Ltd., after the search, which might establish the genuineness of purchases of Rs.1,01,47,216/-. She forcefully argued that the assessee had not brought any material on the record of the Ld. CIT(A) to contradict the finding of the Ld. AO; therefore, the impugned order was not valid in the eyes of law.

The Ld. Sr. DR submitted that the Ld. Ld. AO’s action by making addition under section 69C of the Act without disturbing sales were justified, which was not properly appreciated by the Ld. CIT(A). She further submitted that the payments for purchases of Rs.1,01,47,216/- made through banking channels would get dully disclosed in the books of account and bank account of the assessee, but such payments made to M/s Continental Seeds & Chemical Ltd. recorded in regular books of account did not establish the actual receipts of goods worth Rs.1,01,47,216/- from M/s Continental Seeds & Chemical Ltd. Therefore, the Ld. AO inferred that the assessee had actually purchased and received goods from person(s) other than M/s Continental Seeds & Chemical Ltd. mentioned in regular books of account after making payments from the unexplained sources which were 7 Income Tax Officer-4(1), Raipur vs. Mohammad Ibrahim not recorded in the regular books of account and that was why he made addition under section 69C of the Act without disturbing sales. Thus, she argued vehemently that the Ld. CIT(A)’s finding was not justified.

The Ld. Sr. DR submitted the following pages of the Investigation Report in support of the accommodation entries of Rs.1,01,47,216/- taken by the assessee from M/s Continental Seeds & Chemical Ltd. The relevant part of Investigation Report is as under:

None represented the assessee. We therefore, have heard the Ld. Sr. DR representing the appellant Revenue. The business income is computed in accordance with the provisions of section 28 to 44DB of the Act as these are enabling provisions to allow certain type of allowances/claims/expenditures etc. In section 145(1) of the Act, while making it mandatory to compute the income under head 'business & profession' or 'Income from other sources' based on cash or mercantile system of accounting being regularly followed by the assessee, the word 'shall' have been specifically used to make it mandatory leaving no discretion to use any another method of accounting which is not being regularly followed. Whereas in section 145(3) of the Act, the word 'may' have been deliberately used in a discretionary/directory context because the word 'may' as used in 145(3) of the Act is intricately linked to the AO’s satisfaction also about the correctness of accounts in the very same section. A critical examination of language of this section along with principles of harmonious construction would make it clear that powers of the AO to invoke 145(3) of the Act is merely declaratory/discretionary and not mandatory, where the legislature had no intention to prescribe the mandatory rejection of books of accounts in each & every case where some specific entry in accounts have been found to be bogus/inflated or unverifiable but largely the accounts maintained as per mandate of section 145(1) r/w 145(2) of the Act. That is why the word 'may' have been used at one place and 'shall' at another place in the same section of the Act. Thus, it is obvious that the word; ‘shall’ and ‘may’ have been chosen in the Act distinctively with their natural meaning. The provision using

We find force in the submissions/arguments/contentions of the Ld. Sr. DR that the assessee has not brought any material on the record of the Ld. CIT(A) to contradict the finding of the Ld. AO and to demonstrate the purchases of Rs.1,01,47,216/- having done from M/s Continental Seeds & Chemical Ltd. are genuine. Self-serving material, such as (i) Assessee’s purchase register, (ii) Ledger account of M/s Continental Seeds & Chemical Ltd. in Assessee’s books of account, (iii) Audited books of accounts of the Assessee and (iv) Assessee’s bank account cannot conclusively prove the genuineness of purchases of Rs.1,01,47,216/- having done from M/s Continental Seeds & Chemical Ltd. Further, we are also convinced with the arguments of the Ld. Sr. DR that the addition under section 69C of the Act without disturbing sales, in view of her arguments/contentions mentioned above, is justified. However, considering the facts of the case in entirety and in the interest of justice, we deem it fit to set aside the impugned order and remand the matter back to the file of the Ld. CIT(A) for deciding the case afresh/denovo, in accordance with 13 Income Tax Officer-4(1), Raipur vs. Mohammad Ibrahim the law and above observations, after providing adequate opportunity of being heard to the assessee. We order accordingly. The assessee, no doubt, shall cooperate in remitted appellate proceedings.

In the result, this appeal of Revenue is allowed for statistical purposes.

""थ"/ The Respondent- Mohamad Ibrahim

The Pr. CIT, Raipur (C.G.) 4. िवभागीय "ितिनिध, आयकर अपीलीय अिधकरण, रायपुर/ DR, ITAT, Raipur 5. गाड" फाईल / Guard file.