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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ NEW DELHI
PER SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER The present appeal has been filed by the Department against the order dated 8.10.2013 passed by the Ld. Commissioner of Income Tax(Appeals), Meerut for assessment year 2010-11.
The facts relevant to the case are that the assessee is engaged in the manufacture and trading of PP/HDPE fabrics and bags and during the year under consideration had claimed expenditure of Rs 2,76,58,744/-. Notices under section 133 (6) of the Act had been issued to 22 parties, who had supplied raw materials to the assessee, on the addresses provided by the assessee. In 16 cases, the notices were returned back unserved or there was no compliance from the parties from whom the purchases were purportedly made. It has been stated by the AO that the counsel of the assessee was confronted with the result of the above enquiries and was given an opportunity to produce the parties along with the confirmation so as to establish the veracity of the transactions made by the assessee. However, despite giving opportunities, the assessee failed either to produce the parties or to file the confirmations. In respect of one party from whom the response had been received, there was a discrepancy between the information given by the assessee and the information given by that party. Therefore, the AO proceeded to make an addition to the total income of the assessee. An addition of Rs 22,95,391/- had been made in respect of 4 parties, where the AO noted that the enquiry letters had been returned by the postal authorities.
Addition of Rs. 1,81,78,857/- had been made in respect of 11 parties where the enquiry letters had not been complied with.
Finally, addition of Rs 1,82,515/- was made in one case where the AO noted that there was discrepancy between the information furnished by the assessee and the information given by the seller.
Thus a total addition of Rs. 2,06,56,770/- was made by the AO.
On appeal before the Ld. First Appellate Authority, all the additions were deleted.
Now, the Department has preferred this appeal before us and the following grounds have been raised:-
“1. Whether in the facts and circumstances of the case, the CIT(A) has erred in law in deleting the addition of Rs.22,95,391/- u/s 68 of the I.T. Act, 1961, being unproved sundry creditors ignoring the fact that the assessee failed to prove their genuineness. The confirmations in response to the notices u/s 133(6) of the IT Act, 1961 were also not received and after the AO confronted the same to assessee it still failed to confirm the creditors despite opportunities having been allowed.
2. Whether in the facts and circumstances of the case, the CIT (A) erred in law in deleting the addition of Rs. 1,81,78,857/- being bogus purchases ignoring the fact that since the letters of enquiry u/s 133(6) of the IT Act, 1961 sent to the parties by the AO remained uncomplied with and purchases remained unproved. Despite being given opportunity to establish the veracity of the transaction, the assessee failed to prove the identity of seller and genuineness of transaction.
3. Whether in the facts and circumstances of the case, the CIT(A) has erred in law in deleting the addition of Rs. 1,82,515/-, on account of non-reconciliation of purchase, ignoring the fact that details of information as received u/s 133(6) was different from the details filed by the assessee.”
The Ld. DR supported and relied heavily on the order of the Assessing Officer whereas the Ld. AR placed strong reliance on the order of the Ld. CIT (A) and submitted that the Ld. CIT (A) 3 has correctly adjudicated the issue and hence the same should be confirmed.
We have perused the records as well as the orders of the authorities below. It is seen that the Ld. CIT (A) has discussed the issues before him at great length in para 2.7 of his order which is reproduced below for ready reference:-
“2.7 The facts of the case have been perused. It is noted that the assessment in this case had been taken up only at the fag end of the limitation period and had proceeded in a haphazard manner, resulting in the AO passing the order without giving proper opportunity to the assessee and without the proper appreciation of the evidences filed in support of purchases. This is starkly evident from the fact that addition of substantial amount has been resorted to by the AO even without confronting the assessee in respect of several parties and the opportunity given in respect of other parties, the time period for making the compliance was wholly inadequate. The casual manner in which the assessment order has been passed is also evident from the fact that in certain cases, both the aggregate purchase' made from a particular party as also the credit balance outstanding to that party at the end of the year have both been added to the total income (Khanna Polymers & Pine Polymers). The AO has not even bothered to note that addition in respect of the parties referred to at Sl. No. 5 & 6 of the second chart given on page 3 of the assessment order are already figuring at Sl No 1 of the 1st chart and Sl. No 2 of the 2nd chart on the same page. In respect of M/S Reliable & M/S Baraut Polypack, it has been mentioned in the final remand report that the statement in the assessment order that there was no compliance to the enquiry letters is incorrect. In respect of one-party for which the assessment order has stated that there was a discrepancy between the information given by the 4 assessed and the information provided by that party, the remand report categorically states that there was no such difference. There is no purchase from M/S Vinky during the relevant previous year, as admitted in the final remand report, yet the AO has proceeded to make an addition of the credit balance outstanding to this party at the end of the year. Secondly, as rightly pointed out by the Ld. AR, unlike cash credits, purchases are verifiable by multiple evidences such as transportation of goods, quantitative details of consumption and, most importantly, payments made through banking channels. If indeed the AO wishes to verify the genuineness of purchases, it is incumbent upon him to exercise the powers available under the Act to carry out the verifications referred to above and he cannot simply proceed to make addition to the total income with a bland remark that the enquiry letters had not been responded by the purchasers, without even exercising due diligence in this regard. It is noted that confirmations have been filed in respect of all the parties whose entries were not considered genuine in the assessment order except in respect of the purchase from M/S Kantas, for which the relevant account in the books of the assessee and copies of the purchase bills have been furnished. A perusal of the Ledger account shows that out of aggregate purchase of approximately Rs 11 lakhs, except for payments aggregating to approximately Rs 1 lakh, all other payments have been made through banking channels and only a balance of Rs 2 lakh approximately is outstanding to that party at the end of the year. Confirmation has also not been filed for M/S Vinky, from whom actually there is no purchase during the year, as has been stated above. Further, in the final remand report, it has been pointed out that in respect of M/S Khanna Polymers, no addition can be made on account of bogus purchases. It is also noted that the remand report does not cast any doubt regarding the authenticity of the purchases or any discrepancy noted in the confirmations filed.”
It is seen that the Ld. CIT (A) has passed a reasoned order after due appraisal of all the evidences before him as well as the AO and the observations and findings recorded by him could not be controverted by the Department in the present appeal before us. Hence, in view of the categorical findings of the Ld. CIT (A) remaining un-contradicted, we decline to interfere and accordingly uphold the impugned order.
In the result, the appeal of the Department is dismissed.
Order pronounced in the Open Court on 30th of March, 2016.