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Income Tax Appellate Tribunal, BENCH “SMC”, KOLKATA
Before: Hon’ble Shri N.V.Vasudevan, JM]
This is an appeal by the assessee against the order dated 13.11.2014 of CIT(A)-XXXIII, Kolkata relating to A.Y.2007-08.
2. The only ground raised
by the assesee reads as follows :-
1. That on the facts and circumstances of the case the Ld. CIT(A) erred in confirming the addition of current year purchase from four parties amounting to total Rs.6,39,999/- with the observation as bogus purchase since the genuineness of the transactions remains not established.”
3. The assessee is an individual. She is the proprietor of M/s. Fibreglass Fabricators (India). The assessee is engaged in the business of manufacturing and trading of insulating materials namely Fibre glass sheets, tubes etc. In the course of assessment proceedings the AO issued notice u/.s 133(6) of the Act to three parties from whom the assessee made purchases totaling Rs.6,40,000/- during the previous year. Notices were either not served or not claimed by three parties. The details in this regard are as follows :-
2 Smt.Pompa Sarkar A.Yr.2007-08 Sl.No. Name and address of Opening Purchase Total Remarks the creditors for goods balance made during the year 1. Priya Trading Co. 98,705.49 2,11,855.00 3,10,560.49 Postal 119,Green park,Block- department A, reported as Kolkata-700055 “Not PAN:AAPPH4606N claimed”
Bhawani Mercantiles 57,444.03 1,62,137.20 2,19,581.23 Postal 24-B.P.Dey Street department Serampur,Dist.Hooghly reported as PAN:AMIPP3800H “Not known”
Priya International 98,192.00 1,12,632.80 2,10,824.80 Absence of Station Road, proper New Barrackpur, address Kolkata-700133 PAN:AEZPM3016R 4. Birendra International -- 1,53,375.00 1,53,375.00 Absence of 40/4, Strand Road, 2nd proper Floor, address Kolkata-700001. PAN:ACVPJ4013F Total 6,40,000.00 The assessee was confronted of the enquiry made by the AO. The assessee submitted before AO that he had purchased polyster from Priya Trading Company which was the main product used in manufacturing fibre glass. She gave the details of payments made by the aforesaid party by cheques and also established that the cheques were cleared in the name of the aforesaid party through bank. The assessee expressed his inability to trace the whereabouts of the aforesaid party. As far as Bhawani Mercantile is concerned the assessee explained that the aforesaid party supplied Woven Roving 400 which was the main product for manufacturing of fibre glass. The assessee gave evidence of payments through cheques to the aforesaid party through banking channels and also expressed inability to given the whereabouts of the party as the transactions in question had taken place more than a year. AO was however of the view that even the Departmental Inspector could not locate these parties at the addresses given by the assessee. AO accordingly treated the purchases to the tune of Rs.6,40,000/- as bogus and added the same to the total income of the assessee.
Aggrieved by the order of CIT(A) the assesse has preferred the present appeal before the Tribunal.
I have heard the rival submissions and perused the materials available on record. It is an undisputed position that payments to the aforesaid parties were made by A/c payee cheques and are duly encashed by these parties in their names. The assessee has files copies of bills of purchases from these parties. The gross profit and net profit of the assessee for four assessment years are given below :- Assessment Years Particulars 2007-08 2008-09 2009-10 2010-11 Gross Profit(A) 6,65,207 14,23,598 11,82,758 10,77,248 Net Profit(B) 2,00,106 3,81,451 5,26,665 4,42,807 Turnover © 52,70,969 99,03,047 69,36,652 65,29,538 GP Ratio (A/C)(%) 12.62 14.38 17.05 16.50 NP Ratio(B/C)(%) 3.80 3.85 7.59 6.78”
The books of accounts are duly audited by a Chartered Accountant. Such audit is not finality as far as income tax proceedings are concerned. It is nevertheless prima facie evidence justified the claim of the assessee. A perusal of the Gross profit and net profit of the assessee shows that the same is showing an increasing trend compared to A.Y.2007-08. Therefore, there can be no adverse inference drawn against the assessee as far as suppression of profits are concerned. The fact that notice u/s 133(6) of the Act cannot be served on the assessee cannot be the basis to come to a conclusion that the purchases were bogus. In this regard, I find that the Hon’ble Calcutta High Court in the case of M/s. Diagnostics vs CIT in of 2004 Judgment dated 04.03.2011 on identical facts has held as follows :-
However, as regards the payments made to M/ s. Selvas Photographics are concerned amounting to Rs.3, 12,302/ -, we find that those have been made by account payee cheques and those have been encashed through the bankers of M/s. Selvas Photographics. It appears that according to the appellant, at the time of assessment, the appellant had no business transaction with M/s. Selvas Photographics and consequently, the said party did not co-operate with the Assessing Officer. However, the 4 Smt.Pompa Sarkar A.Yr.2007-08 transaction having taken place through account payee cheques, we are unable to accept the contention of Mr. Agarwal, the learned advocate appearing for the Revenue that the transaction was a non- existent one. If an assessee took care to purchase materials for his business by way of account payee cheques from a third party and subsequently, three years after the purchase, the said third party does not appear before the Assessing Officer pursuant to the notice or even has stopped business, the claim of the assessee on that account cannot be discarded as non-existent. In the case before us, the Revenue has not put forward any other ground, such as, it was not a genuine transaction for other reasons but has simply rejected the claim on the ground as if there was no such transaction.”
The aforesaid decision rendered by the Hon’ble Calcutta High Court supports the plea of the assessee. In the given facts and circumstances of the case, I am of the view that the addition made by the revenue authorities cannot be sustained. Accordingly the same is directed to be deleted.
In the result the appeal of the assessee is allowed.
Order pronounced in the court on 09.12.2015. Sd/- [N.V.Vasudevan] Judicial Member Date: 09.12.2015. R.G.(.P.S.) Copy of the order forwarded to:
Smt. Pompa Sarkar, 7/5, Bijoygarh, Jadavpur, Kolkata-700032.