SHRI SHAM SUNDER AGGARWAL,KAPURTHALA vs. INCOME TAX OFFICER WARD - 2 , KAPURTHALA

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER

I.T.A. No.537/Asr/2019 Assessment Year: 2010-11

Sh. Sham Sunder Aggarwal, Vs. ITO, Ward-2, Prop. M/s P.K. & Company, 15, Kapurthala. New Sabji Mandi, Kapurthala. [PAN: AAWPA3347E] (Respondent) (Appellant)

Appellant by Sh.J.S. Bhasin, Adv. Respondent by Smt. Ratinder Kaur, Sr. DR

Date of Hearing 07.12.2022 Date of Pronouncement 20.12.2022

ORDER Per:Anikesh Banerjee, JM:

The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-2,Jalandhar, [in brevity the ‘CIT (A)’]

bearing appeal No.2/10636/17-18/CIT(A)/Jal, date of order 01.05.2019, order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2010- 11.The impugned order was emanated from the order of the ld. Income Tax Officer

I.T.A. No.537/Asr/2019 2 Assessment Year: 2010-11

Ward-2,Kapurthala, (in brevity the AO) order passed u/s 143(3) r.w.s 148of the

Act date of order 29.12.2017. The assessee took the following grounds which are

read as under: “1. That neither in facts nor on law, the ld.CIT(A) was justified in upholding the reopening of the case as valid, more so, when theproviso to sec 147 was clearly ignored in reasons recorded. 2. That the Id.CIT(A), grossly erred in law, in sustaining the addition of Rs. 14,83,968/-, as made by ld. ITO, by way of disallowance of VAT element on purchases of husk; without appreciating assessee's detailed contentions in correct perspective. 3. That in the light of additional evidence filed, showing TIN of all the suppliers as active, when not denied by the ITO, the impugned disallowance sustained by CIT(A), by way of cryptic findings, is unsustainable in facts and on law. 4. That impugned disallowance not being part of reasons recorded, ought to have been deleted by ld.CIT(A) on this legal premise. 5. That the order under appeal is wholly against law and facts of the case.” 2. Brief fact of the case is that the assessee was assessed u/s 143(3) of the Act.

The reopening was made u/s 148 on basis of the information received from the

I.T.A. No.537/Asr/2019 3 Assessment Year: 2010-11

Sales Tax Department of State Authority. The reopening was made on basis of the

bogus purchased made by assessee amount of Rs.3,70,99,200/- from 43 parties. In

assessment proceeding, the verification was completed from the State Tax

Authority and separately from the parties of assessee by the ld. AO. The ld. AO

retracted from his own findings related bogus purchase and the addition was made

on the basis input VAT of the 43 parties from whom the purchase was made. The

amount of input VAT was Rs.14,83,968/- which was added back with the total

income of the assessee as the sellers are defaulters in the VAT Act. Being

aggrieved, assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld

the order and views of the assessing authority. Being aggrieved, assessee filed an

appeal before us.

which are kept in the record. In the grounds of appeal the ld. Counsel challenged

both the legal and factual issues. First the factual issue is adjudicated for the sake of justice. During hearing, the ld. Counsel first draw our attention in APB page

nos. 15 and 16. As per the documents, the ld. AO called for the information u/s

133(6) from the Assistant Excise And Taxation Commissioner, Aman Nagar,

Kapurthala, for details of the parties from whom the assessee purchased the goods.

I.T.A. No.537/Asr/2019 4 Assessment Year: 2010-11

The State Authority had made the reply and confirmed the transactions of assessee

with the 43 parties during financial year 2009-10.

3.1 The ld. Counsel drawn our attention in the order of ld. AO in page no. 2,

para 3 which is reproduced as below: “03. Brief facts of this case are that the assessee is trading business of husk. During the year under consideration, the assessee shown total sales of Rs. 15,90,01,395/-. An information was received in this case that the assessee has made bogus purchases of husk amounting to Rs.3,70,99,200/- during the year under consideration from some firms whose TINs were cancelled by the Sale Tax Department. To verify these facts, information from the Excise Department was called for under section 133(6) of the I.T. Act, 1961 calling names and addresses of the firms from whom bogus purchases were made by the assessee. In response to this letter the Excise Department vide their No. 2125 dated11.12.2017 furnished list of 43 firms from which the assessee firm purchased husk amounting to Rs.3,70,99,200/-. To verify these purchases letters were issued to all the above firms calling for copy of account of purchases from these firms by the assessee firm. In response tothese replies were received along with purchase account of the assessee from their books alongwith confirmations of sale made by these firms to the assessee firm.”

I.T.A. No.537/Asr/2019 5 Assessment Year: 2010-11

3.2 Further verification of the parties, U/s 133(6), the ld. AO had retracted from

his primary observation related to bogus purchase. As per the ld. AO thesellers

have no Tax Index Number (TIN) and have not paid the VAT Tax. In accounting

principle of VAT is differently treated from the purchases account. The input VAT

is adjusted with output VAT and balance is paid to Govt treasury. The issue is

already before the State Authority and the assessee had booked total value of

purchase in his books of accounts. If there is no TIN number of the sellers, then

there is no question of charging of Input VAT in bills. So, the entire addition is

confusing and beyond jurisdiction of the central authority.

the record. If we consolidate the vat transactions, there are two issues. First issue

isthat the sellers have no TIN. So they are not eligible to charge the vat/collect the

vat from purchasers. The question of disallowance of vat is illegal. Second issue is

that the sellers have TIN, charged the VAT in bills but not deposited in Govt

Treasury. The assessee paid the input VAT to his sellers during purchase the goods

& payment of vat was completed during the purchase was booked. The Vat is pre-

paid tax in nature which the assessee paid to the party with the purchased cost. The

assessee was defaulter in input VAT related his purchase. So, in any case this input

I.T.A. No.537/Asr/2019 6 Assessment Year: 2010-11

tax cannot be said as unpaid. Ld. Sr.Dr was not able to bring any contrary

explanation against the assessee. So, the input VAT which was disallowed by the

ld. AO is illogical & illegal. The entire addition amount of Rs. 14,83,968/- made

by the ld. AO is liable to be deleted.

assessee on legal is left open for academicpurposes.

allowed.

Order pronounced in the open court on 20.12.2022

Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE) Accountant Member Judicial Member

AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T.