M/s. Himalaya Rice Mill, Kolkata V. ITO, Ward - 34(3), Kolkata, Kolkata

CO 183/KOL/2010

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 9092 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 21-11-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 16-12-2010
• Court: TRIBUNAL
• Department Lawyers: T NAG
• Assessee Lawyers: MUZAFFAR HUSSAIN
• Keywords: Bogus purchase
• Section: 143(3)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE , /AND . . . . ''# ''# ''# ''#, $% ) [BEFORE SHRI MAHAVIR SINGH, JM & SHRI ABRAHAM P. GEORGE, AM] & & & & / I.T.A NO. 2070/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 INCOME-TAX OFFICER, WD-34(3), KOLKATA VS. M/S. HIM ALAYA RICE MILL (PAN:AADFH3053M) (,- /APPELLANT ) (./,-/ RESPONDENT ) & C.O. NO.183/KOL/2010 IN & & & & / I.T.A NO. 2070/KOL/2010 '( )* '( )* '( )* '( )*/ // / ASSESSMENT YEAR: 2007-08 M/S. HIMALAYA RICE MILL VS. INCOME-TAX OFFICER, WD-34(3), KOLKATA (CROSS OBJECTOR) (RESPONDENT) DATE OF HEARING: 06.11.2013 DATE OF PRONOUNCEMENT: 21.11.2013 FOR THE APPELLANT: SHRI MUZAFFAR HUSSAIN, ADDL. CIT , SR. DR FOR THE RESPONDENT: SHRI T. NAG, ADVOCATE $0 / ORDER PER BENCH: BOTH, APPEAL BY REVENUE AND CROSS OBJECTION BY ASSE SSEE, ARE ARISING OUT OF ORDER OF CIT(A)-XX, KOLKATA IN APPEAL NO. 273/CIT(A)-XX/WARD -34(3)/09-10/KOL DATED 31.08.2010. ASSESSMENT WAS FRAMED BY ITO, WD-34(3), KOLKATA U/S . 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) FOR ASSESSME NT YEAR 2007-08 VIDE HIS ORDER DATED 18.12.2009. 2. AT THE OUTSET, IT IS TO BE MENTIONED THAT APPEAL BY REVENUE IS BARRED BY LIMITATION BY THREE DAYS AND REVENUE HAS FILED CONDONATION PETITI ON STATING THE REASONS. ON QUERY FROM THE BENCH, LD. COUNSEL FOR THE ASSESSEE HAS NOT OBJECTE D FOR CONDONATION OF DELAY. HENCE, THE DELAY IS CONDONED AND APPEAL OF REVENUE IS ADMITTED . 3. THE ONLY ISSUE REMAINS IN THIS APPEAL OF REVE NUE AND CROSS OBJECTION OF ASSESSEE IS AS REGARDS TO THE ORDER OF CIT(A) DELETING THE ADDITIO N BY CIT(A) AS MADE BY AO ON ACCOUNT OF 2 ITA NO. 2070/K/2010 & C.O. NO.183/K/2010 HMALAYA RICE MILL, AY:2007-08 BOGUS PURCHASES, AS THE ASSESSEE IS UNABLE TO PROVE SUNDRY CREDITORS. THE GROUND AS RAISED BY REVENUE READS AS UNDER: 1. ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN FACT AND IN LAW, IN DELETING THE ADDITIONS OF RS.59,87,370/- MADE FOR I T TO BE BOGUS PURCHASE. AND GROUNDS AS RAISED BY ASSESSEE IN ITS CROSS OBJE CTION READ AS UNDER: 1. THAT THE DELETION OF ADDITION RS.59,87,370/- AL LEGED AS BOGUS PURCHASE OF PADDY WHICH IS INDISPENSABLE AND ESSENTIAL FOR PRODUCTION OF RICE, HAVING BEEN MADE ON SCHISMATIC PURPOSEFUL INTERPRETATION ON COMPARISON THE QUANTITATIVE DETAILS OF RAW MATERIAL AS WELL AS FINISHED PRODUCTS ON FULL VERIF ICATION OF THE FACTS ON RECORDS IS JUSTIFIED AND ELIGIBLE TO BE UPHELD AS ELABORATED V IDE PARA 5 OF THE APPELLATE ORDER. 2. THAT THE ALLEGED NON EXISTING AND BOGUS SUNDRY C REDITORS FOR THE PURCHASE OF PADDY AMOUNTING OF RS.59,87,370/- HAS ULTIMATELY BEEN AD MITTED BY A.O. IN HIS REMAND REPORT THAT ALL THE SUNDRY CREDITORS ARE GENUINE AND THERE IS NO IOTA DOUBT ABOUT THE EXISTENCE OF SUNDRY CREDITORS. ON THE BASIS OF THE REMAND RE PORT AND OTHER RELEVANT DOCUMENTS AND EVIDENCES ON RECORDS THE DELETION OF RS.59,87,3 70/- IS JUSTIFIED AND SHOULD BE UPHELD AS AMPLIFIED VIDE PARA 6 & 7 OF THE APPELLATE ORDER . 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF RUNNING OF SEASONAL RICE MILL LOCATED IN DISTRICT BIRBHUM OF W EST BENGAL. THE ASSESSEE PURCHASES PADDY FROM SMALL CULTIVATORS. THE ASSESSEE IS MAINTAININ G BOOKS OF ACCOUNTS. FROM THE BOOKS OF ACCOUNT, THE AO NOTED THAT THE ASSESSEE PURCHASED P ADDY FOR AN AMOUNT OF RS.3,87,85,172/- DURING THE RELEVANT YEAR. ACCORDING TO AO, ALL THE PURCHASES WERE MADE BY ISSUING PURCHASE BILL BY ASSESSEE FIRM. THE SELLERS SIGNED THE PURC HASE BILL I.E. CASH/CREDIT MEMO IN WHICH QUANTITY OF PADDY AND AMOUNT WAS MENTIONED. THE AO NOTED THAT THE ASSESSEE HAS CURRENT LIABILITY I.E. SUNDRY CREDITORS, WHICH INCREASED FR OM RS.5,67,722/- IN THE LAST YEAR TO RS.72,56,109/- IN THE CURRENT YEAR. ACCORDING TO A O, NEW CREDITORS FOR PURCHASE OF PADDY WAS RS.59,87,370/- OUT OF TOTAL SUNDRY CREDITORS OF RS. 66,81,791/- AS ON 31.03.2007. AS THE ASSESSEE HAS NOT PAID TO SUNDRY CREDITORS I. E AL MOST 101 FOR AN AMOUNT OF RS.59,87,370/- FOR PURCHASE OF PADDY AS ON 31.03.2007, THE AO REQUESTE D THE FIRM TO FURNISH COMPLETE ADDRESS WITH PIN CODE OF THE SUNDRY CREDITORS FROM WHOM PUR CHASES WERE MADE. THE ASSESSEE SUBMITTED THE COMPLETE ADDRESS OF THE SUNDRY CREDIT ORS BUT OUT OF 101 LETTERS 97 LETTERS CAME BACK WITH THE POSTAL REMARK NO SUCH PERSON IN THIS VILLAGE/ NOT KNOWN. HOWEVER, ON 17.11.2009, DURING THE COURSE OF SCRUTI NY PROCEEDINGS, THE ASSESSEES COUNSEL FILED A LETTER DATED 15.11.2009 REQUESTING THE AO T O SEND ANY AUTHORISED PERSON FOR VERIFICATION OF CREDITORS FOR PURCHASE OF PADDY BUT THE AO HAS NOT AUTHORISED ANY ONE OR NO INCOME TAX AUTHORITY WAS SEND FOR VERIFICATION OF SUNDRY CREDI TORS. HOWEVER, ON 14.12.2009, THE ASSESSEES COUNSEL FILED LETTERS FROM PRADHAN/UPPRADHAN/MEMBER S OF THE GRAM PANCHAYAT STATED THAT THE ABOVE STATED 12 PERSONS WERE RESIDING IN THE VILLAG ES IN AND AROUND BIRBHUM, WHO HAVE SOLD 3 ITA NO. 2070/K/2010 & C.O. NO.183/K/2010 HMALAYA RICE MILL, AY:2007-08 PADDY TO ASSESSEE FIRM. THE AO DENIED THE VERACITY OF THESE LETTERS ISSUED BY PRADHAN ETC. AND AS NO SUNDRY CREDITORS WERE VERIFIABLE, THE AO MADE ADDITION OF UNPAID CREDITORS AT RS.59,87,370/- BY MAKING FOLLOWING REMARKS: ADD: INCOME FROM BOGUS PURCHASE AND/OR BOGUS SUNDRY LIABILITIES AS DISCUSSED ABOVE RS.59,87 ,370/- 4. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT (A). HE DELETED THE ADDITION BY STATING THAT THE EXISTENCE OF SUNDRY CREDITORS WAS VERIFIED BY THE AO DURING THE ASSESSMENT PROCEEDING AND EVEN IT IS VERIFIED THAT THE OUTSTANDING DUES I N RESPECT OF SUNDRY CREDITORS WERE PAID OFF IN THE SUBSEQUENT YEAR. THE RELEVANT FINDING OF CIT(A ) IN PARA 8 READS AS UNDER: 8. I HAVE PERUSED THE ASSESSMENT AND THE REMAND REP ORT OF THE AO. I HAVE ALSO CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND T HE MATERIAL ON RECORD. THE AO HAVE MADE THE ADDITION ON THE GROUND THAT THE EXIST ENCE OF SELLERS OF PADDY, WHO ALSO REMAINED AS SUNDRY CREDITORS AS ON 31.03.2007, COULD NOT BE VERIFIED AT THE ASSESSMENT STAGE. BUT THERE WAS NO POSITIVE MATER IAL OR EVIDENCE ON RECORD TO SHOW THAT THE CREDITORS DID NOT EXIST OR THAT THE TRANSA CTIONS WERE BOGUS. HOWEVER, THE EXISTENCE OF SUNDRY CREDITORS WAS VERIFIED BY THE A O IN COURSE OF THE REMAND PROCEEDINGS. THE OUTSTANDING DUES IN RESPECT OF SU CH SUNDRY CREDITORS WERE PAID OFF IN THE SUBSEQUENT YEAR. I FIND MERIT IN THE ARGUME NT THAT THERE WAS NO POSITIVE MATERIAL OR EVIDENCE ON RECORD TO SHOW THAT THE CRE DITORS WERE NOT IN EXISTENCE OR THAT THE TRANSACTIONS OF PURCHASE WERE NOT GENUINE. THE APPELLANT HAS MAINTAINED QUANTITATIVE DETAILS; AND, THE TAX AUDIT REPORT FOR THE YEAR UNDER CONSIDERATION AS WELL AS THOSE FOR THE THREE PRECEDING YEARS WAS PRO DUCED. THE YIELD OF RICE IS AROUND 65% IN ALL THE YEARS. IN FIND SUBSTANCE IN THE ARGUMENT THAT IF PURCHASES OF RS.59,87,370/- INVOLVING 9,850.33 QUINTALS WERE TO BE TREATED AS BOGUS, THE YIELD WOULD RISE TO ABNORMALLY HIGH FIGURE OF 78%. IN VI EW OF THE ABOVE, I AM OF THE CONSIDERED VIEW THAT THE AO WAS NOT JUSTIFIED IN TR EATING THE PURCHASES OF RS.59,87,370/- AS BOGUS. THE ADDITION OF RS.59,87, 370/- IS DELETED. GROUND NO. 1 & 2 ARE ALLOWED. AGGRIEVED REVENUE CAME IN APPEAL BEFORE US AND ASSE SSEE ALSO FILED CROSS OBJECTION SUPPORTING THE ORDER OF CIT(A) 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. AT THE OUTSET, WE HAVE GONE THROUGH THE REMAND REPO RT FILED BY AO VIDE NO. ITO WD.34(3)/ KOL/ REMAND REPORT/2010-11/133 NO. 70 DATED 19.08.2 010, WHEREIN THE AO I.E. ITO, WARD - 34(3), KOLKATA HAS ADMITTED THE EXISTENCE OF ALL TH E SUNDRY CREDITORS. BUT HIS BASIS IS THAT THE POSTMASTER OF THE POST OFFICE RAMPURHAT, DIST. BIRB HUM HAS CONFIRMED THE SAME. THE RELEVANT REMAND REPORT READS AS UNDER: THE DELAY IN SUBMITTING THE REMAND REPORT WAS FOR THE REASON OF WAITING FOR REPLY OF THE LETTER ISSUED TO THE POSTAL AUTHORITY. KINDLY FORGIVE FOR THE DELAY. AS PER YOUR DIRECTION VIDE YOUR LETTER UNDER REFERENCE , ASSESSEE WAS GIVEN AN OPPORTUNITY TO APPEAR ON 13.07.2010 AND SUBMIT THE PROOF IN SUPPORT OF HIS SUBMISSION. A/R OF THE ASSESSEE, SRI T.K. NAG, ADVO CATE, APPEARED. HE WAS ASKED 4 ITA NO. 2070/K/2010 & C.O. NO.183/K/2010 HMALAYA RICE MILL, AY:2007-08 TO PRODUCE SOME OF THE SUNDRY CREDITORS WHO HAVE SO LD PADDY TO THE ASSESSEE. SRI NAG SOUGHT SOME TIME FOR THE SAME. ON 19.07.10, SR T.K. NAG, A/R OF THE ASSESSEE, APP EARED AND PRODUCED TWO OF THE SUNDRY CREDITORS 1. MD. GOLAM RASUL, M, AGE-36 YRS. AS ON 01.01.1995, A DDRESS: DAKHABATI (PURBA MANDALPARA), RAMPURHAT-1, BIRBHUM. IN SUPPORT OF HI S IDENTITY HE PRODUCED HIS VOTER I. D. CARD WB/42/292/042542. 2. MD. NIJAMUDDIN, S/O MOKHTAR ALI OF BENEGRAM, MARGR AM, BIRBHUM-731224. HE ALSO PRODUCED HIS VOTER I .D. CARD WB/42/292/21902 1 IN SUPPORT OF HIS IDENTITY AND ABOVE DETAILS. BOTH ACCEPTED IN PRESENCE OF SRI T.K. NAG AND SRI S UBRATO DEY, ACCOUNTANT OF M/S HIMALAYA RICE MILL, THAT THEY HAVE SOLD PADDY T O THE ASSESSEE. THEY STATED THAT THEY GROW PADDY IN THEIR OWN FIELD AND SALE TH E SAME TO THE ASSESSEE. IT WAS ALSO STATED BY THEM THAT THEY DID NOT GET THE SALE PROCEEDS OF THESE PADDY AT THE TIME OF SALE. SUBMISSION WAS ASKED TO BE GIVEN IN W RITTEN (COPY ENCLOSED). IN ORDER TO COUNTER VERIFY ABOUT THE EXISTENCE OF A LL THE SUNDRY CREDITORS INCLUDING THOSE SUNDRY CREDITORS WHOSE CONFIRMATION HAVE BEEN PRODUCED BY THE ASSESSEE THROUGH THE PANCHAYAT OR GRAM HEADS, LETTER WAS SEN T TO -THE POST MASTER, HEAD POST OFFICE, RAMPURHAT, DIST-BIRBHUM (COPY ENCLOSED ). IN THIS LETTER IT WAS SPECIFICALLY MENTIONED THAT L ETTER SENT TO LIST OF PERSONS ENCLOSED, HAS BEEN RETURNED BACK EARLIER. LATER ON, REPLIES FROM THESE PERSONS HAVE BEEN PRODUCED BY THE ASSESSEE ALONGWITH THE LE TTER OF GRAM PANCHAYAT. IT WAS REQUESTED FROM THE POST MASTER TO VERIFY AGAIN THE EXISTENCE OF THESE PERSONS AT THEIR RESPECTIVE ADDRESSES. REPLY HAS BEEN RECEIVED FROM THE POSTMASTER THAT THESE PERSON EXIST AT THEIR RESPECTIVE ADDRESSES. IT IS ALSO STATED IN HIS REPL Y THAT SOME OF THE PERSONS HAVE DIED IN THE MEAN TIME, BUT THEIR RESIDENCE IS STILL THERE (COPY OF THE REPLY ENCLOSED). REPORT SUBMITTED KIND PERUSAL OF LD. CIT(A)-XX, KO LKATA. WE HAVE GONE THROUGH THE ASSESSEES PAPER BOOK AND FOUND THAT THE ASSESSEE HAS FILED QUANTITATIVE DETAILS OF PADDY, RICE AND BRAN AND YI ELD PERCENTAGE AND SUMMARY FOR LAST THREE YEARS. THE RELEVANT DETAILS ARE ENCLOSED AT ASSESS EES PAPER BOOK PAGE 4 AND ARE BEING REPRODUCED HEREUNDER FOR THE SAKE OF CLARITY: A TABLE FOR YIELD PRODUCT OF PERCENTAGE OF RICE FO R THE LAST THREE YEARS AND THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007- 08 ASSESSMENT PADDY UTILIZED RICE YIELD 5 ITA NO. 2070/K/2010 & C.O. NO.183/K/2010 HMALAYA RICE MILL, AY:2007-08 YEAR FOR PRODUCTION OF RICE (QUINTAL) PRODUCTION (QUINTAL) PERCENTAGE 2004-05 2005-06 2006-07 2007-08 56,600.00 45,500.00 52,050.00 58,954.00 36,970.00 29,575.00 33,832.50 38,320.10 65.32 65.00 65.00 65.00 (ASSESSMENT YEAR UNDER CONSIDERATION) APART FROM IT ASSUMING 9850.33 QUINTAL AS BOGUS PUR CHASE, BALANCE CONSUMPTION OF PADDY I.E. (49103-9850)= 39154 QUINTAL OF PADY HAS YIELDED 31917 QUINTAL OF RICE I.E. 81.5% WHICH IS IMPOSSIBLE AS COMPARED TO 65% Y IELD OF RICE ACCEPTED CONSISTENTLY IN EARLIER YEARS. 6. AFTER GOING THROUGH THE FACTS IN ENTIRETY AND CI RCUMSTANCES OF THE CASE INCLUDING THE REMAND REPORT OF THE AO WHICH IS ACCEPTED BY THE CI T(A), WE ARE OF THE VIEW THAT ONCE OUTSTANDING DUES IN RESPECT OF SUNDRY CREDITORS WER E PAID OFF IN SUBSEQUENT YEARS THERE IS NO FORCE IN THE OBSERVATIONS MADE BY AO IN HIS ASSESSM ENT ORDER. IT IS ALSO A FACT THAT THE ASSESSEE HAS MAINTAINED QUANTITATIVE DETAILS OF THREE PRECED ING YEARS AND THE SAME WAS PRODUCED BEFORE US. THE REVENUE HAS NOT DENIED THE PRODUCE OR YIELD . IN SUCH CIRCUMSTANCES, WE CONFIRM THE ORDER OF CIT(A) AND APPEAL OF REVENUE IS DISMISSED. THE CROSS OBJECTION OF ASSESSEE IS SUPPORTIVE AND HENCE, NEED NO ADJUDICATION. 7. IN THE RESULT, BOTH THE APPEAL AND THE CROSS OBJ ECTION ARE DISMISSED. 8. ORDER IS PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2013. SD/- SD/- . . . . ''# ''# ''# ''# , $% , (ABRAHAM P. GEORGE) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 21 ST NOVEMBER, 2013 12 '3' 4 JD.(SR.P.S.) $0 5 . 6$ )7- COPY OF THE ORDER FORWARDED TO: 1 . ,- / APPELLANT ITO, WARD-34(3), KOLKATA. 2 ./,- / RESPONDENT M/S. HIMALAYA RICE MILL, 7, OLD POST OFFICE ST., KOLKATA-700 001. 3 . 0' ( )/ THE CIT(A), KOLKATA 4. 5. 0' / CIT KOLKATA <= .' / DR, KOLKATA BENCHES, KOLKATA / ./ TRUE COPY, $0'>/ BY ORDER, ' /ASSTT. REGISTRAR .