DHAR & COMPANY PVT. LTD.,HOWRAH V. I.T.O., WARD - 3(3), KOLKATA, KOLKATA

ITA 1113/KOL/2024

AI Insights

Dhar & Company Pvt. Ltd. appealed against the order of the National Faceless Appeal Centre, Delhi, which confirmed the addition of \\u20b942,24,191 as unexplained expenditure in the hands of the company. The addition was initially made by the Assessing Officer following a search operation that revealed the company was a beneficiary of bogus purchases through accommodation entries. The Tribunal found that the assessee had complied with all notices and produced necessary evidence, including bills and vouchers. The Tribunal noted that the sales made by the assessee out of the said purchases were not disbelieved and that the auditor had not drawn any adverse inference regarding the purchases. Consequently, the Tribunal set aside the CIT (A)'s order and directed a minor adjustment in the form of an additional gross profit rate on the disputed purchases.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 474014 (ITAT-KOLKATA)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-03-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDAN DAS
• Assessee Lawyers: P.K. HIMMATSINGHKHA
• Keywords: Set aside; Reassessment proceedings; Unexplained expenditure; Bogus purchase; Accommodation entries; Bogus
• Section: 147; 148; 143(3); 143(1); 271(1)(c); 69; 133(6); 69C

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, KOLKATA BEFORE SHRI RAJESH KUMAR, AM AND SHRI PRADIP KUMAR CHOUBEY, JM ITA No.1113/KOL/2024 (Assessment Year:2011-12) Dhar & Company Pvt. Ltd. Howrah Amta Road, Dassnagar, Howrah-711105, West Bengal Vs. ITO Wad, 3(3), Aaykar Bhavan, P-7, Chowringhee Square, 4th Floor, Kolkata-700069, West Bengal (Appellant) (Respondent) PAN No. AABCD3253A Assessee by : Shri P.K. Himmatsinghkha, AR Revenue by : Shri Chandan Das, DR Date of hearing: 26.02.2025 Date of pronouncement : 17.03.2025 O R D E R Per Rajesh Kumar, AM: This is an appeal preferred by the assessee against the order of the National Faceless Appeal Centre, Delhi (hereinafter referred to as the “Ld. CIT(A)”] dated 26.07.2023 for the AY 2011-12. 02. At the outset, we note that there is delay of 234 days in filing the appeal by the assessee, for which condonation petition along with affidavit was filed. It was stated in the condonation petition that there was change of management in the assessee company during the F.Y. 2018 and new directors took over and old directors resigned. It was further stated that as per the terms agreed upon between the director’s, the old management of the company would be liable for the liabilities arising prior to the change of management and therefore, Page | 2 ITA No.1113/KOL/2024 Dhar & Company Pvt. Ltd. ; A.Y. 2011-12 would responsible for the assessment, reassessment proceedings related to A.Y. 2011-12. It was also stated in the assessment order passed u/s 143(3) of the Act by ITO, Ward 3(3), Kolkata on 17.12.2018 that the old management appointed a consultant, who filed the appeal before the ld. CIT (A) alongwith written submission with digital signature of Mr. Tamal Pal (new Management) were filed. Mr. Tamal Pal was expired on 09.07.2022 at the age of 54, after prolonged illness and his son Mr. Soumyadipta Pal, who was 19 years old, was appointed as director of the company on 14.10.2020. Therefore, in the appellate proceedings could not be attended due to his serious ailments in the family of the Director and when the new management received the notice u/s 271(1)(c) of the Act dated 25.04.2024, it was realized that CIT (A) has passed the order which was not communicated to the previous management and thereafter, steps were taken and appeal was filed with a delay of 234 days. The ld. Counsel for the assessee therefore prayed that since, the delay in filing the appeal is for the sufficient reasons and therefore the same may be condoned. 03. The ld. DR on the other hand strongly opposed the arguments of the ld. AR by submitting that the delay has not been explained by the counsel of the assessee and therefore the appeal may be dismissed in limine by not condoning the delay. 04. After hearing the rival contentions and perusing condonation petition, we find that the delay has occurred due to reasons which were beyond the control of the appellant and therefore, the assessee cannot be penalized by not condoning the delay. In our opinion, the delay is for genuine and bonafide reasons and the same is condoned. Page | 3 ITA No.1113/KOL/2024 Dhar & Company Pvt. Ltd. ; A.Y. 2011-12 05. At the time of hearing, the ld. Counsel for the assessee pressed the ground relating to merits which are against the confirmation of addition of ₹42,24,191/- by the ld. CIT (A) as made by the ld. AO on account of bogus purchases u/s 69C of the Act as unexplained expenditure in the hands of the assessee company. 06. The facts in brief are that the assessee filed the return of income on 30.09.2011, declaring total income of ₹9,78,204/-, which was processed u/s 143(1) of the Act. Subsequently, a search action u/s 132(1) of the Act was conducted on Shri Sanjiw Kumar Singh, who was an entry operator and his related entities. During the course of search, Mr. Singh admitted that he was engaged in providing accommodation entries in the form of bogus purchases on commission basis. The information received by the ld. AO that M/s Dhar & Company Pvt. Ltd., the assessee being beneficiary of the accommodation entry provided by Shri Sanjiw Kumar Singh to the tune of ₹42,24,191/-. Accordingly, the case of the assessee was reopened u/s 147 of the Act by issuing notice u/s 147 of the Act on 22.03.2018, which was complied with vide letter dated 28.04.2018, requesting to treat the return filed on 19.04.2018, in compliance to notice u/s 148 of the Act. Thereafter, the ld. AO issued statutory notices u/s 142 along with questionnaire which were duly complied with by the assessee by filing necessary evidences/ documents. The ld. AO also issued notice u/s 133(6) of the Act to seven sellers/ suppliers, which were returned unserved. Finally, the ld. AO treated the purchases made by the assessee as bogus purchase and added the same to the income of the assessee u/s 69 of the Act as unexplained expenditure. Page | 4 ITA No.1113/KOL/2024 Dhar & Company Pvt. Ltd. ; A.Y. 2011-12 07. In the appellate proceedings, the ld. CIT (A) affirmed the order of ld. AO by dismissing the appeal of the assessee. 08. After hearing the rival contentions and perusing the materials available on record, we find that the case of the assessee was reopened u/s 147 of the Act read with section 148 of the Act after the ld. AO received information to the effect that the assessee was a beneficiary of bogus purchases through accommodation entry to the tune of ₹42,24,191/- from seven parties, belonging to Shri Sanjiw Kumar Singh, who was an entry operator. It was further noticed that the said information was accepted in statement recorded during the course of search of Shri Sanjiw Kumar Singh and his associated concerns. The assessee complied with the said notices and produced the evidences /details such as bills and vouchers and stock registers etc. The accounts of the assessee were also duly audited and the auditor has not drawn any adverse inference in respect of the said purchases. Moreover, the ld. AO has not disbelieved the sales made by the assessee out of the said purchases. We note that during the year the gross profit declared by the assessee was 20.09%, whereas the net profit was 2.71%. In such above scenario the only presumption is that the purchases were made from the grey market whereas the bills were procured from hawala entry operators. Since, the assessee has already declared its purchase in the books of accounts and made sales out of those purchases and declared profit thereon, therefore, we are of the view that the view taken by the ld. CIT (A) confirming the addition of the entire purchases would lead to unrealistic and hypothetical results. therefore, we are not in agreement with the view taken by the ld. CIT (A) on this issue and accordingly, we set aside the order of ld. CIT (A). However, we are of the view that some additional rate of gross profit should be levied on Page | 5 ITA No.1113/KOL/2024 Dhar & Company Pvt. Ltd. ; A.Y. 2011-12 the said purchases. Accordingly, we direct the ld. AO to charge 2.00% on the said purchase over and above the profits declared by the assessee in the books of account. The AO is directed accordingly. In other words the AO directed to delete the addition to the tune of Rs.41,41,707/-. 09. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 17.03.2025. Sd/- Sd/- (PRADIP KUMAR CHOUBEY) (RAJESH KUMAR) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Kolkata, Dated: 17.03.2025 Sudip Sarkar, Sr.PS Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, 5. Guard file. BY ORDER, True Copy// Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Kolkata "