INCOME TAX OFFICER-1(1), RAIPUR, INCOME TAX DEPARTMENT V. SUMIT AGRAWAL, RAIPUR

ITA 197/RPR/2024

AI Insights

The case revolves around an appeal by the Income Tax Officer against the order of the Commissioner of Income-Tax (Appeals), which had deleted an addition made by the A.O on account of bogus purchases claimed by the assessee, Sumit Agrawal, for the assessment year 2010-11. The A.O had reopened the assessment under Section 147 of the Income-tax Act, 1961, based on information from the Commercial Tax Department that the assessee had taken bogus purchase bills from various concerns. The CIT(Appeals) found that the A.O had erred in making the addition as the assessee had not claimed any purchases in his return and the transactions were actually carried out by M/s Gauri Construction. The Tribunal agreed with the CIT(Appeals) and dismissed the revenue's appeal.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 469751 (ITAT-RAIPUR)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Next Hearing Date: 21-11-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 09-05-2024
• Other Referred Cases: Vijay Proteins, 58 ITD 428
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAL AGRAWAL
• Assessee Lawyers: R.B DOSHI; . DECISION
• Keywords: Business income; Reassessment proceedings; Bogus purchase; Accommodation entries; Reason to believe; Bogus
• Section: 147; 148; 131; 22

Judgement Text

"आयकर अपीलȣय अͬधकरण Ûयायपीठ “एक-सदèय” मामला रायपुर मɅ IN THE INCOME TAX APPELLATE TRIBUNAL RAIPUR BENCH “SMC”, RAIPUR Įी रवीश सूद, ÛयाǓयक सदèय क े सम¢ BEFORE SHRI RAVISH SOOD, JUDICIAL MEMBER आयकर अपील सं. / ITA No.197/RPR/2024 CO. No.13/RPR/2024 Ǔनधा[रण वष[ / Assessment Year: 2010-11 The Income Tax Officer-1(1), Raipur (C.G.) .......अपीलाथȸ / Appellant बनाम / V/s. Sumit Agrawal S/o. Mahavir Prasad Agrawal 21/485, Main Road Para, Ramsagar Para, Raipur (C.G.)-492 001 PAN: AGLPA6865C ……Ĥ×यथȸ / Respondent Assessee by : Shri R. B Doshi, CA Revenue by : Shri Mohal Agrawal, Sr. DR सुनवाई कȧ तारȣख / Date of Hearing : 21.11.2024 घोषणा कȧ तारȣख / Date of Pronouncement : 25.11.2024 2 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 आदेश / ORDER PER RAVISH SOOD, JM: The present appeal filed by the revenue is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 19.03.2024, which in turn arises from the order passed by the A.O under Sec. 147 r.w.s.143(3) of the Income-tax Act, 1961 (in short ‘the Act’) dated 26.12.2017 for the assessment year 2010-11. The revenue has assailed the impugned order on the following grounds of appeal: “1. Whether on the facts and in the circumstances of the case, the ld. CIT(A)/NFAC was justified in deleting the addition of Rs.9,56,180/- made by the A.O on account of bogus purchase made by the assessee? 2. Any other ground which may be adduced at the time of hearing.” Also, the assessee is before me as a cross objector for the aforementioned year by raising the following grounds: “1. Without prejudice to the addition deleted on merits, Ld. CIT(A) erred in not adjudicating ground no. 2 taken before him. The notice issued by AO u/s 148 is illegal, ab initio void. There was no material before the AO for formation of belief of escapement. The AO reopened the assessment without application of mind. The reassessment proceeding was illegal and not sustainable. 2. The initiation of reassessment proceedings is illegal inasmuch as reasons were recorded by non jurisdictional AO as well as notice u/s 148 was issued by AO who did not have jurisdiction over assessee. The reassessment proceedings and 3 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 consequent reassessment order is illegal and liable to be quashed. 3. The reassessment order passed by the A.O is illegal inasmuch as no notice u/s.143(2) was issued. The reassessment order is illegal and liable to be quashed. 4. The cross objector reserves the right to add, amend or alter any of the ground/s of cross objection.” 2. Succinctly stated, the assessee had filed his return of income for A.Y.2010-11 on 28.10.2010, declaring an income of Rs.1,80,940/-. The A.O based on information received from the Commercial Tax Department that the assessee had taken bogus purchase bills of Rs.38,24,721/- from the following bogus concerns: , thus, initiated proceedings u/s. 147 of the Act. Notice u/s. 148 of the Act, dated 31.03.2017 was issued by the A.O to the assessee. The “reasons to believe” based on the which the A.O had initiated proceedings u/s. 147 of the Act are culled out as under: “The reasons for issue of notice u/s 148 were as under-\" The Income Tax Department is in possession of certain Name of the concern who provided bogus purchase bill Amount of bogus purchase shown Jay Ambey Sales Corporation Rs.15,97,336/- Minal Enterprises Rs.17,83,862/- Anmol Traders Rs.4,43,523/- Total Rs.38,24,721/- 4 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 information from Commercial Tax Deptt. which are based on taking bogus purchase bills by various persons from different bogus firms during the F.Y. 2009-10. The entry providers and others are found to have provided bogus entries bogus bills to various steel traders/rice millers and other Traders over the years in lieu of which they have received commission. The supplied information confirms that the assessee has taken bogus purchase bill from the following bogus concern(s)- The entry providers used these paper firms to open ban accounts through which they operated this business of providing bills. These bogus firms that were created only on paper by a set of brokers and entry providers, were also used to open bank accounts which were Operated by these brokers and entry providers themselves. The acted as an intermediary in arranging the bogus sale and purchase bills between the parties without actual delivery of goods. After receiving the payment from the steel traders/ rice millers, etc. in their respective bank accounts, the same were withdrawn in cash on the same day. Later on, the cash withdrawn was give back to these traders/millers after deducting their commission. These bogus bills had no transport or bilti/transport challans or weigh bridge slips in support of its genuinity. The modus operandi adopted by the entry operators was to make the beneficiary buy purchase bills without any actual delivery of goods. Since, the assessee has taken bogus purchase bill from aforesaid concern, I have reason to believe that an income of Rs. 38,24,721/- or the entire traded value which may be more than Rs. 38,24,721/- has escaped assessment for the A.Y. 2010-11 within the meaning of section 147 explanation 2(b) of the Income Tax Act, 1961. Therefore, it is proposed to issue notice u/s 148 of the Income Tax Act, 1961.\" Name of the concern who provided bogus purchase bill Amount of bogus purchase shown Jay Ambey Sales Corporation Rs.15,97,336/- Minal Enterprises Rs.17,83,862/- Anmol Traders Rs.4,43,523/- Total Rs.38,24,721/- 5 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 3. The assessee vide his reply dated 06.11.2017 submitted that there was no income which had escaped assessment within the meaning of Section 147 of the Act. It was further submitted by the assessee that he had no dealing with the aforementioned three concerns viz., M/s. Anmol Traders, M/s. Jai Ambey Sales Corporation and M/s. Meenal Enterprises during the year under consideration. However, the aforesaid explanation of the assessee did not find favour with the A.O. It was observed by the A.O that the assessee had not maintained any books of account and in his return of income no sales were shown. Accordingly, as the assessee had failed to substantiate the genuineness of the impugned purchase transactions, therefore, the A.O relying on the order of the ITAT, Ahmedabad in the case of Vijay Proteins, 58 ITD 428 dated 18.01.1996 disallowed 25% of the total purchases of Rs.38,24,721/- i.e. Rs.9,56,180/-. Accordingly, the A.O vide his order passed u/s. 147 r.w.s. 143(3) of the Act, dated 26.12.2017, after making the aforesaid addition determined the income of the assessee at Rs.11,37,120/-. 4. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals) who deleted the addition of Rs.9,56,180/- and allowed the appeal of the assessee by observing as under: “5. Decision: 5.1 I have gone through the facts of the case. I have perused the assessment order and I have gone through the 6 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 submission filed by the appellant. The appellant filed 3 grounds of appeal out of which ground no. 3 is general ground which does not need any adjudication. Ground No.2 challenges the assessment order on technical matter whereas vide ground no. 1 the appellant has contended the addition on merit. The ground no. 1 is taken up for adjudication and is decided as under: 5.2 Ground No. 1: In this case, the AO relied on the information from commercial tax department and reopened the assessment of the appellant on the allegations that the appellant had obtained accommodation entries from three parties M/s.Jai Ambey Sales Corporation, M/s. Minal Enterprises and M/s. Anmol Traders, aggregating to Rs.38,24,721/- The appellant on the other hand, had submitted before the AO that he had not entered into any such transactions with any of these three parties. However, the AO did not accept the contention of the appellant and 25% of the total transaction value was added to the income of the appellant. 5.2.1 In this regard, after considering the facts of the case and after going through the submission of the appellant, I have come to the conclusion that the AO has erred in making the addition in the case of the appellant. In this case, the appellant had since beginning pleaded before the AO that he had not carried out any transaction with any of the three tainted parties and the transaction was actually carried out by one M/s Gauri Construction, which is the proprietorship concern of one Shri. Kalpesh Jain having PAN AGFPJ2678E. There are few facts which the appellant had submitted which deserve consideration: 1. The appellant in this case, has not claimed any purchases. As per the return of income of the appellant filed for the year under consideration, he has shown income from other sources and there is no business income. In this regard, one must understand as to why the assessees debit bogus purchases in their books. There are two modes by which the bogus purchases are debited in the books. In the first mode, the purchases are outright bogus, which are debited in the books in order to inflate the expenses and to reduce the taxable income. In this mode, no material enters into the stock register, the assessee gives the cheque to entry providers and collects bill from them alongwith the cash after deducting their commission. In the second mode, the supplier of the material doesn't give bill to the assessee as he wants cash in lieu of the material supply. In such a case, the 7 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 assessee obtains the bills from accommodation entry providers, but the material is actually purchased and the same entres into stock register. In this mode, normally, the profit embedded in the transaction is added back instead of the entire purchase amount. However, in both these modes, the purchases are debited by the assessees. There is no way that the assessee enters into bogus purchase transactions and the same are no debited into the purchase account, In this case, as certified by the assessee, the purchases are not debited, which means the AO has disallowed something which was never claimed by the appellant as expenses in first place. This is a strange addition by the AO. The AO had defended the aid addition by claiming that the appellant must have made out of books sales from the purchases so made. For any out of books sales, the purchases have to be out of books. In this case, as claimed by the AO, the information was received from the Commercial Tax Department that the appellant obtained bogus purchase bills from three tainted parties, which means that the said transaction was recorded one. It cannot happen that the purchases were recorded and sales were not recorded, which does not give any incentive to the assessee because such transaction would mean showing expenses and not disclosing income, which is never practiced. The AO, it seems, has acted more on presumption and surmises, rather than judiciously in this case. The entire addition has been made based on some presumption, which does not exist in reality. I have gone through the assessment order. I could see that there was no material available with the AO to confirm the fact that the appellant had indeed entered into transaction with the three tainted parties. What the AO had in his possession was merely the information from the Commercial Tax Department, which the AO, unfortunately, did not cross-check during the entire assessment proceedings. The AO should have called for the bank statement of the appellant to check as to whether he entered into any transaction with those parties. The AO should have issued summons u/s 131 or at least notice u/s 133(6) to those tainted parties and should have collected information as to whether those parties entered into any transaction with the appellant. However, the AO did nothing and merely relied on the data from Commercial Tax Department when the appellant was showing the evidences contrary to what the information was received by the AO. 2. The appellant, in this case, has in fact, tried to bring to the notice of the AO that the impugned purchases from the three tainted parties were actually made by another business concern i.e. M/s Gauri Construction. The appellant placed 8 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 before the AO the notices which were received by him but were addressed to M/s Gauri Construction. The fact of the matter is that the appellant had joined as a partner in M/s Gauri Construction in A.Y. 2011-12, the year in which M/s Gauri Construction was converted into a firm from a proprietorship concern. It was therefore very much possible that when the bogus transactions of M/s Gauri Construction for the year A.Y. 2010-11 were noticed by the Commercial tax Department subsequently, they were tagged alongwith the PAN of the partner, which by that time was the appellant. In fact, the notice of the AO addresses M/s Gauri Construction but the PAN was used that of the appellant as can be seen below: Therefore, there is reason to believe that the information was shared by the Commercial tax Department in 2017 about M/s Gauri Construction tagging the partner's name, however, while issuing the notice, the AO used the PAN of the appellant and started proceedings against the appellant itself. 9 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 Interestingly, since the notice was also issued to M/s Gauri Construction, the appellant submitted before the AO, the reply filed by the said concern wherein the transaction of exactly the same amount (Rs.38,24,721/-) was admitted by the said concern with the three tainted parties. The letter submitted by M/s Gauri Construction before the AO is as under: The appellant also submitted the copy of bills of the three tainted parties which are drawn in the name of M/s Gauri Construction. When all these evidences were placed before the AO by the appellant during the assessment proceedings, it was wrong on the part of the AO to still proceed further and make addition in the hands of the appellant. I therefore, direct the AO to delete the addition of Rs. 9,56,180/-. The ground of appeal no. 1 is allowed. 5.3 Since, the appeal has been allowed on 10 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 merits as above, the other grounds become academic in nature and hence do not need any further adjudication. 6. In the result, the appeal is allowed.” 5. The Revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before the Tribunal. 6. I have heard the Ld. Authorized Representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the Ld. AR to drive home his contentions. 7. Shri R.B Doshi, Ld. Authorized Representative (for short ‘AR’) for the assessee at the threshold submitted that the impugned purchases aggregating to Rs.38,24,271/- alleged to have been made by the assessee from three parties, viz. (i) M/s. Anmol Traders; (ii) M/s. Jai Ambey Sales Corporation; and (iii) M/s. Meenal Enterprises were actually purchases made by M/s. Gauri Construction, a firm in which the assessee was a partner. The Ld. AR in support of his aforesaid contention had drawn my attention to the confirmations of two parties viz. (i) M/s. Jai Ambey sales Corporation, Raipur, Page 23 of APB; and (ii) M/s. Anmol Traders, Page 22 of APB. Also, the Ld. AR in order to substantiate the aforesaid factual position had taken me through the copies of sale bills of the aforementioned parties that were issued in the name of M/s. Gauri 11 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 Construction, Page 25 to 45 of APB. The Ld. AR based on his aforesaid contentions submitted that as the CIT(Appeals) after deliberating at length on the issue had rightly adjudicated the issue in favour of the assessee, therefore, the same does not call for any interference. 8. Per contra, the Ld. Departmental Representative (for short ‘DR’) relied on the order of the A.O. 9. Admittedly, it is a matter of fact borne from the order of the CIT(Appeals) that the impugned purchases aggregating to Rs.38,24,271/- alleged to have been made by the assessee from three parties viz. (i) M/s. Anmol Traders; (ii) M/s. Jai Ambey Sales Corporation; and (iii) M/s. Meenal Enterprises were actually the purchases that were made by M/s.Gauri Construction. On a perusal of the copies of purchase bills filed before me at Page 25 to 45 of APB, I find that the same were issued in the name of M/s. Gauri Construction and there is no mention of the name of the assessee. On a perusal of the order of the CIT(Appeals), it transpires that the assessee had joined as a partner in M/s. Gauri Construction in A.Y. 2011-12, the year in which M/s Gauri Construction was converted into a firm from a proprietorship concern. The CIT(Appeals) further opined that when the bogus transactions of M/s Gauri Construction for the year A.Y.2010-11 were noticed by the Commercial tax Department subsequently, they were tagged alongwith the PAN of the partner, which by 12 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 that time was the assessee. It was also observed by the CIT(Appeals) that the notices of the A.O were addressed to M/s Gauri Construction but the PAN was used that of the assessee. I am of the view that when all the evidences placed before the A.O were in the name of M/s. Gauri Construction, therefore, there was no justification on the part of the A.O to have drawn adverse inferences in the hands of the assessee. 10. Considering the aforesaid factual position, I find no infirmity in the view taken by the CIT(Appeals) who had rightly vacated the addition of Rs.9,56,180/- and, thus, uphold the same. Thus, the Ground of appeal No.1 raised by the revenue is dismissed in terms of the aforesaid observations. 11. Ground of appeal No.2 being general in nature is dismissed as not pressed. 12. In the result, appeal filed by the revenue in ITA No.197/RPR/2024 is dismissed in terms of the aforesaid observations. CO No.13/RPR/2024 A.Y.2010-11 13. Shri R. B. Doshi, Ld. AR at the time of hearing of the appeal submitted that as per instructions, he seeks not to press the cross- objection filed by the assessee for the aforementioned year. Considering 13 ITO-1(1), Raipur Vs. Sumit Agrawal ITA No. 197/RPR/2024 CO No.13/RPR/2024 the concession of the Ld. AR, the cross objection filed by the assessee in CO No.13/RPR/2024 is dismissed as not pressed. 14. In the result, cross objection filed by the assessee in CO No.13/RPR/2024 is dismissed. 15. Resultantly, both the appeal filed by the revenue and cross objection filed by the assessee are dismissed in terms of the aforesaid observations. Order pronounced in open court on 25th day of November, 2024. Sd/- (रवीश सूद /RAVISH SOOD) ÛयाǓयक सदèय/JUDICIAL MEMBER रायपुर/ RAIPUR ; Ǒदनांक / Dated : 25th November, 2024. ****SB, Sr. PS आदेश कȧ ĤǓतͧलͪप अĒेͪषत / Copy of the Order forwarded to : 1. अपीलाथȸ / The Appellant. 2. Ĥ×यथȸ / The Respondent. 3. The CIT(Appeals)-1, Raipur (C.G) 4. The Pr. CIT-1, Raipur (C.G) 5. ͪवभागीय ĤǓतǓनͬध, आयकर अपीलȣय अͬधकरण,रायपुर बɅच, रायपुर / DR, ITAT, Raipur Bench, Raipur. 6. गाड[ फ़ाइल / Guard File. आदेशानुसार / BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलȣय अͬधकरण, रायपुर / ITAT, Raipur. "