Kartick Bose , Kolkata V. PCIT, Central - 1, Kolkata , Kolkata

ITA 1027/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8205 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-12-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 16-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMITA CHOUDHURY RESPONDEN
• Assessee Lawyers: PASS RD FLOOR KOLKATA
• Keywords: Bogus purchase; Revision of order; Assessment record
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1027/KOL/2018 ASSESSMENT YEAR:2013-14 KARTICK BOSE C/O NETWORK INDUSTRIES LTD., 171/1, MAHATMA GANDHI ROAD, BURABAZAR, KOLKATA-700 007 [ PAN NO.AOMPB 2179 K ] / V/S . PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, AYAKAR BHAWAN, POORVA, 110, SHANTI PALLY, E.M. BYPASS, 3 RD FLOOR KOLKATA- 107 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SOUMITA CHOUDHURY, ADVOCATE /BY RESPONDENT SHRI A.K. NAYAK, CIT-DR /DATE OF HEARING 03-12-2019 /DATE OF PRONOUNCEMENT 22-01-2020 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2013-14 ARISES AGAINST THE PRINCIPAL COMMISSIONER OF INCOME TAX (CENTRAL)-1, KOLKATAS O RDER DATED 26.03.2018 PASSED IN MEMO.NO.PCIT(C)-1/SEC.263/2017-18/10024-27, INVOLVI NG PROCEEDINGS 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. BOTH THE LEARNED REPRESENTATIVE(S) AT THE OUTSET TAKES US TO THE PCITS DETAILED DISCUSSION HOLDING THE REGULAR ASSESSMENT IN QUESTI ON DATED 24.03.2016 AS AN ERRONEOUS ONE CAUSING PREJUDICE TO INTEREST OF THE REVENUE READS AS UNDER:- ITA NO.1027/KOL/2018 ASSESSMENT YEAR 2013-14 KARTICK BOSE VS PCIT, CEN-1,KOL. PAGE 2 2. THE ABOVE ASSESSMENT ORDER HAS BEEN EXAMINED BY ME ALONG WITH THE ASSESSMENT RECORD. AS FOUND BY ME FROM THE PROFIT AND LOSS ACC OUNT, THE ASSESSEE HAS SHOWN PURCHASE OF RS.42,90,22,980/- AND SALE OF RS. 42,46 ,70,330/-. IN THE ASSESSMENT ORDER, THE AO HAS GIVEN A FINDING THAT PURCHASE OF THE PRO PRIETOR CONCERN IS INFLATED BUT NO FURTHER ENQUIRY IN THE GENUINENESS OF THE PURCHASE DECLARED BY THE ASSESSEE, HAS BEEN MADE. IN CASE OF VIJAY PROTEINS LTD. VS. CIT(2015) 58 TAXMANN. COM,44, THE HON'BLE GUJARAT HIGH COURT HAS CONFIRMED THE DECISION OF IT AT, AHMEDABAD DISALLOWING 25% OF PURCHASE THAT WAS FOUND TO BE INFLATED BY SH OWING HIGHER PURCHASE PRICE THROUGH FICTITIOUS INVOICES. IN THE ASSESSMENT RECO RD, ONLY PURCHASE AND SALE LEDGER ARE AVAILABLE. NO FURTHER DETAILS OR DOCUMENTS ARE AVAI LABLE RELATING TO ENQUIRY MADE BY THE AO TO FIND OUT ABOUT THE GENUINENESS OF PURCHAS E SHOWN BY THE ASSESSEE. IF THE AO HAD INFORMATION ABOUT THE INFLATION OF PURCHASE IN CASE OF THE ASSESSEE, HE SHOULD HAVE INVESTIGATED ABOUT THE GENUINENESS .OF ENTIRE PURCHASES SHOWN BY THE ASSESSEE AND THEN NECESSARY DECISION SHOULD HAVE BEEN TAKEN BY HIM FOR DISALLOWING AN APPROPRIATE PERCENTAGE OF PURCHASE DEPENDING ON THE EXTENT OF THE PURCHASES FOUND TO BE INFLATED. SINCE THE AO HAD NOT MADE ANY ENQUIRY OR VERIFICATION IN RESPECT OF PURCHASES SHOWN BY THE ASSESSEE, THE ABOVE-MENTIONE D ASSESSMENT ORDER DATED 24.03.2016 PASSED IN CASE OF THE ASSESSEE FOR A.Y. 2013-14 U/S 143(3) HAS BEEN FOUND TO BE DEEMED TO BE ERRONEOUS IN SO FAR AS IN PREJUD ICIAL TO THE INTEREST OF REVENUE IN VIEW OF CLAUSE (A) OF EXPLANATION 2 OF SECTION 263. 3. AFTER FINDING THE ASSESSMENT ORDER DATED 24.03.2 016 BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS DISCUSSED IN .PREVIOUS PARA, A NOTICE DATED 13.03.2018 IS ISSUED TO THE ASSESSEE ASKING IT TO E XPLAIN AS TO WHY THE ABOVE MENTIONED ASSESSMENT ORDER SHOULD NOT BE REVISED AS PER THE PROVISIONS OF SECTION 263 TO CORRECT THE ERRORS DISCUSSED IN THE PREVIOUS PAR A. LN RESPONSE TO THIS NOTICE, SHRI JAYDEEP CHAKRABORTY, ADVOCATE APPEARED ON 19.03.201 8 ALONGWITH VAKALATNAMA ON BEHALF OF THE ASSESSEE COMPANY AS ITS AUTHORIZED RE PRESENTATIVE, HEREINAFTER REFERRED AS THE LD. AR AND FILED A WRITTEN SUBMISSION. THIS WRI TTEN SUBMISSION IS REPRODUCED AS UNDER:- 'THAT THE MAIN GROUND OF OBJECTION FOR 263 IS REGAR DING THE INFLATED PURCHASES VALUE. THAT YOUR HONOUR, WE WOULD LIKE TO BRING TO YOUR NO TICE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE PRODU CED ALL THE RELEVANT DOCUMENTS BEFORE THE LD. A.D. RELATING TO ITS PURCH ASE AND EXPENDITURE. A DISALLOWANCE OF 25% ON PURCHASE AD HOC WITHOUT ANY EVIDENCE MAY KINDLY BE RECONSIDERED BY YOUR HONOUR FOR THIS PARTICULAR MAT TER OF THE ASSESSEE SHRI KARTICK BOSE (P AN- AOMPB2179K). TO SUBSTANTIATE OUR PLEA RELATING TO YOUR 263 NOTIC E, WE HAVE RELIED ON THE FOLLOWING CASE LAWS FOR YOUR HONOUR'S KIND PERUSAL. RELIANCE IS PLACED IN THE CASE OF CIT V. LALIT BAHSIN 290 ITR 245 (DEL) WHERE THE DELHI HIGH COURT DELETED THE ADDITION ON THE GROUND THAT A.O. ARRIVED AT CONCLUSION PRIMARILY ON IMAGINATIVE BASI S AND CONJECTURES RATHER THAN ON THE BASIS OF ANY RECORD OR BOOKS OF ACCOUNT AND HENCE DELETED THE ADDITION. RELIANCE IS ALSO PLACED IN THE CASE OF OMEGA ESTATES V S. ITO 106 .ITD 427 (CHENNAI) WHERE THE CHENNAI BENCH OF ITAT HELD THAT SINCE TH E REVENUE ITA NO.1027/KOL/2018 ASSESSMENT YEAR 2013-14 KARTICK BOSE VS PCIT, CEN-1,KOL. PAGE 3 COULD NOT PROVE THAT ACTUAL CONSIDERATION WAS MORE THAN THAT RECORDED BY THE ASSESSEE AND SINCE BOOKS OF ACCOUNT HAD NOT BE REJE CTED, THERE WAS NO BASIS OF MAKING THE ESTIMATED ADDITION. RELIANCE IS FURTHER PLACED IN THE CASE OF K.P. VARGHESE VS . ITO, ERNAKULAM AND ANOTHER 131 ITR 597 (SC) WHEREIN THE SUPREME COURT HELD THAT ASSESSEE MUST BE SHOWN TO HAVE RECEIVED MORE THAN W HAT IS DECLARED OR DISCLOSED ~Y HIM AS CONSIDERATION AND ONLY THEN ADD ITION CAN BE SUSTAINED. RELIANCE IS ALSO FURTHER PLACED IN THE CASE OF PIONEER HIMUDYOG P. LTD. VS. ASSISTANT COMMISSIONER OF INCOME-TAX (ITAT KOLKATA) I. T.A. NO. 338/KOL/2017 WHERE IT HAS BEEN OPINED THAT WITHOUT REJECTING THE BOOKS OF ACCOUNT, THE AD HOC DISALLOWANCE MADE IS NOT SUSTAI NABLE IN THE EYES OF LAW ESPECIALLY WHEN ASSESSEE HAS MAINTAINED BOOKS OF AC COUNT WITH SUPPORTING. RELIANCE IS ALSO FURTHER PLACED IN THE CASE OF BALBIR SINGH VS. ACIT (ITAT JAIPUR) WHERE IT HAS BEEN OPINED THAT EXPENSES CAN'T BE DI SALLOWED ON ESTIMATION BASIS WITHOUT VERIFICATION OF GENUINENES S. CONSIDERING THE ABOVE FACTS AND CIRCUMSTANCES IT IS VERY CLEAR THAT THE QUERIES RAISED BY YOU HAVE DULY BEEN CONSIDERED BY THE A.G. AT THE TIME OF MAKING ASSESSMENT U/S 143(3), THEREFORE, YOUR HONOUR IS RE QUESTED TO DROP THE PROCEEDINGS U/S :?63 OF THE I.T. ACT 1961.' 4. IN THE ABOVE WRITTEN SUBMISSION, THE LD. AR HAS MAINLY ARGUED AGAINST THE AD HOC DISALLOWANCE OF PURCHASES CONTENDING THAT DURING TH E COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE PRODUCED ALL RELEVANT DOCU MENTS BEFORE THE LD. AF) RELATING TO ITS PURCHASES AND EXPENDITURES AND HENCE, AS PLE ADED BY HIM, A DISALLOWANCE OF 25% OF PURCHASES ON AD HOC BASIS WITHOUT ANY EVIDEN CE MAY BE RECONSIDERED. IN SUPPORT OF HIS ARGUMENT, THE LD. AR HAS REFERRED TO CERTAIN JUDGMENTS AS MENTIONED IN THE ABOVE WRITTEN SUBMISSION. HERE, THE PROCEEDING U/S 263 HAS NOT BEEN INITIATED TO MAKE AD HOC DISALLOWANCE OUT OF PURCHASES WITHOUT A NY EVIDENCE BUT DUE TO NOT MAKING ANY ENQUIRY OR VERIFICATION BY THE AO, EVEN AFTER MAKING AN OBSERVATION IN THE ASSESSMENT ORDER THAT PURCHASES ARE INFLATED. DUE TO NOT MAKING REQUISITE ENQUIRY OR VERIFICATION OF THE GENUINENESS OF PURCHASES SHO WN BY THE ASSESSEE, THE ASSESSMENT ORDER PASSED BY THE AO HAS BECOME DEEMED TO BE ERRO NEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THEREFORE, NOW THE AO IS R EQUIRED TO MAKE ENQUIRY FROM THE PARTIES FROM WHOM PURCHASES HAVE BEEN SHOWN E QUANT ITY OF CLOTHES SOLD, RATE OF CLOTHES SOLD B THEM TO THE ASSESSEE CORN ANY AND TH E GENUINENESS OF SUCH SALE MADE BY THEM TO THE ASSESSEE COMPANY AND IF GENUINENESS OF SALES MADE BY THEM TO THE ASSESSEE COMPANY IS NOT VERIFIED DUE TO NON-TRACEAB ILITY OF SUCH PARTIES OR RATE OR QUANTITY OF SUCH CLOTHES SOLD BY THESE PARTIES TO T HE ASSESSEE COMPANY IS FOUND TO BE INFLATED, AN APPROPRIATE PERCENTAGE OF SUCH PURCHAS ES SHOULD BE DISALLOWED BY THE AO FOLLOWING THE DECISION OF VIJAYE PROTEIN (SUPRA) IN WHICH 25% OF PURCHASES WERE DISALLOWED DUE TO PURCHASE PARTIES COULD NOT BE TRA CED OUT AND GENUINENESS OF PURCHASE BILLS COULD NOT BE VERIFIED. THEREFORE, IN THIS CASE ALSO, THE AO IS DIRECTED TO MAKE NECESSARY ENQUIRIES AND VERIFICATION OF PURCHA SES TO FIND OUT ABOUT THE GENUINENESS OF PURCHASES-AND THE BILLS SHOWN IN THE IR NAMES AND THEN, DEPENDING UPON THE RESULT OF ENQUIRIES, MAKE APPROPRIATE DISA LLOWANCE OUT OF PURCHASES KEEPING IN VIEW THE RATES LAID DOWN BY GUJARAT HIGH COURT I N CASE OF VIJAY PROTEINS (SUPRA). ITA NO.1027/KOL/2018 ASSESSMENT YEAR 2013-14 KARTICK BOSE VS PCIT, CEN-1,KOL. PAGE 4 3. WE HAVE HEARD RIVAL PLEADINGS AGAINST AND IN SUP PORT OF THE PCITS ACTION UNDER CHALLENGE ASSUMING SEC.263 REVISION JURISDICT ION. CASE FILE PERUSED. THERE CAN HARDLY BE ANY DISPUTE ABOUT THE SETTLED LEGAL PROPO SITION IN MALABAR INDUSTRIAL CO. LTD. VS. COMMISSIONER OF INCOME TAX (2000) 243 ITR 83 (SC) AND COMMISSIONER OF INCOME TAX VS. MAX INDIA (2007) 295 ITR 282 (SC) THAT BEFORE AN ASSESSMENT I S HELD AS ERRONEOUS CAUSING PREJUDICE TO INTEREST OF THE R EVENUE, BOTH THESE CONDITIONS HAVE TO BE SIMULTANEOUSLY SATISFIED. AND THAT AN ASSESSM ENT CANNOT BE TREATED AS AN ERRONEOUS ONE CAUSING PREJUDICE TO INTEREST OF THE REVENUE IN CASE THE ASSESSING OFFICER HAS TAKEN ONE OF THE POSSIBLE VIEWS. WE KEE P IN MIND THIS SETTLED LEGAL PROPOSITION AND PROCEED TO DEAL WITH THE FACTS OF T HE CASE. WE REITERATE THAT THE PCITS REVISION DIRECTIONS QUOTED THE CATENA OF CASE LAW ( SUPRA) THAT BOGUS PURCHASE HAVE TO BE DISALLOWED @ 25% THAT @ 5% AS PER REGULAR ASSESS MENT IN QUESTION. WE NOTICE THAT THE CASE RECORDS SPEAK OTHERWISE. THIS ASSESSEE IS STATED TO BE AN INDIVIDUAL / PROPRIETOR OF M/S JAYASHRI TRADING CO. AND M/S ANNE TTE ENTERPRISE. HE TRADED IN HOSIERY GOODS & FABRICS. HE HAD ALSO ACTED AS DIREC TOR OF OTHER GROUP CONCERN M/S NETWORK INDUSTRIES LTD. IT TRANSPIRES FROM THE REGU LAR ASSESSMENT DATED 24.03.2016 THAT THE ASSESSING OFFICER FOUND THE ASSESSEE TO HA VE SHOWN VERY LOWER NET PROFIT AGAINST VOLUMINOUS GROSS RECEIPT IN ITS PROFIT AND LOSS ACCOUNT. HE OBSERVED THAT THE ASSESSEES PROPRIETOR CONCERN WERE ACTUALLY DUMMY C ONCERNS FOR INFLATED PURCHASES AND SALES OF M/S NETWORK INDUSTRIES LTD. AND THAT T HE ASSESSEES ENTIRE SALE-PURCHASE TRANSACTIONS WERE WITH THE SAID GROUP CONCERN ONLY. HE THEREFORE PROCEED TO DISALLOW 5% OF THE EXPENDITURE OF 84,90,060/- COMING TO 4,23,503/- IN THE COURSE OF ASSESSMENT. 4. LEARNED CIT-DR VEHEMENTLY SUPPORTED THE PCITS ACTION THAT THE IMPUGNED DISALLOWANCE HAS TO BE MADE @ 25% THAN @ 5% GOING B Y THE HIS FOREGOING REASONING. WE FIND NO MERIT IN REVENUES INSTANT ARGUMENT. WE MAKE IT CLEAR THAT THE CASE LAW QUOTED AT THE REVENUES BEHEST DEALS WITH BOGUS PUR CHASES WHEREAS WE ARE DEALING WITH AN INSTANCE OF ALLEGED INFLATED PURCHASES BETW EEN GROUP CONCERNS FOR THE PURPOSE AND REDUCING GROSS PROFIT RATE. THERE IS FURTHER NO QUARREL ASSESSEES SALE PURCHASE ITA NO.1027/KOL/2018 ASSESSMENT YEAR 2013-14 KARTICK BOSE VS PCIT, CEN-1,KOL. PAGE 5 FIGURES BETWEEN THE GROUP CONCERN HAVE BEEN ACCEPTE D PER SE SINCE THE ASSESSING OFFICER PROCEEDED TO DISALLOW AN ESTIMATED 5% INFLA TED AMOUNT ONLY. WE CONCLUDE IN THIS FACTUAL BACKDROP THAT THE PCIT HAS ERRED IN LA W AND ON FACTS IN HOLDING THE ASSESSING OFFICERS REGULAR ASSESSMENT TO THIS EFFE CT AS AN INSTANCE OF OUTRIGHT BOGUS THAN INFLATED PURCHASES. WE ACCORDING GO BY FOLLOWI NG SETTLED LEGAL PROPOSITION TO HOLD THAT PCIT HAS ERRED IN LAW AND ON FACTS IN ASS UMING HIS SEC. 263 REVISION JURISDICTION. THE SAME STANDS REVERSED. ORDERED ACC ORDINGLY. 5. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 22/01/2020 SD/- SD/- ( ') () ') (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS * - 22/01/2020 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-KARTICK BOSE, C/O NETWORK INDUSTRIES LTD ., 171/1, MAHATMA GANDHI ROAD, BU RRABAZAR, KOLKAT-007 2. /RESPONDENT-PCIT, CENTRAL-1, AAYAKAR BHAWAN, POORVA , 110, SHANTI PALLY, E.M.BYPA SS, 3 RD FLOOR, KOLKATA-107 3. - . / CONCERNED CIT 4. . - / CIT (A) 5. / ))- , - /DR, ITAT, KOLKATA 6. 3 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ -,