M/s. Green Touch Vincom Pvt. Ltd., , Kolkata V. PCIT, Central - 1, Kolkata , Kolkata

ITA 1028/KOL/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7004 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 16-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAUMITRA CHOUDHURY RESPONDE
• Assessee Lawyers: PASS RD FLOOR KOLKTA
• Keywords: Bogus purchase; Assessment record; Set aside
• Section: 143(3); 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1028/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S GREEN TOUCH VINCOM PVT. LTD., 119A, MAHATMA GANDHI ROAD, BURRABAZAR KOLKATA-700 007 [ PAN NO.AADCG 9317 N ] / V/S . PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL-1, AAYAKAR BHAWAN POORVA, 110, SHANTI PALLY, E.M. BYPASS, 3 RD FLOOR KOLKTA- 700 107 /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI SAUMITRA CHOUDHURY, ADVOCATE /BY RESPONDENT SHRI IMOKABA JAMAIR, CIT-DR /DATE OF HEARING 18-08-2020 /DATE OF PRONOUNCEMENT 10-09-2020 /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 CASE NO.PCIT(C)-1/SEC.263/2017-18/10057-60, INVOLV ING PROCEEDINGS U/S 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. WITH THE ABLE ASSISTANCE OF BOTH THE LEARNED REP RESENTATIVE(S), WE NOTICE FROM A PERUSAL OF THE CASE FILE THAT THE PCIT HAS EXERCISE D HIS SEC. 263 REVISION JURISDICTION TO ITA NO.1028/KOL/2018 ASSESSMENT YEAR 2013-14 M/S GREEN TOUCH VINCOM PVT. LTD. VS PCIT, CE NTRAL-1, KOL. PAGE 2 HOLD THAT THE REGULAR ASSESSMENT IN QUESTION DATED 24.03.2016 FRAMED IN ASSESSEES CASE AS AN ERRONEOUS ONE CAUSING PREJUDICE TO INTER EST OF THE REVENUE. THE SAID ASSESSMENT ORDER REVEALS THAT THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD BEEN ACTUALLY BEEN PUT UP FOR THE PURPOSE OF INFLATING P URCHASE AND SALES OF M/S. NETWORK INDUSTRIES LTD. HE THUS DISALLOWED / ADDED 5% OF IT S CARRIAGE AND WAGES EXPENSES OF 80,80,34,415;- COMING TO 4,40,672/-. THE PCIT IS REVISION ORDER UNDER CHALLE NGE INCLUDE THAT THE ASSESSING OFFICER HAS NOT PROPERLY EXAMINED AND VERIFIED THE CORRESPONDING FACTS WHICH RENDERS THE SAME AS ERRON EOUS CAUSING PREJUDICE INTEREST TO THE REVENUE AS UNDER:- 2. THE ABOVE ASSESSMENT ORDER HAS BEEN EXAMINED BY ME ALONG WITH THE ASSESSMENT RECORD. AS FOUND BY ME FROM THE PROFIT A ND LOSS ACCOUNT, THE ASSESSEE HAS SHOWN PURCHASE OF RS.1,52,00,46,751/- AND SALE OF RS.1,52,83,74,383/-. IN THE ASSESSMENT ORDER, THE A O HAS GIVEN A FINDING THAT PURCHASE OF THE PROPRIETOR CONCERN IS INFLATED BUT NO FURTHER ENQUIRY IN THE GENUINENESS OF THE PURCHASE DECLARED BY THE ASSESSE E, HAS BEEN MADE. IN CASE OF VIJAY PROTEINS LTD. VS. CIT (2015) 58 TAXMANN. C OM,44, THE HON'BLE GUJARAT HIGH COURT HAS CONFIRMED THE DECISION OF IT AT, AHMEDABAD DISALLOWING 25% OF PURCHASE THAT WAS FOUND TO BE IN FLATED BY SHOWING HIGHER PURCHASE PRICE THROUGH FICTITIOUS INVOICES. IN THE ASSESSMENT RECORD, ONLY PURCHASE AND SALE LEDGER ARE AVAILABLE. NO FURTHER DETAILS OR DOCUMENTS ARE AVAILABLE RELATING TO ENQUIRY MADE BY THE AO TO FIN D OUT ABOUT THE GENUINENESS OF PURCHASE SHOWN BY THE ASSESSEE. IF THE AO HAD IN FORMATION ABOUT THE INFLATION OF PURCHASE IN CASE OF THE ASSESSEE, HE S HOULD HAVE INVESTIGATED ABOUT THE GENUINENESS .OF ENTIRE PURCHASES SHOWN BY THE A SSESSEE AND THEN NECESSARY DECISION SHOULD HAVE BEEN TAKEN BY HIM FOR DISALLOW ING AN APPROPRIATE PERCENTAGE OF PURCHASE DEPENDING ON THE EXTENT OF T HE 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 PREJUDICIAL TO THE INTEREST OF REVENUE IN VIEW OF CLAUSE (A) OF EXPLANATION 2 OF S ECTION 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 I T TO EXPLAIN AS TO WHY THE ABOVE MENTIONED ASSESSMENT ORDER SHOULD NOT BE REVI SED AS PER THE PROVISIONS OF SECTION 263 TO CORRECT THE ERRORS DISCUSSED IN T HE PREVIOUS PARA. IN RESPONSE TO THIS NOTICE, SHRI JAYDEEP CHAKRABORTY, ADVOCATE APPEARED ON 19.03.2018 ALONGWITH VAKALATNAMA ON BEHALF OF THE ASSESSEE COM PANY AS ITS AUTHORIZED REPRESENTATIVE, HEREINAFTER REFERRED AS THE LD. AR AND FILED A WRITTEN SUBMISSION. THIS WRITTEN SUBMISSION IS REPRODUCED A S UNDER:- ITA NO.1028/KOL/2018 ASSESSMENT YEAR 2013-14 M/S GREEN TOUCH VINCOM PVT. LTD. VS PCIT, CE NTRAL-1, KOL. PAGE 3 '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 AN Y EVIDENCE MAY KINDLY BE RECONSIDERED BY YOUR HONOUR FOR THIS PART ICULAR MATTER OF THE ASSESSEE M/S.GREEN TOUCH VINCOM PVT. LTD. (PAN- AAA DCG 9317N). TO SUBSTANTIATE OUR PLEA RELATING TO YOUR 263 NOTIC E, WE HAVE RELIED ON THE FOLLOWING CASE LAWS FOR YOUR HONOUR'S KIND PERU SAL. 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 IMAGIN ATIVE BASIS 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 THE REVENUE COULD NOT PROVE THAT ACTUAL CONSIDERAT ION WAS MORE THAN THAT RECORDED BY THE ASSESSEE AND SINCE BOOKS OF AC COUNT HAD NOT BE REJECTED, THERE WAS NO BASIS OF MAKING THE ESTIMATE D 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 RECE IVED MORE THAN WHAT IS DECLARED OR DISCLOSED ~Y HIM AS CONSIDERATION AN D ONLY THEN ADDITION CAN BE SUSTAINED. RELIANCE IS ALSO FURTHER PLACED IN THE CASE OF BALBIR SINGH VS. ACIT (ITAT JAIPUR ) WHERE IT HAS BEEN OPINED THAT EXPENSES CANT BE DISALLOWED ON ESTIMATION BASIS WITHOUT VERIFICATIO N OF GENUINENESS. 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 HO NOUR IS REQUESTED TO DROP THE PROCEEDINGS U/S 263 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 DU RING THE COURSE OF ASSESSMENT PROCEEDING, THE ASSESSEE PRODUCED ALL RE LEVANT DOCUMENTS BEFORE THE LD. AO RELATING TO ITS PURCHASES AND EXPENDITUR ES AND HENCE, AS PLEADED BY HIM, A DISALLOWANCE OF 25% OF PURCHASES ON AD HOC B ASIS WITHOUT ANY EVIDENCE MAY BE RECONSIDERED. IN SUPPORT OF HIS ARGUMENT, TH E LD. AR HAS REFERRED TO CERTAIN JUDGMENTS AS MENTIONED IN THE ABOVE WRITTEN SUBMISSION. HERE, THE ITA NO.1028/KOL/2018 ASSESSMENT YEAR 2013-14 M/S GREEN TOUCH VINCOM PVT. LTD. VS PCIT, CE NTRAL-1, KOL. PAGE 4 PROCEEDING U/S 263 HAS NOT BEEN INITIATED TO MAKE A D HOC DISALLOWANCE OUT OF PURCHASES WITHOUT ANY EVIDENCE BUT DUE TO NOT MAKIN G ANY ENQUIRY OR VERIFICATION BY THE AO, EVEN AFTER MAKING AN OBSERV ATION IN THE ASSESSMENT ORDER THAT PURCHASES ARE INFLATED. DUE TO NOT MAKI NG REQUISITE ENQUIRY OR VERIFICATION OF THE GENUINENESS OF PURCHASES SHOWN BY THE ASSESSEE, THE ASSESSMENT ORDER PASSED BY THE AO HAS BECOME DEEMED TO BE ERRONEOUS IN SO FAR AS PREJUDICIAL TO THE INTEREST OF REVENUE. THER EFORE, NOW THE AO IS REQUIRED TO MAKE ENQUIRY FROM THE PARTIES FROM WHOM PURCHASE S HAVE BEEN SHOWN E QUANTITY OF CLOTHES SOLD, RATE OF CLOTHES SOLD B TH EM TO THE ASSESSEE CORN ANY AND THE GENUINENESS OF SUCH SALE MADE BY THEM TO THE AS SESSEE COMPANY AND IF GENUINENESS OF SALES MADE BY THEM TO THE ASSESSEE C OMPANY IS NOT VERIFIED DUE TO NON-TRACEABILITY OF SUCH PARTIES OR RATE OR QUAN TITY OF SUCH CLOTHES SOLD BY THESE PARTIES TO THE ASSESSEE COMPANY IS FOUND TO B E INFLATED, AN APPROPRIATE PERCENTAGE OF SUCH PURCHASES SHOULD BE DISALLOWED B Y THE AO FOLLOWING THE DECISION OF VIJAYE PROTEIN (SUPRA) IN WHICH 25% OF PURCHASES WERE DISALLOWED DUE TO PURCHASE PARTIES COULD NOT BE TRACED OUT AND GENUINENESS OF PURCHASE BILLS COULD NOT BE VERIFIED. THEREFORE, IN THIS CAS E 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 APPROP RIATE DISALLOWANCE OUT OF PURCHASES KEEPING IN VIEW THE RATES LAID DOWN BY GU JARAT HIGH COURT IN CASE OF VIJAY PROTEINS (SUPRA). 5. IN VIEW OF MY ABOVE DECISION, THE ASSESSMENT ORD ER DATED 24.03.2016 IS SET ASIDE AND RESTORED TO THE FILE OF THE ASSESSEE TO T HE EXTENT OF MAKING ENQUIRIES AND VERIFICATION IN RESPECT OF PURCHASES IN THE MAN NER AS DISCUSSED IN PREVIOUS PARA NO.4 AND THEN THE AO SHOULD PASS A FRESH ASSESSMENT ORD ER TAKING INTO ACCOUNT THE FINDING OF ENQUIRIES / VERIFICATION AND FOLLOWING OF MY DIRECTIONS AS DISCUSSED IN PREVIOUS PARA. ADDITION MADE ON ACCOUN T OF DISALLOWANCE OF EXPENSES IN ORIGINAL ASSESSMENT ORDER SHALL REMAIN INTACT. 6. IN THE RESULT, THE ORIGINAL ASSESSMENT ORDER PAS SED U/S.143(3) FOR A.Y 2013- 14 DATED 24.03.2016 IS SET ASIDE AND RESTORED TO TH E FILE OF THE AO FOR MAKING NECESSARY ENQUIRIES / VERIFICATION RELATING TO GENU INENESS OF PURCHASES AND CLOSING STOCK AND PASSING OF FRESH ASSESSMENT ORDER WITH ADDITIONS MADE IN ORIGINAL ASSESSMENT ORDER REMAINING INTACT AS PER M Y DIRECTION IN PREVIOUS PARA. 3. IT IS IN THIS BACKDROP OF FACTS THAT THE ASSESSE E HAS CHALLENGED CORRECTNESS OF PCITS FOREGOING REVISION ACTION. THE REVENUES CAS E ON THE OTHER HAND IS THAT THE PCIT HAS RIGHTLY INVOKED SEC. 263 PROCEEDINGS BY PI N-POINTING THE ABOVE NARRATED LACK OF PROPER ENQUIRY VERIFICATION QUA THE ASSESSEES PURCHASE / SALES. ITA NO.1028/KOL/2018 ASSESSMENT YEAR 2013-14 M/S GREEN TOUCH VINCOM PVT. LTD. VS PCIT, CE NTRAL-1, KOL. PAGE 5 4. WE FIND NO MERIT IN THE PCITS REVISION ACTION U NDER CHALLENGE STAND BEFORE US. CASE FILE SUGGESTS THAT THE PCIT HAD INVOKED HIS SI MILAR REVISION ACTION IN ONE SH KARTICK BOSES CASE, FOR THE VERY ASSESSMENT YEAR O N THE SAME LINES WHO IS ALSO PART OF M/S NETWORK INDUSTRIES LTD GROUP. THE ASSESSING OFF ICER THEREIN HAD ALSO DISALLOWED 5% OF THE EXPENSES WHICH WAS REVISED IN 263 PROCEED INGS. THIS TRIBUNALS CO-ORDINATE BENCHS DECISION IN ITA NO.1027/KOL/2018 DECIDED ON 22.01.2020 HAS REVERSED THE SAID REVISION ACTION AS UNDER:- 3 . WE HAVE HEARD RIVAL PLEADINGS AGAINST AND IN SUPP ORT OF THE PCITS ACTION UNDER CHALLENGE ASSUMING SEC.263 REVISION JURISDICT ION. CASE FILE PERUSED. THERE CAN HARDLY BE ANY DISPUTE ABOUT THE SETTLED L EGAL PROPOSITION 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 IS HELD AS ERRONEOUS CAUSING P REJUDICE TO INTEREST OF THE REVENUE, BOTH THESE CONDITIONS HAVE TO BE SIMULTANE OUSLY SATISFIED. AND THAT AN ASSESSMENT CANNOT BE TREATED AS AN ERRONEOUS ONE CA USING PREJUDICE TO INTEREST OF THE REVENUE IN CASE THE ASSESSING OFFICER HAS TA KEN ONE OF THE POSSIBLE VIEWS. WE KEEP IN MIND THIS SETTLED LEGAL PROPOSITI ON AND PROCEED TO DEAL WITH THE FACTS OF THE 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 ASSESSMENT 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 ANNETTE ENTERPR ISE. HE TRADED IN HOSIERY GOODS & FABRICS. HE HAD ALSO ACTED AS DIRECTOR OF OTHER GROUP CONCER N M/S NETWORK INDUSTRIES LTD. IT TRANSPIRES FROM THE REGULAR ASSESSMENT DATED 24.03.2016 THAT THE ASSESSING OFFICER FOUND THE ASS ESSEE TO HAVE SHOWN VERY LOWER NET PROFIT AGAINST VOLUMINOUS GROSS RECEIPT I N ITS PROFIT AND LOSS ACCOUNT. HE OBSERVED THAT THE ASSESSEES PROPRIETOR CONCERN WERE ACTUALLY DUMMY CONCERNS FOR INFLATED PURCHASES AND SALES OF M/S NE TWORK INDUSTRIES LTD. AND THAT THE ASSESSEES ENTIRE SALE-PURCHASE TRANSACTIO NS WERE WITH THE SAID GROUP CONCERN ONLY. HE THEREFORE PROCEED TO DISALLOW 5% O F THE EXPENDITURE OF 84,90,060/- COMING TO 4,23,503/- IN THE COURSE OF ASSESSMENT. 4 . LEARNED CIT-DR VEHEMENTLY SUPPORTED THE PCITS AC TION 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 AR GUMENT. WE MAKE IT CLEAR THAT THE CASE LAW QUOTED AT THE REVENUES BEHEST DE ALS WITH BOGUS PURCHASES WHEREAS WE ARE DEALING WITH AN INSTANCE OF ALLEGED INFLATED PURCHASES BETWEEN GROUP CONCERNS FOR THE PURPOSE AND REDUCING GROSS P ROFIT RATE. THERE IS FURTHER NO QUARREL ASSESSEES SALE PURCHASE FIGURES BETWEEN THE GROUP CONCERN HAVE BEEN ACCEPTED PER SE SINCE THE ASSESSING OFFICER PR OCEEDED TO DISALLOW AN ESTIMATED 5% INFLATED AMOUNT ONLY. WE CONCLUDE IN T HIS FACTUAL BACKDROP THAT THE PCIT HAS ERRED IN LAW AND ON FACTS IN HOLDING T HE ASSESSING OFFICERS REGULAR ASSESSMENT TO THIS EFFECT AS AN INSTANCE OF OUTRIGHT BOGUS THAN INFLATED ITA NO.1028/KOL/2018 ASSESSMENT YEAR 2013-14 M/S GREEN TOUCH VINCOM PVT. LTD. VS PCIT, CE NTRAL-1, KOL. PAGE 6 PURCHASES. WE ACCORDING GO BY FOLLOWING SETTLED LEG AL PROPOSITION TO HOLD THAT PCIT HAS ERRED IN LAW AND ON FACTS IN ASSUMING HIS SEC. 263 REVISION JURISDICTION. THE SAME STANDS REVERSED. ORDERED ACCORDINGLY . 5. NO REBUTTAL QUA THE FOREGOING CLINCHING ASPECT HAS CAME FROM THE D EPARTMENTS SIDE. WE THEREFORE HOLD THAT PCITS IMPUGNED REVISI ON ACTION IS NOT SUSTAINABLE IN THE EYES OF LAW & REVERSE ORDER UNDER CHALLENGE DATED 2 6.03.2016. THE REGULAR ASSESSMENT DATED 24.03.2016 STANDS RESTORED AS A NECESSARY COR OLLARY. 6. THIS ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 10/09/2020 SD/- SD/- ( ') () ') (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS * - 10/09/2020 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S GREEN TOUCH VINCOM PVT. LTD., 119A, MAHTMA GANDHI ROAD, BURRABA ZAR KOLKATA-700 007 2. /RESPONDENT-PCIT, CENTRAL-1, AYAKAR BHAWAN POORVA, 110, SHANTI PALLY, E.M.BYPASS, 3 RD FLOOR KOLKATA-107 3. - . / CONCERNED CIT 4. . - / CIT (A) 5. ))- , - /DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ -,