I.T.O Wd - 1(2),Hooghly, Hooghly V. Sri Kalin Dutta, Hooghly

ITA 1055/KOL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 4775 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 26-04-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 03-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINABANDHU NASKAR J
• Assessee Lawyers: A K TIBREWAL
• Keywords: Bogus purchase; Unexplained cash credit; Principle of natural justice
• Section: 143(3); 133(6); 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO. 1055 / KOL / 2013 ASSESSMENT YEAR :2008-09 ITO WARD-1(2), HOOGHLY, AAYAKAR BHAWAN, KHADINAMORE, G.T. ROAD, HOOGHLY-712101 V/S . SRI KALIN DUTTA SWARUP NAGAR (LANE-1) DANKUNI (P.O), DIST. HOOGHLY-712311 [ ADAPD 2502 R ] /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI DINABANDHU NASKAR, JCIT-DR /BY RESPONDENT SHRI A.K. TIBREWAL, FCA /DATE OF HEARING 26-04-2016 /DATE OF PRONOUNCEMENT 10-06-2016 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- THIS APPEAL BY THE REVENUE IS ARISING OUT OF ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-XXVI-KOLKATA IN APPEAL NO.249/CIT(A)- XXXVI/KOL/HG/2010-11 DATED 14.02.2013. ASSESSMENT WAS FRAMED BY ACIT CIRCLE-1, HOOGHLY U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 07.12.2010 FOR ASSESSMENT YEAR 2008-09. 2. AT THE VERY OUTSET, WE OBSERVE A DELAY OF AS MAN Y AS 14 DAYS IN THE FILING OF ITS APPEAL BY REVENUE, WHICH THROUGH STANDS SUITABLY EX PLAINED PER ARE ACCOMPANIED AFFIDAVIT BY THE CONCERNED OFFICIAL OF THE REVENUE. LD. AR FOR ASSESSEE SUBMITTED THAT CONSIDERING DELAY HE SHOULD NOT BE HAVING ANY OBJEC TION TO THE BENCH IF CONSIDERING THE DELAY OF CONDONATION. THIS, IN OUR CONSIDERED OPINI ON, ON THE FACTS AND CIRCUMSTANCES OF THE CASE, I.E., IN THIS CASE DESERVES TO BE CONSIDE RED AND SAME IS CONDONED. ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 2 SHRI A.K.TIBREWAL, LD. AUTHORIZED REPRESENTATIVE AP PEARED ON BEHALF OF ASSESSEE AND SHRI DINABANDHU NASKAR, LD. DEPARTMENTAL REPRESENTA TIVE APPEARED ON BEHALF OF REVENUE. 3. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN ALLOWING RELIEF ON ACCOUNT OF CARRIAGE INWARD F OR RS.2,06,080/- 2. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) IN DELETING RS.29,11,129/- ON ACCOUNT OF BOGUS PURCHASES 3. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) OUGHT NOT TO HAVE RELIEF MUCH ON BANKING TRANSACTIONS DESPITE THE UNKNOWN OR BOGUS NATURE OF IDENTITY OF THE SUPPLIERS, IN THE LIGHT O F THE JURISDICTIONAL HIGH COURT DECISIONS IN CIT-V-PRECISION FINANCE (P) TD [208 IT R 254] OR IN CIT-V-UNITED COMMERCIAL & INDUSTRIAL CO (P) LTD [187 ITR 596] 4. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) HAS ERRED IN DELETING RS.2,00,547/- ON ACCOUNT OF UNDISCLOSE D INVESTMENT THROUGH PURCHASES 5. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) HAS APPARENTLY VIOLATED RULE 46A OF IT RULES, 1962 IN A DMITTING FRESH EVIDENCE ON THE ISSUE OF UNDISCLOSED INVESTMENT IN THE LIGHT OF THE LD. TRIBUNALS DECISION IN ITO- V-ELECTRICAL MFG. CO. LTD. [ ITA NO.638/KOL/2012 OR 28 TAXMANN.COM 98 (KOL)] 6. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) HAS ERRED IN DELETING RS.3,66,182/- ON ACCOUNT OF BOGUS SUND RY CREDITORS IN VIOLATION OF THE HON'BLE CALCUTTA HIGH COURTS DECISIONS (SUPRA), LA YING TOO MUCH EMPHASIS ON VAT RECORDS. 7. THAT, ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT THE ASSESSEE GOT FAIR OPPORTUN ITY OF HEARING BEFORE PASSING OF THE ASSESSMENT ORDER AND SO, THE LATTER CANNOT T AKE PLEA OF DENIAL OF NATURAL JUSTICE IN THE LIGHT OF THE HON'BLE CALCUTTA HIGH C OURT DECISION IN HINDUSTHAN TOBACCO COMPANY V- CIT IN [2012] [7 TAXMANN.COM 15 5 (CAL)] 4. THE FIRST ISSUE RAISED BY REVENUE IN THIS APPEAL IS THAT LD. CIT(A) ERRED IN RESTRICTING THE ADDITION MADE BY THE AO FROM RS. 4, 12,160.00 TO RS. 2,06,080.00 ON ACCOUNT OF CARRIAGE INWARD EXPENSES. 5. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IN THE PRESENT CASE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF RE-SELLIN G OF STONE CHIPS, SAND & BUILDING MATERIALS AND ALSO EARNED INCOME FROM TRUCKS UNDER THE NAME AND STYLE M/S K.D. ENTERPRISE. DURING THE YEAR UNDER CONSIDERATION AS SESSEE FILED ITS RETURN OF INCOME ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 3 SHOWING AN INCOME OF RS.5,30,632/- UNDER THE BUSINE SS HEAD. THE ASSESSEE DURING THE YEAR HAS CLAIMED CARRIAGE INWARD CHARGES AMOUNTING TO RS.8,24,320/-. THE ASSESSEE MAINTAINED HANDMADE VOUCHERS CONTAINING THE DETAIL OF VEHICLE NUMBER IN SUPPORT OF ITS EXPENSES. IT WAS OBSERVED BY THE ASSESSING OFFICER THAT THERE WAS NO DETAIL REGARDING THE NAME AND ADDRESS OF THE PARTY TO WHOM PAYMENT H AS BEEN MADE HENCE THESE TRANSACTIONS WERE NON VERIFIABLE. IN RESPONSE TO TH E NOTICE THE ASSESSEE REITERATED THAT IT IS NOT POSSIBLE TO RECORD ALL THE DETAILS IN THE VO UCHER. THEREFORE THE AO ASSUMED THAT THESE VOUCHERS INCOMPLETE AND SO VERIFICATION IS NO T POSSIBLE. ACCORDINGLY THE AO ON AD HOC BASIS DISALLOWED 50% OF CARRIAGE INWARD EXPENSES B Y MAKING ADDITION TO THE TOTAL INCOME OF THE ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D.CIT (A). BEFORE LD. CIT(A) ASSESSEE SUBMITTED THE COPIES OF THE VOUCHERS AND E XPLAINED THAT CARRIAGE INWARD CHARGES WERE PAID DIRECTLY TO THE DRIVERS AND HELPE RS IN CASH. ALL THE VOUCHERS CONTAIN THE NAME OF THE DRIVERS AS WELL AS TRUCK NUMBERS SO DISALLOWANCE OF 50% OF THE TOTAL EXPENSE IS HARDSHIP ON IT. LD.CIT(A) KEEPING THE VO LUME OF TRANSACTION OF THE BUSINESS OF THE ASSESSEE RESTRICTED THE DISALLOWANCE TO 25% OF THE TOTAL CARRIAGE INWARD EXPENSES CLAIMED BY OBSERVING AS UNDER :- 4.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE A/R A ND PERUSED THE ASSESSMENT ORDER AND EVIDENCE ON RECORD. THERE IS NO DISPUTE T O THE ACT OF PAYING CARRIAGE INWARD CHARGES IN CASH BELOW RS.50,000/- TO THE DRI VERS WHO CARRIED THE MATERIALS IN TRUCKS FOR UNLOADING TO THE APPELLANT S WORK SITE. A FEW VOUCHERS DEPICTING THEREIN NAMES OF THE RECIPIENT OF CARRIAG E INWARD CHARGES AND TRUCK NOS. WERE FILED. HOWEVER, THE APPELLANT HAS FAIRLY ADMITTED THAT SOME DISALLOWANCE IN THIS RESPECT IS WARRANT. CONSIDERIN G THE VOLUME OF EXPENSES AND NON-VERIFIABLE NATURE OF VOUCHERS, AD HOC DISALLOWANCE ON ESTIMATE BASIS @ 25% OF THE SAID EXPENDITURE WOULD BE JUSTIFIED AND REAS ONABLE. I, THEREFORE UPHOLD THE DISALLOWANCE TO THE EXTENT OF RS.2,06,080/- OUT OF THE DISALLOWANCE OF RS.4,12,160/- MADE BY THE AO. THE APPELLANT THUS GE TS RELIEF OF RS.2,06,080/- [RS.4,12,160 RS.2,06,080]. GROUND NO.2 IS PARTLY ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD.CIT(A), REVENUE IS IN APPEAL BEFORE US. 7. BEFORE US LD. DR HAS SUBMITTED THAT THERE WERE N O SIGNATURES OF CASHIER, ACCOUNTANT AS WELL AS PROPRIETOR ON THE VOUCHERS BU T SIMPLY PUTTING THUMB IMPRESSION WITHOUT MENTIONING THE NAME OF THE PERSON TO WHOM T HE PAYMENT HAS BEEN MADE. THERE WERE ALSO MISMATCH IN THE AMOUNT WRITTEN IN W ORDS AND NUMERIC. THE LD. DR RELIED UPON THE ORDER OF AO. ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 4 ON THE OTHER HAND THE LD. AR HAS FILED A PAPER BOOK WHICH IS RUNNING PAGES FROM 1 TO 186 AND SUBMITTED THAT NORMALLY TRUCK DRIVERS DO NO T PROVIDE PROPER BILLS AND SOME OF THEM DO NOT KNOW EVEN HOW TO SIGN ON VOUCHERS AND H E RELIED UPON THE ORDER OF LD. CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE BEFORE US. FROM THE AFORESAID DISCUSSION WE FIND THAT THE AO HAS DISALLOWED CARRIAGE INWARD EXPENSE AMOUNTING TO 50% OF THE TOT AL EXPENSE CLAIMED BY THE ASSESSEE DUE TO NON AVAILABILITY OF SUPPORTING EVID ENCE. HOWEVER THE LD.CIT(A) HAS REDUCED THE EXPENSE DISALLOWANCE FROM 50% TO 25% CO NSIDERING THE VOLUME OF THE EXPENSES AND NON-VERIFIABLE NATURE OF VOUCHERS. NOW THE QUESTION BEFORE US IS TO ASCERTAIN WHETHER THE ACTION OF THE LD.CIT(A) FOR D ELETING THE ADDITION MADE BY THE AO IS CORRECT AND COMMENSURATE WITH THE VOLUME OF THE BUS INESS OF THE ASSESSEE. FROM THE FACTS OF THE CASE WE FIND THAT THE AO HAS DISALLOWE D THE EXPENSES ON ESTIMATED BASIS AS THE SUPPORTING DETAILS WERE NOT AVAILABLE AS NAR RATED ABOVE. HOWEVER, WE UNDERSTAND THAT THE PRIVATE TRUCK DRIVERS ON SEVERA L TIMES DO NOT PROVIDE THE PROPER BILLS THEREFORE IT IS DIFFICULT TO PROVIDE THE NECESSARY DETAILS OF THE PARTIES TO WHOM THE PAYMENT WAS MADE. HOWEVER WE FIND THAT THE AO BEFOR E DISALLOWING THE EXPENSES HAS FAILED TO CONSIDER THE CLAIM OF THE ASSESSEE OF SUC H EXPENSES IN THE EARLIER YEARS TO ARRIVE AT THE VIEW WHETHER THE EXPENSES CLAIMED ARE MORE OR LESS. THE AO HAS NOT POINTED OUT ANY FLAW IN THE BOOKS OF ACCOUNTS. THE AO SHOULD HAVE VERIFIED THESE EXPENSES WITH REGARD TO THE PURCHASE CLAIMED BY THE ASSESSEE. WE ALSO FIND THAT THE VOUCHERS IN SUPPORT OF THE EXPENSES ARE ALSO PLACED ON PAGES 14 TO 16 OF THE PAPER BOOK . IN OUR VIEW, REVENUE CANNOT RESORT TO AD HOC AND ARBITRARY DISALLOWANCE OF EXPENSES FOR THE PURPOSE OF ARRIVING AT THE ALLEGED UNDISCLOSED INCOME ESPECIALLY WHEN THERE IS NO INCRIMINATING EVIDENCE FOUND AGAINST TH E ASSESSEE TO ESTABLISH THAT THE ASSESSEE HAD IN ANY MANNER, INFLATED THE EXPENSES A ND NOT ACCOUNTED FOR THE CORRECT INCOME. THEREFORE, AN ASSESSMENT CANNOT BE MADE TO DISALLOW OR ADD BACK EXPENSES ON AD HOC BASIS AND THAT TOO, TO MAKE ARBITRARY ADDITIONS TO THE ALLEGED INCOME AS THE ONUS IS ON THE REVENUE TO PROVE THE ACTUAL EXPENDIT URE AND THEN ESTABLISH THAT THE SOURCE OF MONEY SPENT FOR SUCH EXPENDITURE HAD NOT BEEN SATISFACTORILY EXPLAINED BY THE ASSESSEE. THEREFORE CONSIDERING THE TOTALITY OF THE CASE, WE ARE OF THE CONSIDERED VIEW NOT TO INTERFERE IN THE ORDER OF LD. CIT(A). HENCE THIS GROUND OF REVENUES APPEAL IS DISMISSED. ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 5 9. THE COMMON INTER-CONNECTED ISSUE RAISED IN BOTH THE GROUND NO.2 & 3 ARE THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY AO FOR RS. 29,11,129.00 ON ACCOUNT OF BOGUS PURCHASE. 10. THE ASSESSEE HAS CLAIMED PURCHASES FOR THE MATE RIALS FROM DIFFERENT PARTIES DURING THE RELEVANT ASSESSMENT YEAR. THE AO CROSS V ERIFIED THOSE PURCHASES BY ISSUING THE NOTICES TO DIFFERENT PARTIES UNDER SECTION 133( 6) OF THE ACT. HOWEVER, NOTICES TO SOME OF THE PARTIES WERE RETURNED BACK WITH THE REM ARKS HEREUNDER: SL NO. NAME AMOUNT INVOLVED GIST OF THE REMARKS OF POSTMAN 1 M/S MA TARA ENTERPRISE RS.9,87,036/- (PURCHASE) I NSUFFICIENT ADDRESS 3 M/S KALI ENTERPRISE RS.2,53,949/- (PURCHASE) NOT KNOWN 4 SRI CHANDI SAMANTA RS.67,048/- (PURCHASE) NOT KNO WN 5 SRI GANESH METE RS.1,90,539/- (PURCHASE) NOT KNO WN 6 M/S MAHAMAYA ENTERPRISE RS,67,830/- (PURCHASE) NOT KNOWN 7 M/S SUNNY TRADERS RS.13,44,727/- (PURCHASE) NOT KNOWN AO ON THE BASIS OF ABOVE OBSERVATION HAS DISALLOWED THE PURCHASE AMOUNT CLAIMED BY THE ASSESSEE AMOUNTING TO RS. 29,11,129/- AS BOGUS PURCHASES. 11. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD.CIT (A) WHERE LD. AR SUBMITTED THAT THE ASSESSEE HAS FURNISHED THE DETAI LS OF THE PARTIES FROM WHOM GOODS WERE PURCHASED AND REITERATED THAT DESPITE OF SEVER AL REQUESTS, THE AO HAS NOT PROVIDED THEM THE XEROX COPIES OF THE ENVELOPES THR OUGH WHICH NOTICE WERE ISSUED TO THESE PARTIES FOR THE VERIFICATION. THE PAYMENTS TO THIRD PARTIES FOR THE PURCHASES WERE MADE THROUGH ACCOUNT PAYEE CHEQUES AND IT WAS VERY MUCH APPARENT FROM THE BANK STATEMENT OF THE ASSESSEE. THE ASSESSEE HAS ALSO PR ODUCED THE LEDGERS OF THE RESPECTIVE PARTIES APPEARING IN HIS BOOKS OF ACCOUN T ALONG WITH THEIR CONFIRMATION. ACCORDINGLY THE LD. CIT(A) CONSIDERING THE FACTS AN D CIRCUMSTANCES HAS DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHAS ES BY OBSERVING AS UNDER:- 5.5 I HAVE CONSIDERED THE WRITTEN SUBMISSIONS, REM AND REPORT AND COUNTER REPLIES OF THE APPELLANT AND ALSO GONE THROUGH EVID ENCE ON RECORD. IN THE ASSESSMENT ORDER AS WELL AS IN THE REMAND REPORT, T HE AO WAS ALLEGING THAT THE ADDRESSES OF THE PARTIES SUPPLIED BY THE APPELLANT WERE NOT CORRECT ADDRESS. IT WAS FURTHER STATED BY THE AO THAT FULL DETAILS OF T HE PARTIES COULD NOT BE OBTAINED ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 6 FROM THE CONCERNED BANKS DESPITE REQUISITIONS MADE AND, THEREFORE, SUMMONS U/S. 131 OF THE ACT COULD NOT BE ISSUED TO THE PART IES FOR VERIFICATION OF THE TRANSACTIONS. EXCEPT MISERABLY FAILED TO BRING ON R ECORD ANY EVIDENCE TO CHARGE THE APPELLANT FOR MAKING BOGUS OR FALSE PURCHASE. A S STATED ABOVE, SEVERAL REMINDERS WERE ISSUED TO THE AO DURING LONG SPAN OF TIME TO COLLECT THE DETAILS FROM THE BANKS AND AFTER VERIFICATION OF THE PURCHA SES, TO REPORT ACCORDINGLY. ACCORDING TO THE STATEMENTS OBTAINED BY THE AO FROM DIFFERENT BANKS THROUGH WHICH TRANSACTIONS TOOK PLACE., IT IS FOUND THAT TH E APPELLANT HAS MADE PURCHASES FROM THE AFORESAID SIX PARTIES THROUGH BANKING CHAN NEL, THE DETAILS OF WHICH ARE GIVEN IN THE REMAND REPORT OF THE AO DATED 07-01-20 13. THE APPELLANT ALSO FILED BILLS FROM ALL THESE PARTIES IN SUPPORT OF PURCHASE S MADE FROM THEM. CONFIRMATION OF TRANSACTIONS BY WAY OF LEDGER COPY OF ACCOUNTS H AS ALSO BEEN PLACED ON RECORD. THE APPELLANT ALSO CONDUCTED VAT AUDIT UNDE R WEST BENGAL VALUE ADDED TAX ACT. NO DEFECT OR IRREGULARITY IN THE AUDITED A CCOUNTS WAS POINTED OUT BY THE AO. IN THE ABOVE CIRCUMSTANCES, THE INITIAL ONUS TH AT LIES ON THE APPELLANT, IN MY CONSIDERED OPINION, WAS DULY DISCHARGED. TO REITERA TE, THE VERY FACT THAT ALL THE TRANSACTIONS WERE ENTERED INTO BETWEEN THE PARTIES THROUGH ACCOUNT PAYEE CHEQUES AND THE SAME WERE CONFIRMED BY THE BANKS, M AKES THE QUESTION OF IDENTITY OF THE CREDITORS FALL INTO OBLIVION AND IT BECOMES ABSOLUTELY IRRELEVANT. CONSIDERING THE TOTALITY OF THE FACTS AND CIRCUMSTA NCES OF THE CASE AND EVIDENCES PLACED ON RECORD IN SUPPORT OF PURCHASE TRANSACTION S AND PAYMENT DETAILS, THERE REMAINS HARDLY ANY SCOPE TO DOUBT THE PURCHASE MADE BY THE APPELLANT FROM THE AFORESAID SIX PARTIES. THAT BEING SO, THE ADDITION OF RS.29,11,129/- MADE BY THE AO ON THE ALLEGED GROUND OF BOGUS/FALSE PURCHASES I S DIRECTED TO BE DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US 12. BEFORE US LD. DR SUBMITTED THAT LD. CIT(A) HAS DELETED THE ADDITION MADE BY AO BY HAVING RELIANCE ON THE PURCHASE BILLS OF THE PAR TY AND BANK PAYMENT MADE TO THE PARTY BUT LD. CIT(A) ERRED TO OBSERVE THAT THE BILL S SUBMITTED BY ASSESSEE WERE TEMPERED. THE FIGURES WRITTEN IN WORDS AND VALUE WE RE NOT MATCHING. THERE WAS DIFFERENCE IN THE QUANTITY OF THE PURCHASE BILL AND IN SOME OF THE PURCHASES BILLS THERE WAS OVERWRITING IN THE BILLS OF THE PURCHASE. THE C ONTENTION OF THE ASSESSEE THAT THE PAYMENT WAS MADE IN CHEQUE WAS NOT CORRECT. AS IN M ANY CASES, PAYMENTS WERE IN CASH WHICH WAS BELOW RS.20,000/-. THE LD. DR IN SUP PORT OF HIS CLAIM RELIED IN THE JUDGMENTS OF HONBLE CALCUTTA HIGH COURTS IN THE CA SE OF CIT VS. PRECISION FINANCE PRIVATE LIMITED 208 ITR 254 AND CIT VS. UNITED COMM ERCIAL & INDUSTRIAL CO. (P) LTD. 187 ITR 596.LD. DR VEHEMENTLY RELIED ON THE ORDER O F AO. ON THE OTHER HAND, LD. AR DREW OUR ATTENTION ON THE LEDGER COPIES OF THE PARTIES ALONG WITH THE BILLS OF THE PURCHASES WHICH ARE PLACED FR OM PAGE NO. 18 TO 80 OF THE PAPER BOOK. LD. AR FURTHER SUBMITTED THAT NONE OF THE PUR CHASES WERE BOGUS AND MOST OF THE ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 7 PAYMENTS WERE MADE THROUGH BANKING CHANNEL. THE AO HAS ALSO GOT VERIFIED FROM THE BANK BY ISSUING A NOTICE U/S.133(6) OF THE ACT. TO VERIFY THE EXISTENCE OF THE PARTIES. LD AR VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). 13. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES AND PERUSED THE MATERIALS ON RECORD. FROM THE AFORESAID FINDINGS, WE FIND THAT A O HAS DISALLOWED THE PURCHASES ON THE GROUND THAT NOTICES ISSUED TO THE PARTIES U/S.1 33(6) OF THE ACT WERE RETURNED BACK AS UNSERVED. HOWEVER, LD. CIT(A) HAVE GRANTED TO ASSES SEE BY HAVING RELIANCE ON THE BOOKS OF ACCOUNT AND DETAILED FINANCIAL STATEMENT, CONFIRMATION OBTAINED FROM THE BANK OF THE ASSESSEE IN RESPONSE TO THE NOTICE ISSUED U/ S133(6) OF THE ACT. NOW THE QUESTION BEFORE US IS AS TO WHETHER THE PURCHASES SHOWN BY T HE ASSESSEE ARE BOGUS IN THE AFORESAID CIRCUMSTANCES. FROM THE FACTS OF THE CASE , WE FIND THAT THE AO HAS DISALLOWED THE PURCHASES MERELY ON THE GROUND OF NON SERVICE O F NOTICE U/S. 133(6) OF THE ACT. IN OUR VIEW, THE AO HAS FAILED TO APPRECIATE OTHER CIR CUMSTANCES OF THE CASE SUCH AS THERE WAS NO FLAW IN THE BOOKS OF ACCOUNTS, THERE WAS NO ADVERSE COMMENTS IN THE AUDIT REPORT DULY CERTIFIED BY THE CHARTERED ACCOUNTANT, THE CONFIRMATION RECEIVED FROM THE BANK REGARDING THE PAYMENT MADE TO THE AFORESAID PA RTIES IN RESPONSE TO THE NOTICE U/S. 133(6) OF THE ACT. IN THE INSTANT CASE, ALL THE DET AILS RELEVANT TO THE TRANSACTION FOR THE PURCHASE OF THE MATERIALS ARE VERY MUCH PLACED ON R ECORD. THEREFORE, IN OUR CONSIDERED VIEW, MERELY NOTICE ISSUED U/S. 133(6) OF THE ACT C ANNOT BE THE SOLE GROUND FOR MAKING THE DISALLOWANCE. IN HOLDING SO, WE FIND THE SUPPOR T FROM THE FOLLOWING JUDGMENTS OF HONBLE HIGH COURTS:- A) ACIT V. BAHRI BROS. (P) LTD. (1985) 154 ITR 244 (PAT) WHEREIN THE HONBLE COURT HAS HELD: IDENTIFY OF CREDITORS IS NOT RELEVANT FOR CH EQUE TRANSACTIONS - THE VERY FACT THAT ALL THE TRANSACTIONS WERE ENTERED INTO BETWEEN THE PART IES THROUGH ACCOUNT PAYEE CHEQUES MAKES THE QUESTION OF IDENTITY OF CREDITORS FALL IN TO OBLIVION AND IT BECOMES ABSOLUTELY IRRELEVANT. B) NEMI CHAND KOTHARI V. CIT (2003) 264 ITR 254 (GU J) WHERE THE HONBLE COURT HAS HELD: TRANSACTION BY CHEQUES MAY NOT BE SACROSANCT IT CANNOT BE SAID THAT A TRANSACTION, WHICH TAKES PLACE BY WAY OF CHEQUE, IS INVARIABLY SACROSANCT. ONCE THE ASSESSEE HAS PROVED THE IDENTITY OF HIS CREDITORS, THE GENUINENESS OF THE TRANSACTIONS WHICH HE HAD WITH HIS CREDITORS, AND THE CREDITWORT HINESS OF HIS CREDITORS, VIS--VIS THE TRANSACTIONS WHICH HE HAD WITH THE CREDITORS, HIS B URDEN STANDS DISCHARGED AND THE BURDEN THEN SHIFTS TO THE REVENUE TO SHOW THAT THOU GH COVERED BY CHEQUES, THE AMOUNTS ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 8 IN QUESTION, ACTUALLY BELONGED TO, OR WAS OWNED BY THE ASSESSEE HIMSELF. IT IS ALSO IMPORTANT TO NOTE THAT THE ASSESSEE REQUESTED THE A O TO PROVIDE THE COPY OF THE ORDER SHEET ALONG WITH THE NOTICES ISSUED U/S133(6) OF TH E ACT TO THE AFORESAID PARTIES WITH THE POSTAL REMARK THAT THE NOTICE WERE RETURNED AS UNS ERVED. THE PURPOSE FOR HAVING SUCH INFORMATION FROM THE INCOME TAX OFFICE WAS TO ENSUR E THAT THE ADDRESSES OF THE PARTIES WERE CORRECTLY MENTIONED BUT THE AO FAILED TO PROVI DE TO THE ASSESSEE. LD DR ALSO FAILED TO BRING ANYTHING ON RECORD CONTRARY TO THE ARGUMENT ADVANCED BY LD. AR. THE FACTS OF THE CASE RELIED BY THE REVENUE IN THE CAS E OF CIT VS. UNITED COMMERCIAL & INDUSTRIAL CO. (P) LTD. 187 ITR 596.LD. ARE DIFFERE NT AS IN THAT CASE IT WAS HELD THAT IT WAS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA FA CIE THE IDENTITY OF HIS CREDITORS, THE CAPACITY OF SUCH CREDITORS TO ADVANC E THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. ONLY WHEN THESE TH INGS ARE PROVED BY THE ASSESSEE PRIMA FACIE AND ONLY AFTER THE ASSESSEE HA S ADDUCED EVIDENCE TO ESTABLISH THE AFORESAID FACTS THE ONUS SHIFTS ON TO THE DEPARTMENT. IN THE ABSENCE OF THE BOOKS OF ACCOUNT AND OTHER EVIDENCE OF THE P ARTIES CONCERNED, IT WAS NOT POSSIBLE TO VERIFY THE REAL NATURE OF THE ALLEGED T RANSACTIONS EVEN THOUGH THEY WERE MADE BY CHEQUES. THE GENUINENESS OF THE LOANS CANNO T BE ACCEPTED MERELY BECAUSE CHEQUES WERE EXCHANGED BETWEEN THE PARTIES. THE ASSESSEE HAD FAILED TO PROVE THE CREDITWORTHINESS OF THE ALLEGED LENDER S AND THAT THOSE LENDERS ACTUALLY HAD ANY FUNDS OF THEIR OWN OUT OF WHICH LOANS COULD HAVE BEEN ADVANCED TO THE ASSESSEE. THE ONLY INFERENCE IS THAT THE ASSESSEE H AS MANAGED TO GET THE CONFIRMATORY LETTERS FROM THE PAYEE JUST AS IT HAD MANAGED TO GET THE BOGUS HUNDIS. THE TRANSACTIONS AS WELL AS THE HUNDIS AND CONFIRMATORY LETTERS ARE COLLUSIVE, FICTITIOUS AND FALSE. THEREFORE, ASSESSE E HAS NOT DISCHARGED THE INITIAL ONUS IN PROVING THE LOANS AS GENUINE. IN THE AFORESAID CASE AS RELIED BY REVENUE, THE BOO KS OF ACCOUNTS AND OTHER DOCUMENTS WERE NOT PRODUCED. IN THE INSTANT CASE THE BOOKS OF ACCOUNTS WERE PRODUCED BEFORE THE LOWER AUTHORITIES AND NO FLAW WAS BROUGHT TO OUR NO TICE. ACCORDINGLY, IN VIEW OF THE ABOVE AND AFTER HAVING RELIANCE ON THE AFORESAID JU DGMENTS OF HONBLE HIGH COURTS WE FIND NO REASON TO INTERFERE IN THE ORDER OF LD. CIT (A). HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 14. COMING TO NEXT ISSUE RAISED IN GROUND NO.4 AND 5 WHICH ARE INTER-CONNECTED, SO WE ADJUDICATE THEM TOGETHER, IS THAT LD. CIT(A) ERR ED IN DELETING OF RS.2,00,547/- ON ACCOUNT OF UNDISCLOSED INVESTMENT. THE AO DURING ASSESSMENT PROCEEDINGS FOUND SOME MIS MATCH IN THE FIGURES OF PURCHASED SHOWN BY THE ASSESSEE FROM THE PARTIES AN D IN THE FIGURES OF SALE SHOWN BY ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 9 THE PARTIES IN RESPONSE TO THE NOTICE ISSUED U/S 13 3(6) OF THE ACT. THE DETAILS OF SUCH PARTIES ARE AS UNDER:- SL. NO. NAME OF THE CONCERN AMOUNT OF SALE/SR.DR. REPORTED (RS) YOUR PURCHASE/ SR.CR. CLAIM (RS) DIFFERENCE (RS) 1 SRI PRAMOD KR. NAYAK 96,138/- (SR.DR) 1,20,580/- (SR. CR) 24,442/- 2 M/S STAR ENTERPRISE NIL RS.48,308/- (PURCHASE) 48,308/- 3 M/S NEW STAR ENTERPRISE NIL RS.24,162/- (PURCHASE) 24,162/- 4 M/S NEW MAHAMAYA ENTERPRISE 1,57,425/- (SALE) 53,790/- (PURCHASE) EXCESS PURCHASE OF RS.1,03,635/- ACCORDINGLY, THE AO HAS DISALLOWED THE AFORESAID DI FFERENCE OF PURCHASES FOR RS.2,00,547/- AS UNDISCLOSED INVESTMENT U/S.69 OF T HE ACT AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 15. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE CIT (A) WHO DELETED THE ADDITION MADE BY AO. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 16. AT THE OUTSET, IT WAS OBSERVED THAT IN THE IDEN TICAL ISSUE RAISED BY REVENUE IN GROUNDS NO. 2 & 3, THE ADDITIONS MADE BY AO HAS ALR EADY BEEN DELETED BY US IN PARA NO. 10 TO 12 OF THIS ORDER . IN OUR CONSIDERED VIEW SAME ANALOGY SHALL ALSO BE APPLIED TO THESE GROUNDS OF APPEAL. HENCE, REVENUES GROUND S OF APPEAL ARE DISMISSED. 17. NEXT ISSUE IN THIS APPEAL OF REVENUE IS AS REGA RDS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.3,66,182/- ON ACCOUNT O F BOGUS SUNDRY CREDITORS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO FOUND THAT SUN DRY CREDITOR AMOUNTING TO RS. 3,66,182/- RELATED WITH M/S MA TARA SUPPLIES IS BOG US AND FALSE FOR WANT OF VERIFICATION. THE AO ISSUED NOTICE U/S. 133(6) OF THE ACT BUT THE SAME WAS RETURNED AS UNSERVED. THEREFORE THE AO TREATED THE SAME AS BOGUS SUNDRY C REDITOR AND ADDED TO THE TOTAL INCOME OF ASSESSEE. ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 10 18. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A), WHO DELETED THE ADDITION BY OBSERVING AS UNDER:- 7.2 IDENTICAL ISSUE VIDE GROUNDS NO. 3 & 4 HAS BEE N DEALT WITH IN THIS ORDER ABOVE VIDE PARAS 4 TO 4.5 WHEREIN ALSO THE AO ON TH E ALLEGED GROUND OF INSUFFICIENT ADDRESS OF THE PARTIES DOUBTED THE PUR CHASES AND MADE ADDITION. IN THE REMAND REPORT, THE AO HAS ONLY POINTED OUT THAT AFTER COLLECTING INFORMATION FROM BANKS, SOME IRREGULARITY WAS FOUND IN THE ADDR ESS OF THE SAID PARTY. IN THE PAPER BOOK AT PAGES 23 TO 34, THE APPELLANT HAS FIL ED LEDGER ACCOUNT OF THE SAID PARTY, COPIES OF BILLS OF PURCHASES ETC. COPY OF BA NK STATEMENT SHOWING TRANSACTIONS WITH M/S MAA TARA SUPPLIERS WAS ALSO F URNISHED AT PAGES 143 TO 172 OF THE PAPER BOOK. IN THAT BANK STATEMENT, THE NAME OF THE PARTY HAS ALSO BEEN MENTIONED WHILE CLEARING THE CHEQUES. IN SUCH CIRCUMSTANCES, THE TRANSACTIONS WITH THE SAID PARTY CANNOT BE DOUBTED, UNLESS AND UNTIL SOME CONTRARY EVIDENCE IS BROUGHT ON RECORD, WHICH THE A O FAILED TO DO SO. FURTHER, THE APPELLANT HAS FILED A CONFIRMATION LETTER FROM THE SAID PARTY SHOWING CLOSING BALANCE OF RS.3,66,182/- AS ON 31-03-2008. THE APPE LLANT ALSO CONDUCTED VAT AUDIT UNDER WEST BENGAL VALUE ADDED TAX ACT. IN VIE W OF ABOVE AND FOR THE REASONS DISCUSSED IN PARA-4-5 ABOVE, I AM OF THE CO NSIDERED VIEW THAT THE APPELLANT HAS DISCHARGED HIS INITIAL ONUS OF PROVIN G THE GENUINENESS OF TRANSACTIONS AND THAT BEING SO, THERE IS NO JUSTIFI ABLE REASON TO ENDORSE THE ADDITION. THE ADDITION OF RS.3,66,182/- MADE ALLEGI NG BOGUS SUNDRY CREDITOR AMOUNT IS, THEREFORE, DELETED. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 19. BEFORE US LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AO AND ON THE OTHER HAND, LD.AR DREW OUR ATTENTION ON PAGES FROM 23 TO 36 CON TAINING THE COPY OF THE LEDGER, PURCHASED BILLS, CONFIRMATION OF THE PARTY ALONG WI TH THE PAN OF THE ASSESSEE. LD.AR SUPPORTED THE ORDER OF LD. CIT(A). 20. FROM THE AFORESAID DISCUSSION, WE FIND THAT AO HAS ISSUED A NOTICE U/S.133(6) OF THE ACT TO THE PARTY, MAA TARA SUPPLIERS WHICH WAS RETURNED TO AO AS UNSERVED, THEREFORE, IN THE ABSENCE OF THE VERIFICATION, THE AO HAS MADE THE ADDITION OF THE CREDIT BALANCE APPEARING IN THE LEDGER OF THE PARTY AS CAS H CREDIT. THE ADDITION MADE BY AO WAS DELETED BY LD. CIT(A) AS DISCUSSED AFORESAID. N OW THE QUESTION BEFORE ARISES SO AS TO WHETHER THE CREDIT AMOUNT APPEARING IN THE LE DGER OF THE PARTY AMOUNTS TO UNEXPLAINED CASH CREDIT. FROM THE LEDGER OF THE PAR TY, WE FIND THAT THE ASSESSEE HAS PURCHASED GOODS WORTH OF RS.20,20,280/- DURING THE YEAR AND HAS MADE THE PAYMENT THROUGH THE BANK ACCOUNT FOR AMOUNT OF RS.16,54,098 /-. THE AO HAS DISALLOWED THE CREDIT BALANCE TO THE PARTY WITHOUT DISTURBING THE CORRESPONDING PURCHASE SHOWN IN ITS ITA NO.1055/KOL/2013 A.Y.2008-09 ITO WD-1(2) HG V. SH KALIN DUTTA PAGE 11 PROFIT AND LOSS ACCOUNT WHICH SHOWED THAT AO HAS AC CEPTED THE PURCHASES DECLARED BY ASSESSEE. THEREFORE, IN OUR CONSIDERED VIEW, THE AC TION OF AO FOR ACCEPTING THE PURCHASE WITHOUT ACCEPTING THE CORRESPONDING SUNDRY CREDITORS DOES NOT HOLD GOOD. THE AO IN THE INSTANT CASE HAS FAILED TO VERIFY THE PAY MENT MADE TO THE PARTIES THROUGH BANKING CHANNEL FROM THE PARTY. IN SUPPORT OF PAYME NT, THE ASSESSEE HAS SUBMITTED THE BANK STATEMENT WHICH IS PLACED ON PAGES 143 TO 172 OF THE PAPER BOOK. LD. DR HAS ALSO FAILED TO BRING ANYTHING CONTRARY TO THE FINDI NG OF LD. CIT(A), THE PAN OF THE ASSESSEE WAS VERY MUCH AVAILABLE TO THE AO AND THE AO FAILED TO RECONCILE THE AMOUNT OF CREDITORS BY WAY OF ISSUING NOTICE U/S. 133(6) OF THE ACT TO THE AO HAVING JURISDICTION OVER THE PARTY. THE AO IN THE INSTANT CASE HAS TREA TED THE BALANCE OF THE PARTY AS CASH CREDIT MERELY ON THE GROUND THAT THE NOTICE ISSUED U/S. 133(6) OF THE ACT WAS RETURNED AS UNSERVED. THE AO HAS NOT REJECTED THE PURCHASE BILL AS SUBMITTED BY ASSESSEE AT THE TIME OF FRAMING OF ASSESSMENT UNDER CONSIDERATION. THE ORDER OF AO IS SILENT ABOUT THE COPY OF THE LEDGER AND CONFIRMATION OF ACCOUNT BY T HE PARTY SUBMITTED BY THE ASSESSEE. THEREFORE, IN OUR CONSIDERED VIEW, THE AMOUNT OF CR EDIT BALANCE AS APPEARING IN THE LEDGER OF THE PARTY CANNOT BE REGARDED AS UNEXPLAIN ED CASH CREDIT. HENCE, THIS GROUND OF REVENUES APPEAL IS DISMISSED. 21. IN THE RESULT, APPEAL BY REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 10/ 06/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) KOLKATA, *DKP !- 10 / 06 /201 6 / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-ITO, WARD-1(2), HOOGHLY, AAYAKAR BHAWAN, KHADINAMORE, G.T. ROAD, HOOGHLY -712101 2. /RESPONDENT-SHRI KALIN DUTTA, SWARUP NAGAR (LANE-1) , P.O.DANKUNI DIST. HOOGHLY-7 12311 3. ) *+, , - / CONCERNED CIT KOLKATA 4. , , -- / CIT (A) KOLKATA 5.01233*+, , *+ , / DR, ITAT, KOLKATA 6.26789 / GUARD FILE. BY ORDER/ ,, /TRUE COPY/ / , *+ ,