Steel & Wire Supply Concern, Howrah V. THE ITO, WD-43(1), KOLKATA, Kolkata

ITA 1228/KOL/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9241 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2016
• Court: TRIBUNAL
• Keywords: Bogus purchase; Revision of order; Question of law
• Section: 40A(3); 143(3); 133(6); 263

Judgement Text

I.T.A. NO. 1228/KOL./2016 ASSESSMENT YEAR: 2009-2010 PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA SMC BENCH, KOLKATA BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO. 1228/KOL/ 2016 ASSESSMENT YEAR : 2009-2010 STEEL & WIRE SUPPLY CONCERN,....................... ..........APPELLANT 60. KATAPUKUR, 3 RD BYE LANE, KADAMTALA, HOWRAH-711 101 [PAN : AAKFS 6151 J] -VS.- INCOME TAX OFFICER,................................ ........................RESPONDENT WARD-43(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 APPEARANCES BY: SHRI A.K. TIBREWAL, FCA, FOR THE ASSESSEE MD. GHAYAS UDDIN, JCIT, SR. D.R., FOR THE DEPARTMEN T DATE OF CONCLUDING THE HEARING : JANUARY 30, 2017 DATE OF PRONOUNCING THE ORDER : FEBRUARY 28, 2017 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-13, KOLKATA DA TED 29.02.2016 FOR THE ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUND S:- (1) THAT, THE LEARNED COMMISSION OF INCOME TAX (AP PEALS) HAD FAILED TO APPRECIATE THAT THE IMPUGNED ASSESSME NT ORDER HAS BEEN PASSED BY THE LEARNED ASSESSING OFFICER U/ S 143(3) OF THE ACT BY HOLDING M/S AP TRADERS AS A BOGUS PARTY IN SPITE OF THE FACT THAT SUCH PARTY HELD A VALID REGISTRATI ON CERTIFICATE UNDER WEST BENGAL VALUE ADDED TAX ACT, 1995 AND THE REGISTRATION NUMBER OF THE PARTY-APPEARED IN THE PU RCHASE BILLS PRODUCED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS. I.T.A. NO. 1228/KOL./2016 ASSESSMENT YEAR: 2009-2010 PAGE 2 OF 7 2. THAT, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAD FAILED TO APPRECIATE THAT THE ORIGINAL ASSESSMENT O RDER PASSED U/S 143(3) OF THE ACT WAS HELD TO BE ERRONEOUS AND WAS DIRECTED TO BE REVISED U/S 263 OF THE ACT ON THE GR OUND THAT THE ALLEGED VIOLATION U/S 40A(3) WAS NOT PROPERLY CONSI DERED IN TILE SAID ASSESSMENT ORDER (PARA-2, PAGE-25 -OF THE PAPE R BOOK ENCLOSED IN PART-B) AND THERE WAS NO DISCUSSION IN THE ORDER PASSED U/S 263 OF THE ACT THAT THE IMPUGNED PURCHAS ES WERE BOGUS. 3. THAT, THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) HAD FAILED TO APPRECIATE THAT IF PURCHASES ARE HELD TO BE BOGUS THE EFFECT THEREOF FROM SALE OR CLOSING STOCK SHOULD HA VE BEEN ALSO ELIMINATED AS OTHERWISE IN THE ABSENCE OF PURCHASE OF THE MATERIAL THERE CANNOT BE ANY SALE WHICH IS LIABLE T O BE TAXED. 4. THAT, THE IMPUGNED ASSESSMENT IS BASED ON IRRELE VANT CONSIDERATIONS AND, THEREFORE, THE SAME IS BAD IN L AW AND PERVERSE. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IS A PA RTNERSHIP FIRM ENGAGED IN THE BUSINESS OF TRADING OF IRON AND STEE L MATERIALS. THE ORIGINAL ASSESSMENT OF THE ASSESSEE-FIRM WAS COMPLE TED UNDER SECTION 143(3) OF THE ACT ON 22.11.2011 DETERMINING TOTAL I NCOME AT RS.1,61,255/-. SUBSEQUENTLY, THE LD. CIT, KOLKATA-X V BY HIS ORDER DATED 06.03.2014 PASSED UNDER SECTION 263 OF THE INCOME T AX ACT, 1961 (THE ACT) SET ASIDE THE ORIGINAL ASSESSMENT ORDER AND D IRECTED THE ASSESSING OFFICER TO PASS A FRESH ASSESSMENT ORDER AFTER EXAM INING THE RELEVANT ISSUES AND AFTER ALLOWING THE ASSESSEE AN OPPORTUNI TY IN THIS REGARD. THE ASSESSING OFFICER IN PURSUANCE TO THIS ORDER PASSED UNDER SECTION 263 PASSED A FRESH ASSESSMENT ORDER UNDER SECTION 143(3 ) READ WITH SECTION 263 ON 17.06.2014, DETERMINING THE TOTAL INCOME AT RS.39,57,121/-, INTER ALIA, MAKING AN ADDITION OF RS.37,95,866/- TOWARDS BOGUS PURCHASES FROM ONE M/S. APEX TRADERS, ON THE GROUND THAT IT IS A N ON-EXISTING PARTY. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEA L. THE FIRST APPELLATE AUTHORITY CONFIRMED THE ADDITION. FURTHER, BEING AG GRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. I.T.A. NO. 1228/KOL./2016 ASSESSMENT YEAR: 2009-2010 PAGE 3 OF 7 3. THOUGH THE ASSESSEE HAS TAKEN FIVE GROUNDS OF AP PEAL, IN FACT, ONLY ONE ADDITION IS DISPUTED, I.E. AN AMOUNT OF RS.37,9 5,866/-, BEING PAYMENT MADE TO M/S. APEX TRADERS. GOODS WERE CLAIMED TO HA VE BEEN PURCHASED BY PAYMENT THROUGH CHEQUES. BUT ENQUIRIES REVEALED THAT THE CHEQUES WERE, IN FACT, BEARER CHEQUES. THE NOTICES ISSUED U NDER SECTION 133(6) OF THE ACT TO M/S. APEX TRADERS GOT RETURNED WITH THE COMMENTS FROM THE POSTAL AUTHORITIES THAT THE ADDRESS GIVEN IS A WRON G ADDRESS. ENQUIRY MADE BY THE INCOME TAX INSPECTOR DID NOT GIVE ANY R ESULT AND THE PARTY COULD NOT BE LOCATED AT THE ADDRESS GIVEN IN THE IN VOICE/BILL. THE ASSESSEE WAS ASKED TO FURNISH THE CORRECT ADDRESS, WHICH WAS NOT DONE. THUS THE ASSESSING OFFICER CONCLUDED THAT FOR THE FOLLOWING REASONS THE PURCHASES WERE BOGUS:- (I) NON-AVAILABILITY OF M/S. APEX TRADERS, FROM WH OM PURCHASES OF GOODS WERE MADE. (II) THE ASSESSEE COULD NEITHER PRODUCE THE PARTY NOR GIVE THE CORRECT ADDRESS OF THE PARTY. (III) THE PAYMENTS WERE CLAIMED TO BE MADE BY CHEQ UE. 4. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE ORDER UNDER SECTION 263 OF THE ACT, THE LD. CIT, KOLKATA-XV SET ASIDE THE ASSESSMENT BY DIRECTING THE ASSESSING OFFICER TO EXAMINE THE GENU INENESS AND CREDITABILITY OF M/S. APEX TRADERS, KOLKATA AS THIS PARTY WAS NOT TRACEABLE AND AS THE PAYMENTS MADE BY THE ASSESSEE TO THIS PA RTY IS NOT DOCUMENTED BY ANY EVIDENCE. HE FURTHER SUBMITS AS F OLLOWS:- (A) THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE IS N OT DISTURBED. (B) STOCK SUMMARY HAS BEEN FURNISHED DISCLOSING PU RCHASE OF MATERIAL AS WELL AS SALE OF MATERIAL AND CLOSING ST OCK AND NONE OF THESE FIGURES WERE DISTURBED. (C) COPY OF CERTIFICATE OF REGISTRATION IN FORM B FROM THE CENTRAL SALES TAX DEPARTMENT WAS FURNISHED, WHICH IS PLACED AT PAGES 31 & 32 OF THE PAPER BOOK. (D) COPIES OF BILLS RECEIVED FROM M/S. APEX TRADER S WERE FURNISHED AT PAGES 34 TO 41 OF THE PAPER BOOK. I.T.A. NO. 1228/KOL./2016 ASSESSMENT YEAR: 2009-2010 PAGE 4 OF 7 (E) PURCHASES OF THE GOODS FROM M/S. APEX TRADERS WERE DECLARED IN THE RETURN UNDER THE SALES TAX ACT. (F) THE ACCOUNTS HAVE BEEN AUDITED AND THE AUDITORS HAVE ISSUED AN AUDIT REPORT UNDER SECTION 30E UNDER WEST BENGAL VALUE ADDED TAX ACT, 2003 IN FORM NO. 88 ON 14.12.2009 CONSIDERING THESE PURCHASES AND SALES AND HAD NOT FOUND ANY DISCREPANCY. THE SALES TAX DEPARTMENT ACCEPTED THESE PURCHASES AND SALES AS GENUINE. (G) THE ASSESSING OFFICER HAS NOT DOUBTED THE SALES OF THESE GOODS AND UNDER SUCH CIRCUMSTANCES, THE PURCHASES C ANNOT BE DOUBTED. (H) THE ASSESSEE CANNOT BE HELD RESPONSIBLE IF THE PERSON FROM WHOM GOODS ARE PURCHASED IS NOT AVAILABLE AT THE AD DRESS GIVEN IN THE BILLS AFTER THE LAPSE OF A SUBSTANTIAL PERIOD OF TI ME AS THEY WOULD HAVE SHIFTED THE PLACE OF BUSINESS AND WERE UNDER NO OBL IGATION TO INFORM THE SAME TO THE ASSESSEE. (I) THAT THE ASSESSEE HAS PRODUCED ALL POSSIBLE EVI DENCE WITHIN THIS POSSESSION AND CONTROL TO DEMONSTRATE THAT THE PURCHASES IN THIS CASE WERE GENUINE. 5. ON A QUERY FROM THE BENCH, IT IS SUBMITTED THAT THE PAYMENTS WERE MADE IN CASH. 6. THE LD. D.R., MD. GHAYAS UDDIN, ON THE OTHER HAN D, VEHEMENTLY CONTROVERTED THE SUBMISSIONS MADE BY THE ASSESSEE A ND SUBMITTED THAT A PERUSAL OF THE BILLS ISSUED BY M/S. IMPEX TRADERS D EMONSTRATED THAT THE PAYMENTS WERE TO BE ACCEPTED ONLY BY ACCOUNT PAYEE CHEQUES BUT ON THE CONTRARY, PAYMENTS WERE MADE IN CASH. HE POINTED OU T THAT THIS DISCREPANCY LEADS TO THE PASSING OF AN ORDER UNDER SECTION 263 BY THE LD. CIT AND THAT THE ASSESSEE HAS NOT CHALLENGED THIS O RDER. HE ARGUED THAT THE ASSESSEE HAS LOST HIS RIGHT TO CHALLENGE THIS I SSUE AS HE HAS ACCEPTED I.T.A. NO. 1228/KOL./2016 ASSESSMENT YEAR: 2009-2010 PAGE 5 OF 7 THE ORDER PASSED BY THE LD. CIT UNDER SECTION 263 O F THE ACT. HE FURTHER ARGUED THAT THE ASSESSEE FAILED TO PRODUCE EVIDENCE OF EXISTENCE OF M/S. APEX TRADERS DESPITE NUMEROUS OPPORTUNITIES. HE POI NTED OUT THAT ENQUIRIES MADE BY THE REVENUE BY ISSUING NOTICES UN DER SECTION 133(6) OF THE ACT AND BY DEPUTING THE INSPECTOR OF INCOME TAX RESULTED IN COMING TO A CONCLUSION THAT M/S. APEX TRADERS DOES NOT EXIST. ON QUANTITATIVE TALLY ETC. HE SUBMITTED THAT THE ASSESSING OFFICER HAS NO T SPECIFICALLY ACCEPTED THEM. 7. AFTER HEARING THE RIVAL CONTENTIONS AND CONSIDER ING ALL THE PAPERS ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW AND CASE LAWS CITED, WE HOLD AS FOLLOWS:- THE UNDISPUTED FACT IN THIS CASE IS THAT THE ASSES SEE MAINTAINS BOOKS OF ACCOUNT AND THE BOOK RESULTS HAVE BEEN DIS TURBED DISALLOWING THE SAID PURCHASE. THE FIGURES OF SALES AND CLOSING STOCK HAVE NOT BEEN COMMENTED UPON BY THE ASSESSING OFFICER. THE ASSESS EE HAS FAILED TO GIVE THE CORRECT ADDRESS OF M/S. APEX TRADERS. THE ASSES SEE HAS PRODUCED SALES TAX REGISTRATION DETAILS OF M/S. APEX TRADERS BUT NO OTHER DETAILS HAVE BEEN GIVEN. THE BOOKS OF ACCOUNT OF THE ASSESS EE ARE AUDITED AND THE AUDITORS WHO FURNISHED THE AUDIT REPORT UNDER SECTI ON 30E OF THE WEST BENGAL VALUE ADDED TAX ACT, 2003 HAVE NOT FOUND ANY DISCREPANCY IN THE PURCHASES FROM M/S. APEX TRADERS. THE ASSESSING OFF ICER IN THIS CASE HAS NOT MADE ANY ENQUIRIES FROM THE SALES TAX DEPARTMEN T. KEEPING IN VIEW THE VAT RETURNS FILED BY THE ASSESSEE, THE AUDIT RE PORT GIVEN BY THE AUDITOR, COPIES OF THE CERTIFICATE OF REGISTRATION UNDER SALES TAX ACT OF M/S. APEX TRADERS, THE FACT THAT THE BOOKS OF ACCOU NT OF THE ASSESSEE HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER, I AM IN CLINED TO PARTLY AGREE WITH THE SUBMISSION OF THE ASSESSEE THAT THE ADDITI ON IN QUESTION ON THE GROUND THAT THE PURCHASE IS A BOGUS PURCHASE, CANNO T BE SUSTAINED. THE ASSESSEE HAS RELIED ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS.- CRESCENT EXPORT SYND ICATE [ITA NO. 202 OF 2008 (CALCUTTA HIGH COURT)], JUDGMENT DATED 30.07.2 008, WHEREIN IT IS HELD AS UNDER: I.T.A. NO. 1228/KOL./2016 ASSESSMENT YEAR: 2009-2010 PAGE 6 OF 7 THE ASSESSEE ALSO PRODUCED BILLS IN RESPECT OF ALL PURCHASE MADE FROM THESE 15 PARTIES AND FINALLY THE LD. CIT( A) HAS HELD AS REGARDS THE PURCHASE, IT IS SEEN THAT THESE WERE RECORDED IN THE STOCK REGISTER, THEIR CONSUMPTION I S ALSO RECORDED THEREIN, UP TO THE STAGE OF FINAL PRODUCTI ON. ALL THESE RECORDS ARE AUDITED. THEY ARE PRODUCED BEFORE THE ASSESSING OFFICER FOR EXAMINATION WHO HAD NOT BEEN ABLE TO POINT OUT ANY DEFECT IN IT. UNDER THE CIRCUMSTANCES THE PURCHASES ARE CONSIDERED TO BE GENUINE. SO THE PURC HASES HAVE BEEN HELD TO BE GENUINE. ACCORDINGLY, IN OUR OPINION, THE LEARNED TRIBUNAL H AS CORRECTLY CAME TO THE CONCLUSION BY DELETING THE AD DITION OF RS.15,69,116/- UNDER SECTION 40A(3) OF THE ACT. ON THE OTHER GROUND AS IT APPEARS THAT THE CIT(APPEAL) HAS BEEN DIRECTED TO RECONSIDER THE MATTER. IN VIEW OF THAT WE DO NOT THINK THAT ANY SUBSTANTIAL QUESTION OF LAW IS INVOL VED IN THIS MATTER. HENCE THE APPEAL BEING ITA NO. 202 OF 2008 IS DISMISSED. 8. IN THE CASE ON HAND, AS PAYMENTS ARE MADE IN CAS H, THE ASSESSING OFFICER AS WELL AS THE LD. CIT(APPEALS) HAVE RIGHTL Y SUSPECTED THE GENUINENESS OF THE SAME. THE ASSESSEE HAS NOT BEEN ABLE TO LEAD ANY THIRD PARTY EVIDENCE IN SUPPORT OF ITS CLAIM. THE ONLY VA LID ARGUMENT IS THAT THERE COULD BE NO SALES WITHOUT PURCHASES. BUT THE PRICE AT WHICH THE GOODS WERE PURCHASED REMAINED A GREY COLOUR WHEN AD MITTEDLY THE PAYMENT WAS MADE IN CASH. AS THE UNDISPUTED FACT TH AT THE PAYMENTS WERE MADE IN CASH UNDER SECTION 40A(3) IS ATTRACTED AS POINTED OUT BY THE LD. CIT(APPEALS) IN HIS ORDER PASSED UNDER SECTION 263 OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE VIEW THAT SECT ION 40A(3) HAS TO BE APPLIED AND THE DISALLOWANCE RESTRICTED TO THIS AMO UNT. THIS WOULD MEET THE ENDS OF JUSTICE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED IN PART. ORDER PRONOUNCED IN THE OPEN COURT ON FEBRUARY 28, 2017. SD/- J. SUDHAKAR REDDY (ACCOUNTANT MEMBER) KOLKATA, THE 28 TH DAY OF FEBRUARY, 2017 COPIES TO : (1) STEEL & WIRE SUPPLY CONCERN, 60. KATAPUKUR, 3 RD BYE LANE, KADAMTALA, HOWRAH-711 101 I.T.A. NO. 1228/KOL./2016 ASSESSMENT YEAR: 2009-2010 PAGE 7 OF 7 (2) INCOME TAX OFFICER, WARD-43(1), KOLKATA, 3, GOVERNMENT PLACE (WEST), KOLKATA-700 001 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-13, KOLK ATA, (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.