Ghanshyam Das Agarwal, Siliguri V. ACIT, Circle - 3, Siliguri, Siliguri

ITA 1459/KOL/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87603 (ITAT-KOLKATA)
• Duration Of Justice: 4 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 19-03-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 15-07-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RAVI TULSIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA , ACCOUNTANT MEMBER ITA NO. 1459 /KOL/ 2010 ASSESSMENT YEAR: 2001 - 02 GHANSHYAM DAS AGARWAL, S.F. ROAD, SILIGURI [ PAN NO.ACBPA 8334 L ] / V/S . ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE - 3, CENTRAL REVENUE BUILDING, HAKIMPARA, SILIGURI / APPELLANT .. / RESPONDENT / BY APPELLANT SRI RAVI TULSIAN, FCA / BY RESPONDENT SMT. MADHU MALTI GHOSH, JCIT, DR / DATE OF HEARING 18 - 12 - 2014 / DATE OF PRONOUNCEMENT 09 - 01 - 2015 / O R D E R PER SHAMIM YAHYA , ACCOUNTANT M EMBER : - THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME - TAX (APPEALS), SILIGURI DATED 19 - 01 - 2010 AND PERTAINS TO ASSESSMENT YEAR 2001 - 02. 2. GROUND RAISED READ AS UNDER: - 1. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.18,64,605/ - TREATING THE PURCHASES OF RS.9,64,605/ - MADE FROM M/S BHIWANI ENTERPRISES AND RS.9,00,000/ - MADE FROM M/S SHIVM TRADING CO. AS FICTITIOUS WITHOUT DISPUTING THE QUANTITATIVE DETAILS OF THE RICE EXPORTED AND OTHER DOCUMENTARY EVIDE NCES. ITA NO.1459/KOL/2010 A.Y. 2001 - 02 GHANSHYAM DAS AGARWAL V. ACIT, CIR - 3, SLG. PAGE 2 2. THAT THE LD. CIT(A) ERRED IN TREATING THE PAYMENTS MADE TO THIRD PARTY ON BEHALF OF THE SUPPLIERS AS HYPOTHETICAL. 3. THAT THE LD. CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.40,000/ - AND RS.60,000/ - RECEIVED FROM SRI KISHAN LOHIA AND SMT. SUS HILA GOYAL AGGREGATING TO RS.1,00,000/ - AS NOT GENUINE. 4. THAT THE LD. CIT(A) ERRED IN NOT GIVING COGNIZANCE TO THE FACT THAT BOTH THE DONOR ARE ASSESSED TO INCOME TAX, THE LOANS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUES, ONE OF THE LOAN CREDITOR IS A WELL KNOWN PERSON AND THE OTHER IS HIS WIFE, THE LOAN CREDITORS ARE CREDITWORTHY. 3. AS REGARDS G ROUND NO.3 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT HE SHALL NOT BE PRESSING THIS GROUND. ACCORDINGLY, THIS GROUND IS DISMISSED AS NOT PRESSED. 4. NOW , W E DEAL WITH THE ONLY REMAINING ISSUE WHICH PERTAINS TO ADDITION OF 18,64,605/ - THE ASSESSEE IS ENGAGED IN MAKING EXPORTS TO BANGLADESH OF VARIOUS ITEMS. IN COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER CALLED FOR INFORMATION REGARD ING PURCHASES I SSUING REQUISITIONS U/S 13 3 (6) OF THE ACT FROM DIFFERENT PARTIES INCLUDING M/S BHAWANI ENTERPRISE AND M/S SHIVAM TRADING COMPANY WHICH WERE RETURNED UNSERVED WITH POSTAL REMARKS NOT KNOWN . THE AO HAS GIVEN THE DETAILS OF TRANSACTION AS UNDER: - BHAWANI EN TERPRISES: THE ADDRESS OF THIS PARTY WAS GIVEN AS BHAWANI ENTERPRISES, KARUPA, PO BHABANI, SASARAM (ROHTAS), BIHAR. DURING THE YEAR, THE AGGREGATE PURCHASES OF RICE FROM THIS SUPPLIER WAS 9,64,605/ - AND ALMOST ALL THE PAYMENT WERE MADE THROUGH BANKIN G CHANNELS EXCEPT 4,605/ - ONLY WHICH WAS PAID IN CASH. BOTH OPENING AND CLOSING BALANCE WERE NIL . SHIVAM TRADING CO: THE DETAILED ADDRESS OF THIS PARTY WAS GIVEN AS : SHIVAM TRADING COMPANY, SAIYADRAJA, CHANDAULI, UP. THE AGGREGATE PURCHASE OF RICE WAS 9,00,000/ - AND THE FULL PAYMENT WAS MADE THROUGH DEMAND DRAFT ISSUING ITA NO.1459/KOL/2010 A.Y. 2001 - 02 GHANSHYAM DAS AGARWAL V. ACIT, CIR - 3, SLG. PAGE 3 ONE CHEQUE NO.521652 DATED 25.01.2001. THE OPENING AND CLOSING BALANCES WERE NIL . IN RESPONSE TO THE LETTER ISSUED TO THE ASSESSEE, THE ASSESSEE SUBMITTED THAT ALL THE PAYMENTS WERE M ADE IN THE FY 2000 - 01 AGAINST THE PURCHASES MADE DURING THE FINANCIAL YEAR. THERE IS NO SCOPE OF ANY DOUBT ON THE PURCHASES MADE FROM THEM AS ALL THE GOODS PURCHASED WERE EXPORTED. ON EXAMINATION OF THE SUBMISSION OF THE ASSESSEE, THE AO OBSERVED THAT THE POSTAL REMARK CASTS VERY SERIOUS DOUBT ABOUT THE EXISTENCE OF THE PARTY. AGAINST SUCH A FINDING, THE ASSESSEE COULD NOT OFFER ANY PLAUSIBLE EXPLANATION TO PROVE THE AUTHENTICITY OF HIS TRANSACTIONS WITH THEM. THEREFORE, HE CONCLUDED THAT THE AMOUNT OF PURC HASES SHOWN AGAINST THOSE TWO PARTIES, NAMELY M/S BHAWANI ENTERPRISES & SHIVAM TRADING COMPANY WERE FALSE AND FABRICATED. THE ASSESSEE HAD SHOWN PURCHASES OF 9,64,605/ - FROM M/S BHAWANI ENTERPRISE AND 9,00,000/ - FROM SHIVAM TRADING. THEREFORE, AO HAS ADD ED THE TOTAL PURCHASE AMOUNT OF 18,64,605/ - AS INCOME OF THE ASSESSEE. BEFORE THE LD. CIT(A) ASSESSEE SUBMITTED THAT ASSESSEE FURNISHED FOLLOWING EVIDENCES / ARGUMENTS BEFORE THE AO IN COURSE OF ASSESSMENT PROCEEDINGS TO PROVE THE AUTHENTICITY OF THE TRAN SACTION 1. XEROX COPIES OF THE PURCHASE BILLS WERE FILED. (MANY OF THESE BILLS WERE DULY STAMPED BY THE SALES TAX CHECK POSTS) 2. THE EXPORT PROCESS WAS EXPLAINED TO THE AO. IT WAS ALSO EXPLAINED THAT IN CASE OF EXPORT OF RICE, TRUCKS ARE LOADED AT POINT OF PURCHASE AND THE TRUCK HAS TO ENTER DIRECTLY TO UNLOADING POINT IN BANGLADESH BORDER. NO TRANSSHIPMENT IS ALLOWED IN INDIA IN CASE OF RICE EXCEPT IN SOME UNAVOIDABLE CIRCUMSTANCES AND THAT ALSO AFTER OBTAINING THE PRIOR PERMISSION FROM THE APPROPRIATE AUTH ORITIES. 3. QUANTITATIVE DETAILS GIVEN IN AUDITED STATEMENT OF ACCOUNTS WERE ALSO REFERRED. ITA NO.1459/KOL/2010 A.Y. 2001 - 02 GHANSHYAM DAS AGARWAL V. ACIT, CIR - 3, SLG. PAGE 4 4. IT WAS EXPLAINED TO THE AO THAT AS THE EXPORT OF ANY COMMODITY IS DIRECTLY UNDER THE CONTROL OF CUSTOM S AUTHORITY AND RBI, HENCE THE QUANTITY OF ANY COMMODITY EXPORTED CANNOT BE MANIPULATED. WHEN THE EXPORT IS SUPPORTED BY EVIDENCES, THERE MUST BE CORRESPONDING PURCHASES ALSO. IN VIEW OF THIS FACT, THE QUANTITATIVE DETAILS AS SUBMITTED BY THE ASSESSEE MUST BE TAKEN AS CORRECT. 5. COPY OF SALES REGISTER MAINTAINED B Y THE ASSESSEE AS PER THE GUIDELINES OF RBI. 6. STATEMENTS OF ACCOUNT OF BOTH THE PARTIES AS PER THE BOOKS OF ACCOUNT WERE FILED. THE STATEMENTS HAVE CLEARLY SHOWN THAT THE PAYMENTS WERE MADE THROUGH DD. IN SUPPORT, BANK STATEMENTS WERE ALSO FILED. 7. IT WAS EXP LAINED TO THE AO THAT THE ENTIRE QUANTITY OF EXPORT AND ITS VALUE WAS SUBJECT TO THE CONTROL OF RBI AS HIS BANKER HAD TO SUBMIT COPY OF THE GR FORMS TO RBI AGAINST ALL CORRESPONDING EXPORTS. 5. APART FROM THE ABOVE, LD. COUNSEL FOR THE ASSESSEE FURTHER SU BMITTED BEFORE THE LD. CIT(A) THAT ASSESSING OFFICER DID NOT DIS PUT E THE OPENING AND CLOSING STOCK OF RICE AND THE Q UANTITATIVE DETAILS . T HAT THE AO DID NOT POINT OUT ANY DEFECT IN THE QUANTITY OF EXPORT . T HAT IN THE PROCESS OF EXPORT OF GOODS SHIPPING BIL LS ARE PREPARED WHICH IS VERIFIED BY THE CUSTOM AUTHORITY . T HAT INVOICE ARE ALSO VERIFIED BY THEM . T HAT ASSESSEE HAD MADE THE PAYMENTS THROUGH BANK . R EGARDING THE NON - DELIVERY OF LETTERS SENT BY THE AO, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE CAN BE VARIOUS REASONS FOR IT LIKE CHANGE OF ADDRESS, CLOSING DOWN OF THE FIRM ETC., THE LETTERS WERE SENT IN THE YEAR 2004 WHEREAS THE PURCHASES WERE MADE IN THE FY 2000 - 01. THAT E VEN IF, THERE WAS NO EXISTENCE OF THE SUPPLIERS AT PRESENT, IT DOES NOT ME AN THAT THEY DID NOT EXIST AT THE MATERIAL POINT OF TIME. TH AT TH EREFORE, THE DISALLOWANCE OF PURCHASES ON THIS GROUND WAS NOT JUSTIFIED, ESPECIALLY, IN THE LIGHT OF EXISTENCE OF VARIOUS CIRCUMSTANTIAL EVIDENCES SUPPORTING THEIR CONTENTION. ITA NO.1459/KOL/2010 A.Y. 2001 - 02 GHANSHYAM DAS AGARWAL V. ACIT, CIR - 3, SLG. PAGE 5 6. CONSIDERING THE SUBMISSION OF THE ASSESSEE LD. CIT(A) REMITTED THE MATTER BACK TO THE ASSESSING OFFICER. THE AO INFORM ED THAT THE PAYMENTS WERE MADE ACTUALLY NOT TO M/S BHIWANI ENTERPRISES AND M/S SHIVAM TRADING CO. THE ACTUAL PAYMENTS WERE MADE TO ONE M/S PAWN TRADERS AND M/S GOVIND NAGAR SUGAR LTD. FROM WHOM NO PURCHASE WAS MADE. WHEN THE LD. CIT(A) ASKED THE ASSESSEE TO SUBMIT COMMENT IN THIS REGARD LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS PER THE USUAL PRACTICE IN THE BUSINESS, THE PAYMENTS ARE MADE T O SOME OTHER PERSONS ON THE INSTRUCTION OF THE SUPPLIERS. THIS TYPE OF INSTRUCTION IS GENERALLY GIVEN TO AVOID BANK CHARGES AND MAKE THE PAYMENT FAST. IF A SUPPLIER HAS TO MAKE ANY PAYMENT TO HIS OWN SUPPLIERS, HE USUALLY GIVES INSTRUCTION TO HIS BUYER TO SEND THE DRAFT DIRECTLY IN FAVOUR OF HIS OWN SUPPLIER. IN SUCH CASES, THE SUPPLIER CAN AVOID BANK CHARGES AND SIMULTANEOUSLY, THE DELAY OF 2/3 DAYS REQUIRES IN BANKING CHANNELS. THIS WAS THE COMMON PRACTICE UP TO LAST 5/6 YEARS. THE ASSESSEE NEVER CLAIMED THAT THE DRAFTS WERE PURCHASED IN THE NAME OF THE SUPPLIERS BUT IT WAS STATED THAT THE PAYMENT WERE MADE BY DEMAND DRAFTS. THERE WAS NOTHING WRONG, IF THE PAYMENTS WERE MADE TO SOME OTHER PERSONS ON ACCOUNT OF THE SUPPLIER. THE AR FURTHER CONTENDED THAT TO ARRIVE AT A CONCLUSION, THE ENTIRE EVIDENCE AND MATERIALS ARE TO B CONSIDERED. THE AO CAME TO THE CONCLUSION ON THE BASIS OF ONLY ONE FACT. HE FAILED TO BRING ANY RECORD THE PURPOSE OF MAKING THE PAYMENTS TO PAWAN TRADERS AND GOVIND NAGAR SUGAR LTD. TH AT THE RE WAS NO EVIDENCE THAT PAYMENTS MADE TO THESE TWO PARTIES WERE RECEIVED BACK BY THE ASSESSEE. HOWEVER, LD. CIT(A) WAS NOT SATISFIED AND HE TOOK ADVERSE INFERENCE THAT THE SUPPLIERS WERE NOT TRACEABLE AT THE GIVEN ADDRESS AND THAT PAYMENT WAS MADE TO TH IRD PARTY. ACCORDINGLY, LD. CIT(A) CONFIRMED THE ADDITION. 7. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. ITA NO.1459/KOL/2010 A.Y. 2001 - 02 GHANSHYAM DAS AGARWAL V. ACIT, CIR - 3, SLG. PAGE 6 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE NOTE THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE HAS PRODUCED T HE FOLLOWING BEFORE THE ASSESSING OFFICER: - (I) COPIES OF PURCHASE BILLS (MOST OF THEM WERE STAMPED BY THE SALES TAX CHECK POSTS AND HAD THE SUPPLIER S CST NO. ETC.) (II) QUANTITATIVE DETAILS OF OPENING STOCK, CLOSING STOCK, PURCHASES AND SALES AS GIVEN IN THE AUDITED ACCOUNTS. (III) BANK STATEMENTS SUBSTANTIATING THE PAYMENTS MADE TO THE SUPPLIERS. WE NOTE THAT AUTHORITIES BELOW HAVE NOT DISPUTED THE QUANTITY OF EXPORTS. THE OPENING AND CLOSING STOCK HAVE ALSO NOT BEEN DISPUTED . A DVERSE INFERENCE IS ONLY DRAWN ON THE GROUND THAT NO RESPONSE CAME FROM THE SUPPLIERS WHEN LETTER WAS ISSUED TO THEM AND ADVERSE INFERENCE HAS ALSO BEEN DRAWN ON THE GROUND THAT PAYMENT WAS MADE TO THIRD PARTY. IN OUR CONSIDERED OPINION, THE ADVERSE INFERENCE DRAWN BY THE AUTHORIT IES BELOW IN THIS CASE CANNOT LEAD TO DISALLOWANCE OF PURCHASE. THIS IS BECAUSE THE PURCHASES HAVE BEEN EXPORTED AND THE EXPORT HAS NOT BEEN DENIED BY THE AO. THE PURCHASES BILLS WERE STAMPED BY THE SALES TAX CHECK P OSTS. THE PURCHASE AND CONSEQUENT EXPORT ALSO GO THOROUGH EXAMINATION BY THE CUSTOM AUTHORITY . H ENCE, WE AGREE WITH THE ASSESSEE THAT WHEN THE EXPORT OF COMMODITY IS UNDER CONTROL OF CUSTOMS AND RESERVE BANK OF INDIA AND EXPORT IS SUPPORTED BY THE EVIDENCE , A CORRESPONDING PURCHASE CANNOT BE DIS ALLOWED. FURTHERMORE, WH EN THE PAYMENTS HAVE BEEN MADE TO OTHER PARTY ON INSTRUCTION OF SUPPLIERS, ADVERSE INFERENCE ALSO CANNOT BE DRAWN BECAUSE IT IS A CUSTOM AND PRACTICE IN THE TRADE. ASSESSEE HAS BEEN FOLLOWING THIS PRACTICE FOR THE PAST 5 - 6 YEARS. 9 . THUS, WE FIND THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSEE S PURCHASES CANNOT BE DISALLOWED. IN THIS REGARD, WE PLACE RELIANCE UPON THE FOLLOWING CASE LAW THAT THIS TRIBUNAL IN CASE OF SAGAR BOSE V. ITO 56 ITD 561 (KOL) HELD THAT THE ASSESSEE HAS FURNISHED THE DETAILS AND PARTICULARS OF ITA NO.1459/KOL/2010 A.Y. 2001 - 02 GHANSHYAM DAS AGARWAL V. ACIT, CIR - 3, SLG. PAGE 7 PURCHASES AND SALES OF FINISHED GOODS DATEWISE, BILLWISE, NAMEWISE, ITEMWISE, QUANTITYWISE, STOCK FOLIOWISE AND AMOUNTWISE AND ALSO GOVT. ORDER NUMBERWISE AND THE ITO HAS NOT POINTED OUT ANY DEFECT S, IRREGULARITY AND DISCREPANCY IN THE STATEMENT AND BOOKS OF ACCOUNT, BILLS AND VOUCHERS, PRODUCED BEFORE HIM. THESE STATEMENTS GIVEN ALL RELEVANT PARTICULARS AND DETAILS ARE GOOD PIECES OF EVIDENCE DULY SUPPORTED BY BOOKS OF ACCOUNT AND UNLESS AND UNTIL THEY ARE CONTROVERTED OR THEIR CONTENTS ARE DISBELIEVED OR DISTURBED BY POINTING OUT DEFECT OR BY PROVING THE DEFECTS WITH POSITIVE EVIDENCE, PURCHASES CANNOT BE DECLARED TO BE BOGUS. THUS, WE COME TO THE CONCLUSION ON THE BASIS OF THE ABOVE MENTIONED OBSE RVATIONS AND FINDINGS THAT THE ITO WAS NOT JUSTIFIED IN DECLARING THE PURCHASES TO BE BOGUS FOR THE REASONS GIVEN BY HIM. WE FURTHER PLACE RELIANCE UPON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE OF MATHER & PLATT (INDIA) LTD. V. COMMISSIONER OF INCOME - TAX [168 ITR 493] WHEREIN THE HON BLE HIGH COURT HELD THAT IN RESPECT OF COMMISSION PAID TO S AND V, THE ASSESSEE HAD ESTABLISHED THAT IN 1974 IT WAS IN CORRESPONDENCE WITH THE AGENTS. THE ASSESSEE HAD PAID COMMISSION TO THE SAID AGENTS IN ONE C ASE BY BANK DRAFT AND IN THE OTHER BY AN ACCOUNT PAYEE CHEQUE. THE ONLY FACT ON THE BASIS OF WHICH THE TRIBUNAL HAD PROCEEDED WAS THAT FOUR YEAR AFTER THE TRANSACTION, SUMMONS ISSUED TO THE AGENTS HAD COME BACK UNSERVED. ON THE ENTIRETY OF EVIDENCE, IT COU LD NOT BE HELD THAT MERELY BECAUSE A PERSON WAS NOT FOUND IN THE ADDRESS AFTER FOUR YEARS, THE PERSON WAS NON - EXISTENT. THE ASSESSEE HAD DISCHARGED ITS PRIMARY ONUS AND ESTABLISHED THE IDENTITIES OF THE SAID TWO COMMISSION AGENTS AND NO EVIDENCE HAD BEEN B ROUGHT ON RECORD BY THE REVENUE TO REBUT THE CASE OF THE ASSESSEE. 10. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT WE HOLD THAT ASSESSEE HAS EXPORTED THE PURCHASES MADE AND THE EXPORTS HAVE NOT BEEN DISPUTED. THE PURCHASE BILLS ALSO CONTA INED THE STAMPED BY SALES TAX CHECK ITA NO.1459/KOL/2010 A.Y. 2001 - 02 GHANSHYAM DAS AGARWAL V. ACIT, CIR - 3, SLG. PAGE 8 POSTS . THE REVENUE IS NOT DISPUTING THE QUAN TI T ATIVE DETAILS OF OPENING AND CLOSING STOCK , PURCHASES AND SALES PAYMENTS HAVE BEEN MADE THROUGH BANK. HENCE, MERELY BECAUSE NOTICE CAME BACK UNSERVED FROM THE SUPPLIERS AFTE R SEVERAL YEARS OF THE PURCHASES MADE ASSESSEE S PURCHASES CANNOT BE DISALLOWED. ACCORDINGLY, WE SET ASIDE THE ORDER OF AUTHORITIES BELOW AND DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. 11. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09 / 0 1 /201 5 SD/ - SD/ - ( MAHAVIR SINGH ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEM BER KOLKATA, *DKP - 09 /0 1 /201 5 / COPY OF ORDER FORWARDED TO: - 1 . / APPELLANT GHANSHYAM DAS AGARWAL, S.F.RD. SILIGURI 2 . / RESPONDENT - ACIT, CIR - 3, CENTRAL REVENUE BULDG. HAKIMPARA, SLG. 3 . / CONCERNED CIT 4 . - / CIT (A) 5 . , / DR, ITAT, KOLKATA 6 . / GUARD FILE. BY ORDER/ , /TRUE COPY/ / ,