Sharma Egg Supplier , Siliguri V. ITO, Ward - 2(3), Siliguri , Siliguri

ITA 1846/KOL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8819 (ITAT-KOLKATA)
• Duration Of Justice: 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 28-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Bogus
• Section: 69C; 40A(3)

Judgement Text

1 ITA NO. 1846/KOL/2018 SHARMA EGG SUPPLIER, AY 2015-16 , A(SMC) , IN THE INCOME TAX APPELLATE TRIBUNAL A (SMC) BENCH: KOLKATA ( ) BEFORE . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 1846/KOL/2018 ASSESSMENT YEAR: 2015-16 SHARMA EGG SUPPLIER (PAN: ABOFS1688K) VS. INCOME-TAX OFFICER, WD-2(3), SILIGURI APPELLANT RESPONDENT DATE OF HEARING 19.12.2018 DATE OF PRONOUNCEMENT 28.12.2018 FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI BAIJNATH SINGH, ADDL. CIT ORDER THIS APPEAL PREFERRED BY THE ASSESSEE IS AGAINST TH E ORDER OF THE LD. CIT(A), SILIGURI DATED 07.08.2018 FOR AY 2015-16. 2. GROUND NO. 1 OF ASSESSEES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.7,21,803/- AS MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES. BRIEFLY STATED FACTS ARE THAT AO WHILE GOING THROUGH THE PU RCHASE LEDGER AND COPIES OF RELEVANT BILLS & VOUCHERS PRODUCED NOTED THAT THERE IS PAYMENT OF CASH FOR PURCHASE WHICH WERE IN VIOLATION OF SECTION 40A(3) OF THE ACT AND THAT THE RE WERE PURCHASES MADE BY ASSESSEE OUT OF BOOKS WHICH WERE NOT RECORDED. SO THE AO CALLED FO R THE INSPECTORS REPORT & AFTER PERUSING THE REPORT OF THE INSPECTOR AND REPLY OF A SSESSEE WAS PLEASED TO HOLD THAT THE PURCHASE OF EGGS OF RS.7,21,803/- WAS BOGUS. THEREF ORE, THE AO TREATED THE SUM OF RS.7,04,478/- AS BOGUS PURCHASE U/S. 69C OF THE ACT . ON APPEAL, THE LD. CIT(A) CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE IS NOW IN AP PEAL BEFORE US. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. FACTS ARE NOT REPEATED AGAIN FOR THE SAKE OF BREVITY. WE NOTE THAT AO HAS ACCEPTED THE SALE OF EGGS. HOWEVER, HE DOUBTED THE PURCHASE S, WHEN HE ACCEPTED THE SALES. THE 2 ITA NO. 1846/KOL/2018 SHARMA EGG SUPPLIER, AY 2015-16 LD.AR SUBMITTED BEFORE US THAT ALL THE PURCHASES AN D SALES MADE ARE RECORDED REGULARLY IN THE BOOKS. WE NOTE THAT THE PURCHASES WERE TAKEN I NTO ACCOUNT AND CHARGED TO THE P&L ACCOUNT. THE NATURAL COROLLARY WOULD BE THAT THE E GGS HAVE BEEN PURCHASED AND THEN ONLY IT CAN BE SOLD. THE INSPECTORS REPORT THAT CERTAIN S ELLING PARTIES ARE NOT TRACEABLE CANNOT BE A GROUND FOR TREATING THE ENTIRE PURCHASES OF EGGS BY ASSESSEE AS BOGUS AT THE WHEN AO ACCEPTS THE SALE OF EGGS SHOWN BY THE ASSESSEE. SA LE OF EGGS CANNOT HAPPEN WITHOUT EGGS ARE THERE IN ASSESSEES POSSESSION AND SO THE ENTIR E ADDITION OF PURCHASE OF EGGS OF CERTAIN PARTIES AS DONE IN THIS CASE CANNOT BE COUNTENANCED . THE AO CANNOT DISALLOW THE PURCHASE WITHOUT REDUCING EITHER THE SALES OR THE STOCK BY A MATCHING SUM. SO WE ARE OF THE OPINION THAT EVEN IF THE EGGS PURCHASED BY THE ASSESSEE ARE NOT FROM THE PARTIES SHOWN IN THE BOOKS, THE ASSESSEE INFACT HAD PURCHASED THE EGGS FROM SOM E OTHER PARTY WHICH WAS EVENTUALLY SOLD. SO THE ENTIRE PURCHASE CANNOT BE ADDED AND O NLY THE PROFIT EMBEDDED IN THE SALES CAN BE ADDED. WE NOTE THAT THE ASSESSEE HAS SHOWN THE GP @ 3.5%. RELYING ON THE DECISION OF HONBLE GUJARAT HIGH COURT IN A SIMILAR CASE REPORT ED AS CIT VS. BHOLANATH POLY FAB PVT. LTD. 355 ITR 290 (GUJ.) AND CIT VS. SIMIT P. SHETH 356 ITR 451 (GUJ), WE CONSIDER THE GP @ 5% WOULD BE SUFFICIENT IN THE FACTS AND CIRCUMST ANCES OF THE CASE FOR THE INTEREST OF JUSTICE IN THIS CASE. THEREFORE, THIS GROUND OF AP PEAL OF ASSESSEE IS PARTLY ALLOWED. 4. GROUND NO. 2 OF ASSESSEES APPEAL IS AGAINST THE ACTION OF LD. CIT(A) IN CONFIRMING THE ADDITION OF RS.4,26,021/- MADE BY THE AO ON ACC OUNT OF CASH PURCHASES. BRIEFLY STATED FACTS ARE THAT THE AO ON EXAMINATION OF THE PURCHAS E LEDGER AND THE COPIES OF THE RELEVANT BILLS AND VOUCHERS PRODUCED FOUND THAT THE ASSESSEE HAD MADE PAYMENT TO M/S. PAUL EGG CENTRE OF RS.4,26,021/- IN CASH IN VIOLATION OF SEC . 40A(3) OF THE ACT. ACCORDINGLY, AO ISSUED A SHOW CAUSE LETTER DATED 20.09.2017 AS TO W HY THE ABOVE CASH PAYMENTS AND THE PURCHASE NOT REFLECTED IN THE BOOKS OF ACCOUNT BE N OT DISALLOWED U/S. 40A(3) AND U/S. 69C OF THE ACT. THE AO DEPUTED AN INSPECTOR TO INQUIRE AN D REPORT AS TO WHETHER THE PARTIES FROM WHOM THE PURCHASES WERE MADE IN CASH WERE ENGAGED I N POULTRY FARMING OR TRADERS OF THE POULTRY PRODUCTS, WHO GAVE THE FOLLOWING FEED BACK REPORT: 1. REGARDING PURCHASES MADE FROM PAUL EGG CENTRE, S AHUDANGI, DIST: JALPAIGURI - ON MEETING THE OWNER OF MRS. PAUL EGG CENTRE SRI DIPAK PAUL, IT WAS REVEALED BY HIM THAT HE USED TO SELL THE EGGS TO STATED THAT HE MRS. SHARMA EGG SUPPLIER, BUT IN CASH ONLY. AND ALSO MRS. PAUL EGG CENTRE IS A TRADER IN EGGS AND NOT EN GAGED IN POULTRY FARMING. 3 ITA NO. 1846/KOL/2018 SHARMA EGG SUPPLIER, AY 2015-16 5. ACCORDING TO AO, THE PURCHASES OF RS.4,26,021/- FROM M/S. PAUL EGG CENTRE, HAVE BEEN MADE IN CASH WHICH FACT HAS BEEN CONFIRMED BY THE OWNER SHRI DIPAK PAUL, AND AS M/S. PAUL EGG CENTRE IS A TRADER IN EGGS AND NOT PRODUCE S THE PRODUCTS I.E. THE EGGS, FROM THE POULTRY FARMER DIRECTLY, RULE 6DD IS NOT APPLICABLE IN THIS CASE AND THE SAME WAS DISALLOWED U/S. 40A(3) OF THE ACT AND ADDED BACK THE SAME TO T HE RETURNED INCOME OF THE ASSESSEE. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF AO. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. THE FACTS STATED ABOVE ARE NOT REPEATED FOR THE SAKE OF BREVITY. WE NOTE THAT THE AO NOTED THAT THE ASSESSEE HAS PURCHASED EGGS IN CASH FROM M/S. PAUL EGG CENTRE TO THE TUNE OF RS.4,26,021/- WHICH FACT HAS BEEN CONFIRMED BY THE OWNER OF M/S. PAUL EGG CENTRE SHRI DIPAK PAUL AND DULY NOTED BY AO WHILE FRAMING THE A SSESSMENT ORDER. SO THE GENUINENESS OF THE CASH PAYMENT TO PROCURE EGG FOR TRADE OF ASS ESSEE FROM M/S. PAUL EGG CENTRE IS NOT DISPUTED. IN SUCH A SCENARIO, THE LD.AR RELIED UPO N THE DECISION OF HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT VS CRESCENT EXPORT SYND ICATE IN ITA NO.202 OF 2008 ORDER DATED 30.07.2008 WHEREIN IT WAS HELD AS UNDER:- IT ALSO APPEARS THAT THE PURCHASES HAVE BEEN HELD TO BE GENUINE BY THE LEARNED CIT(APPEAL) BUT THE LEARNED CIT(APPEAL) HAS INVOKED SECTION 40A(3) FOR PAYMENT EXCEEDING RS.20,000/- SINCE IT IS NOT MADE BY CROSSED CHEQUE OR BANK DRAFT BUT BY BEARER CHEQUES AND HAS COMPUTED THE PAYMENTS FALLING UNDER PROVISIONS OF SECTION 40A(3) FOR RS.78,45,580/- AND DISALLOWED @ 20% THEREON 15,69,116/-. IT IS ALSO M ADE CLEAR THAT WITHOUT THE PAYMENT BEING MADE BY BEARER CHEQUE THESE GOODS COULD NOT HAVE BE EN PROCURED AND IT WOULD HAVE HAMPERED THE SUPPLY OF GOODS WITHIN THE STIPULATED TIME. THEREFORE, THE GENUINENESS OF THE PURCHASE HAS BEEN ACCEPTED BY THE LD.CIT(APPEAL) WH ICH HAS ALSO NOT BEEN DISPUTED BY THE DEPARTMENT AS IT APPEARS FROM THE ORDER SO PASSED B Y THE LEARNED TIRBUNAL. IT FURTHER APPEARS FROM THE TRANSACTION THAT NEITHER THE ASSESSING OFF ICER NOR THE CIT(A) HAS DISBELIEVED THE GENUINENESS OF THE TRANSACTION. THERE WAS NO DISPU TE THAT THE PURCHASES WERE GENUINE. ACCORDINGLY, IN OUR OPINION, THE LEARNED TRIBUNAL H AS CORRECTLY CAME TO THE CONCLUSION BY DELETING BY ADDITION OF RS.15,69,116/ - UNDER SECTION 40A(3) OF THE ACT. 7. SINCE THE AO HAS NOT DOUBTED THE GENUINENESS OF THE PURCHASES MADE BY CASH BY THE ASSESSEE FROM M/S. PAUL EGG CENTRE, BY APPLYING THE RATIO AS HELD BY HONBLE JURISDICTIONAL HIGH COURT OF THE OPINION THAT NO DISALLOWANCE WAS WARRANTED SO, WE ORDER DELETION OF THE ADDITION. 4 ITA NO. 1846/KOL/2018 SHARMA EGG SUPPLIER, AY 2015-16 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 28TH DECE MBER, 2018. SD/- (A. T. VARKEY) JUDICIAL MEMBER DATED: 28TH DECEMBER, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 APPELLANT SHARMA EGG SUPPLIER, C/O, SUBASH AGARWA L & ASSOCIATES, SIDDHA GIBSON, 1, GIBSON LANE, SUITE-213, 2 ND FLOOR, KOLKATA-700069. 2 RESPONDENT ITO, WARD-2(3), SILIGURI. 3 4 5 CIT(A)-SILIGURI. (SENT THROUGH E-MAIL) CIT , SILIGURI DR, KOLKATA BENCHES, KOLKATA (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR