Naresh Pachisia, Kolkata V. ACIT, Circle - 37, Kolkata

ITA 2497/KOL/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2795 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-06-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 01-04-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 30-11-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RABIN CHOUDHURY CIT SR DR R
• Keywords: Bogus purchase; Business expenditure; Accommodation entries
• Section: 143(1); 147; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, VICE PRESIDENT, KZ] I.T.A. NO. 2497/KOL/2018 ASSESSMENT YEAR: 2010-11 NARESH PACHISIA....................................................................................APPELLANT C/O. S.L. KOCHAR, ADVOCATE, 5, ASHUTOSH CHOWDHURY AVENUE, KOLKATA 700 019. [PAN: AFRPP 4518 G] ACIT, CIRCLE-37, KOLKATA..................................RESPONDENT 54/1, RAFI AHMED KIDWAI ROAD, KOLKATA 700 016. APPEARANCES BY: SHRI ANIL KOCHAR, ADVOCATE APPEARING ON BEHALF OF THE ASSESSEE. SHRI RABIN CHOUDHURY, ADDL. CIT, SR. DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : APRIL 01, 2019 DATE OF PRONOUNCING THE ORDER : JUNE 07, 2019 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 11, KOLKATA DATED 05.09.2018 AND THE GROUNDS RAISED BY THE ASSESSEE THEREIN READ AS UNDER: 1. FOR THAT THE ORDERS PASSED BY THE LOWER AUTHORITIES ARE ARBITRARY, ERRONEOUS, WITHOUT PROPER REASONS, INVALID AND BAD-IN-LAW TO THE EXTENT TO WHICH THEY ARE PREJUDICIAL TO THE INTERESTS OF THE APPELLANT. 2. FOR THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE JURISDICTION ADOPTED BY THE A.O. U/S 147 WITH REFERENCE TO THE REASONS RECORDED WAS VALID. 3. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 3,16,575/- MADE BY THE A.O. AS UNDISCLOSED INCOME OF THE APPELLANT BY REJECTING THE EXPLANATION AND EVIDENCES TENDERED BY THE APPELLANT RELATING TO BUSINESS TRANSACTIONS WITH SHREE GANESH TRADING CO. 4. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 22,512/- CLAIMED UNDER THE HEAD BUSINESS PROMOTION EXPENSES ON THE ALLEGED GROUNDS. 5. FOR THAT THE LD. CIT(A) OUGHT TO HAVE PROPERLY APPRECIATED THE EXPLANATION OF THE APPELLANT WITH REGARD TO THE CLAIM FOR TRAVELLING EXPENSES OF RS. 2,62,482/- AND OUGHT TO HAVE ALLOWED THE SAME AS IT WAS A BUSINESS EXPENDITURE. 6. FOR THAT THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED THE DISALLOWANCE OF RS. 21,268/- CLAIMED UNDER THE HEAD MAINTENANCE EXPENSES. 2 I.T.A. NO. 2497/KOL/2018 ASSESSMENT YEAR: 2010-11 NARESH PACHISIA 2. AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRESSED GROUND NO. 1, 2 & 4 OF THE ASSESSEES APPEAL. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 3. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 3 RELATING TO THE DISALLOWANCE OF RS. 3,16,575/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF ALLEGED BOGUS PURCHASES, THE RELEVANT FACTS ARE THAT THE ASSESSEE IS AN INDIVIDUAL WHO IS ENGAGED IN THE BUSINESS OF TRADING IN PLYWOOD. THE RETURN OF INCOME FILED BY HIM FOR THE YEAR UNDER CONSIDERATION ON 30.09.2010 DECLARING A TOTAL INCOME OF RS. 15,42,573/- WAS INITIALLY PROCESSED BY THE AO U/S 143(1) ON 06.05.2011. THEREAFTER, CERTAIN INFORMATION WAS RECEIVED BY THE AO FROM DGIT, INV. MUMBAI REGARDING BOGUS PURCHASE OF RS. 3,10,575/- MADE BY THE ASSESSEE FROM M/S. SHREE GANESH TRADING COMPANY. ACCORDINGLY, ASSESSMENT WAS REOPENED BY THE AO AND A NOTICE U/S 148 WAS ISSUED BY HIM ON 12.08.2014 AFTER RECORDING THE REASONS. ON 25.08.2014, THE ASSESSEE FILED A LETTER STATING THAT THE RETURN ORIGINALLY FILED BY HIM ON 30.09.2010 MAY BE TREATED AS THE RETURN FILED IN COMPLIANCE TO THE NOTICE U/S 148. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE AO THAT THE PURCHASES MADE FROM M/S. SHREE GANESH TRADING COMPANY AMOUNTING TO RS. 3,16,575/- WERE GENUINE PURCHASES AND IT WAS NOT AN ACCOMMODATION ENTRY AS ALLEGED BY THE AO. IN ORDER TO SUPPORT AND SUBSTANTIATE THIS CONTENTION, THE FOLLOWING DOCUMENTARY EVIDENCE WAS FILED BY THE ASSESSEE: I. INVOICE NO. 531 DATED 10.09.2009 ISSUED IN THE NAME OF MY PROPRIETORSHIP CONCERN PLYWOOD & HARDWARE FOR RS. 3,16,575/- FOR 450 PCS (1340 SQ. MTR) OF 6 MM PLYWOOD @ RS. 210 PER SQ. MTR. 3 I.T.A. NO. 2497/KOL/2018 ASSESSMENT YEAR: 2010-11 NARESH PACHISIA II. BANK STATEMENT OF CITI BANK OF SEPTEMBER, 2009 SHOWING CLEARANCE ON 29.09.2009 OF MY ACCOUNT PAYEE CHEQUE NUMBERED 691234 OF RS. 3,16,575/- ISSUED FOR PAYMENT AGAINST THE SAID PURCHASE. THIS ENTRY IN BANK STATEMENT ALSO CONTAINS THE NAME OF PAYEE M/S. SHREE GANESH TRADING COMPANY AND IT BANK ZOROASTRIAN COOPERATIVE BANK. III. STOCK REGISTER OF MARINE PLY 6 MM FOR SEPTEMBER, 2009 SHOWING THE SAID PURCHASE FROM M/S. SHREE GANESH TRADING COMPANY AND ALSO CORRESPONDING SALE TO M/S. SARDA PLYWOOD INDS. LTD. IV. SALE INVOICE DATED 10.09.2009 ISSUED TO M/S. SARDA PLYWOOD INDS. LTD. FOR SALE OF INTER ALIA MARINE PLY (6 MM) V. LEDGER ACCOUNT OF M/S. SARDA PLYWOOD INDS. LTD. FOR THE YEAR ENDED 31.03.2010 (CONTAINING THE ABOVE SALE TRANSACTION WITH THEM) DULY SIGNED BY THEM. 4. THE CONTENTION OF THE ASSESSEE REGARDING THE GENUINENESS OF THE PURCHASES MADE FROM M/S. SHREE GANSH TRADING COMPANY WAS NOT FOUND ACCEPTABLE BY THE AO. HE NOTED THAT MR. KISHORE P. MEHTA, PROP. M/S. SHREE GANESH TRADING COMPANY (SGTC) HAD CLEARLY STATED IN HIS STATEMENT THAT NO ACTUAL SALE WAS MADE BY HIS PROPRIETARY CONCERN AND ONLY ACCOMMODATION ENTRIES WERE GIVEN. HE HAD ALSO STATED THAT CASH WAS GIVEN BACK TO THE ASSESSEE AGAINST THE CHEQUE RECEIVED TOWARDS PAYMENT OF THE SAID PURCHASES AND A COMMISSION @ 30 PAISA PER 100 RUPEES WAS RECEIVED BY HIM FOR GIVING BOGUS BILLS. KEEPING IN VIEW THIS CATEGORICAL STATEMENT MADE BY MR. KISHORE P. MEHTA, PROP. M/S. SHREE GANESH TRADING COMPANY (SGTC), THE AO TREATED THE PURCHASES CLAIMED TO BE MADE BY THE ASSESSEE FROM THE SAID CONCERN AS BOGUS AND ADDITION OF RS. 3,16,575/- WAS MADE BY HIM TO THE TOTAL INCOME OF THE ASSESSEE IN THE ASSESSMENT COMPLETED U/S 143(3)/147 VIDE AN ORDER DATED 31.12.2015. 5. THE ADDITION MADE BY THE AO ON ACCOUNT OF THE ALLEGED BOGUS PURCHASE WAS CHALLENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE 4 I.T.A. NO. 2497/KOL/2018 ASSESSMENT YEAR: 2010-11 NARESH PACHISIA LD. CIT(A) AND SINCE THE SUBMISSIONS MADE BY THE ASSESSEE IN SUPPORT OF HIS CASE ON THIS ISSUE WERE NOT FOUND ACCEPTABLE BY HIM, THE LD. CIT(A) CONFIRMED THE ADDITION MADE BY THE AO ON ACCOUNT OF BOGUS PURCHASES BY HOLDING THAT NEITHER THE PURCHASE NOR THE SALE OF PLYWOOD WAS GENUINE. 6. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE, THE SALE OF PLYWOOD MADE BY THE ASSESSEE WAS HELD TO BE BOGUS BY THE LD. CIT(A) VIDE HIS IMPUGNED ORDER IGNORING THE FACT THAT THE SALE SO DECLARED BY THE ASSESSEE AS HIS INCOME WAS ACCEPTED BY THE AO. WHEN THE SALE OF PLYWOOD WAS DECLARED BY THE ASSESSEE AS HIS INCOME AND THE SAME WAS ACCEPTED, IT FOLLOWS THERE HAS TO BE A CORRESPONDING PURCHASE. I, THEREFORE, FIND MERIT IN THE CONTENTION RAISED ON BEHALF OF THE ASSESSEE THAT EVEN IF THE RELEVANT BILL PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM FOR SUCH PURCHASES WAS FOUND TO BE BOGUS, THE FACTUM OF PURCHASES CANNOT BE DISPUTED KEEPING IN VIEW THAT THE CORRESPONDING SALE OF THE PLYWOOD WAS NOT DISPUTED. IN THESE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT WHAT CAN BE DISPUTED ON THE BASIS OF THE ADVERSE FINDINGS RECORDED BY THE AO IS THE PURCHASE BILL AND NOT PURCHASES AND IF THE PURCHASE BILL IS NOT GENUINE, THE CLAIM OF THE ASSESSEE FOR THE CORRESPONDING PURCHASES CANNOT BE TREATED AS FULLY VERIFIABLE. THE ENTIRE PURCHASES CLAIMED BY THE ASSESSEE THEREFORE CANNOT BE DISALLOWED AND WHAT CAN JUSTIFIABLY BE DISALLOWED, IN MY OPINION, IS SOME PORTION OF SUCH PURCHASES FOR THE UNVERIFIABLE ELEMENT INVOLVED THEREIN. IN ALL THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT IT WOULD BE FAIR AND REASONABLE TO MAKE A DISALLOWANCE TO THE EXTENT OF 25% OF THE CORRESPONDING PURCHASES FOR SUCH UNVERIFIABLE ELEMENT INVOLVED THEREIN. I, ACCORDINGLY, RESTRICT THE 5 I.T.A. NO. 2497/KOL/2018 ASSESSMENT YEAR: 2010-11 NARESH PACHISIA DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE TO THE EXTENT OF 25% AND ALLOW PARTLY GROUND NO. 3 OF THE ASSESSEES APPEAL. 7. AS REGARDS THE ISSUE INVOLVED IN GROUND NO. 5 RELATING TO THE DISALLOWANCE OF RS. 2,62,482/- MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF FOREIGN TRAVEL EXPENSES, IT IS OBSERVED THAT FOREIGN TRAVEL EXPENSES OF RS. 2,62,482/- WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF VISIT TO TRADE FAIR IN GERMANY. IT WAS EXPLAINED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER THAT THE SAID TRADE FAIR WAS FOR MACHINES AND TOOLS USED, INTER ALIA, IN CARPENTRY AND FURNITURE INDUSTRY. IT WAS ALSO SUBMITTED THAT VISIT TO THE SAID TRADE FAIR GAVE THE ASSESSEE AN OPPORTUNITY TO EXPLORE AND EXPAND INTERNATIONAL CONTACTS. THE AO DID NOT FIND MERIT IN THIS EXPLANATION OF THE ASSESSEE. ACCORDING TO HIM, THE ASSESSEE WAS NOT EITHER AN EXPORTER OR A MANUFACTURER WHO REQUIRED TO VISIT THE TRADE FAIR OF MACHINES AND TOOLS. HE ALSO FOUND THAT THE ASSESSEE HAD GONE TO GERMANY WITH A TOURIST VISA AND HAD ALSO STAYED ONE FULL DAY AND NIGHT AT DUBAI ON BOTH UP AND DOWN JOURNEY. HE, THEREFORE, HELD THAT THE FOREIGN TRAVELLING EXPENSES CLAIMED BY THE ASSESSEE WERE NOT FOR THE PURPOSE OF ITS BUSINESS AND MADE A DISALLOWANCE OF RS. 2,62,482/-. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. 8. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT EVEN THOUGH THERE WERE CERTAIN DEFICIENCIES IN THE CLAIM MADE BY THE ASSESSEE FOR FOREIGN TRAVEL EXPENSES IN AS MUCH AS HE HAD GONE TO GERMANY ON A TOURIST VISA AND HAD ALSO TAKEN HALT IN DUBAI, THE FACT REMAINS TO BE SEEN IS THAT THE TRADE FAIR/EXHIBITION VISITED BY HIM WAS THE EXHIBITION OF MACHINES AND TOOLS USED, INTER ALIA, IN CARPENTRY AND 6 I.T.A. NO. 2497/KOL/2018 ASSESSMENT YEAR: 2010-11 NARESH PACHISIA FURNITURE INDUSTRY. SINCE THE ASSESSEE WAS CARRYING ON THE BUSINESS OF TRADING IN PLYWOOD, HIS PARTICIPATION IN THE FAIR/EXHIBITION IN GERMANY CANNOT BE ENTIRELY TREATED AS FOR NON-BUSINESS PURPOSE. IT WAS CONNECTED TO HIS BUSINESS AND KEEPING IN VIEW THE SAME AS WELL AS THE DEFICIENCIES POINTED OUT BY THE A.O., I AM OF THE VIEW THAT IT WOULD BE FAIR AND REASONABLE TO RESTRICT THE DISALLOWANCE MADE BY THE AO ON ACCOUNT OF FOREIGN TRAVEL EXPENSES TO 50%, I ACCORDINGLY DIRECT THE AO TO RECOMPUTE THE DISALLOWANCE ON THIS ISSUE AND ALLOW PARTLY GROUND NO. 5 OF THE ASSESSEES APPEAL. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH JUNE, 2019. SD/- (P.M. JAGTAP) VICE PRESIDENT DATED: 07/06/2019 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. NARESH PACHISIA, C/O. S.L. KOCHAR, ADVOCATE, 5, ASHUTOSH CHOWDHURY AVENUE, KOLKATA 700 019. 2. ACIT, CIRCLE 37, KOLKATA. 3. THE CIT(A) 4. THE CIT 5. DR TRUE COPY, BY ORDER, ASSISTANT REGISTRAR / H.O.O. ITAT, KOLKATA 7 I.T.A. NO. 2497/KOL/2018 ASSESSMENT YEAR: 2010-11 NARESH PACHISIA