M/s Benaka Minerals Trading Pvt Ltd , Bangalore V. Income Tax Officer Ward-1(1)(3), Bangalore

ITA 305/BANG/2019

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 4132 (ITAT-BANGALORE)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 19-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PALANI KUMAR
• Keywords: Opportunity of being heard; Cost of acquisition; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH SMC-C, BANGALORE BEFORE SHRI A.K.GARODIA, ACCOUNANT MEMBER ITA NO. 305 (BANG) 2019 (ASSESSMENT YEAR : 2014 15) M/S. BENAKA MINERALS TRADING PVT. LTD., APPELLANT 421/32, 7 TH B MAIN, JAYANAGAR 4 TH BLOCK, ROOM NO. 732, 7 TH FLOOR, BMTC BUILDING, 80 FEET ROAD, KORAMANGALA, BANGALORE 560011. PAN. AAECB2541G VS ITO WARD 1 (1) (3), RESPONDENT BANGALORE. ASSESSEE BY : SHRI PRANAV KRISHNA, ADVOCATE REVENUE BY : SHRI PALANI KUMAR, ADDL. CIT DR DATE OF HEARING : 01-05-2019 DATE OF PRONOUNCEMENT : 08-05-2019 O R D E R PER A. K. GARODIA, A.M.: THIS APPEAL IS FILED BY THE ASSESSEE AND IT IS DIRECTED AGAINST THE ORDER OF CIT (A) 1 BENGALURU DATED 26.11.2018 FOR A. Y. 2014 15. 2. THE ASSESSEE HAS RAISED AS MANY AS 7 GROUNDS BUT ONLY ONE GRIEVANCE OF THE ASSESSEE IS ABOUT ADDITION OF RS. 19,10,931.41 BY DISALLOWING THE PURCHASES FROM A SUPPLIER M/S CARBON LOGIX OF THIS AMOUNT. 3. LEARNED AR OF THE ASSESSEE SUBMITTED THAT IT IS NOTED BY THE AO IN PARA 3.1 OF THE ASSESSMENT ORDER THAT THE NAME OF THIS PARTY IS NOT APPEARING IN FORM 26AS ALTHOUGH IN THE BILLS OF THIS PARTY PRODUCED BEFORE THE AO, IT IS SHOWN THAT TCS IS DEDUCTED. FOR THIS REASON ALONE, THE AO CAME TO THE CONCLUSION THAT THIS SUPPLIER IS NOT GENUINE AND THE PURCHASES SHOWN BY THE ASSESSEE FROM THIS PARTY WAS DISALLOWED. THEREAFTER HE SUBMITTED THAT AS PER PARA 2.0 OF THE ORDER OF CIT (A), IT IS NOTED BY HIM THAT THE AR OF THE ASSESSEE WAS ASKED TO PRODUCE CONFIRMATION FROM THIS PARTY AND PROVE THE GENUINENESS OF THE SAID TRANSACTION BUT THE ASSESSEE EXPRESSED THE INABILITY TO DO SO BY SAYING THAT THAT THE SAID COMPANY CLOSED ITS OPERATIONS AND IS ABSCONDING. HE SUBMITTED THAT AS PER PAGE 6 OF THE PAPER BOOK IS A SEARCH REPORT OF THE DEALER OF COMMERCIAL TAX ITA NO. 305(BANG)2019 2 DEPARTMENT, GOVT. OF KARNATAKA AND AS PER THE SAME, THIS PARTY IS DULY REGISTERED WITH COMMERCIAL TAX DEPARTMENT, GOVT. OF KARNATAKA. THEREAFTER HE SUBMITTED THAT ON PAGES 1 & 2 OF THE PAPER BOOK IS THE LEDGER ACCOUNT COPY OF THIS PARTY IN THE BOOKS OF THE ASSESSEE AND AS PER THE SAME, AN AMOUNT OF RS. 18,92,196.41 (NET OF PURCHASE VALUE RS. 19,10,931.41 LESS TCS RS. 18,735/-) WAS PAID BY THE ASSESSEE TO THIS PARTY BY WAY OF 5 CHEQUES. THEREAFTER, HE SUBMITTED THAT THE COPY OF BANK STATEMENT OF THE ASSESSEES ACCOUNT WITH DENA BANK IS AVAILABLE ON PAGES 95 TO 100 OF THE PAPER BOOK AND THESE CHEQUES ARE CLEARED FROM THIS BANK ACCOUNT. THEREAFTER, HE SUBMITTED THAT ON PAGE NO. 4 OF THE PAPER BOOK IS THE DETAIL OF QUANTITY AND VALUE OF PURCHASE AND SALE OF COAL AND FROM THE SAME IT CAN BE SEEN THAT AGAINST PURCHASE OF COAL OF 336.860 MT AT A COST OF RS. 10,27,423/-, EQUAL QUANTITY OF COAL WAS SOLD FOR RS. 10,61,109/-. HE SUBMITTED THAT IF PURCHASE IS NOT ACCEPTED, THE SALE SHOULD ALSO BE EXCLUDED AND THEN THE INCOME OF THE ASSESSEE WILL GO DOWN. AT THIS JUNCTURE, THE BENCH WANTED TO SEE AS TO WHETHER THE VALUE OF COAL PURCHASE AND SALE SHOWN ON THIS PAGE OF THE PAPER BOOK IS ALLYING WITH PURCHASE AND SALE SHOWN IN THE PROFIT & LOSS ACCOUNT. IN REPLY, LEARNED AR OF THE ASSESSEE SUBMITTED A COPY OF THE AUDITED STATEMENT OF ACCOUNTS AND POINTED OUT THAT THE AMOUNT OF SALE OF MINERALS IS RS. 791,36,288/- AND COST OF PURCHASE IS RS. 756,65,979/- AS PER NOTE 19 & 21 RESPECTIVELY ENCLOSED WITH PROFIT & LOSS ACCOUNT BUT FURTHER DETAIL OF COAL PURCHASE AND SALE IS NOT READILY AVAILABLE. HE SUBMITTED THAT IF THE MATTER IS RESTORED BACK TO THE AO, THE ASSESSEE CAN SATISFY THAT EQUAL QUANTITY OF COAL PURCHASE AND SALE IS ACCOUNTED FOR BY THE ASSESSEE AND THERE IS NO EXCESS CLAIM OF COAL PURCHASE. LEARNED DR OF THE REVENUE SUPPORTED THE ORDER OF AO & CIT (A). HE ALSO SUBMITTED THAT THE ASSESSEE COULD NOT PROVIDE THE LATEST ADDRESS OF THE SUPPLIER AND THEREFORE, THE ORDER OF CIT (A) SHOULD BE UPHELD. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. IN THE LIGHT OF ABOVE DISCUSSION, I FIND THAT THE SUPPLIER IN QUESTION IS DULY REGISTERED WITH COMMERCIAL TAX DEPARTMENT, GOVT. OF KARNATAKA. HENCE, IT CANNOT BE SAID THAT THIS PARTY HAS NO EXISTENCE ALTHOUGH THE ASSESSEE COULD NOT PRODUCE THIS PARTY OR ITS CONFIRMATION. BUT THE ASSESSEE HAS EXPLAINED THE REASONS FOR ITS INABILITY TO DO SO BY STATING THAT THAT THE SAID COMPANY CLOSED ITS OPERATIONS AND IS ABSCONDING. THIS EXPLANATION IS NOT SHOWN TO BE FALSE AND HENCE, IT APPEARS REASONABLE. BY WAY OF PURCHASE AND SALE OF COAL OF EQUAL QUANTITY, THE ASSESSEE IS SHOWING A PROFIT OF RS. 33,686/- AND THE ASSESSEE HAS COLLECTED TCS OF RS. 18,735/-. THERE IS NO DISCUSSION ON THIS ASPECT AS TO WHETHER THE ASSESSEE HAS MADE PAYMENT OF THIS AMOUNT TCS OR NOT. THERE IS NO DISCUSSION IN THE ORDERS OF LOWER AUTHORITIES ITA NO. 305(BANG)2019 3 ABOUT THE QUANTITY OF COAL PURCHASED AND SOLD. THERE IS NO DISCUSSION ABOUT THIS ASPECT ALSO ABOUT THE RATE AT WHICH THE COAL WAS PURCHASED AND SOLD AND MARKET PRICE OF SIMILAR COAL DURING THAT PERIOD BECAUSE IF THE QUANTITY OF COAL PURCHASE AND SALE IS TALLYING THEN THE ONLY OBJECTION MAY BE THIS THAT THE COST IS INFLATED IF THE DEPARTMENT CAN SHOW THAT THE PURCHASE PRICE SHOWN IS HIGHER THAN MARKET PRICE OF SIMILAR COAL DURING THAT PERIOD. IN THAT SITUATION ALSO, ONLY THE INFLATED PRICE CAN BE DISALLOWED AND NOT THE TOTAL PURCHASE COST. IN VIEW OF THIS DISCUSSION, I SET ASIDE THE ORDER OF CIT (A) AND RESTORE THE MATTER TO THE AO FOR A FRESH DECISION WITH THE DIRECTION THAT HE SHOULD EXAMINE THIS ASPECT FIRST AS TO WHETHER THE ASSESSEE HAS MADE PAYMENT TO CENTRAL GOVT. ACCOUNT OF THE TCS AMOUNT. HE SHOULD ALSO EXAMINE THE QUANTITATIVE RECONCILIATION FOR PURCHASE AND SALE OF COAL TO FIND OUT AS TO WHETHER THE PURCHASE IS MORE THAN SALE PLUS CLOSING STOCK. IF QUANTITY IS TALLYING, THE AO CAN EXAMINE THIS ASPECT AS TO WHETHER THE PURCHASE PRICE CLAIMED IS EXCESSIVE AS COMPARED TO MARKET PRICE OF SIMILAR COAL DURING THAT PERIOD. THE AO SHOULD PASS NECESSARY ORDER AS PER LAW IN THE LIGHT OF ABOVE DISCUSSION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE. SD/- ( A .K. GARODIA ) ACCOUNTANT MEMBER BANGALORE D A T E D : 08.05.2019 /MS/ COPY TO : 1 APPELLANT 2 RESPO NDENT 3 CIT(A) , BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE