M/s Asha Spring & Engineering Co., Howrah V. I.T.O.,Ward-46(1), Kolkata

ITA 314/KOL/2020

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5802 (ITAT-KOLKATA)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 16-03-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JAYANTA KHANRA
• Assessee Lawyers: PINKI SHAW ACA
• Keywords: Bogus purchase; Income from undisclosed sources; Opportunity of cross examination; Question of law; Third party statement; Accommodation entries; Tax effect
• Section: 13; 68

Judgement Text

1 ITA NO.314/KOL/2020 ASHA SPRING & ENGINEERING CO., AY 2011-12 IN THE INCOME TAX APPELLATE TRIBUNAL A(SMC) BENCH , KOLKATA ( . . , ) [BEFORE SHRI A. T. VARKEY, JM] I.T.A. NO. 314/KOL/2020 ASSESSMENT YEAR:2011-12 ASHA SPRING & ENGINEERING CO. (PAN: AAOFA8421H) VS. INCOME-TAX OFFICER, WARD-46(1), KOLKATA APPELLANT RESPONDENT DATE OF VIRTUAL HEARING 02.02.2021 DATE OF PRONOUNCEMENT 05.02.2021 FOR THE APPELLANT MS. PINKI SHAW, ACA FOR THE RESPONDENT SHRI JAYANTA KHANRA, JCIT, SR. D R ORDER THIS IS AN APPEAL PREFERRED BY THE ASSESSE E AGAINST THE ORDER OF THE LD.CIT(A)-14, KOLKATA DATED 21.01.2020 FOR AY 2011-12. 2. THOUGH THE ASSESSEE HAS RAISED AS MANY AS 13 (TH IRTEEN) GROUNDS OF APPEAL, THE LD. AR OF THE ASSESSEE MS. PINKI SHAW AT THE TIME OF HE ARING BROUGHT TO MY NOTICE GROUND NO. 5 WHICH READS AS UNDER: 5. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE HONBLE CIT(APPEAL) WAS NOT JUSTIFIED IN LAW IN SUSTAINING THE RATE OF G.P. RES TRICTED TO 28.69% ON IMPUGNED PURCHASES I.E. RS.1.99,203/- OUT OF RS.6,94,330/- IS LIABLE T O BE DELETED. 3. BRIEF FACTS OF THE CASE AS NOTED BY THE AO ARE T HAT HE RECEIVED A LETTER FROM THE PR. DIT (INV.), KOLKATA DATED 05.07.2016 INFORMING THA T SHRI SANJIW KUMAR SINGH, THE BILL MASTER WAS ENGAGED IN PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF BOGUS BILLS TO VARIOUS PARTIES IN LIEU OF COMMISSION. ACCORDING T O THE CONTENT OF THE LETTER, THE AO NOTED THAT A SURVEY OPERATION WAS CONDUCTED IN THE CASE O F SHRI SANJIW KUMAR SINGH WHICH WAS LATER CONVERTED INTO SEARCH AND CERTAIN INCRIMINATI NG DOCUMENTS WERE SEIZED FROM WHICH IT CAME TO LIGHT THAT HE WAS INVOLVED IN PROVIDING ACC OMMODATION ENTRIES IN THE FORM OF BOGUS BILLS IN LIEU OF COMMISSION. ACCORDING TO THE INFO RMATION, SHRI SANJIW KUMAR SINGH WAS 2 ITA NO.314/KOL/2020 ASHA SPRING & ENGINEERING CO., AY 2011-12 OPERATING PAPER CONCERNS AND THE MODUS OPERANDI OF PROVIDING ACCOMMODATION ENTRIES WAS ADMITTED BY HIM. AS PER THE INFORMATION, THE ASSES SEE WAS INVOLVED IN GETTING ACCOMMODATION ENTRIES THROUGH SEVEN PAPER CONCERNS OF SHRI SANJIW KUMAR SINGH VIZ., M/S. DURGA SALES, M/S. GANGOTRI TRADING COMPANY, M/ S. JAYSHREE SALES CORPORATION, M/S. KASTURI METAL TRADING PVT. LTD., M/S. MEAL & ALLOY SYNDICATE, M/S. TARAMA MERCHANTS PVT. LTD. AND M/S. VASUKINATH ENTERPRISES FROM WHOM THE ASSESSEE HAS SHOWN TO HAVE PURCHASED GOODS WORTH RS.2,88,323/-, RS.36,651/-, RS.1,34,558 /-, RS.74,583/-, RS.2,78,022/-, RS.40,629/- AND RS.1,29,887/- RESPECTIVELY. ACCORD ING TO AO, BASED ON THIS INFORMATION, HE REOPENED THE ASSESSMENT OF THE ASSESSEE ; AND THE A O ACKNOWLEDGES THAT THE ASSESSEE HAD FILED AUDITED BALANCE SHEET, P&L ACCOUNT, BANK STAT EMENT ETC. HOWEVER, ACCORDING TO AO, THE ASSESSEE FAILED TO FURNISH THE REQUIRED DETAILS CALLED FOR BY HIM. THEREFORE, HE ADDED THE AMOUNT OF RS.6,94,330/- WHICH THE ASSESSEE HAD SHOW N TO HAVE PURCHASED GOODS FROM THE AFORESAID CONCERNS, AS UNACCOUNTED INCOME IN THE HA NDS OF THE ASSESSEE AND TAXED U/S. 68 OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO A S THE ACT). AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), WHO GAVE PARTIAL RELIEF TO THE ASSESSEE BY NOTING AS UNDER: THEREFORE, AFTER CONSIDERING THE FACTUAL MATRIX O F THE CASE, IT APPEARS THAT THE AO IN THE ASSESSMENT ORDER HAD TREATED THE ENTIRE ALLEGED PUR CHASE AS BOGUS BUT HAS NOT REJECTED THE BOOKS OF ACCOUNT WHICH IS ESSENTIALLY MEANS THAT HE HAS ACCEPTED THE SALES. UNDER SUCH CIRCUMSTANCES, THE HONBLE COURTS HAVE TAKEN A VIEW THAT THE ENTIRE UNVERIFIED PURCHASES ARE NOT RENDERED VULNERABLE FOR ADDITION, ONLY THE ELEMENT OF PROFIT EMBEDDED FROM SUCH PURCHASE SHOULD BE CONSIDERED FOR ADDITION. THE AP PELLANT HAD DISCLOSED A GP OF 28.69% FOR THE AY 2011-12. THEREFORE, IT WOULD BE REASONA BLE TO LIMIT UNDISCLOSED PROFIT EMBEDDED IN THE BOGUS PURCHASE TO 28.69% AT RS.1,99,203/-. T HE ADDITION OF RS.6,94,336/- IS RESTRICTED TO RS.1,99,203/-. THIS GROUND OF APPEAL PARTLY SUC CEEDS AND IS THEREFORE PARTLY ALLOWED. AGGRIEVED BY THE AFORESAID ACTION OF THE LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE ME. 4. ASSAILING THE ACTION OF THE LD. CIT(A), THE LD. AR OF THE ASSESSEE MS. PINKI SHAW SUBMITTED THAT THE ASSESSEE HAD BEEN ABLE TO DISCHA RGE THE ONUS UPON IT TO SHOW THAT THE PURCHASES MADE BY THE ASSESSEE FROM THE SEVEN CONCE RNS (SUPRA) WERE GENUINE. ACCORDING TO LD. AR, THE ASSESSEE HAD FILED ALL THE DOCUMENTS TO SUBSTANTIATE THAT THE PURCHASES ARE GENUINE AND SUPPORTING DOCUMENTS LIKE SAMPLE COPY O F THE INVOICES FROM SEVEN CONCERNS 3 ITA NO.314/KOL/2020 ASHA SPRING & ENGINEERING CO., AY 2011-12 HAVE BEEN FILED WHICH IS PLACED AT PAGES 11 TO 36 O F PAPER BOOK AND SHE DREW OUR ATTENTION SPECIFICALLY TO PAGES 11, 15, 16, 17, 18, 20, 21, 2 4 AND 25 WHICH ARE THE SAMPLE INVOICES/BILLS SHOWING THAT PURCHASES HAVE BEEN MAD E FROM EACH OF THE SEVEN CONCERNS NAMED (SUPRA). THE LD. AR DREW MY ATTENTION TO THE SAMPLE COPY OF IN VOICE OF ONE CONCERN AND POINTED OUT THAT VAT HAS BEEN PAID, BUY ERS AS WELL AS THE SELLERS VAT/CST NOS. WERE GIVEN AND THE PAYMENTS HAVE BEEN MADE THR OUGH BANKING CHANNELS. THE LD. AR DREW MY ATTENTION TO PAGES 37 TO 44 OF THE PAPER BO OK WHEREIN THE COPIES OF CONFIRMATION OF TRANSACTION BY THE SAID SEVEN PARTIES ARE GIVEN. T HE LD. AR ALSO DREW MY ATTENTION TO PAGE 77 AND 78 OF THE PAPER BOOK WHICH ARE THE PHOTO COP IES OF ACKNOWLEDGMENT OF SALES TAX RETURN AND PAGE 78 SHOWN THE QUANTITATIVE STOCK STA TEMENT FOR THE RELEVANT YEAR. SO, ACCORDING TO THE LD. AR, THE ASSESSEE HAS DISCHARGE D THE ONUS UPON IT TO PROVE THE GENUINENESS OF THE PURCHASE MADE FROM THE SEVEN PAR TIES BY PRODUCING THE PRIMARY DOCUMENTS. ACCORDING TO LD. AR, THE AO ERRED IN BE LIEVING THE THIRD PARTY INFORMATION TO DRAW ADVERSE VIEW AGAINST THE SEVEN CONCERNS/ASSESS EE. FURTHER, THE ACTION OF AO IS BAD FOR NOT PROVIDING THE ASSESSEE, A COPY OF THE STATEMENT OF SRI SANJIW KUMAR SINGH WHICH WAS SUPPOSED TO HAVE BEEN RECORDED U/S. 133A/132 OF THE ACT ; AND MOREOVER, NO OPPORTUNITY TO TEST HIS STATEMENT BY CROSS EXAMINATION WAS PROVIDE D TO THE ASSESSEE. THEREFORE, RELYING ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CA SE OF CIT-7, NEW DELHI VS. M/S. ODEON BUILDERS PVT. LTD.,IN REVIEW PETITION (C) DIARY NO. 22394 OF 2019 IN CIVIL APPEAL NOS.9604 & 9605 OF 2018 DATED 21.08.2019, THE LD. A R PLEADED THAT NO ADDITION OUGHT TO HAVE BEEN MADE ON THIS ISSUE. ACCORDING TO LD. AR SINCE THE BOOKS OF THE ASSESSEE WHICH ARE AUDITED HAS NOT BEEN REJECTED AND THE AO HAS AC CEPTED PURCHASES AND SALES NO SEPARATE ADDITION WAS WARRANTED, SO THE LD. CIT(A) RIGHTLY D ELETED THE SAME. HOWEVER, ACCORDING TO LD. AR, THE LD. CIT(A) ERRED IN LAW BY RESTRICTING THE ADDITION TO RS.1,99,203/- BY ADDING G.P PERCENTAGE OF 28.69% TO RS.6,94,336/- . THEREF ORE, SHE PLEADED THAT THE ADDITION SUSTAINED BY LD. CIT(A) SHOULD BE DELETED. 5. PER CONTRA, THE LD. DR VEHEMENTLY OPPOSED THE SU BMISSION OF THE LD. AR AND SUBMITTED THAT THE ASSESSEE FAILED TO PROVIDE THE D ETAILS BEFORE THE AO AND EVEN BEFORE THE LD. CIT(A) IT WAS NOT DISPUTED THAT THESE WERE BOGU S PURCHASES, THEREFORE, THE LD. CIT(A) 4 ITA NO.314/KOL/2020 ASHA SPRING & ENGINEERING CO., AY 2011-12 HAS RIGHTLY ADDED THE GP SHOWN BY THE ASSESSEE I.E. @28.69% OF THE BOGUS PURCHASES, WHICH ACTION OF LD. CIT(A) SHOULD NOT BE DISTURBED. 6. HAVING HEARD RIVAL SUBMISSIONS AND AFTER PERUSA L OF THE RECORDS, IT IS NOTED THAT BASED ON THE INFORMATION GIVEN BY DDIT (INV.) THAT PURSUA NT TO A SEARCH/SURVEY CONDUCTED ON SHRI SANJIW KUMAR SINGH (3 RD PARTY) AND STATEMENTS RECORDED U/S. 132(4) OF THE ACT, THE AO HAS REOPENED THE ASSESSMENT OF THE ASSESSEE AND ALLEGED THAT SINCE THE ASSESSEE HAS SHOWN TO HAVE MADE PURCHASES OF RS.6,94,330/- FROM 7 (SEVEN) PARTIES CONNECTED WITH SHRI SANJIW KUMAR SINGH AND SINCE HE [SHRI SANJIW KUMAR SINGH] HAS ACCEPTED THAT HE IS PROVIDING ACCOMMODATION ENTRIES IN THE FORM OF PURCHASE BILLS ETC.; AND SINCE THE ASSESSEE HAD MADE PURCHASES OF GOODS FROM THESE CONCERNS TO THE TUNE OF RS.6,94,330/-, THE AO MADE THE ENTIRE ADDITION OF RS.6,94,330/-. ON APPEAL, LD. CIT(A) R ESTRICTED THE ADDITION TO GP PERCENTAGE @ 28.69% OF THE BOGUS PURCHASES OF RS.6,94,330/- AT RS.1,99,230/-. THIS ACTION OF LD. CIT(A) IS UNDER CHALLENGE. IT IS NOTED THAT THE AS SESSEES ACCOUNTS ARE AUDITED. THE ASSESSEE IN ORDER TO PROVE THE GENUINENESS OF THE P URCHASES FROM THE SEVEN CONCERNS (SUPRA) HAVE FILED THE COPIES OF INVOICES FROM WHICH THE VA T/CST OF THE BUYERS AND SELLERS ARE EVIDENT; AND THE VAT HAS BEEN PAID BY THE ASSESSEE ;AND THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNEL ; AND ALL THE 7 (SEVEN) PAR TIES HAVE CONFIRMED THE TRANSACTIONS. THUS, THE ASSESSEE HAS DISCHARGED THE ONUS OF PROOF BY ADDUCING THE PRIMARY EVIDENCE TO SUBSTANTIATE THE PURCHASE TRANSACTIONS FROM THESE S EVEN (7) CONCERNS. THEREFORE, IN SUCH A SCENARIO, THE AO COULD HAVE DISBELIEVED THE TRANSAC TION ONLY ON THE BASIS OF RELIABLE MATERIAL TO DISPROVE THE SAME. IN THIS CASE THE AO TOOK THE SUPPORT OF THE STATEMENT GIVEN BY SHRI SANJIW KUMAR SINGH IN THIRD PARTY ACTION TO TAKE AN ADVERSE VIEW AGAINST THE ASSESSEE. IN SUCH A SITUATION, THE AO OUGHT TO HAV E CONFRONTED THE ASSESSEE WITH THE STATEMENT OF SHRI SANJIW KUMAR SINGH OR MATERIAL AG AINST THE ASSESSEE ; AND NOT KEPT THE ASSESSEE IN DARK IF HE INTENDED TO USE IT AGAINST T HE ASSESSEE. MOREOVER THE AO HAS NOT FOUND ANY INFIRMITY WITH THE DOCUMENTS FILED BY THE ASSESSEE TO PROVE THE TRANSACTIONS. SO, OTHER THAN THE THIRD PARTY STATEMENT, WHICH WAS NOT EVEN EXAMINED BY THE AO AND WITHOUT PROVIDING A COPY TO ASSESSEE AND THE STATEMENT NOT TESTED ON THE TOUCH-STONE OF CROSS- EXAMINATION, CANNOT BE THE BASIS TO DRAW ADVERSE I NFERENCE AGAINST THE ASSESSEE. THEREFORE, 5 ITA NO.314/KOL/2020 ASHA SPRING & ENGINEERING CO., AY 2011-12 NO ADDITION WAS WARRANTED. TO COME TO MY AFORESAID DECISION, I RELY ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. M/S. O DEON BUILDERS PVT. LTD. (SUPRA) WHEREIN THE HONBLE SUPREME COURT HAS HELD AS UNDER : WE HAVE PERUSED THE REVIEW PETITION AND FIND THAT THE TAX EFFECT IN THIS CASE IS ABOVE RS.L CRORE, THAT IS, RS.6,59,27,298/-. ORDINARILY, THERE FORE, WE WOULD HAVE RECALLED OUR ORDER DATED 17TH SEPTEMBER, 2018, SINCE THE ORDER WAS PASSED ON LY ON THE BASIS THAT THE TAX EFFECT IN THIS CASE IS LESS THAN RS.1 CRORE. HOWEVER, ON GOING THROUGH THE JUDGMENTS OF THE CIT, ITAT AND THE HIGH COURT, WE FIND THAT ON MERITS A DISALLOWANCE OF RS.19,39,60,866/- WAS B ASED SOLELY ON THIRD PARTY INFORMATION, WHICH WAS NOT SUBJECTED TO ANY FURTHER SCRUTINY. TH US, THE CIT (APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE STATING: 'THUS, THE ENTIRE DISALLOWANCE IN THIS CASE IS BASE D ON THIRD PARTY INFORMATION GATHERED BY THE INVESTIGATION WING OF THE DEPARTMEN T, WHICH HAVE NOT BEEN INDEPENDENTLY SUBJECTED TO FURTHER VERIFICATION BY THE AO WHO HAS NOT PROVIDED THE COPY OF SUCH STATEMENTS TO THE APPELLANT, THUS DENY ING OPPORTUNITY OF CROSS EXAMINATION TO THE APPELLANT, WHO HAS PRIMA FACIE D ISCHARGED THE INITIAL BURDEN OF SUBSTANTIATING THE PURCHASES THROUGH VARIOUS DOCUME NTATION INCLUDING PURCHASE BILLS, TRANSPORTATION BILLS, CONFIRMED COPY OF ACCOUNTS AN D THE FACT OF PAYMENT THROUGH CHEQUES, & VAT REGISTRATION OF THE SELLERS & THEIR INCOME TAX RETURN. IN VIEW OF THE ABOVE DISCUSSION IN TOTALITY, THE PURCHASES MADE BY THE APPELLANT FROM M/S PADMESH REALTORS PVT. LTD. IS FOUND TO BE ACCEPTABLE AND TH E CONSEQUENT DISALLOWANCE RESULTING IN ADDITION TO INCOME MADE FOR RS.19,39,60,866/-, I S DIRECTED TO BE DELETED.' THE ITAT BY ITS JUDGMENT DATED 16 TH MAY, 2014 RELIED ON THE SELF SAME REASONING AND DISMISSED THE APPEAL OF THE REVENUE. LIKEWISE, THE HIGH COURT BY THE IMPUGNED JUDGMENT DATED 5 TH JULY, 2017, AFFIRMED THE JUDGMENTS OF THE CIT AND ITAT AS CONCURRENT FACTUAL FINDINGS, WHICH HAVE NOT BEEN SHOWN TO BE PERVERSE AND, THEREFORE, DISMISSED THE APPEAL STATING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES FROM THE IMPUGNED ORDER OF THE ITAT. 7. RESPECTFULLY FOLLOWING THE RATIO LAID BY THE HON BLE SUPREME COURT, I AM INCLINED TO DELETE THE ADDITION OF RS. 1,99,230/-. THEREFORE, THE APPEAL OF THE ASSESSEE IS ALLOWED. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER IS PRONOUNCED IN THE OPEN COURT ON 5 TH FEBRUARY, 2021. SD/- (ABY. T. VARKEY) JUDICIAL MEMBER DATED : 5 TH FEBRUARY, 2021 JD(SR.P.S.) 6 ITA NO.314/KOL/2020 ASHA SPRING & ENGINEERING CO., AY 2011-12 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT M/S. ASHA SPRING & ENGINEERING CO., ICHAPUR, KAMARDANGA, BATTALA, HOWRAH-711104. 2 RESPONDENT ITO, WARD-46(1), KOLKATA. 3. 4. 5. CIT(A)-14, KOLKATA (SENT THROUGH E-MAL) CIT , KOLKATA DR, ITAT, KOLKATA. (SENT THROUGH E-MAL) / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR