Sanjay Sharma, Ghaziabad V. ACIT Circle-59(1), New Delhi

ITA 3520/DEL/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6339 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2015-2016
• Appeal Filed On: 23-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus
• Section: 68; 69C; 133(6); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI SMC-1 BENCH, NEW DELHI [THROUGH VIDEO CONFERENCE] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ITA NO. 3520/DEL/2019 [ASSESSMENT YEAR: 2015-16] SHRI SANJAY SHARMA VS. THE A.C.I.T 418, IMPERIAL BLOCK, SUPERTECH ESTATE CIRCLE 59 (1) SECTOR 9, VAISHALI, GHAZIABAD NEW DELHI. PAN: ANZPS 3382 D [APPELLANT] [RESPONDENT] DATE OF HEARING : 16.09.2020 DATE OF PRONOUNCEMENT : 22.09.2020 ASSESSEE BY : SHRI P.C. YADAV, ADV SHRI LALIT MOHAN, CA REVENUE BY : SHRI R.K. GUPTA, SR. DR ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE CIT(A)- 38, NEW DELHI DATED 19.03.2019 PERTAINING T O A.Y. 2015-16. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE CIT(A) ERRED IN SUSTAINING THE ADDITION OF RS.7 ,99,173/- OUT OF SUNDRY CREDITORS OUTSTANDING AT THE CLOSE OF THE A. Y UNDER CONSIDERATION. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E APPELLANT IS AN INDIVIDUAL HAVING SOURCE OF INCOME FROM HOUSE PROPE RTY, BUSINESS OR PROFESSION AND INCOME FROM OTHER SOURCES. DURING TH E COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFI CER ISSUED NOTICES UNDER SECTION 133(6) OF THE INCOME TAX ACT, 1961 [H EREINAFTER REFERRED TO AS 'THE ACT' FOR SHORT] TO THE FOLLOWING PARTIES : SR. NO . PAN NAME AMOUNT REMARK/ STATUS 1 AGMPA7207P M/S GEETA METAL I NDUSTRIES 12036 CONFIRMED 2 ARLPS6594B M/S J.K. GENERATORS 6375 NO RESPONSE 3 AACCP3274A M/S PDRV ENTERPRISES (P) 6259557 CONFIRMED 4 AAEPA7698C M/S PLASTRONICS (INDIA) 8150510 CONFIRMED 5 M/S PUNEET CARGO SERVICE 15014 CONFIRMED 6 AAECR4728D M/S RAJSHILA SYNTHETICS PVT. LTD 2514159 CONFIRMED 7 ABGPY8854M M/S SHA ENGINEERING WORKS 51000 CONFIRMED 8 AAHPG7462K M/S USHA TRANSFORMERS & CONTROLS (P) LTD 22845559 CONFIRMED 9 ARHPS4041H M/S UV INTERNATIONAL 4176 PAYMENT ALREADY MADE ON 20.05.2014 10 AADPV0103A J.P. INDUSTRIES (DELHI) 567713 NO RESPONSE 11 AAAFB0982G B.P. CHEMICAL (FARIDABAD) 227284 NO RESPONSE 12 AATFA4584G AUM UDHYOG KALA (HP) 1225288 CONFIRMED TOTAL 41878671 3 4. 9 OUT OF THE AFORESTATED 12 PARTIES CONFIRMED TH E TRANSACTIONS. HOWEVER, ON ACCOUNT OF THREE PARTIES, NO RESPONSE W AS RECEIVED IN RESPECT OF THE NOTICES SERVED UNDER SECTION 133(6) OF THE ACT. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT BY DEVIS ING A FORMULA NOT KNOWN TO INCOME TAX PROCEEDINGS AND CAME OUT WITH A WHIMSICAL RESULT. THE RELEVANT FINDINGS OF THE ASSESSING OFFI CER READ AS UNDER: 7. SINCE IT IS NOT POSSIBLE TO VERIFY ALL OUTSTAND ING SUNDRY CREDITORS AND IT WOULD BE LOGICAL IF FINDINGS OF TH E SAMPLE ARE EXTRAPOLATED TO THE OUTSTANDING SUNDRY CREDITORS, T HUS GIVING BENEFIT OF MAJORITY OF CONFIRMED AMOUNT TO THE ASSE SSEE. ACCORDINGLY, SUNDRY CREDITORS NOT FOUND TO BE GENUI NE TO BE ADDED U/S 68 WOULD BE UNVERIFIED AMOUNT X TOTAL OUTSTANDING CREDITORS SAMPLE SIZE 799173 X 62158180 = 1186168 41878671 5. IN LIGHT OF THE AFORESTATED FANTASTIC COMPUTATIO N, THE ASSESSING OFFICER MADE AN ADDITION OF RS.11,86,168/-. 6. THE ASSESSEE STRONGLY AGITATED THE MATTER BEFORE THE CIT(A). 4 7. THE LD. CIT(A) WAS CONVINCED THAT THE FORMULA US ED BY THE ASSESSEE IS WITHOUT ANY BASIS AND IS ARBITRARY. HOW EVER, THE LD. CIT(A) CONFIRMED THE ADDITIONS ON ACCOUNT OF THREE CREDITO RS, NAMELY, U.V. INTERNATIONAL, J.P. INDUSTRIES, AND B.P. CHEMICALS AS UNDER: I) U.V. INTERNATIONAL RS. 4,176/- II) M/S J.P. INDUSTRIES RS. 5,67,713/- III) M/S B.P. CHEMICALS RS. 2,27,484/- 8. BEFORE ME, THE LD. COUNSEL FOR THE ASSESSEE VEHE MENTLY STATED THAT THE CREDITORS ARE OUTCOME OF THE PURCHASES MAD E FROM THEM AND THE ASSESSING OFFICER HAS NOT DRAWN ANY ADVERSE INF ERENCE IN SO FAR AS TOTAL PURCHASES ARE CONCERNED. THE LEARNED COUNSEL FURTHER STATED THAT THE ASSESSING OFFICER HAS ACCEPTED THE SALES MADE O UT OF THE SAID PURCHASES. IT IS THE SAY OF THE LEARNED AR THAT ON SUCH TRANSACTIONS, NO ADDITION CAN BE MADE UNDER SECTION 68 OF THE ACT. 9. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FI NDINGS OF THE ASSESSING OFFICER. 10. I HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW. THE TOTAL PURCHASES MADE FROM THE THREE PARTIES ARE AS UNDER: 5 I) U.V. INTERNATIONAL RS. 4,176/- II) M/S J.P. INDUSTRIES RS. 5,67,713/- III) M/S B.P. CHEMICALS RS. 2,27,484/- DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AS SHOWN SALES OF RS.13.41 CRORES ON PURCHASES OF RS.91.37 CRORES. TH E THREE PURCHASES MENTIONED HEREINABOVE ARE PART OF THE TOTAL PURCHAS ES. 11. I FIND THAT NOT ONLY THE ASSESSING OFFICER HAS ACCEPTED THE SALES FIGURES BUT HAS ALSO ACCEPTED THAT TOTAL PURCHASES. THE TWO MOST RELEVANT DECISIONS OF THE TRIBUNAL NEED MENTION HER E: 124 TTJ 554 (DEL) ELNAD INTERNATIONAL (P) LTD. V D CIT '5.4 WE HAVE CONSIDERED THE FACTS OFTHE CASE AND RI VAL SUBMISSIONS. FROM THE SUBMISSIONS MADE BEFORE US, I T IS CLEAR THAT THE TRANSACTIONS OF PURCHASE AND SALE WERE REC ORDED IN THE BOOKS OF ACCOUNT AND THESE TRANSACTIONS LED TO PROFIT TO THE ASSESSEE, WHICH WAS BROUGHT TO TAX, IF SALES HA VE BEEN EFFECTED OUT OF PURCHASES MADE FROM THESE PARTIES, THEN, IT CANNOT BE SAID THAT THE PURCHASES WERE BOGUS. THE F INDING OF 6 BOGUS SALE CAN ONLY LEAD TO THE INFERENCE THAT THE CORRESPONDING AMOUNT SHOULD BE DELETED FROM THE TUR NOVER OF THE ASSESSEE. THE ASSESSING OFFICERHAS ALSO NOT REJ ECTED THE BOOKS OF ACCOUNT TO ESTIMATE PROFIT ON THESE TRANSA CTIONS IN CASE IT WAS A FIRM FINDING THAT PURCHASES AND SALES WERE BOGUS. THE FACTS OF THE CASE OF LA MEDICA (SUPRA) A RE DIFFERENT IN THE SENSE THAT DETAILED ENQUIRIES WERE MADE INTO THE PURCHASES MADE BY THE ASSESSEE, WHICH WERE HELD TO BE BOGUS BY THE AO. IT WAS FOUND THAT THE PURCHASE CONSIDERATION GOT DEPOSITED IN A BANK ACCOUNT OF AN EMPLOYEE IN CALCUTTA, WHICH WAS OPENED WITH THE INTRODUCTION OF THE ASSESSEE. NO SUCH ENQUIRY WAS MADE IN THIS CASE. IN THE CASE OF LA MEDICA (SUPRA), IT WAS ALSO NOT THE CASE THAT SALES WERE EFFECTED FROM THE PURCHASES MADE AND, THUS, THE PUR CHASES COULD NOT BE OUTRIGHTLY TERMED AS BOGUS.WE ARE OF T HE VIEW THAT THE FACTS OF THE TWO CASES ARE DISTINGUISHABLE . IN ABSENCE OF DISPLACING THE FINDING OF THE LEAMED CIT (A) AND THE FACT THAT THE ASSESSEE SHOWED PROFIT FROM THESE TRANSACTIONS, IT IS HELD THAT THERE IS NO SUCH ERRO R IN THE ORDEROF THE LEAMED CIT(A) WHICH REQUIRES CORRECTION FROM US. THUS, THIS GROUND IS DISMISSED. 7 II) 310 ITR 99 (AT) (SB) (DEL) MANOJ AGGARWAL VS. D CIT 'FOR EXAMPLE, IN THE CASE OF CREDIT PURCHASES, THE ACCOUNT OF THE SUPPLIER IS CREDITED WITH THE AMOUNT PAYABLE. I N SUCH A CASE, WHERE THE PURCHASE IS ALLOWED AS EXPENDITURE, IT MAY NOT BE POSSIBLE FOR THE ASSESSING OFFICER TO AGAIN CALL UPON THE ASSESSEE TO PROVE THE NATURE AND SOURCE AMOUNT CRED ITED FOR THE REASON THAT THE PURCHASE ITSELF WAS ALLOWED AS EXPENDITURE ONLY ON BEING SATISFIED THAT ITWAS A GE NUINE PURCHASE ON CREDIT. IMPLICITLY, THE NATURE AND SOUR CE OF THE AMOUNT CREDITED HAS ALSO TO BE TAKEN AS HAVING BEEN EXPLAINED SATISFACTORILY. ANOTHER POSSIBLE ARGUMENT CAN BE TH AT IN SUCH A CASE, THE AMOUNT CREDITED IS NOT A CASH CREDIT IN THE SENSE THAT MERE MONIES HAVE BEEN RECEIVED BY THE ASSESSEE , BUT THE CREDIT REPRESENTS A LIABILITY PAYABLE BY THE ASSESS EE IN FUTURE. UNDER ACCOUNTING PRINCIPLES, A LIABILITY CAN ONLY B E BROUGHT INTO ACCOUNT BY A CREDIT ENTRY IN THE BOOKS OF ACCO UNT IN FAVOUR OF THE PERSON TO WHOM THE MONEY IS PAYABLE' THUS, THERE IS MARKED DIFFERENCE BETWEEN A CREDIT REPRESE NTING A LIABILITY PAYABLE BY THE ASSESSEE AND A CREDIT REPR ESENTING MONIES RECEIVED FROM ANOTHER PERSON. IT IS BECAUSE OF THIS DISTINCTION, A LIABILITY FOR PURCHASE WHICH HAS BE EN CREDITED IN THE ACCOUNT OFTHE SUPPLIER CANNOT BE ADDED UNDER SE CTION 68 OF THE ACT, MORE SO WHEN THE PURCHASE HAS BEEN ACCE PTED AS GENUINE AND A DEDUCTION THEREFORE HAS BEEN ALLOWED. 8 12. FURTHER, THE DECISION IN THE CASE OF JHABUA POW ER INVESTMENTS LTD 938/DEL/2018 DATED 21.05.2019, WHICH HAS BEEN A UTHORED BY ME, NEEDS MENTION WHEREIN IT HAS BEEN HELD AS UNDER: '8. I HAVE CAREFULLY CONSIDERED THE ORDER OF THE AU THORITIES BELOW. IT IS NOT IN DISPUTE THAT THE A.O MADE IMPUG NED ADDITION OF RS. 4,97,5G9/- TREATING THE PURCHASES A S BOGUS EXPENSES. IT IS EQUALLY TRUE THAT THE PURCHASES WER E DEBITED IN THE REGULAR BOOKS OF ACCOUNT OF THE ASSESSEE. TH E SALES OUT OF THE PURCHASES WERE ACCEPTED BY THE A.O. I FURTHE R FIND THAT THE NOTICES ISSUED BY THE A.O ON THE ADDRESS O F MS KUMAR SALES WERE DULY SERVED. NOTHING PREVENTED THE A.O TO ISSUE SUMMONS TO M/S KUMAR SALES TO FORCE ITS ATTEN DANCE AND EXAMINE THE TRANSACTION. I FURTHER FIND THAT TH E CIT(A) REALISINGTHAT SECTION 69C IS NOT APPLICABLE ON THE FACTS OF THE CASE INVOKED SECTION 68 OF THE ACT. IN FIND THAT TH E ASSESSEE HAS FURNISHED ALL THE DETAILS OF SALES MADE TO M/S OVERSEAS AND SUCH DETAILS CAN BE SEEN FROM THE FOLLOWINGS CH ART:- -- 9. THE SALE INVOICES ARE EXHIBITED AT PAGES 5 TO 10 OF THE PAPER BOOK. IN MY CONSIDERED OPINION, THE POWER OF THE CIT(A) ARE CO TERMINUS TO THAT OF THE A.O AND, THER EFORE, HE SHOULD HAVE EXAMINED THE TRANSACTION IF HE WANTED T O INVOKE THE PROVISIONS OF SECTION 68 OF THE ACT. FAILING WH ICH THE 9 ACTION OF THE CIT (A) CANNOT BE UPHELD. THE CONTENT ION OF THE DR THAT FRESH OPPORTUNITY SHOULD BE GIVEN TO THE CI T (A) TO EXAMINE THE TRANSACTION DOES NOT HAVE ANY FORCE. IN MY CONSIDERED VIEW, NO SECOND INNINGS SHOULD BE GIVEN TO EXAMINE THE SAME SET OF FACTS WHICH WERE VERY MUCH BEFORE T HE LOWER AUTHORITIES. I DO NOT FIND ANY MERIT IN THE ORDER O F THE CIT(A). I HAVE ACCORDINGLY DIRECT THE A.O TO DELETE THE ADDITION OF RS. 4,97,589/. THE APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 13. IN THE LIGHT OF THE AFORE-MENTIONED DECISIONS, I DO NOT FIND ANY MERIT IN THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINED BY THE LD.CIT(A). I, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED ADDITION. 14. IN THE RESULT THE APPEAL OF THE ASSESSEE IN ITA NO. 3520/DEL/2019 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.09 .2020. SD/- [N.K. BILLAIYA] ACCOUNTANT MEMBER DATED: 22 ND SEPTEMBER, 2020. 10 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) ASST. REGISTRAR, 5. DR ITAT, NEW DELHI DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER