ACIT, New Delhi V. Smt. Sarita Goel, Ghaziabad

ITA 3521/DEL/2017

• Counselvise Citation: [2022] 107 COUNSELVISE.COM (IT) 1490 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2009-2010
• Appeal Filed On: 01-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase; Business income; Accommodation entries; Set aside
• Section: 148; 143(3); 145(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘G’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 3521/Del/2017 (Assessment Year : 2009-10) Addl. CIT Central Circle – 17 New Delhi PAN No. ABUPG 1305 K Vs. Smt. Sarita Goel Prop. M/s Geetika Steel Traders, R-9-45, Raj Nagar Ghaziabad (APPELLANT) (RESPONDENT) Assessee by Ms. Chinu Basin, C.A. Revenue by Shri Abhishek Kumar, Sr. D.R. Date of hearing: 20.07.2022 Date of Pronouncement: 01.08.2022 ORDER PER ANIL CHATURVEDI, AM: This appeal filed by the Revenue is directed against the order dated 27.03.2017 passed by the Commissioner of Income Tax (Appeals)-28, New Delhi relating to Assessment Year 2009-10. 2. Brief facts of the case as culled out from the material on record are as under:- 3. Assessee is an individual and proprietor of M/s. Geetika Steels. Assessee filed its original return of income for A.Y. 2009- 10 on 30.09.2009 declaring total income of Rs.23,77,989/-. The 2 case was selected for scrutiny and thereafter, assessment was framed u/s 143(3) of the Act vide order dated 14.12.2011 and the total income returned by the assessee was accepted. Thereafter, case was reopened by issuance of notice u/s 148 of the Act and consequently, the assessment was framed u/s 143(3) r.w.s 147 of the Act vide order dated 21.03.2016 and the total income was determined at Rs.2,54,26,756/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 27.03.2017 in Appeal No.58/16-17/30/16-17 allowed the appeal of the assessee. Aggrieved by the order of CIT(A), Revenue is now in appeal and has raised the following grounds: “1. That the Commissioner of Income Tax (appeals) erred in law and on facts of the case in deleting the addition of Rs.2,30,48,767/- made by the AO on account of payments towards bogus purchase. 2. (a) The order of the CIT(A) is erroneous and not tenable in law and on facts. (b) The appellant craves leave to add, alter or amend any/ all of the grounds of appeal before or during the course of the hearing of the appeal.” 4. AO has noted that information was received from DCIT, Circle – 2, Ghaziabad that in the assessment proceedings in the case of Shri Surendra Kumar Sharma, Prop. M/s. Ridhi Sidhi Enterprises, on the basis of the documents and statements of Shri Surendra Kumar Sharma, it was noted that M/s. Ridhi Sidhi Enterprises was not involved in any sale and purchase of goods but had merely provided purchase entries to various vendors and the bank entries were rotated through its bank account. AO also noted that commercial tax department had also found that all the concerns from whom purchases were shown to be non-existent 3 and to be bogus firms. AO also noted that on the basis of aforesaid information addition was also made in case of Shri Vijay Kumar Goel and in case of M/s. Bagai Steels. AO noted that assessee has made purchases from M/s. Ridhi Sidhi Enterprise aggregating to Rs. 2.30 crores. He accordingly asked the assessee to prove the purchases. AO thereafter for the reasons noted in the order concluded that the books of accounts of the assessee cannot be considered to be reliable. He therefore, rejected the books of accounts u/s 145(3) of the Act and thereafter the purchases made was considered to be bogus and he therefore disallowed the entire purchase and made addition of Rs.2,30,48,767/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who deleted the addition by observing as under: “4. I have carefully considered the fact of the case, finding of the Assessing Officer and the submission of the Ld A.R. The brief fact of the case is that on the basis of information received from the Income Tax Officer, Ward- 2(3), Ghaziabad, the Assessing Officer of Sh. Surendra Kumar Sharma, Proprietor of M/s Ridhi. Sidhi Enterprises, that the appellant has taken accommodation purchase bills from M/s Ridhi Sidhi Enterprises, the case of the appellant was reopened and the assessment was completed u/s 147/143(3) of the Act, wherein addition of Rs. 2,30,48,767/- was made by Ld. AO by disallowing entire purchases made from M/s Ridhi Sidhi Enterprises. 4.1 The AO has made additions in question of Rs.2,30,48,767/- by disallowing entire purchases made from M/s Ridhi Sidhi Enterprises, a proprietary concern of Shri Surendra Kumar Sharma treating the purchases made from this party as bogus only on the basis of the information received from the Income Tax Officer, Ward- 2(3), Ghaziabad, the Assessing Officer of Sh. Surendra Kumar Sharma, Proprietor of M/s Ridhi Sidhi 4 Enterprises. The finding of Income Tax Officer, Ward- 2(3), Ghaziabad is based on the basis of statement of Sh. Surendra Kumar Sharma, recorded during the course of the assessment proceeding. However even the copy of statement of Sh. Surendra Kumar Sharma was not provided to the appellant as admitted by the A.O in his report dated 20.01.2017. Hence it is apparent that the addition made by the A.O is totally based on the findings of Income Tax Officer, Ward- 2(3), Ghaziabad. The A.O has neither conducted any independent enquiry to conclude that the actual material was not purchased by the appellant nor he has not pointed out any defects in the sales records of the appellant and moreover the corresponding sales have been duly accepted by the A.O. It is further noted that the G.P rate of the assessee is progressive. It has increased from 83% in A.Y 2007-08 to 2.63% in 2008-09 to 3.44% in the year under consideration. Moreover the assessment of earlier years and also for the year in question were duly passed under section 143(3) of the Act. 4.2 It is noted that similar information was also forwarded by the I.T.O Ward-2(3), Ghaziabad, to the ACIT Circle-2 Ghaziabad, assessing officer of Sh. Vijay Kumar Goel Proprietor Mankey Lai Jagdish Prasad, who had also made purchase of Iron and Steel from M/s Ridhi Sidhi Enterprises. Based on the said n urination and taking into consideration of identical facts similar addition was made in the hand of Sh. Vijay Kumar Goel Proprietor Mankey Lai Jagdish Prasad However on appeal the same was deleted by appellate authority. The Hon’ble I TAT, Delhi in the case of Sh. Vijay Kumar Goel Proprietor Mankey Lai Jagdish Prasad ITA No. 670/Del/2013 A.Y 2009-10 vide order dated 17.06.2015 held as under - ITA No. 670/Pel/2013 : Asstt. Year 2009-10 “The Ld. CIT (A) after considering the submissions of the assessee and the remand report of the AO observed that no independent enquiry had made by the AO to form an opinion that M/s Riddhi Siddhi Enterprises had provided accommodation bills to the assessee in respect of the material purchased by it and his remand report was silent on this issue. The Ld. CIT(A) pointed out that Sh. Surendra Kumar Sharma had given evasive replies to the questions and had nowhere stated that he was into business of 5 providing accommodation bills or that he had provided accommodation bills to the assessee in the material purchased from him. The Ld. CIT(A) observed that the AO had not pointed out any defects in the sales records and in the books of accounts. The Ld. CIT(A) categorically stated that the AO has not commented upon the submission of the assessee on the total sales shown by him in the books of accounts. He also mentioned that withdrawals made by Sh. Surendra Kumar Sharma from his different bank accounts did not match with any of the deposits in the bank account of the assessee and there were mostly cheque clearing entries and no cash deposits. The Ld. CIT(A) mentioned that Sh. Surendera Kumar Sharma in his statement recorded under oath by Income Tax Officer, Ward- 2(3), which was attached by the AO with the remand report, has nowhere stated that he issued accommodation bills to the parties including the assessee and that the AO had not conducted any independent enquiry to conclude that the actual material was not purchased by the assessee. The Ld. CIT(A) observed that the information in possession of the AO, if any, was never confronted to the assessee except that query was raised on 26.12.2011 but copies of the material was not provided to the assessee. He also observed that the allegation of the AO that cheques were credited in the bank account of M/s Riddhi Siddhi Enterprises and the cash was withdrawn on the same date did not conclusively establish that the assessee did not make any purchase. The Ld. CIT(A) observed that sales had been accepted and the AO had not expressed any doubt over the sales made by the assessee and that the copy of the Trade Tax Order filed by the assessee for the year under consideration revealed that the purchases made by the assessee from M/s Riddhi Siddhi Enterprises had been accepted by the Trade Tax Department. The Ld. CIT(A) further observed that looking to the facts and surrounding circumstances of the case the possibility of buying the said material from the parties other than M/s Riddhi Siddhi Enterprises could not be completely ruled out specially in the background of the fact that no doubt was expressed by the assessee on the quantum of the material sold. The Ld. CIT(A) was of the view that the material might have been purchased by the assessee from the parties other than Riddhi Siddhi Enterprises probably to save some local taxes etc. and at 6 best could be treated as unverifiable purchases inviting some better margin of profit. The Ld. CIT(A) held that the AO was not justified to make the addition of the entire cost of material to the income of the assessee that would result into unimaginable profit in the business particularly when the sales had been accepted purchases also have to be accepted. The Ld. CIT(A) observed that the AO had not disturbed the trading results as disclosed by the assessee and the payment for the purchase of material had been made through banking channel, similarly, the payment for the sale of the material had been received through proper banking channel and there was no material on record that the assessee paid his money in cash for issuing cheque in his name and that there was no effective cash deposit in the bank account of the assessee. He according deleted the addition of Rs. 1,39,70,618/- made by the AO and in view of the inference that the assessee might have made impugned purchases from some other parties at a lower cost, and thus earned much better profit on the sale of the impugned purchases, he directed the AO to apply net profit rate of 5% on the said unverifiable purchases of Rs. 1,39,70,618/- which was worked out at Rs. 6,98,530/-. Accordingly the addition to that extent was sustained. We have considered the submissions of both the parties and carefully gone through the material available on the record. In the present case, it appears that the AO made the addition merely on the basis of statement of one Sh. Surendra Kumar Sharma, Proprietor of M/s Rddhi Siddhi Enterprises which was later on retracted and it was stated that he was not indulged in providing the entries to the assessee or to any other person. The AO did not provide any opportunity to the assessee to cross examine Sh. Surendra Kumar Sharma. In the present case, it is also noticed that the turnover of the assessee was accepted by the Trade Tax Department and it is not the case of the AO that proper books of accounts were not maintained by the assessee in regular course of business or the same method of accounting was not followed consistently. The Ld. CIT(A) examined the bank accounts as well as books of accounts of the assessee and categorically stated that the purchases as well as the sales were through banking channel and there was no cash deposit in the bank account of the assessee. In the 7 present case, the AO has not pointed out any defects in the books of account therefore, the Ld. CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. As regards to the addition sustained by the Ld. CIT(A) by applying the net profit rate of 5% of the alleged unverifiable purchase. We are of the view that when the Ld. CIT(A) himself accepted the trading results of the assessee and also held that the payment for purchases of material had been made through banking channel, GP rate declared by the assessee was progressive then there was no occasion to make the addition by applying the net profit rate of 5% by considering the purchases of Rs. 1,39,70,618/- as unverifiable. We, therefore, by considering the totality of the facts as discussed herein above the addition sustained by the Ld. CIT(A). In the result, the appeal of the Department is dismissed and Cross Objection of the assessee is allowed.” 4.3 On further appeal the Hon’ble Allahabad High Court in ITA No. 289 of 2015 vide order dated 18.11.2015 dismissing the revenue appeal held as under : “On the other hand, the appellate authority further found that sales made by the assessee had been accepted by the assessing officer. We are of the opinion that the once the sales have been accepted, it necessary falls that the assessee had also made purchases and it cannot, therefore, be held that bogus purchases were made. Consequently, the mere fact that purchases were made from a Firm whose registration was cancelled does not mean that bogus purchase were made by the assessee or that the Firm was a non-existing Firm. In our view, the deletion was rightly made by the first appellate authority. This being a question of fact, no substantial questions of law arises for consideration” 4.4 Considering above it is apparent that the issue raised in appeal in question on identical facts has already been considered and decided by the Hon’ble ITAT, Delhi in ITA No. 8 670/Del/2013 and Hon’ble Allahabad High Court in ITA No.289 of 2015 in case of Sh. Vijay Kumar Goel Proprietor Mankey Lai Jagdish Prasad. Further since all the material facts are found to be same, hence the issue under consideration is held to be is squarely covered by the decision of the Jurisdictional ITAT in the case of Sh. Vijay Kumar Goel and the finding of the Hon’ble Tribunal has been duly confirmed by Hon’ble Allahabad High Court. Since, the issue in this case is a covered issue, therefore respectively following the findings in the above decisions, it is held that no material evidence has brought out by the Assessing Officer to indicate that M/s Rddhi Siddhi Enterprises has provided accommodation entries to the assessee. Accordingly ground no 4 to 6 is allowed and the addition of Rs. 2,30,48,767/ made by the A.O on account of bogus purchase is deleted . 5. Ground no 1 is of general nature and ground no 2 and 3 was not pressed by the appellant and ground no 7 and 8 is premature, hence dismissed accordingly. In result the appeal is partly allowed for statistical purpose.” 5. Aggrieved by the order of CIT(A), Revenue is now in appeal before us. 6. Before us, Learned DR took us to the findings of AO and supported the order of AO and he further submitted that CIT(A) had erred in following the decision of ITAT, Delhi in the case of Vijay Kumar Goel (supra) because in that case, the turnover of the assessee was accepted by Commercial Tax Department whereas in the case of the assessee there is nothing on record to demonstrate that the turnover of the assessee was accepted by the Commercial Tax Department. He therefore, submitted that the order of CIT(A) be set aside. 9 7. Learned AR on the other hand reiterated the submissions made before the lower authorities and further submitted that identical issue arose in the case of Vijay Kumar Goel in ITA No.670/Del/2013 and the Hon’ble Delhi Tribunal had deleted the addition made by AO. She further submitted that the decision of the Tribunal has been upheld by the Hon’ble Allahabad High Court in ITA No.289 of 2015 order dated 18.11.2015. She further submitted that similar additions was made by AO in the case of Ramesh Chand Goel (HUF), HUF of the husband of the assessee but the additions were directed to be deleted by Hon’ble ITAT. She placed on record the copy of the aforesaid decision. She further submitted that the decision of Delhi Tribunal in Ramesh Chand Goel, HUF has been upheld by Hon’ble Delhi High Court in ITA No.46/2022 & CM Appl.12538/2022 order dated 14.03.2022. She therefore submitted that since the facts of the case of the assessee are identical to Ramesh Chand Goel (supra) and Vijay Kumar Goel (supra) and since the decision of Tribunal has been upheld by Hon’ble High Court, no interference to the order of CIT(A)’s is called for. As far as the submission of Learned DR that the turnover of assessee has not been accepted by Commercial Tax Department, she submitted that the contention of Learned DR is factually incorrect. In support she stated that the turnover of the assessee has been accepted by Commercial Tax Department and placed on record the copy of the order. 8. We have heard the rival submissions and perused the material available on record. The issue in the present ground is 10 with respect to the addition made on account of alleged bogus purchases. We find that CIT(A) while deleting the addition has given a finding that AO has not conducted any independent enquiry to conclude that assessee had not actually made the purchases and that the corresponding sales have been accepted by the AO. He has further given a finding that GP rate of the assessee has increased from 0.83% (for A.Y. 2007-08) to 2.63% (for A.Y. 2008-09) to 3.44% in the year under consideration. He has further given a finding that identical issue arose in the case of Vijay Kumar Goel (supra) and the Hon’ble Tribunal had decided the issue in favour of the assessee and the order of Tribunal has been upheld by Allahabad High Court. Before us, no material has been placed by Revenue to demonstrate that the finding of CIT(A) that the facts of the present case are identical to that of Vijay Kumar Goel is incorrect nor has it placed any material to demonstrate that the order of Hon’ble High Court in the case of Vijay Kumar Goel has been set aside by higher judicial forum. Considering the totality of the aforesaid facts and in absence of any distinguishing feature pointed by Learned DR, we do not find any reason to interfere with the order of CIT(A). Thus the ground of Revenue is dismissed. 9. In the result, appeal of the Revenue is dismissed. Order pronounced in the open court on 01.08.2022 Sd/- Sd/- (ASTHA CHANDRA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 01.08.2022 11 PY* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI Date of dictation 20.07.2022 Date on which the typed draft is placed before the dictating Member 21.07.2022 Date on which the approved draft comes to the Sr.PS/PS 21.07.2022 Date on which the fair order is placed before the Dictating Member for Pronouncement 21.07.2022 Date on which the fair order comes back to the Sr. PS/ PS 01.08.2022 Date on which the final order is uploaded on the website of ITAT 01.08.2022 Date on which the file goes to the Bench Clerk 01.08.2022 Date on which file goes to the Head Clerk. The date on which file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order