SHRI SHAM SUNDER AGGARWAL, KAPURTHALA V. INCOME TAX OFFICER WARD - 2 , KAPURTHALA

ITA 537/ASR/2019

AI Insights

The case involves an appeal by Sh. Sham Sunder Aggarwal, the proprietor of M/s P.K. & Company, against the order of the Commissioner of Income Tax (Appeals)-2, Jalandhar, which upheld the ITO's decision. The ITO had reopened the assessee's case under section 148 of the Income Tax Act, based on information from the Sales Tax Department regarding alleged bogus purchases. The ITO initially made additions based on these purchases but later retracted, focusing instead on the input VAT from these transactions, amounting to Rs. 14,83,968/-, due to the sellers being defaulters under the VAT Act. The CIT(A) upheld this addition, leading to the current appeal.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 115008 (ITAT-AMRITSAR)
• Duration Of Justice: 10 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-12-2022
• Assessment Year: misc
• Appeal Filed On: 06-02-2022
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 147; 148; 143(3); 133(6); 250; 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No.537/Asr/2019 Assessment Year: 2010-11 Sh. Sham Sunder Aggarwal, Prop. M/s P.K. & Company, 15, New Sabji Mandi, Kapurthala. [PAN: AAWPA3347E] (Appellant) Vs. ITO, Ward-2, Kapurthala. (Respondent) Appellant by Sh.J.S. Bhasin, Adv. Respondent by Smt. Ratinder Kaur, Sr. DR Date of Hearing 07.12.2022 Date of Pronouncement 20.12.2022 ORDER Per:Anikesh Banerjee, JM: The instant appeal of the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals)-2,Jalandhar, [in brevity the ‘CIT (A)’] bearing appeal No.2/10636/17-18/CIT(A)/Jal, date of order 01.05.2019, order passed u/s 250 (6) of the Income Tax Act 1961, [in brevity the Act] for A.Y. 2010- 11.The impugned order was emanated from the order of the ld. Income Tax Officer I.T.A. No.537/Asr/2019 Assessment Year: 2010-11 2 Ward-2,Kapurthala, (in brevity the AO) order passed u/s 143(3) r.w.s 148of the Act date of order 29.12.2017. The assessee took the following grounds which are read as under: “1. That neither in facts nor on law, the ld.CIT(A) was justified in upholding the reopening of the case as valid, more so, when theproviso to sec 147 was clearly ignored in reasons recorded. 2. That the Id.CIT(A), grossly erred in law, in sustaining the addition of Rs. 14,83,968/-, as made by ld. ITO, by way of disallowance of VAT element on purchases of husk; without appreciating assessee's detailed contentions in correct perspective. 3. That in the light of additional evidence filed, showing TIN of all the suppliers as active, when not denied by the ITO, the impugned disallowance sustained by CIT(A), by way of cryptic findings, is unsustainable in facts and on law. 4. That impugned disallowance not being part of reasons recorded, ought to have been deleted by ld.CIT(A) on this legal premise. 5. That the order under appeal is wholly against law and facts of the case.” 2. Brief fact of the case is that the assessee was assessed u/s 143(3) of the Act. The reopening was made u/s 148 on basis of the information received from the I.T.A. No.537/Asr/2019 Assessment Year: 2010-11 3 Sales Tax Department of State Authority. The reopening was made on basis of the bogus purchased made by assessee amount of Rs.3,70,99,200/- from 43 parties. In assessment proceeding, the verification was completed from the State Tax Authority and separately from the parties of assessee by the ld. AO. The ld. AO retracted from his own findings related bogus purchase and the addition was made on the basis input VAT of the 43 parties from whom the purchase was made. The amount of input VAT was Rs.14,83,968/- which was added back with the total income of the assessee as the sellers are defaulters in the VAT Act. Being aggrieved, assessee filed an appeal before the ld. CIT(A). The ld. CIT(A) upheld the order and views of the assessing authority. Being aggrieved, assessee filed an appeal before us. 3. The ld. Counsel for the assessee filed a written submission and paper book which are kept in the record. In the grounds of appeal the ld. Counsel challenged both the legal and factual issues. First the factual issue is adjudicated for the sake of justice. During hearing, the ld. Counsel first draw our attention in APB page nos. 15 and 16. As per the documents, the ld. AO called for the information u/s 133(6) from the Assistant Excise And Taxation Commissioner, Aman Nagar, Kapurthala, for details of the parties from whom the assessee purchased the goods. I.T.A. No.537/Asr/2019 Assessment Year: 2010-11 4 The State Authority had made the reply and confirmed the transactions of assessee with the 43 parties during financial year 2009-10. 3.1 The ld. Counsel drawn our attention in the order of ld. AO in page no. 2, para 3 which is reproduced as below: “03. Brief facts of this case are that the assessee is trading business of husk. During the year under consideration, the assessee shown total sales of Rs. 15,90,01,395/-. An information was received in this case that the assessee has made bogus purchases of husk amounting to Rs.3,70,99,200/- during the year under consideration from some firms whose TINs were cancelled by the Sale Tax Department. To verify these facts, information from the Excise Department was called for under section 133(6) of the I.T. Act, 1961 calling names and addresses of the firms from whom bogus purchases were made by the assessee. In response to this letter the Excise Department vide their No. 2125 dated11.12.2017 furnished list of 43 firms from which the assessee firm purchased husk amounting to Rs.3,70,99,200/-. To verify these purchases letters were issued to all the above firms calling for copy of account of purchases from these firms by the assessee firm. In response tothese replies were received along with purchase account of the assessee from their books alongwith confirmations of sale made by these firms to the assessee firm.” I.T.A. No.537/Asr/2019 Assessment Year: 2010-11 5 3.2 Further verification of the parties, U/s 133(6), the ld. AO had retracted from his primary observation related to bogus purchase. As per the ld. AO thesellers have no Tax Index Number (TIN) and have not paid the VAT Tax. In accounting principle of VAT is differently treated from the purchases account. The input VAT is adjusted with output VAT and balance is paid to Govt treasury. The issue is already before the State Authority and the assessee had booked total value of purchase in his books of accounts. If there is no TIN number of the sellers, then there is no question of charging of Input VAT in bills. So, the entire addition is confusing and beyond jurisdiction of the central authority. 4. The ld. Sr. DR vehemently argued and relied on the order of the ld. CIT(A). 5. We have heard the rival submission and relied on the documents available in the record. If we consolidate the vat transactions, there are two issues. First issue isthat the sellers have no TIN. So they are not eligible to charge the vat/collect the vat from purchasers. The question of disallowance of vat is illegal. Second issue is that the sellers have TIN, charged the VAT in bills but not deposited in Govt Treasury. The assessee paid the input VAT to his sellers during purchase the goods & payment of vat was completed during the purchase was booked. The Vat is pre- paid tax in nature which the assessee paid to the party with the purchased cost. The assessee was defaulter in input VAT related his purchase. So, in any case this input I.T.A. No.537/Asr/2019 Assessment Year: 2010-11 6 tax cannot be said as unpaid. Ld. Sr.Dr was not able to bring any contrary explanation against the assessee. So, the input VAT which was disallowed by the ld. AO is illogical & illegal. The entire addition amount of Rs. 14,83,968/- made by the ld. AO is liable to be deleted. 6. As we have decided the factual issue in favour of assessee, the issues alleged by assessee on legal is left open for academicpurposes. 7. In the result, the appeal of the assessee bearing ITA No. 537/Asr/2019 is allowed. Order pronounced in the open court on 20.12.2022 Sd/- Sd/- (Dr. M. L. Meena) (ANIKESH BANERJEE ) Accountant Member Judicial Member AKV Copy of the order forwarded to: (1)The Appellant (2) The Respondent (3) The CIT (4) The CIT (Appeals) (5) The DR, I.T.A.T. True Copy By Order