Amita Senapati, Rayagada V. ITO, Rayagada Ward, Rayagada

ITA 61/CTK/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 3159 (ITAT-CUTTACK)
• Duration Of Justice: 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2013-2014
• Appeal Filed On: 16-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRISUBHENDU DATTA
• Assessee Lawyers: P K MISHRA
• Keywords: Bogus purchase; Rejection of books of accounts; Principle of natural justice; Corroborative evidences
• Section: 142(1); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 AMITA SENAPATI, DOORDARSAN DIGITAL SHOPPE, NEAR DIC OFFICE, RAYAGADA. VS. ITO, RAYAGADA WARD, RAYAGADA PAN/GIR NO.BNUPS 8060 C (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.K.MISHRA, AR REVENUE BY : SHRISUBHENDU DATTA, DR DATE OF HEARING : 13/08/ 2018 DATE OF PRONOUNCEMENT : 27 /08/ 2018 O R D E R PER N.S.SAINI, AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A) - 1, BHUBANESWAR DATED 3.11.2017 FOR THE ASSESSMENT YEAR 2013 - 14. 2. THE SOLE ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.20,40,648/ - MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT AS BOGUS CREDITORS. 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER REQUIRED T HE ASSESSEE TO FURNISH THE DETAILS ALONGWITH ADDRESSES OF THE SUNDRY CREDITORS, WHICH WERE FILED BY THE ASSESSEE. THE ASSESSING OFFICER SEN T LETTERS CALLING FOR INFORMATION 2 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 U/S.133(6) OF THE ACT TO THE SUNDRY CREDITORS. 24 SUNDRY CREDITORS RESPONDED TO TH E LETTERS OF THE ASSESSING OFFICER AND IN CASE OF 18 SUNDRY CREDITORS, THE LETTERS CALLING FOR INFORMATION WERE RETURNED UNSERVED. THEREFORE, THE ASSESSING OFFICER MADE AN ADDITION OF RS.47,43,843/ - ON ACCOUNT OF 24 SUNDRY CREDITORS, WHO RESPONDED TO THE LETTERS BUT HAD EITHER STATED TO HAVE NO TRANSACTIONS WITH THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR OR THAT THEY HAVE NO DUES FROM THE ASSESSEE. THE ASSESSING OFFICER ALSO MADE ADDITION OF RS.35,48,217/ - REPRESENTING THE CREDIT BALANCES IN THE NAME O F SUNDRY CREDITORS OF WHOM LETTERS U/S.133(6) COULD NOT BE SERVED. IN THIS WAY, HE MADE ADDITION OF RS.82,92,060/ - ON ACCOUNT OF BOGUS SUNDRY CREDITORS. 4. ON APPEAL, THE CIT(A) DELETED RS.49,99,580/ - BEING AMOUNT SHOWN AS PAYABLE TO 18 SUNDRY CREDITORS O N THE GROUND THAT THEY REPRESENTED BALANCE BROUGHT FORWARD FROM EARLIER YEARS AND THAT ACCORDING TO HIM, IT CANNOT BE CONSIDERED AS INCOME OF THE ASSESSEE IN SUBSEQUENT YEAR UN LESS SECTION 41(1) IS FOUND TO BE APPLICABLE. 5. WITH REGARD TO 4 SUNDRY CREDITO RS TO WHOM THE ASSESSEE HAD SHOWN RS.7,53,393.77 AS PAYABLE, THE CIT(A) OBSERVED THAT THE ASSESSEE HAS POINTED OUT IN PARA 6 OF THE WRITTEN SUBMISSION THAT IN RESPECT OF 4 SUNDRY CREDITORS, THE ASSESSING OFFICER HAS STATED THAT THE CREDITORS HAVE SUBMITTED THAT THEY HAVE NO TRANSACTIONS WITH THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. THE ASSESSEE FILED DETAILS OF TRANSACTION WITH 3 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 THESE FOUR PARTIES ALONGWITH RELEVANT PURCHASE BILLS AND THE ASSESSEE SUBMITTED THAT THE CREDITORS HAVE STATED LIES BEFORE THE ASSESSING OFFICER AND THE ASSESSEE HAD TRANSACTION WITH THEM DURING THE PREVIOUS YEAR SUPPORTED BY PURCHASE BILLS AND PAYMENT MADE THROUGH BANKS. THE CIT(A) OBSERVED THAT HE WAS INCLINED TO BELIEVE THAT THE CONCERNED PARTIES/CREDITORS HAVE PERHAPS NOT STATED THE TRUTH BEFORE THE ASSESSING OFFICER FOR REASONS BEST KNOWN TO THEM. MAY BE THESE CREDITORS HAVE NOT REFLECTED THE TRANSACTIONS WITH THE ASSESSEE IN THEIR BOOKS OF ACCOUNT AND IN ORDER TO HIDE THE SAME, HAVE DENIED HAVING ANY TRANSACTIONS WITH THE ASSESSEE. HE OBSERVED THAT THE CLOSING BALANCE AS ON 31.3.2013 IN RESPECT OF IBC SYSTEMS OF RS.1,99,913/ - AND M/S. R.K.ENTERPRISES OF RS.2,65,000/ - REPRESENT THE BROUGHT FORWARD BALANCES FROM EARLIER YEARS AND, THEREFORE, SAME CANNOT BE CONSIDERED FOR ADDITION FOR THE ASSESSMENT YEAR 2013 - 14, THE IMPUGNED ASSESSMENT YEAR AND HENCE, HE ALLOWED FURTHER DEDUCTION OF RS.4,64,913/ - ON ACCOUNT OF SUNDRY CREDITORS. 6. THE CIT(A) FURTHER OBSERVED THAT THE ASSESSEE IN PARA 7 OF WRITTEN SUBMISSION IN RESPECT OF LG ELECTRONICS (P) LTD., AND M/S. ELECTRONICS WORLD, THE ASSESSING OFFICER HAS CONSIDERED THE UN - RECONCILED CREDIT BALANCES OF RS.2,20,320/ - AND RS.5,60,398/ - RESPE CTIVELY AS INCOME OF THE ASSESSEE. IT WAS SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, RECONCILIATION STATEMENTS WERE FILED BEFORE THE ASSESSING OFFICER RECONCILING THE UN - RECONCILED CREDIT BALANCES, BUT THE ASSESSING OFFICER HAS NOT TAKEN T HE SAME INTO CONSIDERATION. THE ASSESSEE 4 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 REQUESTED THAT THE RECONCILIATION STATEMENTS SHOULD BE TAKEN INTO CONSIDERATION AND THE ADDITION MADE ON ACCOUNT OF THE ABOVE UN - RECONCILED CREDIT BALANCES OF RS.7,86,919/ - SHOULD BE DELETED. THE CIT(A) OBSERVED THA T AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, IT APPEARS THAT THE ASSESSING OFFICER HAS NOT TAKEN INTO CONSIDERATION THE RE - RECONCILED STATEMENT, COPIES OF WHICH HAVE BEEN FILED AT THE TIME OF APPEAL HEARING. HE OBSERVED THAT IT IS NOT CLEAR AS TO W HETHER SUCH STATEMENTS WERE FILED BEFORE THE ASSESSING OFFICER. THEREFORE, IN THE INTEREST OF NATURAL JUSTICE, HE DIRECTED THE ASSESSING OFFICER TO CONSIDER THE RECONCILIATION STATEMENTS IN RESPECT OF 2 PARTIES TO BE PRODUCED BEFORE HIM BY THE ASSESSEE WHI LE GIVING EFFECT TO THIS ORDER AND TAKE APPROPRIATE DECISION WITH REGARD TO THE IMPUGNED ADDITION AFTER VERIFYING THE FACTS. 7. FURTHER, THE CIT(A) OBSERVED THAT AS REGARDS BALANCE ADDITION ON ACCOUNT OF SUNDRY CREDITORS ARE CONCERNED, THEY HAVE TO BE CONF IRMED SINCE THE ASSESSEE HAS NOT FURNISHED ANY MATERIALS TO SHOW THAT THE BALANCE SHOWN IN THE NAMES OF THE CONCERNED CREDITORS ARE CORRECT AND GENUINE. THEREFORE, HE SUSTAINED ADDITION OF RS.20,40,648/ - AND ALLOWED RELIEF OF RS.54,64,493/ - TO THE ASSESSE E AND RESTORED ADDITION OF RS.7,86,919/ - SHOWN IN THE NAME OF LG ELECTRONICS INDIA LTD., AND M/S. ELECTRONICS WORLD TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERING THE RECONCILIATION STATEMENT FILED BY THE ASSESSEE. 5 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 8. LD A.R. OF THE ASSESSEE SUBMITTE D THAT THIS BENCH OF THE TRIBUNAL IN THE CASE OF ANUPAMA INDUSTRIES VS ITO IN ITA NO.411/CTK/2017 FOR THE ASSESSMENT YEAR 2009 - 2010 ORDER DATED 31.07.2018 HAS HELD THAT WHERE BOOKS OF ACCOUNT HAS NOT BEEN REJECTED, THERE CAN BE NO ADDITION IN RESPECT OF P URCHASES FROM SUNDRY CREDITORS AND DELETED THE ADDITION MADE BY THE ASSESSING OFFICER U/S.68 OF THE ACT. HE SUBMITTED THAT IN THE CASE OF THE ASSESSEE ALSO, IT IS AN ACCEPTED FACT THAT BOOKS OF ACCOUNT HAVE NOT BEEN REJECTED AND, THEREFORE, BALANCE ADDITI ON ON ACCOUNT OF SUNDRY CREDITORS OF RS.20,40,648/ - SUSTAINED BY THE CIT(A) SHOULD BE DELETED IN VIEW OF THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ANUPAMA INDUSTRIES (SUPRA). 9. ON THE OTHER HAND, LD D.R. FULLY JUSTIFIED THE ORDER OF THE CI T(A). 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE, THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER MADE ADDITION OF RS.82,92,060/ - AS SUNDRY CRE DITORS ON THE GROUND THAT OUT OF TOTAL LETTERS SENT TO THE CREDITORS U/S. 133(6), 24 SUNDRY CREDITORS HAVE STATED THAT THEY HAVE NO TRANSACTIONS WITH THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR OR THAT THEY HAVE NO DUES FROM THE ASSESSEE. IN CASE OF 18 SUNDRY CREDITORS, LETTERS WERE RETURNED UNSERVED. 6 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 11. ON APPEAL, THE CIT(A) DELETED THE ADDITION OF RS.49,99,560/ - ON THE GROUND THAT THEY WERE BROUGHT FORWARD BALANCES FROM EARLIER YEARS AND NO ADDITION CAN BE MADE UNLESS SECTION 41(1) IS FOUND TO BE APPLICABLE. 12. FURTHER, HE DELETED ADDITION OF RS.4,63,913/ - IN RESPECT OF AMOUNTS STANDING IN THE BOOKS OF THE ASSESSEE PAYABLE TO IBC SYSTEMS OF RS.1,99,913/ - AND M/S. R?K. ENTERPRISES OF RS.2,65,000/ - ALSO ON THE GROUND THAT THEY WERE BROUGHT FORWA RD BALANCES FROM EARLIER YEARS. 13. FURTHER, WITH REGARD TO BALANCE AMOUNT OF RS.7,86,919 STANDING IN THE NAME OF TWO CREDITORS NAMELY LG ELECTRONICS PVT LTD., AND M/S. ELECTRONICS WORLD OF RS.2,20,320/ - AND RS.5,60,398/ - RESPECTIVELY, THE CIT(A) OBSERVED THAT THE ADDITION WAS MADE ON THE GROUND THAT THEY WERE UN - RECONCILED CREDIT BALANCE. BEFORE HIM, THE ASSESSEE FILED RECONCILED STATEMENT AND, THEREFORE, HE RESTORED THE ADDITION OF RS.7,86,919/ - IN RESPECT OF TWO CREDITORS TO THE FILE OF THE ASSE SSING OFFICER TO RE - ADJUDICATE THE SAME AS PER LAW AFTER VERIFYING THE FACTS. 14. FOR THE BALANCE SUNDRY CREDITORS OF RS.20,40,648/ - , HE CONFIRMED THE ADDITION ON THE GROUND THAT THE ASSESSEE FAILED TO FURNISH ANY MATERIAL TO SHOW THAT THE CREDITORS AR E CORRECT AND GENUINE. 15. WE FIND THAT WITH REGARD TO DELETION OF RS.56,64,493/ - AND RESTORATION OF THE SUNDRY CREDITORS OF RS.7,86,919/ - TO THE FILE OF THE ASSESSING OFFICER, THE REVENUE HAS NOT FILED ANY APPEAL BEFORE US. 7 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 16. WITH REGARD TO BALANCE ADDITION OF RS.20,40,648/ - , LD A.R. HAS RELIED ON THE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF ANUPAMA INDUSTRIES (SUPRA), WHEREIN, IT WAS HELD THAT SINCE THE BOOKS OF ACCOUNT HAS NOT BEEN REJECTED, THERE CAN BE NO ADDITION IN RESPECT OF PURCH ASES FROM SUNDRY CREDITORS AND DELETED THE ADDITION MADE U/S.68 OF THE ACT. 1 7 . WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE ORDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS BENCH OF THE TRIBUNAL IN THE CASE OF ANUPAMA INDUSTRIES VS ITO IN ITA NO.411/CTK/2017 FOR THE ASSESSMENT YEAR 2009 - 2010 ORDER DATED 31.7.2018 HAS EXHAUSTIVELY DISCUSSED THE ISSUE AND HELD AS UNDER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 2, BHUBANESWAR, DATED 30.06.2017 PASSED IN I.T.APPEAL NO.0314/2014 - 15 FOR THE ASSESSMENT YEAR 2009 - 2010. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL : - '1. THE ORDER PASSED BY THE AUTHORITY IS NOT BASED UPON THE FACTS AND THEREFORE NOT MAINTAINABLE BEFORE THE EYES OF LAW; 2. THE NATURE OF BUSINESS OF THE ASSESSEE IS SUCH THAT IT RUNS ON THE BASIS OF TRADE CREDIT GIVEN BY THE SUPPLIERS FROM TIME TO TIME WHICH IS REPAI D IN THE TRADE CYCLE - THE AUTHORITY FAILED TO RECOGNIZE IT EVEN AFTER PRESENTATION OF INFORMATION THERE TO; 3. SINCE THE CASE RELATES TO SOME 8 YEARS BACK, SOME SUPPLIERS HAVE CLOSED THEIR BUSINESS AND ARE NOT TRACEABLE, HENCE ADDING BACK OF SUCH CREDI TORS IS NOT CORRECT IN THE EYE OF LAW. 4. THE AUTHORITY HAS MERELY TAKEN THE BENEFITS OF DOUBT AND ADDED RS 40,69,845 TO THE TOTAL INCOME. WITH THIS ADDITION THE TOTAL INCOME BECOMES APPROXIMATELY RS 50,00,000 WHICH IS NOT PRACTICAL WITH THE LEVEL AND NA TURE OF TURNOVER OF THE BUSINESS.' 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN MANUFACTURING & TRAINING OF CAST/MILD STEEL SANITARY ITEMS AND PUMP SETS AND FILED THE RETURN OF INCOME ON 30.09.2009 FOR THE A.Y.2009 - 2010 DECLARING TOTAL IN COME OF RS.7,82,020/ - . THE RETURN OF INCOME WAS PROCESSED U/S.143(1) OF THE ACT. SUBSEQUENTLY THE CASE WAS SELECTED UNDER SCRUTINY AND NOTICES U/S.143(2) & 142(1) OF THE ACT WERE ISSUED. IN COMPLIANCE OF THE SAME, LD. AR APPEARED BEFORE THE AO AND CASE WAS 8 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 DISCUSSED. THE AO IN THE COURSE OF HEARING PROCEEDINGS FOUND THAT THE ASSESSEE HAS DISCLOSED SUNDRY CREDITORS AND THE AO HAS CALLED FOR THE INFORMATION OF SUNDRY CREDITORS DETAILS AND ALSO ISSUED NOTICE U/S.133(6) OF THE ACT FOR SUBMITTING THE INFORMATION WHEREAS IN MOST OF THE CASES THE INFORMATION WERE SENT BY THE PARTIES WITH REGARD TO MONEY AND OUTSTANDING BALANCE. THE AO HAS INCORPORATED THESE FACTS IN THE ASSESSMENT ORDER AND ALSO THE ASSESSEE FILED EXPLANATIONS IN RESPECT OF CREDITORS WHERE DIFFEREN CE AROSE AND ALSO THE AO REQUIRED THE ASSESSEE TO RECONCILE THE OUTSTANDING AMOUNT. THE ASSESSEE FILED RECONCILIATION AND WRITTEN SUBMISSION WHICH HAS BEEN INCORPORATED BY THE AO AT PAGES 2 TO 7. THE AO HAVING CONSIDERED THESE FACTS WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE IN RESPECT OF CERTAIN CREDITORS AND, THEREFORE, MADE ADDITION OF RS.1,17,20,648/ - AS THERE IS A DISPARITY IN THE ACCOUNTS AND THE DETAILS WERE NOT TALLIED AND THE AO PASSED ORDER U/S.143(3) OF THE ACT, DATED 30.12.2011. 4. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). IN THE APPELLATE PROCEEDINGS LD. AR MADE SUBMISSION AND ALSO REMAND REPORT WAS CALLED FOR. LD. CIT(A) HAVING GONE THROUGH THE REMAND REPORT AND INFORMATION OF THE AO REFERRE D AT PAGE 3 TO 5 AND ALSO CONSIDER THE OBJECTIONS OF THE ASSESSEE AND HAS GRANTED RELIEF TO THE EXTENT OF RS.76,50,803/ - BUT CONFIRMED THE ADDITION OF RS.40,69,845/ - AND PARTLY ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) TH E ASSESSEE FILED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. BEFORE US, LD. AR SUBMITTED THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.40,69,845/ - IRRESPECTIVE OF THE FACT THAT THE ASSESSEES EXPLAINED THE CLOSING BALANCE AVAILABLE AS ON 31.03.200 9 AND WHEREVER THERE IS A DIFFERENCE IN AMOUNT AND HAS BEEN PAID IN THE SUBSEQUENT YEARS. THE CONTENTION OF THE LD. AR THAT THE AO HAS NOT REJECTED THE BOOKS OF ACCOUNTS. THE ASSESSEE COOPERATED IN THE ASSESSMENT PROCEEDING AND APPELLATE PROCEEDINGS. LD. A R ALSO RELIED ON THE JUDICIAL DECISION AND PRAYED FOR ALLOWING THE APPEAL. 7. LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES AND EXPLAINED THAT THE AO HAS CALLED FOR THE INFORMATION FROM THE PARTIES AND NO INFORMATION WAS AVAILABLE EXCEPT THE CONFIRMATI ON FROM THE PARTIES AND THE DIFFERENCE IN RECONCILIATION OF AMOUNT, THEREFORE, PRAYED FOR DISMISSAL OF THE APPEAL OF THE ASSESSEE. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. PRIMA FACIE WE FOUND THAT THE CIT(A) HAVING CONSIDERED THE REMAND REPORT AND THE FINDINGS OF AO AND EXPLANATIONS OF THE ASSESSEE HAS GRANTED RELIEF AND SUSTAINED AN AMOUNT OF RS.40,69,8 45/ - IN RESPECT OF TWO PARTS, FIRSTLY THE PURCHASES OF SIX PARTIES MENTIONED IN THE APPELLATE ORDER AT PAGE 8 AND THE CREDITS APPEARING IN THEIR NAMES ARE NOT GENUINE, ACCORDINGLY, THE CIT(A) CONFIRMED AN AMOUNT OF RS.15,69,168/ - . SECONDLY THE CIT(A) CONFI RMED THE ADDITION OF RS.25,00,677/ - U/S.68 OF THE ACT, SINCE THE ASSESSEE COULD NOT GET CONFIRMATION FROM THE ABOVE PARTIES AND THERE IS 9 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 NO SUPPORTING EVIDENCE. IN THE COURSE OF HEARING PROCEEDINGS, LD. AR SUBMITTED THAT THE ASSESSEE HAS TRIED TO GET CONFI RMATION FROM THE PARTIES BUT THE SAME WERE NOT AVAILABLE DUE TO VARIOUS REASONS. THE CONTENTION OF LD. AR THAT THE TRANSACTIONS WERE GENUINE AND ARE NOT DISPUTED AND ALSO THE BOOKS OF ACCOUNTS WERE NOT REJECTED BY THE AO U/S.145(3) OF THE ACT. LD. AR ALSO RELIED ON THE DECISION THIS BENCH OF THE TRIBUNAL IN THE CASE OF T.BISWANATH PATRO (HUF) VS. DCIT, IN ITA NO.20/CTK/2017, ORDER DATED 31.01.2018. WE HAVE PERUSED THE ORDER OF TRIBUNAL AND FOUND THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF T HE ASSESSEE AS THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED BY THE AO, THEREFORE, NO ADDITION CAN BE MADE IN RESPECT OF SALES AND PURCHASES. THE OBSERVATIONS OF THE TRIBUNAL IN THIS REGARD ARE AS UNDER : - 10. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE O RDERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. THE SOLE CRUX OF THE DISPUTE ISSUE IS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER IN RESPECT OF SUNDRY CREDITORS AND SUNDRY DEBTORS. WE FIND THAT THE SUNDRY CREDITORS ARE IN RESPECT OF PU RCHASES, AS EXPLAINED BY LD A.R. WHICH HAVE BEEN FULLY DISCLOSED WHEREAS THE DIFFERENCE IN SUNDRY DEBTORS IS EXPLAINED IN RESPECT OF SALE, WHICH IS PROPERLY INVOICED AND THERE IS NO DISPUTE. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HA S ACCEPTED THE PURCHASES AND SALES. ONLY AFTER THE ASSESSING OFFICER ISSUING LETTERS U/S.133(6) OF THE ACT HAS MADE OBSERVATION THAT THERE IS NO PROPER COMPLIANCE AND THE CIT(A) HAS GRANTED RELIEF ON THIS ISSUE AFTER CALLING THE REMAND REPORT. SIMILARLY, IN THE CASE OF SALES, THE ASSESSEE HAS DISCLOSED THE SUNDRY DEBTOR'S RECEIVABLES AND THEY ARE PROPERLY DEALT IN THE BOOKS OF ACCOUNT AS PER THE ACCOUNTING PRINCIPLES. ON THIS ISSUE, THE CIT(A) HAS CALLED COMMENTS FROM THE ASSESSING OFFICER AND THE ASSESSIN G OFFICER HAS FILED REMAND REPORT , ON WHICH, THE CIT(A) HAS ALLOWED RELIEF. WE PERUSED THE ORDER OF THE ASSESSING OFFICER. WE FIND THAT THE ASSESSING OFFICER HAS DOUBTED THE BALANCE OF SUNDRY CREDITORS BUT AS FAR AS THE BOOKS OF ACCOUNT ARE CONCERNED, IT IS NOT DISPUTE THAT THE ASSESSING OFFICER HAVING ACCEPTED THE PURCHASE AND SALES, THE ASSESSEE BEING A DEALER IN MEDICINES, THERE CANNOT BE ANY REASON FOR THE ASSESSING OFFICER TO TAKE A DIFFERENT VIEW IN RESPECT OF CREDITORS. ACCORDINGLY, WE ARE OF THE SU BSTANTIVE VIEW THAT SINCE THE BOOKS OF ACCOUNTS HAVE BEEN ACCEPTED BY THE ASSESSING OFFICER, THERE CANNOT BE ANY ADDITION WITH RESPECT OF SALES AND PURCHASES. AS THERE IS NO DEFECT IN THE PURCHASES AND SALES, THE ADDITION IN RESPECT OF SUNDRY CREDITORS AND SUNDRY DEBTORS CANNOT BE SUSTAINED. WE SUPPORT OUR VIEW RELYING ON THE DECISION OF ALLAHABAD BENCH OF THE TRIBUNAL IN THE CASE OF JCIT VS. MATHURA DAS ASHOK KUMAR (2006) 101 TTJ 810 (ALL), WHEREIN, IT WAS HELD THAT WHEN PURCHASES ARE ACCEPTED TO BE GENUIN E BALANCE REMAINING OUTSTANDING AT THE END OF THE YEAR AGAINST SUCH, PURCHASES CANNOT BE TREATED AS BOGUS LIABILITY AND ADDITION MADE ON THAT BASIS CANNOT BE SUSTAINED. FURTHER, THE ITAT VISAKHAPATAM IN THE CASE ITO VS JAYANGA ANITHA (2016) 46 CCH 407 HAS HELD THAT WHEN TRADING RESULTS I.E. SALES AND PURCHASES HAD 10 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 BEEN ACCEPTED AS GENUINE, NO ADDITION U/S.68 OF THE ACT COULD BE MADE FOR UNEXPLAINED SUNDRY CREDITORS. WE, ACCORDINGLY, DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION MADE BY THE ASSESSING O FFICER. 9. IN THE INSTANT CASE, WE FIND THAT THE AO HAS DOUBTED THE BALANCE OF SUNDRY CREDITORS, HOWEVER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO HAS ACCEPTED THE PURCHASES AND SALES WHEREAS AFTER CALLING FOR REMAND REPORT FROM THE AO, THE CIT (A) GRANTED THE RELIEF. WE FIND THAT SINCE THE BOOKS OF ACCOUNTS HAVE NOT BEEN REJECTED BY THE ASSESSING OFFICER, THERE CAN BE NO ADDITION IN RESPECT OF PURCHASES FROM SUNDRY CREDITORS. ACCORDINGLY, WE RESPECTFULLY FOLLOW THE ABOVE JUDICIAL PRECEDENCE OF T RIBUNAL AND DIRECT THE AO TO DELETE THE ADDITION MADE U/S.68 OF THE ACT. I 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 1 8 . THE KOLKATA BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS. PUSPAL KUMAR DAS IN ITA NO.1442/KOL/2012 FOR THE ASSESSMENT YEA R 2007 - 08 ORDER DATED 10.12.2015 HAS HELD AS UNDER: 3. GROUND NO.1 OF THE APPEAL BY THE REVENUE IS AGAINST ADDITION OF RS.10,14,942/ - AS BOGUS PURCHASES. BRIEF FACTS RELATING TO THIS GROUND ARE THAT THE ADDITION HAS BEEN DISCUSSED IN PARA (4) OF THE ASSES SMENT ORDER AND FROM THE DISCUSSION MADE BY THE A.O., IT IS OBSERVED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. HAD ISSUED NOTICES UNDER SECTION 133(6) TO VARIOUS PARTIES IN ORDER TO VERIFY THEIR TRANSACTIONS OF SALES BY THEM TO THE ASSESSE E WHICH WILL BE CORRESPONDING PURCHASES BY THE ASSESSEE. THE AO NOTICED CERTAIN DISCREPANCIES WHICH COULD NOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE. THE DISCREPANCIES NOTICED BY THE AO WAS AS UNDER: TABLE - 8 SI. NO . NAME OF THE PARTY PURCHASES SHOWN REFERENCE NO. SHOWN OR PURCHASE DISCREPANCY (RS.) 1. M/S.R.K. DUTTA & COMPANY 72,001 T ABLE - 1 ,SI.NO.L 2 M/S.JAYSHREE TRADING CO. 32,904 TABLE - L, S I.NO.2 3 M/S.BINOD KUMAR AGARWALA 71,989 TABLE - L, SI.NO.3 4 . M/S. KAMAL STATINER STORES 30,194 TABLE - L, SI.NO A 5. M/S. CHOWDHURY HARDWARE 93,300 TABLE - L, SI.NO.5 STORES 6 M/S. R. K. PODDER.& BROS. 1,16,744 TABLE - L, SI.NO.6 11 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 7 . M/S. SREEMA HARDWARE 4,000 TABLE - L, SI.NO.7 8 M/S. GUPTA TRADING CONCERN 17,000 TABLE - L, SI.NO.8 9 M/S. MRITUNJOY TREDING CO. 56,190 TABLE - L, SI.NO.9 10 M/S. CHATTERJEE KUNDU & CO. 2,848 TABLE - 5, SI.NO.2 11 M/S. MEHTA ENTERPRISE 1,01,455 TABLE - 7,SI.NO.L 12 M/S. COMBAT CH EMICALS PVT. 1,24,618 TABLE - 7, SI.NO.2 LTD. 13 M/S. RAJ & RAJ PVT. LTD . 2,91,699 TABLE - 7,SI.NO.3 10,14,942 THE AO NOTICED THAT ON INSPECTORS VISIT AT THE ADDRESSES IN RESPECT OF SL. NOS. 1 TO 9, GIVEN BY THE ASSESSEE, THE PARTIES COULD NOT BE TRACED. IN REGARD TO SL. NO. 10 AND 11, THE PARTIES HAVE SHOWN PURCHASES BY THE ASSESSEE LESSER BY RS.2,848/ - AND RS.1,01,455/ - RESPECTIVELY. IN REGARD TO SL.NOS.12 TO 13, THE NOTICE UNDER SECTION 133(6) COUL D NOT BE SERVED ON THE PARTIES AT THE ADDRESSES GIVEN BY THE ASSESSEE. 4. AFTER CONSIDERING THE EXPLANATION PROVIDED BY THE ASSESSEE, THE A.O. HELD THAT THESE TRANSACTIONS TOTALING TO RS.10,14,942/ - WERE BOGUS AND HE BASED HIS FINDINGS ON THE FOLLOWING OB SERVATIONS : 1. IT IS SEEN THAT NO SPECIFIC DETAILS OR EXPLANATIONS HAVE BEEN OFFERED IN RESPECT OF DISCREPANCIES, MENTIONED ABOVE. THEREFORE, THE SAID EXPLANATION IS TREATED AS VERY GENERAL IN NATURE. 2. THE ASSESSEE IS NOT CLAIMING THAT THE PURCHASES WERE MADE FROM THE GENUINE PURCHASERS. HE RECEIVED PURCHASE BILLS FROM DIFFERENT ENTITIES ON GOOD FAITH, AS SUBMITTED. IT HAS NOT BEEN SPECIFIED HOW THE ORDERS WERE PLACED, HOW THE GOODS WERE RECEIVED AND FROM WHOM THE BILLS WERE RECEIVED. HE HAS ALSO ADMI TTED THAT IT IS NOT POSSIBLE FOR HIM TO PROVE THAT THE PURCHASERS OR THE ADDRESSES MENTIONED ON THE BILLS EXISTED DURING THE PERIOD UNDER CONSIDERATION. THE ONUS IS ON THE ASSESSEE TO SUBSTANTIATE EVERY EXPENDITURE CLAIMED AND EVERY LIABILITIES SHOWN BY HI M. THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS; 3. BOOKS OF ACCOUNTS FOR A. Y.2007 - 08 WERE PRODUCED ONLY ONCE DURING THE COURSE OF, HEARING. THE DISCREPANCIES FOUND DURING VERIFICATION, AS MENTIONED IN TABLE - 3 ABOVE COULD NOT BE EXPLAINED. THE SAID BOO KS OF ACCOUNTS HAVE NOT BEEN PRODUCED FOR THE SECOND TIME EVEN AFTER REPEATED REMINDERS. 4. THE BOOKS OF ACCOUNTS FOR A.Y.2008 - 09 HAVE NOT BEEN PRODUCED ALSO, AFTER REPEATED REMINDERS. THE ASSESSEE HAS NOT SHOWN ANY INTENTION TO SUBMIT SPECIFIC CLARIFICAT ION IN RESPECT OF FINDINGS OBSERVED DURING THE PROCEEDINGS. 12 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 4. BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE ABOVE ADDITION HAD BEEN MADE AS BOGUS PURCHASES BY THE A.O. WITHOUT CONSIDERING THE FACT THAT THE GOODS WERE EITHER SOLD TO CESC LTD. WHICH IS THE ONLY PARTY TO WHOM THE ASSESSEE HAD SUPPLIED GOODS AND THAT THESE GOODS WERE APPEARING IN THE CLOSING STOCK AS PER STOCK REGISTER AND WITHOUT THESE PURCHASES IT WOULD NOT HAVE BEEN POSSIBLE FOR THE ASSESSEE TO SELL THESE GOODS. IT WAS FURTHER SUBMITTED THAT THAT ADDITION WAS MADE WITHOUT GIVING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 5. THE LD. CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, REMAND REPORT OF THE AO AND ASSESSEES REJOINDER AND OTHER EVIDENCES ON RECORD, GAVE HIS FINDINGS. 5.1 THE CIT(A) WAS OF THE VIEW THAT THE AO CONSIDERED PURCHASES AS BOGUS ON THE GROUND THAT PURCHASES WERE MADE FROM THE AFORESAID PARTIES IN TWO YEAR I.E. 2006 - 07 AND 2007 - 08 TOTALLING TO RS.12,62,135/ - AGAI NST WHICH ONLY A CASH PAYMENT OF RS.16,500/ - WAS MADE IN 2007 - 08. THE REMAINING PAYMENTS WERE MADE ENTIRELY IN CASH IN THE SUBSEQUENT YEAR I.E. A.Y. 2008 - 09, AFTER WHICH THERE WAS NO TRANSACTION WITH THESE PARTIES. THE MAIN CONTENTION OF THE ASSESSEE AGAI NST THE ABOVE WAS THAT THESE ARE GENUINE PURCHASES AGAINST WHICH SUPPLIES HAVE BEEN MADE BY IT TO CESC LTD. FURTHER THAT THE PURCHASED ITEMS HAVE BEEN ENTERED IN THE STOCK REGISTER OF THE ASSESSEE AND THEREFORE WITHOUT PURCHASES NO SALES COULD HAVE BEEN MA DE. 5.2 THE ASSESSEE HAS ALSO PROVIDED THE DETAILS OF THE ITEMS PURCHASED FROM THESE PARTIES AND SUPPLIED TO M/S. CESC LTD. IN THE REMAND REPORT, THE A.O. HAS ACKNOWLEDGED THAT THE ENTRIES FOR (CASH PAYMENTS WERE MADE OF THE ACCOUNTS FOR THESE PARTIES AND ALL THESE ACCOUNTS WERE SQUARED UP IN FINANCIAL YEAR ENDING ON 31.03.2008. IN RESPECT OF THE REMAINING FOUR PARTIES OUT OF THE ABOVE MENTIONED LIST, THE A.O. HAS MADE ADDITION ON THE GROUND OF NON - RECONCILIATION OF THE ACCOUNTS WITH THE ASSESSEE. THE SAME ARE DISCUSSED AS UNDER: (I) DISCREPANCY OF RS.848/ - IN RESPECT OF ACCOUNT OF M/S. CHATTERJEE KUNDU & CO. WHEREIN PURCHASES SHOWN BY THE PARTY WERE OF RS.L0,61,354/ - AS AGAINST SHOWN BY THE ASSESSEE OF RS.L0,64,202/ - . (II) DISCREPANCY OF RS.L,01,455/ IN THE CASE OF M/S. MEHTA ENTERPRISE WHICH HAS SHOWN SALES OF RS.1,642/ - AGAINST RS.L,02,597/ - SHOWN BY THE ASSESSEE. (III) M/S. COMBAT CHEMICALS PVT. LTD. AND M/S. RAJ & RAJ PVT. LTD. IN RESPECT OF WHOM IT IS CLAIMED THAT NOTICES U/S.133(6) COULD NOT BE SE RVED AS THE NOTICES WERE RETURNED UN - SERVED BY THE POSTAL DEPARTMENT. 5.3. THE CIT(A) WAS OF THE VIEW THAT THE ADDITION HAS BEEN MADE BY THE A.O. TAKING THE DUAL GROUNDS OF THE TRANSACTIONS NOT CAPABLE OF BEING VERIFIED AS THE INSPECTOR COULD NOT SERVE TH E NOTICES U/S.133(6) AND THAT NOMINAL PAYMENTS HAVE BEEN MADE AGAINST PURCHASES IN TWO YEAR I.E. 13 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 A.Y.2006 - 07 AND 2007 - 08 WHEREAS ALMOST THE ENTIRE OUTSTANDING BALANCES HAVE BEEN PAID IN CASH BY 31.03.2008. IN THIS REGARD, WHILE THE TRANSACTION COULD NOT BE VERIFIED AS THESE PARTIES WERE NOT TRACEABLE UPON LOCAL ENQUIRY OF THE INSPECTOR, HOWEVER, IT IS SEEN THAT THE ASSESSEE IS A SUPPLIER PROVIDING STATIONERY ITEMS TO M/S. CESC LTD. WHICH HE PURCHASED FROM VARIOUS PARTIES IN THE MARKET. THE ASSESSEE HAS PROV IDED DETAILS OF THE ITEMS PURCHASED BY HIM AND SUBSEQUENTLY SUPPLIED TO M/S. CESC LTD. IT IS SEEN THAT THESE ARE PETTY ITEMS OF OFFICE STATIONERY AND OFFICE MAINTENANCE INCLUDING OFFICE FURNITURE ETC. IT IS ALSO SEEN THAT ASSESSEE HAS ALSO PROVIDED THE VAL UATION OF ITEM WISE DETAILS OF CLOSING STOCK AMOUNTING TO RS.6,88,565/ - AS ON 31.03.2007. WHILE THE A.O. HAS OBSERVED THAT VERIFICATION COULD NOT BE DONE FROM THE ABOVE MENTIONED PARTIES, HOWEVER THE ADDITION IN RESPECT OF DISALLOWING THE PURCHASES FROM TH ESE PARTIES DOES NOT STAND TEST AS THE DISALLOWANCE BRINGS INTO QUESTION THE SALES BEING SHOWN BY THE ASSESSEE, AS HIS ACTIVITIES ARE, IN TRADING NATURE AND THE ENTIRE SUPPLIES ARE BEING MADE TO ONE CONCERN I.E. M/S. CESC LTD. 5.4. THE CIT(A) POSED THE QU ESTION AS TO HOW IF THE PURCHASES ARE BEING DISALLOWED TO THE EXTENT OF RS.10,14,942/ - WHAT WILL HAPPEN TO THE CORRESPONDING SALES BEING SHOWN. THE CIT(A) THEREFORE HELD THAT THE A.O. WAS NOT JUSTIFIED IN CONSIDERING THE ENTIRE PURCHASES AS BOGUS FROM THES E NINE PARTIES. THE CIT(A) ALSO OBSERVED THAT IT WAS THE OTHER PARTIES WHO WERE SUPPRESSING THEIR SALES. HOWEVER, SINCE THE ASSESSEE IS DISCLOSING MORE PURCHASES, THERE IS NO JUSTIFICATION FOR THE ABOVE ADDITION. THE CIT(A) HELD THAT THE AO AT BEST COULD H AVE REJECTED THE BOOKS AND ESTIMATED INCOME OF THE ASSESSEE BUT HE HAS NOT DONE SO. ADDING THE ENTIRE SALES AS INCOME COULD GIVE ABSURD RESULTS. THE CIT(A) ACCORDINGLY DELETED THE ADDITION OF RS.10,14,156/ - . 6. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS RAISED GR.NO.1 BEFORE THE TRIBUNAL. WE HAVE HEARD THE RIVAL SUBMISSIONS. THE LEARNED DR RELIED ON THE FINDINGS OF THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED SUBMISSIONS MADE BEFORE CIT(A ) AND RELIED ON THE ORDER OF THE CIT(A). 7. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS. IT IS CLEAR FROM THE ORDER OF THE CIT(A) AND THE EVIDENCE ON RECORD THAT THERE WAS NO VALID BASIS TO TREAT THE ENTIRE PURCHASES AS BOGUS AS WA S DONE BY THE AO. IF PURCHASES ARE BEING DISALLOWED TO THE EXTENT OF RS.10,14,942/ - WHAT WILL HAPPEN TO THE CORRESPONDING SALES BEING SHOWN. THE CIT(A) THEREFORE WAS RIGHT IN CONCLUDING THAT THE A.O. WAS NOT JUSTIFIED IN CONSIDERING THE ENTIRE PURCHASES AS BOGUS FROM THESE NINE PARTIES. THE FACT THAT THE OTHER PARTIES AVOIDED NOTICES U/S.133(6) OF THE ACT COULD BE BECAUSE THEY WERE NOT DISCLOSING SALES MADE TO THE ASSESSEE IN THEIR BOOKS OF ACCOUNTS. THE AO AT BEST COULD HAVE REJECTED THE BOOKS AND ESTIMATE D INCOME OF THE ASSESSEE BUT HE HAS NOT DONE SO. TREATING THE ENTIRE PURCHASES AS BOGUS AND MAKING ADDITION WOULD RESULT IN ABSURD RESULTS IN THAT THE ENTIRE SALE PROCEEDS WOULD GET TAXED AS INCOME. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE, THE ADD ITION MADE WAS RIGHTLY 14 ITA NO.61/CTK/2018 ASSESSMENT YEAR : 2013 - 2014 DELETED BY THE CIT(A). WE FIND NO GROUND TO INTERFERE WITH THE ORDER OF THE CIT(A). CONSEQUENTLY, GR.NO.1 RAISED BY THE REVENUE IS DISMISSED. 1 9 . AS THE FACTS OF THE CASE ARE SIMILAR TO THE FACTS OF THE ABOVE QUOTED DECISIONS INASMU CH AS THE BOOKS OF ACCOUNT IN THE INSTANT CASE WAS NOT REJECTED BY THE ASSESSING OFFICER, RESPECTFULLY FOLLOWING THE SAME , WE HOLD THAT ADDITION U/S.68 CANNOT BE MADE IN RESPECT OF SUNDRY CREDITORS OF RS.20,40,648/ - . HENCE, WE DELETE RS.20,40,648/ - MADE U /S.68 OF THE ACT AS BOGUS PURCHASES AND ALLOW THIS GROUND OF APPEAL. 20. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 27 /08/2018. S D/ - SD/ - (PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 27 /08/2018 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT: AMITA SENAPATI, DOORDARSAN DIGITAL SHOPPE, NEAR DIC OFFICE, RAYAGADA. 2. THE RESPONDENT. ITO, RAYAGADA WARD, RAYAGADA 3. THE CIT(A) - 1, BHUBANESWAR 4. PR.CIT - 1, BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//