INCOME TAX OFFICER, WARD-2(3)(6), SURAT, ADAJAN V. SUNIL DEVKISHAN PANWAR, MAHIDHARPURA, SURAT

ITA 61/SRT/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 6176 (ITAT-SURAT)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 15-05-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 18-01-2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AASHISH POPHARE
• Keywords: Bogus purchase; Opportunity of cross examination; Borrowed satisfaction; Set aside
• Section: 148; 143(3); 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER ITA No. 61/Srt/2024 (AY: 2012-13) (Hearing in Hybrid Mode) I.T.O. Ward-2(3)(6), Room No. 405, 4 th Floor, Anavil Business Centre, Adajan Hazira Road, Surat-395009. Vs. Sunil Devkishan Panwar, Office No. 404, Shayona Apartment, H. No. 6/2013/24, Hath Falia, Mahidharpura, Surat-395003 PAN : ASYPP 8504 G APPELLANT RESPONDEDNT C.O. No. 02/Srt/2024 (Arising out of ITA No. 61/Srt/2024)(AY: 2012-13) Sunil Devkishan Panwar, Office No. 404, Shayona Apartment, H. No. 6/2013/24, Hath Falia, Mahidharpura, Surat-395003 PAN : ASYPP 8504 G Vs. I.T.O. Ward-2(3)(6), Room No. 405, 4 th Floor, Anavil Business Centre, Adajan Hazira Road, Surat-395009. APPELLANT RESPONDEDNT Department by Shri Aashish Pophare, CIT-DR Assessee by Shri Himanshu Gandhi, C.A. Date of hearing 16/05/2024 Date of pronouncement 28/06/2024 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. The appeal by the revenue and the cross objection by the assessee are directed against the order of National Faceless Appeal Centre, Delhi (NFAC)/learned Commissioner of Income tax (Appeals), [‘ld. CIT(A)’ for short] dated 21/11/2023 for the Assessment Year (AY) 2012-13. The Revenue in its appeal has raised the following grounds of appeal:- ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 2 “1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition made by the AO of Rs. 5,04,80,000/- without appreciating the facts that the assessee had failed to prove the genuineness of the transaction made with "Keshav Impex" which was identified as a bogus accommodation entry provider, completely controlled by Shri Anil B Chokhra. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition without considering the facts that if separate documentary evidences submitted by assessee during the appeal proceedings on which decision was given, either which have been not provided to the Assessing Officer for verification or not called a remand report on the same. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in ignoring the fact that even though the payments made by the assessee towards the purchases are through banking channels will not establish that the transactions are genuine. 4. It is therefore prayed that the order of the Ld. CIT(A) may kindly be set aside and that of the Assessing Officer be restored. 5. The appellant craves leave to add, alter, amend and/or withdraw any grounds of appeal either before or during the course of hearing of the appeal. 2. Further on receipt of notice of revenue’s appeal, the assessee filed his Cross Objection raising following grounds: “1. On the facts & circumstances of the case and law, the ld. CIT(A) erred in confirming the reopening of the assessment u/s 148 which is bad in law and deserves to be quashed. 2. The respondent craves leave to add, alter, amend, modify or delete any of the aforesaid grounds of appeal.” 3. Brief facts of the case are that the assessee is an individual and engaged in the business of diamonds, filed his return of income for A.Y. 2012-13 on 30/09/2012 declaring total income of Rs. 9,90,170/-. The case of assessee was selected for scrutiny. Assessment was completed under Section 143(3) of the Income Tax Act, 1961 (in short, the Act) on 18/03/2015 determining income at Rs. 16,77,080/-. Subsequently, the case of assessee was reopened on the basis of information received from ITO, Ward-1(1)(4), Surat vide his ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 3 letter dated 25/03/2019. As per information, the case of one Anil Chokhara, Proprietor of Keshav Impex, information was received from ADIT (Inv.), Mumbai that Anil Chokhara was not doing any business. He was engaged in the activity of providing accommodation entry to various beneficiaries. The assessee was one of the person who has availed accommodation entry aggregating of Rs. 5.04 crores. On the basis of such information, the Assessing Officer was of the view that the income of assessee has escaped assessment. The Assessing Officer issued notice under Section 148 of the Act on 30/03/2019. In response to notice under Section 148, the assessee filed his return of income on 28/04/2019 declaring income of Rs. 15,06,630/-. The assessee asked for reasons of reopening. Reasons of reopening were provided to the assessee on 09/07/2019. The assessee filed objection against reopening which was disposed of by the detailed order. After disposal of objection, the Assessing Officer proceeded for reassessment. The assessee was asked to furnish details of business activities, Profit & Loss Account, bank statement, ledger account of Keshav Impex etc. The Assessing Officer recorded that despite giving opportunity, the assessee not cared to submit any detail, accordingly, a final show cause notice dated 05/11/2019 was served upon the assessee. Contents of show cause notice is recorded in para 6 of assessment order. In the show cause notice, the Assessing Officer asked assessee to substantiate the purchases shown from Keshav Impex and show caused as to why such purchases be not treated as bogus accommodation entry. The Assessing Officer recorded that the assessee filed his reply on 12/11/2019. Reply of assessee is scanned on page No. 4 to 8 of assessment ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 4 order. In the reply, the assessee stated that he is in the trade of diamonds, during the year, the assessee bought polished and rough diamonds, details of which were furnished. The assessee specifically contended that the assessee has not made any purchases from ‘Keshav Impex’ as has been incorrectly contended in the show cause notice. The assessee specifically stated that he has sold cut and polished diamonds 4032.49 carats worth Rs. 5.04 crores to Keshav Impex. Payment was received within 15/30 days from the date of sale through banking channel. In case, the sale is doubted, it needs to be reduced from stock, then stock position will show negative stock of 4032.49 carats. There is no stock left with the assessee. The assessee also stated that the case was reopened on the basis of information in case of Anil Chokhara and his cross examination may be allowed. The assessee also relied on various case laws. The assessee contended that no addition can be made when quantity is tallied. Reply of assessee was not accepted by the Assessing Officer. Assessing Officer retreated that the assessee made purchases from non-genuine supplier Keshav Impex of Rs. 5.04 crores, who is engaged in providing accommodation entry. The Assessing Officer held that in absence of any explanation, the assessee failed to furnish verifiable evidence. The Assessing Officer added Rs. 4.04 crores on account of unaccounted bogus purchases in the assessment order dated 18/11/2019 passed under Section 143(3) r.w.s. 147 of the Act. 4. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee challenged the validity of reopening and addition on merit. The assessee furnished detailed ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 5 written submission alongwith dates and events. Submissions of assessee is recorded on page No. 4 to 43 of order of ld. CIT(A). The assessee against reopening, submitted that the reopening is not justified as the assessee has not made purchases rather have made sales to Keshav Impex. Assessment was reopened only on the basis of information from the Investigation Wing, Mumbai. Copy of material information, statement recorded were not shared with assessee. No opportunity of cross examination of such persons was allowed. Additions are wrong on facts as well as on law. None of the documents furnished by the assessee was disputed by the Assessing Officer. No addition is permissible as the sales were already offered for tax by the assessee and same would lead to double taxation which is against the principle of taxation. If sale is doubted then sale value needs to be reduced which will result in a negative stock which is not possible as closing stock is NIL at the year end. The assessee furnished bank statement highlighting the transaction alongwith tax audit report. To support his submission, the assessee relied upon the decision of Hon'ble Jurisdictional Tribunal in ITO Vs M/s Exotic Jewels in ITA No. 1162 & 1391/Ahd/2017 dated 28/09/2021 and furnished comparative facts of his case vis a vis case of ITO Vs Exotic Jewels (supra). The assessee also relied on various other cases. 5. The ld. CIT(A) on considering the submission of assessee; on reopening noted that the assessee has contended that the reasons recorded are not correct as the assessee has not made purchases rather sold the goods to Keshav Impex. The reasons recorded are based on borrowed satisfaction. The ld. CIT(A) by referring the decision of Hon'ble Apex Court in Raymond Woolen Mills Ltd. Vs. ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 6 ITO (1999) 236 ITR 34 (SC) held that sufficiency or correctness of the material was not a thing to be considered at the stage of reopening. The ld. CIT(A) also referred the decision Hon'ble Supreme Court in the case of ACIT Vs Rajesh Jhaveri Stock Brokers (P) Ltd. (2007) 161 Taxman 316 (SC). By referring the above decisions, the ld. CIT(A) simply held that there was a relevant and cogent material before the Assessing Officer for reopening the assessment and rejected the corresponding ground. On merit, the ld. CIT(A) held that the Assessing Officer has not discharged his onus of disproving the transaction with Keshav Impex as the shame arrangement. The Assessing Officer neither reproduced the statement of proprietor of Keshav Impex, wherein he has stated that the assessee is a beneficiary of bogus transaction nor brought any cogent evidence on record to controvert the document filed by the assessee. The Assessing Officer made addition of bogus purchases, no comments were made on the nature of sales made by assessee. Books of account of assessee was not rejected nor re- casted the trading result. The assessee has produced the record of purchases and sales, VAT has been duly paid, sales tax assessment has been completed and input credits were also allowed in favour of assessee. On the basis of aforesaid observation, the ld. CIT(A) allowed full relief to the assessee. Aggrieved by the order of ld. CIT(A), the revenue has filed present appeal before the Tribunal. On service of grounds of appeal/memo of appeal of revenue, the assessee has filed his cross objection challenging the validity of reassessment. ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 7 6. We have heard the submissions of learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue and the learned Authorised Representative (ld. AR) of the assessee and have perused the orders of the lower authorities carefully. The ld. CIT-DR for the revenue supported the order of Assessing Officer and would submit that the assessee is the beneficiary of accommodation entry of purchases as has been held by Assessing Officer. The ld. CIT(A) allowed full relief to the assessee by accepting the contention of assessee. The ld. CIT-DR for the revenue submits that the addition made by Assessing Officer may be restored. In the alternative submission, the ld. CIT-DR for the revenue submits that in case of purchases of diamonds, this Bench has taken consistent view to disallow 6% of purchases, therefore, the purchases to that extent may be disallowed. 7. On the other hand, the ld. AR of the assessee on merit of the case has supported the order of ld. CIT(A). The ld. AR of the assessee submits that the assessee has not made any purchases from Keshav Impex rather made a sale to such entity. The assessee has received sale consideration through banking channel within a reasonable time as per the trade practice. Evidences of sales of goods to Keshav Impex is not disputed. The assessee right from the beginning stated that no purchase was shown from Keshav Impex rather the assessee has sold goods to such party. With regard to grounds raised in his cross objection by the assessee, the ld. AR of the assessee submits that the Assessing Officer reopened the case merely on the basis of information from DDIT (Inv.), Mumbai without conducting any independent enquiry. None of the material or statement of person on the basis of which the reopening was ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 8 made, provided to the assessee. The reopening itself is bad in law. The reasons recorded was not sustainable as such reasons recorded have no life link. The Assessing Officer despite bringing the fact in his notice that the assessee has not made any purchase rather sold goods to them, still made addition of bogus purchase. The ld. AR of the assessee by showing his sales register has shown the ledger account of Keshav Impex and the ledger account showing the payment through banking channel on 18/11/2011 or on 19/11/2011. The ld. AR of the assessee submits that the grounds of his cross objection is directly covered by the decision of this Bench in ITO Vs M/s Exotic Jewels (supra). 8. We have considered the submissions of both the parties and have perused the orders of the lower authorities carefully. We have also deliberated on various documentary evidences filed by the assessee alongwith various decisions of the Tribunal. We find that the Assessing Officer while passing the assessment order, simply made addition on the basis of information available with him. The assessee right from the beginning contending that they have not made any purchase from Keshav Impex rather they have sold goods to them. The Assessing officer remained silent on such objection. The assessee furnished sales register, payment register and stock register. No comments on such evidences were made by Assessing Officer. The Assessing Officer reiterated his contention of purchases from alleged entry provider while making addition despite recording the facts stated by the assessee about the sales with the impugned party. The statement of such party or report of Investigation Wing nowhere mentioned in the assessment order. We find that ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 9 the sale of assesse to the impugned party was not disputed. The assessing Officer has not brought any evidence to show that assessee had any other transaction of same amount with the impugned party. Similarly, the payment received by assessee against sale is not doubted. Book result of assesse was of the Act even touched by the Assessing Officer. The Assessing officer made addition by blind eyes. 9. We find that before the ld. CIT(A), the assesse reiterated his similar contention as raised before the Assessing officer. The ld. CIT(A) allowed relief to the assessee by holding that Assessing Officer has not discharged his onus of disproving the transaction of sale by assessee with Keshav Impex. The Assessing Officer neither referred the statement of proprietor of Keshav Impex wherein he has allegedly mentioned the name of the assessee as a beneficiary of bogus transaction nor brought any cogent evidence on record to controvert the document filed by the assessee. The Assessing Officer made addition of bogus purchases, no comments were made on the nature of sales made by assessee. Books of account of assessee was not rejected nor re- casted the trading result. The assessee has produced the record of purchases and sales, VAT has been duly paid, sales tax assessment has been completed and input credits were also allowed in favour of assessee. We find that the ld. CIT(A) allowed full relief to the assessee by appreciating the facts in right prospective. 10. We have independently examined the facts of the case and find that no adverse material is brought on record to substantiate the allegation of reopening that the assessee has shown purchases from impugned party i.e. ITA. 61/Srt/2024 & CO 02/Srt/2024 ITO Vs Sunil Devkishan Panwar 10 Keshav Impex. The Assessing officer even not examined the facts pleaded by the assessee and to verify the evidence brought on record. The Assessing Officer made addition by ignoring vital facts. We find that the ld. CIT(A) on appreciation of facts, deleted the entire addition. Before us, no contrary fact or evidence is brought on record to take other view. Therefore, we affirm the order of the ld. CIT(A) with our additional observation. In the result, grounds of appeal raised by the revenue are dismissed. C.O. No. 02/Srt/2024 (A.Y. 2012-13 11. Considering the fact that we have dismissed the appeal of revenue on merit, therefore, adjudication of grounds in cross objection filed by assessee have become academic. 12. Finally, the appeal of the revenue and cross objection filed by the assessee are dismissed. Order pronounced on 28/06/2024 in open court. Sd/- Sd/- (BIJAYANANDA PRUSETH) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 28/06/2024 *Ranjan Copy to: 1. Assessee – 2. Revenue - 3. CIT 4. DR 5. Guard File By order Sr. Private Secretary, ITAT Surat