ITO,Ward-41(2), Kolkata, Kolkata V. Smt. Nisha More, Howrah

ITA 615/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4967 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 17-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Assessee Lawyers: M D SAHA
• Keywords: Bogus purchase; Unexplained cash credit; Business income; Bogus loan
• Section: 40A(3); 68; 144

Judgement Text

I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 615/KOL./ 2012 ASSESSMENT YEAR : 2008-2009 INCOME TAX OFFICER, ............................. .........APPELLANT WARD-41(2), KOLKATA, 4TH FLOOR, PODDAR COURT, 18, RABINDRA SARANI, KOLKATA-700 001 -VS.- SMT. NISHA MORE,................................... .....................RESPONDENT 33, 34 & 36, KALUPARA LANE, WARD-4, HOWRAH-711 106 PAN : AKGPM 9529 A] APPEARANCES BY: SHRI SAURABH KUMAR, SR. D.R., FOR THE DEPARTMENT SHRI M.D. SAHA, A.R., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : NOVEMBER 21, 2013 DATE OF PRONOUNCING THE ORDER : NOVEMBER 28, 2013 O R D E R PER BENCH: 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST AN O RDER DATED 6 TH JANUARY, 2012 OF COMMISSIONER OF INCOME TAX (APPEAL S)-XII, KOLKATA FOR ASSESSMENT YEAR 2008-09. 2. REVENUE IS AGGRIEVED ON DELETION OF AN ADDITION OF RS.1,70,85,846/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF ALLEGED BOGUS SUNDRY CREDITORS AND ON ADDITION OF RS.4,60,000/- FOR ALLE GED BOGUS LOANS. 3. ASSESSEE IS AN EXPORTER OF FOOD GRAINS, VEGETABL ES AND FRUITS TO BANGLADESH AND HAD FILED HER RETURN FOR THE IMPUGNE D ASSESSMENT YEAR DECLARING AN INCOME OF RS.1,37,560/-. SHE WAS RUNNI NG THE BUSINESS AS A PROPRIETORSHIP CONCERN NAMED M/S. ANSH ENTERPRISES. ASSESSING OFFICER I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 2 FOUND FROM THE BALANCE-SHEET AS ON 31.03.2008 FILED BY THE ASSESSEE ALONGWITH HER RETURN OF INCOME, THAT THERE WERE THR EE SUNDRY CREDITORS TOTALLING RS.1,70,85,864/-. THEIR NAMES AND AMOUNTS WERE AS UNDER :- (I) M/S. RAJPUTANA VANIJYA PVT. LTD. - RS.97,80,7 44/-; (II) M/S. CLASSIC SALES AGENCY - RS.37,54,020/-; (III) M/S. SHREE MANGALAM ENTERPRISES - RS.35,51, 100/- 4. FIRST OF THREE PERSONS BEING A CORPORATE ENTITY, ASSESSING OFFICER VERIFIED THE RECORDS AVAILABLE WITH THE INCOME TAX DEPARTMENT. FROM THE BALANCE SHEET FILED BY THE SAID COMPANY, ASSESSING OFFICER FOUND THAT THERE WAS NO SUCH AMOUNT DUE FROM THE ASSESSEE. AS PER THE ASSESSEE, THE CREDIT BALANCE IN THE ACCOUNT OF M/S. RAJPUTANA VAN IJYA PVT. LTD. (IN SHORT RVPL) AROSE ON ACCOUNT OF PURCHASES MADE BETWEEN 27.11.2007 AND 12.01.2008 FOR A SUM OF RS.1,08,69,800/-. ASSESSING OFFICER FOUND FROM THE PAN OF THAT COMPANY, THAT IT WAS INCORPORATED O NLY ON 24.01.2008. FURTHER ACCORDNG TO THE ASSESSING OFFICER, SAID M/S . RVPL HAD A TURNOVER OF RS.15,77,000/- ONLY FOR 14 MONTHS PERIOD ENDING ON 31.03.2009. ITS DIRECTOR SHRI SUMIT SHARMA WAS SUMMONED AND STATEME NT ON OATH TAKEN FROM HIM UNDER SECTION 131(1) OF THE ACT. IT WAS ST ATED BY THE SAID DIRECTOR THAT THEY WERE WHOLESALE DEALERS OF HARDWA RE GOODS, IRON AND STEEL. HE ALSO CONFIRMED THAT THE LEDGER FILED BY T HE ASSESSEE UNDER THE SIGNATURE OF ONE SHRI SANJIV KR. SINGH, ANOTHER DIR ECTOR OF THE SAID COMPANY WAS NOT A GENUINE ONE. HE FURTHER STATED TH AT ASSESSEE, IF SHE WAS WILLING TO PAY THE CREDIT AMOUNT SHOWN IN THEIR BOOKS, HE WOULD BE WILLING TO PAY 50% THEREOF TO THE INCOME TAX DEPART MENT THIS STATEMENT WAS CONFRONTED TO THE ASSESSEE. ASSESSING OFFICER A SKED THE ASSESSEE TO PRODUCE BILLS OF PURCHASES AND EVIDENCE FOR PAYMENT S TO M/S. RVPL. ASSESSEE FAILED TO PRODUCE ANY SUPPORTING RECORDS. SHRI SANJIV KR. SINGH, THE DIRECTOR, OF M/S. RVPL WHO PURPORTEDLY SIGNED T HE CONFIRMATION, ALSO DENIED ANY RELATION WITH THE ASSESSEE. ASSESSING OF FICER NOTED FROM THE LEDGER OF THE ASSESSEE THAT EVERY PAYMENT SHOWN TO HAVE BEEN MADE TO M/S. RVPL WERE OF SUMS LESS THAN RS.20,000/- DESPIT E THERE BEING PURCHASES IN EXCESS OF RS.1 CRORE FROM THEM. EXPLAN ATION OF THE ASSESSEE I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 3 IN THIS REGARD WAS THAT SUPPLIER HAD INSISTED SUCH PAYMENT ON A DAILY BASIS. ASSESSING OFFICER REFUSED TO ACCEPT THE CLAI M OF THE ASSESSEE. HE HELD THAT NO CREDIT BALANCE IN THE NAME OF M/S. RVP L EXISTED AT ALL. 5. ASSESSING OFFICER MADE A VERIFICATION OF THE SEC OND SUNDRY CREDITOR NAMELY M/S. CLASSIC SALES AGENCY (IN SHORT CSA) A LSO. NO SUCH PERSON COULD BE FOUND AT THE ADDRESS OF THE SAID SUNDRY CR EDITOR. SINCE ASSESSEE HAD FILED A CONFIRMATION OF ONE SHRI SUNIL DAS, PRO PRIETOR OF M/S. CSA WITH PAN, ASSESSING OFFICER ASCERTAINED HIS ADDRESS AND ISSUED SUMMONS TO SHRI SUNIL DAS. IN REPLY, HE STATED THAT HE NEVE R KNEW THE ASSESSEE BUT WAS ONLY A RADIO MECHANIC. SHRI SUNIL DAS, WHEN HE WAS SHOWN THE LETTER FILED BY ASSESSEE BEARING HIS SIGNATURE, DENIED SUC H SIGNATURE. ASSESSING OFFICER ALSO NOTED THAT ASSESSEE HAD SHOWN AN OPENI NG CREDIT BALANCE FOR THE SAID CREDITOR, BUT IN THE RETURN FILED BY THE S AID CREDITOR, THERE WAS NO SUCH DUES SHOWN FROM THE ASSESSEE. ASSESSEE HAD SHO WN ROUTINE PAYMENTS OF RS.19,000/- OR AROUND EVERYDAY, AGAINST THE PURCHASES. DESPITE NOTICE ISSUED BY ASSESSING OFFICER, ASSESSE E FAILED TO PRODUCE ANY SUPPORTING RECORDS IN THE NATURE OF PURCHASE BILLS OR VOUCHERS TO ESTABLISH THE GENUINENESS OF THESE TRANSACTIONS. 6. FINALLY, HE VERIFIED THE CREDIT BALANCE SHOWN AG AINST M/S. SHREE MANGALAM ENTERPRISES (IN SHORT SME). FROM THE PAN FURNISHED, ASSESSING OFFICER FOUND THAT THE SAID CONCERN WAS R UN BY ONE SHRI AJAY JALAN. SHRI AJAY JALAN WAS RESIDING AT PATNA. SHRI JALAN HAD FILED HIS RETURN IN FORM ITR-2 WHICH WAS EXCLUSIVELY MEANT FOR ASSES SEES NOT ENGAGED PROFESSION OR BUSINESS. THE SAID RETURN DID NOT SHO W ANY AMOUNT AS DUE FROM ASSESSEE. 7. ASSESSING OFFICER DID GIVE AN OPPORTUNITY TO THE ASSESSEE FOR PRODUCING THE ABOVE CREDITORS AND FOR THEIR EXAMINA TION, IF SHE WANTED TO DO SO. ASSESSEE NEVER USED SUCH OPPORTUNITY. THEREF ORE, HE CAME TO A CONCLUSION THAT PURCHASES WERE NOT CORRECTLY AND FA IRLY REFLECTED IN THE ACCOUNTS OF ASSESSEE. NEVERTHELESS AS PER THE ASSES SING OFFICER SINCE SALES I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 4 WERE SHOWN BY ASSESSEE, THERE WOULD HAVE BEEN PURCH ASES MADE AS WELL. IN THIS VIEW OF THE MATTER, ASSESSING OFFICER CONSI DERED THE SAID CREDITORS OF RS.1,71,24,938/- AS BOGUS AND MADE AN ADDITION A CCORDINGLY. 8. ASSESSING OFFICER ALSO FOUND THAT THE ASSESSEE H AD TAKEN LOANS FROM FAIR PERSONS, NAMELY SMT. SIMPLE MORE, SMT. DIMPLE MORE, SHRI MURARI MORE AND SMT. BINA MORE OF RS.1,00,000/-, RS.1,20,0 00/-, RS. 41,00,000/- AND RS.1,40,000/- RESPECTIVELY. THOUGH PANS OF THE CONCERNED PERSONS WERE FURNISHED BY THE ASSESSEE, ASSESSING OFFICER R EFUSED TO ACCEPT THESE CREDITS. ACCORDING TO HIM, THESE PERSONS HAD INCOME , WHICH WERE MUCH LESS THAN THE TAXABLE LIMIT AND THEIR CREDITWORTHIN ESS COULD NOT BE ESTABLISHED. TAKING THIS VIEW OF THE MATTER, HE MAD E AN ADDITION OF RS.4,60,000/- AS BOGUS LOAN, RELYING ON SECTION 68 OF THE ACT. 9. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE LD. C IT(APPEALS). ARGUMENT OF THE ASSESSEE WAS THAT IT EXPORTED GOODS WORTH RS.8,68,03,739/- AND LOCALLY SOLD GOODS VALUED RS.5 4,61,490/-. FOR EFFECTING THESE SALES, AS PER ASSESSEE, SHE HAD PUR CHASED GOODS OF VALUE RS.8,71,62,501/-, OVER AND IMPORTED GOODS WORTH RS. 41,45,098/-. ASSESSEE ALSO POINTED OUT THAT SHE HAD RECEIVED DUT Y DRAW BACK OF RS.14,62,813/- ON THE EXPORTS. IN SUPPORT OF HER EX PORT SALES ASSESSEE FILED COPIES OF EXPORT INVOICE, AND BANK REMITTANCE CERTIFICATE WHICH WERE COUNTERSIGNED BY INSPECTOR OF CUSTOM. ASSESSEE ALSO PRODUCED RECORDS TO SHOW THAT GOODS WERE INDEED EXPORTED. AS PER THE AS SESSEE WHEN GENUINENESS OF SALES WAS NOT DOUBTED, PURCHASES ALO NE COULD NOT BE DOUBTED. CREDITORS VERIFIED BY THE ASSESSING OFFICE R HAD TURNED HOSTILE AND DID NOT RESPOND SINCE THEY THEMSELVES HAD MANIP ULATED THEIR ACCOUNTS, NOT SHOWING THE SALE TRANSACTIONS IN THEI R BOOKS. AS PER ASSESSEE, THE ITEMS PURCHASED WERE FOOD ITEMS WHICH REQUIRED SMALL CASH PAYMENTS TO THE SUPPLIERS ON A DAILY BASIS. ASSESSE E ALSO POINTED OUT THAT EXISTENCE OR NON-EXISTENCE OF A TRADE LICENCE, DID NOT BAR A SUPPLIER FROM ENTERING INTO A SALE WITH THE ASSESSEE. AS PER THE ASSESSEE THIS WAS NOT I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 5 CRITICAL IN DECIDING ON THE GENUINENESS OF A PURCHA SE TRANSACTION. ASSESSEE FURTHER POINTED OUT THAT ASSESSING OFFICER HIMSELF HAD ADMITTED THE FACTUM OF SALE AND PURCHASE. ONCE IT WAS SO ACC EPTED, ASSESSING OFFICER COULD NOT CALL INTO QUESTION GENUINENESS OF THE CREDIT PURCHASE ALONE. RELIANCE WAS PLACED ON THE DECISION OF SPECI AL BENCH OF THIS TRIBUNAL IN THE CASE OF MANOJ AGGARWAL VS.- DCIT [ 2008] 113 ITD 377 (DELHI). 10. LD. CIT(APPEALS) WAS APPRECIATIVE OF THESE CONT ENTIONS, TO AN EXTENT. ACCORDING TO HIM, ASSESSEE COULD NOT HAVE E FFECTED SUCH LARGE QUANTUM OF SALE WITHOUT EFFECTING CORRESPONDING PUR CHASES. ASSESSEE HAD PROVED THAT SHE HAD EXPORTED GOODS. AS PER LD. CIT( APPEALS) WHEN THE ENTIRE SALES WERE SUPPORTED BY DOCUMENTARY EVIDENCE AND ACCEPTED AS GENUINE, IT WOULD NOT BE POSSIBLE TO CONCLUDE THAT PURCHASES WERE NOT GENUINE. AS PER LD. CIT(APPEALS), ASSESSING OFFICE R IF HE ACCEPTED THE PURCHASE TO BE GENUINE, THE AMOUNTS DUE TO CREDITOR S FROM WHOM SUCH PURCHASES WERE AFFECTED COULD NOT BE CONSIDERED AS BOGUS. FURTHER, AS PER LD. CIT(APPEALS), PURCHASES MIGHT HAVE BEEN MADE BY THE ASSESSEE FROM OTHER PARTIES BUT IN THE BOOKS, NAMES OF THESE CRED ITORS MIGHT HAVE BEEN MENTIONED. NEVERTHELESS ACCORDING TO HIM PURCHASES INDEED WERE MADE BY THE ASSESSEE. LD. CIT(APPEALS) ALSO COMPARED THE AUDITED ACCOUNTS OF THE PROPRIETARY CONCERN OF ASSESSEE FOR ASSESSMENT YEARS 2006-07 TO 2009-10. ACCORDING TO HIM THE ONLY COURSE AVAILABLE WHEN TRADE CREDITORS WERE NOT FOUND CORRECT, WAS TO REJECT THE BOOKS OF ACCOUNTS. IN SUCH A SITUATION, BEST COURSE, AS PER LD. CIT(APPEALS) WOU LD BE TO RESORT TO ESTIMATION OF INCOME. ASSESSEE WAS ENGAGED IN BUSIN ESS OF PULSES, RICE AND SUGAR. ANOTHER ASSESSEE NAMED M/S. KAMAL STORES , ENGAGED IN A SIMILAR LINE OF BUSINESS HAD SHOWN A NET PROFIT AT THE RATE OF 0.68%, AGAINST 0.11% SHOWN BY ASSESSEE. HE, THEREFORE, DIR ECTED THE ASSESSING OFFICER TO ADOPT NET PROFIT @ 0.70% ON THE TURNOVER OF ASSESSEE. IN OTHER WORDS, LD. CIT(APPEALS) FIXED THE PROFITS OF THE AS SESSEE AT RS.6,45,856/- I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 6 WHILE DELETING THE ADDITION OF RS.1,70,85,846/- ON ACCOUNT OF BOGUS CREDIT. 11. VIS-A-VIS THE ADDITION FOR ALLEGED BOGUS LOANS, IT WAS SUBMITTED BY THE ASSESSEE BEFORE LD. CIT(APPEALS) THAT SUCH LOAN S WERE OBTAINED BY ACCOUNT PAYEE CHEQUES, AND CREDITORS HAD FILED CONF IRMATIONS, WITH PERMANENT ACCOUNT NOS. IT WAS SUBMITTED THAT THESE PARTIES WERE ALL RELATIVES OF ASSESSEE. LD. CIT(APPEALS) WAS OF THE OPINION THAT ASSESSEE HAD DISCHARGED THE ONUS RESTING ON HER, FOR PROVING THE LOANS. THE CAPITAL A/CS. OF THE RESPECTIVE PERSONS DID SHOW THAT THEY WERE HAVING SUFFICIENT FUNDS FOR GIVING THE LOANS. IN THIS VIEW OF THE MAT TER, HE DELETED THE ADDITION OF RS.4,60,000/- ALSO. 12. NOW BEFORE US, LD. D.R. STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT CREDIT PURCHASES OF GO ODS CLAIMED BY THE ASSESSEE WERE NEVER ACCEPTED BY THE ASSESSING OFFIC ER. ASSESSEE HAD NEVER PRODUCED ANY BILLS AND VOUCHERS IN SUPPORT OF ITS PURCHASES. JUST BECAUSE IT EFFECTED SALES TOTALLING TO RS.9,22,65,2 29/- IT COULD NOT BE SAID THAT THERE WERE PURCHASES WORTH RS.8,86,25,314/-. W HEN PURCHASE BILLS WERE NOT PRODUCED ASSESSEE COULD NOT SAY THAT ITS CLAIM OF PURCHASE SHOULD BE BELIEVED AS SUCH. SALES OF RS.9,22,65,229 /- COULD HAVE BEEN ACHIEVED BY THE ASSESSEE EVEN WITH A LESSER PURCHAS E OF RS.7,15,39,450/-, IN OTHER WORDS, EXCLUDING THE PURCHASES EQUIVALENT TO BOGUS TRADE CREDITORS BALANCES. ASSESSING OFFICER HAD ACCEPTED THE PURCHASES TO THE EXTENT IT COULD BE BELIEVED, CONSIDERING THE SALES EFFECTED BY THE ASSESSEE. HE HAD ONLY EXCLUDED THE TRADE CREDITS OF THREE PAR TIES WHO HAD TOTALLY DENIED ANY TRADING WITH THE ASSESSEE. THEREFORE, AS SESSEE CANNOT SAY THAT ALL THE PURCHASES WERE GENUINELY MADE. NOT ONLY HAD THE ALLEGED TRADE CREDITORS DENIED ANY CREDIT BALANCE, BUT IN THE CA SE OF ONE OF THE CREDITORS NAMELY RVPL, THE CREDITOR ITSELF WAS NOT EXISTING DURING THE TIME ASSESSEE CLAIMED PURCHASES FROM IT. M/S. CSA T HE SECOND CREDITOR WAS ONLY A SMALL TIME RADIO MECHANIC WHO NEVER DEAL T IN ANY OF THE ITEMS SOLD BY THE ASSESSEE. THIRD PERSON HAD FILED A RETU RN OF INCOME WHICH WAS I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 7 MEANT FOR NON-BUSINESS ACTIVITY AND DID NOT SHOW AN Y BALANCE AS DUE FROM THE ASSESSEE. FIRST TWO PERSONS HAD SPECIFICALLY DE NIED ANY TRANSACTION DONE WITH THE ASSESSEE. THEY HAD ALSO DENIED THE SI GNATURES IN THE CONFIRMATIONS FILED BY THE ASSESSEE. IN THE FACE OF THESE FACTS TO SAY THAT ASSESSING OFFICER SHOULD HAVE ACCEPTED THE TRADE CR EDITS AS GENUINE AND THE PURCHASES TO THAT EXTENT ALSO GENUINE IS UNJUST IFIED. ACCORDING TO LD. D.R., LD. CIT(APPEALS) HAD SIMPLY PRESUMED THAT FOR THE SALES MENTIONED THERE WOULD HAVE BEEN EQUAL PURCHASE ALSO. AS PER T HE LD. D.R., LD. CIT(APPEALS) WENT WRONG IN DIRECTING THE ASSESSING OFFICER TO ADOPT A GROSS PROFIT PERCENTAGE, RESORTING THEREBY TO AN ES TIMATION, WHILE DELETING THE ADDITION MADE FOR BOGUS CREDITORS. REL IANCE WAS PLACED ON THE DECISION OF HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS.- LAA MEDICA (250 ITR 574). 13. IN SO FAR AS LOAN CREDITS OF RS.4,60,000/- WAS CONCERNED, LD. D.R. SUBMITTED THAT NONE OF THE PARTIES HAD THE RESOURCE S TO SUPPORT THE LOANS. ACCORDING TO HIM, JUST BECAUSE PAYMENTS WERE EFFECT ED BY ACCOUNT PAYEE CHEQUES WOULD NOT MEAN THAT THE TRANSACTIONS WERE G ENUINE. 14. PER CONTRA, LD. A.R. STRONGLY SUPPORTING THE OR DER OF LD. CIT(APPEALS) SUBMITTED THAT ASSESSING OFFICER BY HI MSELF ACCEPTED THE PURCHASES AND SALES. ACCORDING TO HIM, ASSESSING OF FICER AT PAGE 4 OF THE ASSESSMENT ORDER ACCEPTED THAT WHEN SALES WERE THER E, PURCHASES ALSO WOULD HAVE BEEN THERE. AGAIN AT PAGE 5 OF THE ASSES SMENT ORDER, ASSESSING OFFICER HAD ACCEPTED THAT FOR EVERY SALE THERE WOULD BE A PURCHASE. ASSESSING OFFICER ALSO MENTIONED THAT THE RE WAS NO RELIABLE INFORMATION THAT ASSESSEE HAD EFFECTED PURCHASES US ING DISCLOSED SOURCE OF INCOME. ACCORDING TO HIM, IN SUCH CIRCUMSTANCES, WHEN THE CREDITORS WERE NOT FOUND TO BE CORRECT, THE ONLY COURSE LEFT TO THE ASSESSING OFFICER WAS TO REJECT THE BOOKS OF ACCOUNTS AND GO FOR AN E STIMATED ASSESSMENT. LD. CIT(APPEALS) HAD CORRECTLY DONE THIS. LD. CIT(A PPEALS) HAD CO- TERMINUS POWERS WITH THAT OF ASSESSING OFFICER. SIN CE HE WAS NOT SATISFIED I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 8 WITH THE CORRECTNESS OR COMPLETENESS OF THE ACCOUNT S OF ASSESSEE, HE HAD DIRECTED AN ASSESSMENT TO BE MADE IN THE MANNER PRO VIDED UNDER SECTION 144 OF THE ACT. REVENUE HAD NOT RAISED ANY GROUND A GAINST THIS ACTION OF THE LD. CIT(APPEALS) AND THEREFORE, COULD NOT SAY T HAT ADDITION DONE BY THE ASSESSING OFFICER SHOULD BE REINSTATED. RELYING ON THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS .- PANCHAM DAS JAIN [205 CTR 444], LD. A.R. SUBMITTED THAT ONCE GOODS W ERE ACCEPTED TO HAVE BEEN PURCHASED AND PROFITS THEREFROM CONSIDERED BY ASSESSING OFFICER, THEN THE CREDITORS COULD NOT BE CONSIDERED AS BOGUS . AS PER LD. A.R., HONBLE ALLAHABAD HIGH COURT, HAD NOTED THAT CREDIT ORS WERE BOGUS, BUT DESPITE THAT IT WAS HELD THAT ONCE PURCHASE OF GOOD S WERE ACCEPTED, AN ADDITION UNDER SECTION 68 COULD NOT BE FASTENED ON THE ASSESSEE. RELIANCE WAS ALSO PLACED ON THE DECISION OF HONBLE JHARKHAN D HIGH COURT IN THE CASE OF AMITABH CONSTRUCTION PVT. LTD. VS.- ACIT [ 335 ITR 523], FOR SUPPORTING HIS ARGUMENT THAT ONCE BOOKS OF ACCOUNTS WERE NOT FOUND RELIABLE, ONLY COURSE AVAILABLE WAS TO PROCEED UNDE R SECTION 145(3) OF THE ACT AND NO ADDITION COULD BE MADE FOR SUNDRY CREDIT ORS AS SUCH. 15. SO FAR AS LOAN CREDIT WAS CONCERNED, LD. A.R. S UBMITTED THAT ASSESSEE HAD DISCHARGED HER PRIMARY ONUS FOR PROVING THE CRE DIT, BY FILING CONFIRMATIONS AND GIVING PAN. ASSESSING OFFICER HAD SIMPLY DISBELIEVED THESE EVIDENCES, DESPITE THE FACT THAT ALL THE LOAN CREDITORS WERE ASSESSES. IN SUCH CIRCUMSTANCES, AS PER LD. A.R. THE ORDER OF LD. CIT(APPEALS) WAS FAIR AND SHOULD NOT BE DISTURBED. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT ASSES SEE HAD SHOWN SALES OF RS.9,22,65,229/- WHICH COMPRISED OF EXPORTS OF RS.8 ,68,03,739/- AND LOCAL SALES OF RS.54,61,490/-. AGAINST THIS, ASSESS EE HAD SHOWN PURCHASES OF GOODS OF RS.8,71,62,501/- APART FROM EXPORT OF G OODS WORTH RS.41,45,098/-, TOTALLING TO RS.9,13,07,599/-. LD. CIT(APPEAL) HAD REACHED A CONCLUSION THAT ASSESSING OFFICER HAD ACCEPTED AS SESSEES SALES AS WELL I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 9 AS PURCHASES. THE RELEVANT OBSERVATION OF THE ASSES SING OFFICER IN THE ASSESSMENT ORDER IS REPRODUCED HEREUNDER :- I UNDERSTAND THAT THE DETAILS OF PURCHASES ARE NOT CORRECTLY AND FAIRLY REFLECTED. THE AMOUNT ATTRIBUT ED TO THE SUNDRY CREDITORS IS MANIFESTLY BOGUS. IT IS ALSO TO ACCEPT THAT WHEN SALES ARE MADE, THERE MUST HAVE BEEN PURCHASES AND EXPENSES INCURRED. TO ENSURE THERE IS TRANSPARENCY IN TRANSACTION AND MONITORING OF TRAIL OF MONEY, THE L EGISLATURE HAS ENACTED SECTION 40A(3) FOR PAYMENT OF MONEY EXC EEDING RS.20,000/- OTHERWISE THE EXPENSES WOULD BE DISALLO WED. EVEN IF I REFRAIN FROM SAYING THAT MONEY FOR PURCHA SES WERE OUT OF HER UNDISCLOSED SOURCE AS THE INCIDENTS OF P URCHASES RUNNING INTO CRORES WERE FAKE SO FAR AS IDENTITY OF THE SUPPLIERS ARE CONCERNED, IT IS NOT ESTABLISHED FROM THE SIDE OF THE ASSESSEE THAT MONEY WERE ACTUALLY PAID IN INSTA LMENTS OF LESS THAN RS.20,000/-EVERY DAY SO AS TO AVOID THE R IGOURS OF SECTION 40A(3). IN EVERY ASSESSMENT PROCEEDINGS, UN LIKE A PENAL PROCEEDING, THE ASSESSEE HAS TO DISCHARGE HIS /HER ONUS ADEQUATELY AND THEN ONLY THE AUTHORITY IS TO EXAMIN E ITS CONTENTION. HERE IT IS ABSOLUTELY MISSING. THE ASSE SSEE IS NOT A PETTY BUSINESSWOMAN. SHE IS ENGAGE, I BEG TO REPE AT, IN IMPORT-EXPORT BUSINESS IT IS ALTOGETHER A DIFFERENT MATTER, AND OF COURSE, NOT WITHIN MY JURISDICTION AS THERE IS NOTHING SAID TO THE CONTRARY, IF HER CLOSE FAMILY MEMBERS D ID THE BUSINESS USING HER NAME. THE ASSESSEES ACCOUNTS AR E AUDITED BY A CHARTERED ACCOUNTANT. SO, BEFORE HIM THE CASH MEMOS ETC. WERE PRODUCED, IT IS PRESUMED. BUT THESE ARE N OT PRODUCED BEFORE ME. THE DIFFERENCE BETWEEN THE JOB OF AN AUDITOR OF ACCOUNTS AND THAT OF AN AO LIES IN THE B ASIC FACT THAT THE LATTER ENJOYS THE POWER TO CROSS-CHECK THE ACCOUNTS. AFTER THIS, I ACCEPT ALL THE PURCHASES AND SALES CONSIDERING THAT FOR EVERY SALE THERE WOULD BE PURC HASE. IT IS ALSO ADMITTED THAT THERE IS NO RELIABLE INFORMATION ON THE PURCHASE, OR AT ALL SHE MADE PURCHASES FROM THE DIS CLOSED SOURCES OF MONEY. IT IS ALSO SEEN THAT SOME PURCHAS ES ARE SHOWN TO HAVE BEEN MADE FROM A CONCERN THAT DID NOT COME INTO EXISTENCE. IN ANOTHER CASE, THE SO-CALLED SUPP LIER WENT ON RECORD TO SAY THAT IT HAD NOT BEEN HIS SIGNATURE WHICH IS CLAIMED BY THE ASSESSEE. THESE MAY BE TREATED AS WI LFUL ATTEMPTS TO AVOID TAXES AND TO BE DEALT WITH SEPARA TELY. HAVING SAID ALL THIS, I ACCEPT HER BALANCE SHEET AS ON THE END OF THE PREVIOUS YEAR, OR FOR THAT MATTER, BALANCE S HEET OF M/S. ANSH ENTERPRISES AS ON 31.3.2008 BECAUSE THE A SSETS ARE COUNTERBALANCED AND CERTIFIED BY A QUALIFIED AUDITO R. BUT I REGRET I CANNOT TREAT THE SUNDRY CREDITORS FIGURES AS GENUINE. IT IS RS.17124938 [ONE CRORE SEVENTY ONE L AKHS I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 10 TWENTY FOUR THOUSAND NINE HUNDRED AND THIRTY EIGHT] ONLY WHICH IS TREATED AS UTTERLY BOGUS. PENAL PROCEEDING S U/S. 271(1)(C) HAVE BEEN SEPARATELY INITIATED FOR ALLEGE D GROUND OF FURNISHING INACCURATE PARTICULARS OF INCOME. FROM A READING OF THE ABOVE, WE ARE UNABLE TO CONCU R WITH THE VIEW OF LD. CIT(APPEALS) THAT ASSESSING OFFICER HAD ACCEPTED AL L THE CLAIM OF PURCHASES AS GENUINE. WHAT HE HAD MEANT WAS THAT FO R EVERY SALE THERE WOULD BE A PURCHASE. AT THE SAME TIME, HE MENTIONED THAT THERE WAS NO RELEVANT INFORMATION ON THE PURCHASES. THERE WAS NO EVIDENCE TO SHOW THAT PURCHASES WERE PAID FROM DISCLOSED SOURCES OF MONEY. IT IS NOT DISPUTED THAT ASSESSEE HAD FAILED TO PRODUCE ANY PU RCHASE BILL OR RECORDS IN SUPPORT OF THE PURCHASES. OUT OF THE THREE CREDI TORS, M/S. RVPL WAS NOT ONLY NOT EXISTING DURING THE PERIOD WHEN ASSESSEE C LAIMED TO HAVE MADE PURCHASES FOR IT, BUT IT HAD ALSO DENIED ANY TRANSA CTION WITH THE ASSESSEE AT ALL. ITS DIRECTORS EVEN STATED THAT THEY WERE W ILLING TO PAY 50% OF THE MONEY TO THE TAX DEPARTMENT, IF THE ASSESSEE WAS WI LLING TO PAY THE AMOUNT OF RS.97,80,744/- SHOWN AS PAYABLE TO THEM. 17. THE SECOND CREDITOR NAMELY M/S. CSA WAS REPRESE NTED BY ITS PROPRIETOR SHRI SUNIL DAS. HE WAS A RADIO MECHANIC, WHO HAD NEVER DONE ANY BUSINESS WITH THE ASSESESE. HE DENIED ANY TRANS ACTION WITH THE ASSESSEE. BOTH SHRI SUNIL DAS, PROPRIETOR OF M/S. C SA AND SHRI SANJIV KR. SINGH AND SHRI SUMIT SHARMA, DIRECTORS OF M/S. RVPL DENIED THE SIGNATURES IN THE LEDGER COPIES PRODUCED BY ASSESSE E. AS FOR THE THIRD TRADE CREDITOR NAMELY M/S. SHREE MANGALAM ENTERPRIS ES REPRESENTED BY SHRI AJAY JALAN, THE SAID PERSON WAS NOT DOING ANY BUSINESS AND HIS INCOME TAX RETURN DID NOT SHOW ANY BUSINESS INCOME. 18. ASSESSEE WAS GIVEN AN OPPORTUNITY FOR PRODUCING THE CREDITORS AND EXAMINING THEM. ASSESSEE DID NOT AVAIL SUCH OPPORTU NITY. IN THE FACE OF THE ABOVE FACTS, WE CANNOT FIND ANY FAULT IN THE OR DER OF ASSESSING OFFICER FOR COMING TO A CONCLUSION THAT THE TRANSACTIONS, E FFECTED TO THE EXTENT OF THE CREDIT BALANCES IN THE NAMES OF THESE THREE PAR TIES WERE NOT GENUINE I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 11 AND WERE BOGUS. CASE OF THE ASSESSEE BEFORE LD. CIT (APPEALS), RESTED ON THE PREMISE THAT WHEN SALES WERE VOUCHED AND EXPORT S WERE CERTIFIED, THERE COULD BE NO BOGUS PURCHASES OR NO BOGUS TRADE CREDITORS. THIS IN OUR OPINION, ARISES OUT OF A MISCONCEPTION. THE CLA IM OF ASSESSEE WAS THAT THERE WERE PURCHASES WORTH RS.9,13,07,599/- FOR ACH IEVING A SALES TURNOVER OF RS.9,22,65,229/-. HOWEVER, THE SAME LEV EL OF SALES COULD HAVE BEEN ACHIEVED WITH A PURCHASES OF RS.7,51,79,983/- ALSO, VIZ. EXCLUDING THE BOGUS TRADE CREDIT VALUE OF RS.1,70,85,864/-. O NCE ASSESSEE FAILED TO PRODUCE PURCHASE BILLS, IT CANNOT SAY THAT WHATEVER PURCHASES SHOWN BY IT WAS TO BE BELIEVED. IT IS NOT THE CASE OF THE ASSES SING OFFICER THAT ASSESSEE HAD NOT MADE ANY PURCHASES. ASSESSEE HAD DEFINITELY EFFECTED PURCHASES, BUT NOT TO THE EXTENT SHOWN BY IT, AS PROVED BY THE EXISTENCE OF BOGUS CREDITORS. ASSESSING OFFICER HAD NOT AT ANY POINT OF TIME STATED THAT HE WAS MAKING THE ADDITION UNDER SECTION 68 OF THE ACT . HE NEVER CONSIDERED THE AMOUNT AS UNEXPLAINED CASH CREDIT. HE SIMPLY DI SBELIEVED THE PURCHASES TO THAT EXTENT. NO DOUBT, THE CASE OF MAN OJ AGGARWAL VS.- DCIT [113 ITD 377 (DEL.)], RELIED ON BY THE LD. CIT(APPE ALS), IT WAS HELD BY THE SPECIAL BENCH OF THIS TRIBUNAL THAT ONCE THE ACCOUN T OF THE SUPPLIER IS CREDITED WITH THE AMOUNT PAYABLE AND THE PURCHASE W AS ALLOWED AS AN EXPENDITURE, AN ASSESSEE CANNOT BE CALLED UPON, TO PROVE THE NATURE AND SOURCE OF THE CREDIT. IN OUR OPINION, THIS CASE HA S NO APPLICATION SINCE, HERE PURCHASE ITSELF HAS NOT BEEN FULLY ALLOWED BY THE ASSESSING OFFICER, IN VIEW OF THE BOGUS CREDIT SHOWN IN THE NAMES OF T HREE PARTIES. 19. NOW COMING TO THE DECISIONS RELIED ON BY THE LD . A.R., FIRST ONE IS THAT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF PANCHAM DASS JAIN [205 CTR 444] (SUPRA). IN THE SAID CASE, ASSESSEE W AS A DEALER IN IRON GOODS AND AGRICULTURAL IMPLEMENTS AND PERSONS IN WH OSE NAMES THE CREDITS APPEARED USED TO MANUFACTURE IRON GOODS AND AGRICULTURAL IMPLEMENTS AND HAD ALSO SOLD IT TO THE ASSESSEE ON CREDIT. IT WAS ON ACCOUNT OF THIS REASON THE TRIBUNAL HELD THAT THE P URCHASES HAVING BEEN ACCEPTED BY THE ASSESSING OFFICER, TRADE CREDITORS COULD NOT BE CONSIDERED NON-GENUINE. ON THE OTHER HAND, IN THE CASE BEFORE US, THERE IS NO I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 12 EVIDENCE TO SHOW THAT ANY OF THE THREE PERSONS HAD SOLD ANYTHING ON CREDIT TO THE ASSESSEE. FURTHER NONE OF THEM HAD AN Y DEALINGS WITH THE ASSESSEE AND TWO OF THEM SPECIFICALLY DENIED ANY TR ANSACTION, AND EVEN THE SIGNATURES. ASSESSEE WAS DEALING IN FOOD GRAINS , FRESH VEGETABLES AND FRUITS, WHEREAS M/S. RVPL, THE FIRST CREDITOR DEALT IN HARDWARE ITEMS. SECOND PARTY NAMELY M/S. CSA WAS A RADIO MECHANIC A ND THE THIRD PARTY NAMELY M/S. SME WAS NOT EVEN HOLDING A TRADE LICENC E. NONE OF THESE PARTIES WERE IN THE LINE OF MANUFACTURING OR SUPPLY ING THE TYPE OF ITEMS DEALT BY THE ASSESSEE. HENCE, IN OUR OPINION, DECIS ION OF THE HONBLE ALLAHABAD HIGH COURT RELIED ON BY THE LD. A.R. WOUL D NOT HAVE ANY APPLICABILITY ON FACTS. HONBLE APEX COURT IN THE C ASE OF CIT VS.- SUN ENGINEERING WORKS [198 ITR 297], HAS CLEARLY HELD T HAT OBSERVATIONS OF A COURT ARE TO BE UNDERSTOOD ONLY IN THE LIGHT OF QUE STION BEFORE IT. A DECISION OF A COURT TAKES ITS COLOUR FROM THE QUEST ION INVOLVED IN THE CASE AND IT IS NOT PROPER TO PICK OUT A WORD OR SENTENCE DIVORCED FROM THE QUESTION RAISED AND TREAT IT AS COMPLETE LAW. 20. COMING TO THE DECISION OF THE HONBLE JHARKHAND HIGH COURT IN THE CASE OF AMITABH CONSTRUCTION (P) LTD. VS.- ADDL. C IT 335 ITR 523 RELIED ON BY THE LD. A.R, THE ISSUE THERE WAS AN ADDITION MADE UNDER SECTION 68, HOLDING THAT BOOKS OF ACCOUNTS WERE TO BE REJECTED. ON THE OTHER HAND, HERE THE ASSESSING OFFICER HAS NOT HELD THAT THE BO OKS WERE TO BE REJECTED AT ALL. HE HAD ONLY DISALLOWED PURCHASES EQUIVALENT TO THE TRADE CREDITORS PROVED TO HAVE BEEN BOGUS. IN OUR OPINION, THE DECI SION OF THE HONBLE JHARKHAND HIGH COURT WILL NOT FURTHER CASE OF ASSES SEE. 21. AS AGAINST ABOVE THE DECISION OF THE HONBLE DE LHI HIGH COURT IN THE CASE OF CIT VS.- LA MEDICA [(2001) 250 ITR 575 (DE LHI) (SUPRA) RELIED ON BY THE REVENUE, IS ON ALL FOUR SQUARES. THEIR LORDS HIPS HELD THAT ONCE MATERIAL WAS BROUGHT ON RECORD BY THE REVENUE TO SH OW THAT PURCHASES WERE NOT MADE FROM THE PERSONS SHOWN BY THE ASSESSE E, THE QUESTION WHETHER SUCH PURCHASES WERE MADE FROM SOME OTHER PE RSONS WAS NOT RELEVANT. I.T.A. NO.: 615/KOL./2012 ASSESSMENT YEAR : 2008-09 PAGE 1 TO13 13 22. LD. CIT(APPEALS), IN OUR OPINION, FELL IN ERROR , WHEN HE DELETED THE ADDITION AND DIRECTED A BEST OF JUDGMENT ASSESSMENT AFTER REJECTING THE BOOKS, ESPECIALLY WHEN ASSESSING OFFICER HAD NOT DO NE SO. 23. IN THE RESULT, GROUND NO. 1 OF THE REVENUE STAN DS ALLOWED AND ADDITION OF RS.1,70,85,846/- MADE FOR BOGUS SUNDRY CREDITORS IS REINSTATED. 24. WITH RESPECT TO ADDITION OF BOGUS LOAN CREDIT O F RS.4,60,000/-, THE ASSESSEE HAD DISCHARGED THE PRIMARY ONUS RESTING ON HER, BY PRODUCING CONFIRMATION LETTERS, PAN OF THE CONCERNED PARTIES. LD. CIT(APPEALS) HAS CLEARLY BROUGHT OUT THAT CONCERNED PARTIES WERE HAV ING SUFFICIENT CAPITAL BALANCE AS ON 31.03.2008 FOR JUSTIFYING IT. THIS HA S NOT BEEN REBUTTED BY THE REVENUE. WE ARE OF THE OPINION, SUCH ADDITION O F RS.4,60,000/- WAS RIGHTLY DELETED BY HIM. WE DO NOT FIND ANY REASON T O INTERFERE WITH THE ORDER OF LD. CIT(APPEALS) ON THIS ISSUE. GROUND NO. 2 OF THE REVENUE STANDS DISMISSED. 25. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF NOVEMBER, 2013. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 28 TH DAY OF NOVEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.