S.G.V. Cotyarns P.Ltd, Panipat V. ITO, Ward-4, Panipat

ITA 633/DEL/2019

AI Insights

The case involves S.G.V. Cotyams Pvt Ltd, the appellant, contesting an assessment order by the Income Tax Officer, Panipat, which added Rs. 10,99,578 to the assessee's income, alleging bogus purchases from M/s Ganpati Enterprises. The Assessing Officer based this on information from the DDIT, Investigation, Panipat, and a statement from M/s Ganpati Enterprises admitting to providing accommodation bills. The assessee argued that the purchases were genuine and supported by VAT-invoiced documents, and that these purchases were part of the closing stock, making the addition revenue neutral. The Tribunal found merit in the assessee's argument regarding the revenue neutrality but acknowledged the possibility of a commission paid for the accommodation entries, thus allowing a partial relief by reducing the addition to 1% of the disputed purchases.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300960 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 3 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: G
• Next Hearing Date: 07-05-2023
• Assessment Year: 2010-2011
• Appeal Filed On: 28-01-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Bogus purchase; Accommodation entries

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI ‘G’ BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND MS. ASTHA CHANDRA, JUDICIAL MEMBER ITA No. 633/DEL/2019 [A.Y. 2010-11] S.G.V. Cotyams Pvt Ltd Vs. The Income tax Officer Kabri Road, VPO Kabri Ward – 4 Panipat Panipat PAN: AACCS 4209 C (Applicant) (Respondent) Assessee By : Ms. Apoorva Bhardwaj, CA Shri Sanjay Agarwal, CA Department By : Ms. Yamini Gautam, Sr. DR Date of Hearing : 08.05.2023 Date of Pronouncement : 10.05.2023 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER:- This appeal by the assessee is preferred against the order of the ld. CIT(A), Karnal dated 27.11.20189 pertaining to Assessment Year 2010-11. 2 2. The substantive grievances of the assessee read as under: “1. That the Id. CIT(A) has erred in law and on facts while confirming the assessment order passed by the ld. AO without appreciating the fact that reasons to believe recorded for initiating proceedings uls 147 of the Income Tax Act, 1961 must be reasonable and based on reasons which are relevant and material, which is not so in the present case. Hence, the reopening of this case is not valid and tenable as per law. As such, the assessment order may please be quashed. 2. That the ld. CIT(A) has erred in law and on facts while upholding the decision of the ld Assessing Officer account of purchases made from Ganpati Enterprises without appreciating the submissions of the assessee. As such the addition of Rs. 10,99,578 /- may please be deleted. 3. That the ld. CIT(A) has erred in law while not considering that the ld. AO has made an addition of Rs. 10,99,578.000 on account of appreciating the supporting documents placed on record by the assessee in respect of purchases made from Ganpati Enterprises to prove the genuineness of the transactions. As such, the addition of Rs. 10,99,578 .00 may please be deleted. 4. That the ld. CIT(A) erred in law and facts of the case while not appreciating that the fact that ld. Assessing Officer has made addition of Rs.10,99,§78 on account of bogus purchases whereas reasons to believe 3 were recorded only for Rs.10,52,140. As such the addition of Rs. 10,99,578/- may please be deleted.” 3. Briefly stated, the facts of the case are that, during the course of scrutiny assessment proceedings, on the basis of information received from the office of the DDIT, Investigation, Panipat, the Assessing Officer came to know about the purchases made from M//s Ganpati Enterprises, which are not genuine but are accommodation entries. 4. During the course of scrutiny assessment proceedings, statement of Shri Rajesh Kumar, P/o M//s Ganpati Enterprises was recorded u/s 131 of the Income-tax Act, 1961 [the Act, for short] accepting that he is not doing any business, but was only providing accommodation bills. 5. The assessee was asked to prove the genuineness of the purchases made from M//s Ganpati Enterprises. 6. In its reply, the assessee explained that purchases are genuine and are supported by invoices from M//s Ganpati Enterprises on which VAT has been separately charged and paid by the assessee. It was further explained that since the purchases are made in the month of March, entire purchases are part of closing stock as on 31 st March and, 4 therefore, it would be a futile exercise in treating the purchases as bogus as it would amount to removal of the same from stock in trade as on 31 st March and the entire exercise would be Revenue neutral. 7. The contention of the assessee did not find any favour with the Assessing Officer who proceeded by making addition of the entire purchases from M//s Ganpati Enterprises. 8. The assessee agitated the matter before the ld. CIT(A) but without any success. 9. Before us, the ld. counsel for the assessee reiterated what has been stated before the lower authorities. 10. We have carefully perused the orders of the authorities below. The entire dispute is that the entire purchases from M//s Ganpati Enterprises was made in the month of March. It is also an admitted fact that the entire purchases are part of closing stock as on 31 st March, which means that if the alleged purchases from M//s Ganpati Enterprises are treated as bogus and the entire purchases of Rs. 10,99,578/- including VAT is excluded from the purchases, then the same amount has to be excluded from the stock in trade as on 31 st 5 March, which would make the entire exercise futile and Revenue neutral for the year under consideration. 11. However, at the same time, if we agree with the contention of the Revenue that M//s Ganpati Enterprises was providing accommodation entries/accommodation bills, then the assessee must have paid something for arrangement of accommodation bills and normally, in such line, commission ranges from 0.5% to 1%. Therefore, for the purchases of Rs. 10,52,140/- excluding VAT, the assessee must have paid commission of 1%. Therefore, we direct the Assessing Officer to restrict the addition to the extent of 1% of the purchases of Rs. 10,52,140/-. 12. The ld. counsel for the assessee did not press the ground relating to reopening of assessment. The same is, therefore, dismissed as not pressed. 6 13. In the result the appeal of the assessee in ITA No. 633/DEL/2019 is partly allowed. The order is pronounced in the open court on 10.05.2023. Sd/- Sd/- [ASTHA CHANDRA] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 10 th May, 2023. VL/ Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi 7 Date of dictation Date on which the typed draft is placed before the dictating Member Date on which the typed draft is placed before the Other Member Date on which the approved draft comes to the Sr.PS/PS Date on which the fair order is placed before the Dictating Member for pronouncement Date on which the fair order comes back to the Sr.PS/PS Date on which the final order is uploaded on the website of ITAT Date on which the file goes to the Bench Clerk Date on which the file goes to the Head Clerk The date on which the file goes to the Assistant Registrar for signature on the order Date of dispatch of the Order