Sri Pravesh Kejriwal , Kolkata V. ITO, Ward - 35(1), Kolkata , Kolkata

ITA 698/KOL/2018

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9506 (ITAT-KOLKATA)
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 13-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B DAS
• Assessee Lawyers: A RUSTAGI
• Keywords: Bogus purchase; Rejection of books of accounts; Unexplained expenditure; Corroborative evidences
• Section: 69C; 133(6)

Judgement Text

ITA NO. 698/KOL/2018 A.Y. 2014-2015 SRI PRAVESH KEJRIWAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA D BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ) AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 698/KOL/2018 ASSESSMENT YEAR: 2014-2015 SRI PRAVESH KEJRIWAL,.............................. .................................APPELLANT 13, BRABOURNE ROAD, KOLKATA-700 001 [PAN: AFYPK 1028 B] -VS.- INCOME TAX OFFICER,................................ .................................RESPONDENT WARD-35(1), KOLKATA, AAYAKAR POORVA, 110, SHANTI PALLY, KOLKATA-700 107 APPEARANCES BY: SHRI A. RUSTAGI A.R., FOR THE APPELLANT SHRI B. DAS, SR. D.R. , FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : DECEMBER 12, 2018 DATE OF PRONOUNCING THE ORDER : DECEMBER 19, 2018 O R D E R PER SHRI P.M. JAGTAP, VICE-PRESIDENT (KZ):- THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKATA DA TED 20.02.2018 AND THE SOLITARY ISSUE INVOLVED THEREIN RELATES TO THE ADDITION OF RS.6,36,690/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF THE ALL EGED BOGUS PURCHASES, WHICH IS SUSTAINED BY THE LD. CIT(APPEALS) TO THE E XTENT OF RS.95,504/-. 2. THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUA L, WHO IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND TRADING OF TEA MA CHINERY ITEMS. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION W AS FILED BY HIM ON 27.11.2014 DECLARING TOTAL INCOME OF RS.5,87,540/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE MACHINERY EXPENSES CLAI MED BY THE ASSESSEE ITA NO. 698/KOL/2018 A.Y. 2014-2015 SRI PRAVESH KEJRIWAL 2 WERE EXAMINED BY THE ASSESSING OFFICER. DURING THE COURSE OF SUCH EXAMINATION, THE RELEVANT DETAILS OF THE PARTIES WE RE FURNISHED BY THE ASSESSEE ALONG WITH THE COPIES OF BILLS/VOUCHERS FO R MACHINERY EXPENSES. IN ORDER TO VERIFY THE ASSESSEES CLAIM, LETTERS UN DER SECTION 133(6) WERE ISSUED BY THE ASSESSING OFFICER TO THE SELECTED FIV E PARTIES, BUT THE SAME WERE RETURNED BACK UN-SERVED FROM THE POSTAL AUTHOR ITY WITH THE REMARK NOT KNOWN. WHEN THIS POSITION WAS CONFRONTED BY T HE ASSESSING OFFICER TO THE ASSESSEE, IT WAS SUBMITTED BY THE ASSESSEE T HAT HE WAS HAVING REGULAR TRANSACTIONS WITH THE CONCERNED PARTIES FOR A LONG PERIOD OF TIME. THE COPIES OF THE LEDGER ACCOUNT OF THE SAID PARTIE S WERE ALSO FURNISHED BY THE ASSESSEE POINTING OUT THAT THE PAYMENTS TO T HE SAID PARTIES WERE MADE BY ACCOUNT PAYEE CHEQUES AFTER DEDUCTING TAX A T SOURCE. COPIES OF TRADE LICENSE/PROFESSIONAL TAX RECEIPTS OF THE PART IES WERE ALSO FILED BY THE ASSESSEE. WHEN THE ASSESSING OFFICER REQUIRED T HE PERSONAL APPEARANCE OF FIVE PARTIES FOR HIS EXAMINATION, THE ASSESSEE PRODUCED FOUR OUT OF FIVE PARTIES FOR VERIFICATION BEFORE TH E ASSESSING OFFICER. ALTHOUGH ALL THESE FOUR PARTIES CONFIRMED THE TRANS ACTIONS WITH THE ASSESSEE INVOLVING MACHINERY WORK BEFORE THE ASSESS ING OFFICER, TWO OF THEM, ACCORDING TO THE ASSESSING OFFICER, COULD NOT ESTABLISH THEIR IDENTITY. KEEPING IN VIEW THE SAME AS WELL AS THE F AILURE OF THE ASSESSEE TO PRODUCE THE FIFTH PARTY NAMELY KALIMATA ENGINEERING WORKS, THE ASSESSING OFFICER TREATED THE BILLS FOR MACHINERY E XPENSES RAISED BY THE CONCERNED THREE PARTIES AS BOGUS AND MADE THE ADDIT ION OF RS.6,36,690/- BY TREATING MACHINERY EXPENSES TO THAT EXTENT AS UN EXPLAINED UNDER SECTION 69C OF THE ACT. 3. THE ADDITION OF RS.6,36,690/- MADE BY THE ASSESS ING OFFICER BY TREATING THE RELEVANT BILLS ISSUED BY THE CONCERNED THREE PARTIES AS UNEXPLAINED EXPENDITURE UNDER SECTION 69C WAS CHALL ENGED BY THE ASSESSEE IN THE APPEAL FILED BEFORE THE LD. CIT(APP EALS). DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE THE LD. CIT(APPEALS ), IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT ALL THE RELEVANT BIL LS ISSUED BY THE ITA NO. 698/KOL/2018 A.Y. 2014-2015 SRI PRAVESH KEJRIWAL 3 CONCERNED PARTIES WERE PRODUCED BEFORE THE ASSESSIN G OFFICER FOR VERIFICATION. IT WAS ALSO SUBMITTED THAT COPIES OF THEIR LEDGER ACCOUNTS MAINTAINED REGULARLY IN THE BOOKS OF THE ASSESSEE W ERE ALSO PRODUCED BEFORE THE ASSESSING OFFICER TO SHOW THAT THE PAYME NTS TO THE SAID PARTIES WERE MADE BY ACCOUNT PAYEE CHEQUES AFTER DEDUCTING TAX AT SOURCE. IN ORDER TO CLARIFY THE DOUBTS EXPRESSED BY THE ASSESS ING OFFICER REGARDING THE IDENTITY OF THE CONCERNED PARTIES, COPIES OF TH EIR PAN CARDS WERE FILED BY THE ASSESSEE BEFORE THE LD. CIT(APPEALS). AFTER CONSIDERING THIS DOCUMENTARY EVIDENCE PLACED ON RECORD BY THE ASSESS EE, THE LD. CIT(APPEALS) PROCEEDED TO DECIDE THE ISSUE VIDE PAR AGRAPH NO. 7.1 & 7.2 AT PAGE 9 OF HIS IMPUGNED ORDER AS UNDER:- 1. I HAVE CAREFULLY EXAMINED THE ACTION OF THE LD AO IN TREATING THE EXPENDITURE ON ACCOUNT OF PURCHASES AS BOGUS IN VIEW OF NON-IDENTITY / NON-COMPLIANCE OF THE PARTIE S INVOLVED, WHO HAD WERE ALLEGED TO HAVE TRANSACTIONS WITH THE ASSESSEE. AFTER GOING THROUGH THE FINDINGS OF THE LD. AO AND THE APPELLANT'S SUBMISSIONS WITH JUDGMENTS CITED, J AM OF THE CONSIDERED VIEW THAT ADDITION OF WHOLE AMOUNT OF PU RCHASES MADE FROM A PARTY JUST BECAUSE THAT PARTY DID NOT A PPEAR BEFORE THE LD. AO OR BECAUSE IT HAD NOT BEEN ABLE T O PROVIDE THE IDENTITY EVEN WHEN IT APPEARED. IT IS ALSO TO B E KEPT IN MIND THAT INSTANT CASE IS NOT PRECISELY A CASE ATTR ACTING ADDITION U/S 69C OF INCOME TAX ACT, 1961. AT THE SA ME TIME, THE FACTS OF NON-APPEARANCE OF CONCERNED PARTIES BE FORE LD AO/NON-SUBMISSION OF IDENTITY DOCUMENTS CANNOT BE I GNORED ALTOGETHER AND IF NO ADDITION IS MADE, NON-COMPLIAN CE OF DEPARTMENT NOTICES MAY BECOME AN ACCEPTABLE POSITIO N, AND THEREFORE IN MY CONSIDERED VIEW THERE HAVE TO BE CE RTAIN DETERRENT IN THE MATTER. 2. I FIND THAT IN THE CIRCUMSTANCES EMANATING FROM THE CASE, THE LD. AO HAS TREATED THE ALLEGED PURCHASES AS BOGUS, BUT HAS NOT REJECTED THE BOOKS OF ACCOUNTS, WHICH I N ESSENCE MEANS THAT THE SALES HAVE BEEN FOUND TO BE ACCEPTAB LE. IN MY CONSIDERED VIEW OF THE FACTUAL MATRIX, THIS WOULD A PPEAR TO BE A CASE WHERE PURCHASES HAVE BEEN MADE FROM PARTIES OTHER THAN THOSE MENTIONED IN THE BOOKS OF ACCOUNTS. THES E PURCHASES WERE IN ALL PROBABILITY FROM THE GREY MAR KET, AND ACCORDINGLY BILLS OBTAINED. I FIND THAT IN SUCH SIT UATIONS, HON'BLE COURTS HAVE TAKEN A VIEW THAT THE ENTIRE UN VERIFIED PURCHASES ARE NOT RENDERED VULNERABLE FOR ADDITION; RATHER ONLY THE 'ELEMENT OF PROFIT' EMBEDDED FROM SUCH PUR CHASES OUGHT TO BE CONSIDERED FOR ADDITION. IT WOULD BE JU ST AND FAIR IN MY CONSIDERED VIEW TO ARRIVE AT SUCH PERCENTAGES OF THE PROFITS WHICH WOULD JUSTIFY SUCH ADDITION. ITA NO. 698/KOL/2018 A.Y. 2014-2015 SRI PRAVESH KEJRIWAL 4 THE LD. CIT(APPEALS) THUS SUSTAINED THE ADDITION OF RS.6,36,690/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF MACHINERY EXPENSES TO THE EXTENT OF RS.95,504/- BEING THE PRO FIT ESTIMATED AT 15%. BEING AGGRIEVED BY THE ORDER OF LD. CIT(APPEALS), T HE ASSESSEE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS SUBMITTED ON BEHALF OF THE ASSESSEE BEFORE THE LD. CIT(APPEALS) AS WELL AS BEF ORE US, THE RELEVANT DETAILS OF THE CONCERNED FIVE PARTIES ALONG WITH TH E COPIES OF BILLS ISSUED BY THEM WERE DULY FURNISHED BY THE ASSESSEE BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS IN SUPP ORT OF HIS CLAIM FOR MACHINERY EXPENSES. THE COPIES OF THEIR LEDGER ACCO UNTS MAINTAINED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE WERE ALSO PLAC ED ON RECORD BEFORE THE ASSESSING OFFICER BY THE ASSESSEE POINTING OUT THAT ALL THE PAYMENTS TO THE SAID PARTIES WERE MADE BY ACCOUNT PAYEE CHEQ UES AFTER DEDUCTING TAX AT SOURCE. THE ASSESSING OFFICER, HOWEVER, INSI STED FOR THEIR PERSONAL PRESENCE TO CROSS VERIFY THE CLAIM OF THE ASSESSEE AND COMPLYING WITH THIS REQUIREMENT OF THE ASSESSING OFFICER, THE ASSESSEE PRODUCED FOUR OF THE FIVE PARTIES FOR EXAMINATION BEFORE THE ASSESSING O FFICER. ALTHOUGH THE SAID FOUR PARTIES CONFIRMED THE TRANSACTIONS WITH T HE ASSESSEE FOR MACHINERY EXPENSES BEFORE THE ASSESSING OFFICER, TH E ASSESSING OFFICER TREATED THE BILLS RAISED BY TWO PARTIES FOR MACHINE RY EXPENSES ON THE ASSESSEE ON THE GROUND THAT THEY COULD NOT ESTABLIS H THEIR IDENTITY. HE ALSO TREATED THE BILLS ISSUED BY THE FIFTH PARTY AS BOGUS AS THE ASSESSEE COULD NOT PRODUCE THE SAID PARTY FOR VERIFICATION B EFORE HIM. IN OUR OPINION, WHEN THE BILLS ISSUED BY THE SAID TWO PART IES WERE DULY FURNISHED BY THE ASSESSEE, PAYMENTS AGAINST THE SAID BILLS WE RE MADE BY THE ASSESSEE BY ACCOUNT PAYEE CHEQUES AFTER DEDUCTION O F TAX AT SOURCE AND THE SAID PARTIES NOT ONLY APPEARED BEFORE THE ASSES SING OFFICER FOR EXAMINATION BUT ALSO CONFIRMED THE RELEVANT TRANSAC TIONS WITH THE ITA NO. 698/KOL/2018 A.Y. 2014-2015 SRI PRAVESH KEJRIWAL 5 ASSESSEE, THERE WAS NO REASON FOR THE ASSESSING OFF ICER TO DOUBT THEIR IDENTITY AND DISALLOW THE CORRESPONDING MACHINERY E XPENSES ONLY ON THE BASIS OF SUCH UNFOUNDED DOUBT. SIMILARLY HE WAS NOT JUSTIFIED IN TREATING THE BILLS ISSUED BY THE FIFTH PARTY AS BOGUS MERELY BECAUSE OF THE FAILURE OF THE ASSESSEE TO PRODUCE THE SAID PARTY BEFORE HI M FOR VERIFICATION, ESPECIALLY WHEN THE OVERWHELMING EVIDENCE WAS PRODU CED BY THE ASSESSEE IN THE FORM OF RELEVANT BILLS, PAYMENTS BY CHEQUE, TAX DEDUCTION AT SOURCE, ETC. TO SUPPORT AND SUBSTANTIATE HIS CLA IM FOR THE CORRESPONDING MACHINERY EXPENSES. AS A MATTER OF FACT, THE ASSESS EE EVEN FILED THE COPIES OF PAN CARDS OF THESE PARTIES TO ESTABLISH T HEIR IDENTITY BEFORE THE LD. CIT(APPEALS) AND ALTHOUGH THE LD. CIT(APPEALS) ACCEPTED THE FACTUM OF MACHINERY EXPENSES INCURRED BY THE ASSESSEE ON THE BASIS OF THE SUPPORTING EVIDENCE, HE TREATED THE BILLS ISSUED BY THE CONCERNED THREE PARTIES AS BOGUS ON THE BASIS OF UNFOUNDED DOUBTS E XPRESSED BY THE ASSESSING OFFICER AND SUSTAINED THE ADDITION TO THE EXTENT OF PROFIT ON ESTIMATED BASIS. HAVING REGARD TO ALL THE FACTS OF THE CASE AS WELL AS THE EVIDENCE PLACED ON RECORD BY THE ASSESSEE, WE ARE O F THE VIEW THAT THE LD. CIT(APPEALS) OUGHT TO HAVE DELETED THE ADDITION MAD E BY THE ASSESSING OFFICER ON ACCOUNT OF THE ALLEGED BOGUS MACHINERY E XPENSES WHEN THE CLAIM OF THE ASSESSEE FOR SUCH EXPENSES WAS DULY SU PPORTED BY THE RELEVANT AND COGENT EVIDENCE. IN THAT VIEW OF THE M ATTER, WE DELETE THE ADDITION MADE BY THE ASSESSING OFFICER AND SUSTAINE D BY THE LD. CIT(APPEALS) ON THIS ISSUE AND ALLOW THIS APPEAL OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON DECEMBER 19, 2018. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER VICE -PRESIDENT (KZ) KOLKATA, THE 19 TH DAY OF DECEMBER, 2018 COPIES TO : (1) SRI PRAVESH KEJRIWAL, 13, BRABOURNE ROAD, KOLKATA-700 001 ITA NO. 698/KOL/2018 A.Y. 2014-2015 SRI PRAVESH KEJRIWAL 6 (2) INCOME TAX OFFICER, WARD-35(1), KOLKATA, AAYAKAR POORVA, 110, SHANTI PALLY, KOLKATA-700 107 (3) COMMISSIONER OF INCOME TAX (APPEALS)-10, KOLKAT A, (4) COMMISSIONER OF INCOME TAX- , (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.