Shri Hazi Mohd. Irfan, Ghaziabad V. ITO, Ghaziabad

ITA 711/DEL/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3531 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-05-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 07-02-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Assessee Lawyers: S PARASHAR
• Keywords: Bogus purchase
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES SMC : DELHI BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER ITA.NO.711/DEL./2017 ASSESSMENT YEAR 2012-2013 SHRI HAZI MOHD. IRFAN, S/O. RAHAM ILAHI, H.NO.22, PREM NAGAR, GHAZIABAD, U.P. PAN AAKPI 1170P VS. THE INCOME TAX OFFICER, WARD-1(3), GHAZIABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI ANOOP SHARMA, ADVOCATE & SHRI S. PARASHAR, ADVOCATE FOR REVENUE : SHRI KAUSHLENDRA TIWARI, SR. D.R. DATE OF HEARING : 02.11.2017 DATE OF PRONOUNCEMENT : 06 .11.2017 ORDER THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), GHAZIABAD, DATED 30.11.201 6 FOR THE A.Y. 2012-2013. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE RETU RN OF INCOME HAS BEEN FILED ON 21 ST SEPTEMBER, 2012 DECLARING INCOME OF RS.4,47,293/-. THE ASSESSEE IS RUNNING A PROPRIETAR Y CONCERN NAMELY M/S. REENA STEEL TRADING IN SCRAP. THE CASE WAS SEL ECTED FOR SCRUTINY. THE A.O. PASSED THE ORDER UNDER SECTION 1 43(3) DATED 16 TH 2 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. FEBRUARY, 2015. THE A.O. MADE ADDITION TO THE INCOM E OF ASSESSEE OF RS.7,45,000/- AS UNSECURED LOAN, RS.13,97,750/- TOW ARDS BOGUS PURCHASE AND RS.2,02,466/- ON ACCOUNT OF DIFFERENCE IN CLOSING STOCK. THE A.O. COMPLETED THE ASSESSMENT AT A TOTAL INCOME OF RS.27,92,506/-. THE ASSESSEE CHALLENGED ALL THE ADD ITIONS BEFORE LD. CIT(A). HOWEVER, THE APPEAL OF ASSESSEE HAS BEEN DI SMISSED. 3. I HAVE HEARD THE LEARNED REPRESENTATIVES OF BOT H THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ALL THE ISSUES ARE DECIDED AS UNDER. ISSUE NO.1 - UNSECURED LOANS : 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT HAS BEEN NOTICED THAT ASSESSEE HAS RECEIVED UNSECURED LOANS FROM THE FOLLOWING PERSONS. 1. MS. GULISTA BEGUM RS.1,50,000 2. MOHD. SHAHBAZ RS. 1,45,000 3. MS. SABNAM BEGUM RS. 50,000 4. MRS. PRAVEEN BEGUM RS. 1,00,000 5. SHRI JAHANGIR RS. 50,000 6. MOHD. SHAHNAWAZ RS. 2,50,000 3 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. 4.1. THE A.O. NOTED THAT INFORMATION WAS CALLED FO R FROM THE ABOVE PERSONS TO PROVE IDENTITY, GENUINENESS OF THE TRANSACTIONS OF UNSECURED LOANS AND CREDITWORTHINESS. THE ASSESSEE WAS REQUIRED TO PRODUCE ALL THE ABOVE PERSONS TO RECORD THEIR STATE MENTS ON OATH. BUT, NONE HAVE BEEN PRODUCED. THE A.O. ALSO NOTED T HAT THERE ARE CASH DEPOSITS IN THE BANK ACCOUNT OF THE CREDITORS BEFORE GIVING LOAN TO THE ASSESSEE OF THE SAME AMOUNT. THE A.O. ACCORD INGLY, NOTED THAT ASSESSEE FAILED TO PROVE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION S IN THE MATTER AND ACCORDINGLY, MADE THE ADDITION. 4.2. THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT ADDITION HAS BEEN MADE BECAUSE THE CREDITORS HAVE NOT BEEN PRODU CED BEFORE A.O. FOR EXAMINATION. HOWEVER, THE ASSESSEE PROVIDED COP Y OF THEIR INCOME TAX RETURNS, COPY OF LEDGER ACCOUNT OF UNSECURED LO AN, COPY OF BALANCE SHEET AND COPY OF THE BANK ACCOUNT OF THE C REDITORS. THEREFORE, BURDEN UPON ASSESSEE TO PROVE IDENTITY O F THE CREDITORS, THEIR CREDITWORTHINESS AND GENUINENESS OF THE TRANS ACTION HAVE BEEN DISCHARGED. IT IS ALSO EXPLAINED THAT ASSESSEE TRIE D HIS BEST EFFORTS TO 4 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. PRODUCE THE CREDITORS BEFORE A.O. HOWEVER, NONE AGR EED TO COME TO THE INCOME TAX DEPARTMENT DUE TO FEAR. 4.3. THE LD. CIT(A) CONSIDERING THE MATERIAL ON RE CORD NOTED THAT THE EXAMINATION OF THE BANK ACCOUNTS OF THE CR EDITORS SHOWS THAT THERE HAVE BEEN CASH DEPOSITS IN ALL THE ACCOUNTS J UST BEFORE EXTENDING LOAN THROUGH CHEQUES. NONE OF THE PARTIES HAVE BEEN PRODUCED BEFORE THE A.O. FOR EXAMINATION. THEREFORE , ASSESSEE FAILED TO PROVE GENUINE CREDIT IN THE MATTER. THE APPEAL W AS ACCORDINGLY DISMISSED. 5. AFTER CONSIDERING THE RIVAL CONTENTIONS, I DO N OT FIND ANY MERIT IN THIS GROUND OF APPEAL OF ASSESSEE. THE LEA RNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW AND SUBMITTED THAT ALL THE DOCUMENTS WERE PRO DUCED TO THE SATISFACTION OF THE A.O, THEREFORE, NO ADDITIONS SH OULD BE MADE. HE HAS RELIED UPON THE ORDER OF ITAT, LUCKNOW BENCH (T HIRD MEMBER) IN THE CASE OF DWARKADHEESH SUGAR INDUSTRIES VS. ITO, ITA.NO.115/2011 DATED 07 TH MAY, 2012 AND SUBMITTED THAT ASSESSEE NEED NOT TO PROVE SOURCE OF THE SOURCE. MERELY BECA USE CASH IS 5 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. DEPOSITED IN THEIR ACCOUNT IS NOT SUFFICIENT TO REJ ECT THE EXPLANATION OF ASSESSEE. 6. ON THE OTHER HAND, THE LD. D.R. RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND RELIED UPON THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NAVODYA CAS TLE PVT. LTD., 367 ITR 306. 7. ON CONSIDERATION OF THE FINDINGS OF THE AUTHORI TIES BELOW IN THE LIGHT OF SUBMISSIONS OF THE PARTIES, I AM OF THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE MATTER. THE ASSES SEE PRODUCED COPY OF THE INCOME TAX RETURN, COPY OF THE LEDGER ACCOUN T, COPY OF THE BALANCE SHEET AND BANK ACCOUNT OF THE CREDITORS BEF ORE A.O. HOWEVER, NO CONFIRMATION FROM THE CREDITORS HAVE BEEN FILED. IT IS ALSO AN ADMITTED FACT THAT BEFORE GIVING LOANS TO THE ASSES SEE, THERE ARE CASH DEPOSITS IN ALL THE ACCOUNTS OF THE CREDITORS. THE ITAT, AGRA BENCH IN THE CASE OF SMT. SUMAN GUPTA VS. ITO 138 ITD 153 CO NSIDERING THE IDENTICAL FACTS THAT THERE WERE MEAGRE BANK BALANCE IN THE BANK ACCOUNT OF THE CREDITORS AND CASH HAVE BEEN DEPOSIT ED IN THEIR BANK ACCOUNTS BEFORE GIVING LOAN TO THE ASSESSEE, CONFIR MED THE ADDITION UNDER SECTION 68 OF THE I.T. ACT. THE ORDER OF THE TRIBUNAL HAVE BEEN 6 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. CONFIRMED BY HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF SMT. SUMAN GUPTA VS. CIT IN ITA.NO.680 OF 2012 DATED 07 TH AUGUST, 2012 BY DISMISSING APPEAL OF ASSESSEE. THE HONBLE GUJRA T HIGH COURT IN THE CASE OF BLESSING CONSTRUCTION VS. ITO 32 TAXMAN N.COM 366 HELD THAT WHERE SIZEABLE AMOUNTS WERE DEPOSITED IN CASH IN ACCOUNT OF DEPOSITORS ONLY BEFORE THEIR WITHDRAWAL THROUGH CHE QUES IN FAVOUR OF THE ASSESSEE, ADDITION WAS JUSTIFIED. IN THE PRESENT CASE, THE RETURN OF INCOME OF THE CREDITORS WOULD SHOW THAT THEY HAV E DECLARED SMALL INCOME AND PAID MEAGRE TAX. IN THEIR BANK ACCOUNTS, THERE WAS MEAGRE BANK BALANCE PRIOR TO GIVING LOAN TO THE ASS ESSEE AND CASH HAVE BEEN DEPOSITED IMMEDIATELY BEFORE GIVING LOAN TO THE ASSESSEE. FURTHER, ASSESSEE FAILED TO PRODUCE ANY OF THE CRED ITOR BEFORE A.O. FOR EXAMINATION TO VERIFY GENUINENESS OF TRANSACTION. T HEREFORE, ASSESSEE FAILED TO PROVE IDENTITY OF THE CREDITORS, THEIR CR EDITWORTHINESS AND GENUINENESS OF THE TRANSACTION IN THE MATTER. THE O RDER OF THE LUCKNOW BENCH CANNOT BE GIVEN PREFERENCE AGAINST TH E DECISION OF THE HONBLE HIGH COURTS REFERRED TO ABOVE. IN THE R ESULT, NO INTERFERENCE IS CALLED FOR. THIS GROUND OF APPEAL O F ASSESSEE IS DISMISSED. 7 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. ISSUE NO.2 BOGUS PURCHASES : 8. THE A.O. ASKED THE ASSESSEE TO FURNISH BILLS AN D VOUCHERS OF PURCHASES MADE DURING ASSESSMENT YEAR UNDER APPE AL. THE ASSESSEE HAS FURNISHED THE LIST OF PARTY-WISE PURCH ASE AS WELL AS PHOTO COPIES OF THE PURCHASE BILLS. THE ASSESSEE HA S FURNISHED PHOTO COPY OF THE PURCHASE BILLS TO THE TUNE OF RS.10,42, 500 FROM M/S. H.K. STEEL TRADERS, GHAZIABAD BEARING DIFFERENT BILLS AN D M/S. TRILOK TRIPURARI TRADING CO. ACHECHJA, GAUTAM BUDH NAGAR O F RS.3,55,250. AS PER SIX PURCHASE BILLS OF M/S. HK STEEL TRADERS, IT HAS BEEN NOTICED THAT QUANTITY OF PURCHASE OF MATERIAL AND RATE OF P URCHASE OF MATERIAL DID NOT MATCH WITH THE TOTAL WRITTEN IN ALL THE BIL LS. IN OTHER PURCHASE VOUCHER OF M/S. TRILOK TRIPURARI TRADING CO. ACHECH JA, GAUTAM BUDH NAGAR OF RS.3,55,250, QUANTITY OF MATERIAL IS SHOWN IN KGS AND RATE OF MATERIAL SHOWN AT RS.25,000 AND TOTAL OF BILL SH OWN RS.3,55,250 WHICH DID NOT MATCH EACH OTHER. THE ASSESSEE EXPLAI NED BEFORE A.O. THAT TOTAL BILLS AMOUNT ARE DULY RECORDED IN THE BO OKS OF ACCOUNT. THE PARTY FROM WHICH ASSESSEE PURCHASED MATERIAL MENTIO NING IN KG BUT WRITTEN MT WHILE IN MT HE SHOULD POINT OUT 8.690 MT BUT THEY HAVE WRITTEN 8690 MT WHICH IS A MISTAKE DUE TO ILLITERAC Y OF THE PARTY. THE 8 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. ASSESSEE PURCHASED MATERIAL OF 8.690 MT OR CAN SAY 8690 KG. THE A.O. HOWEVER, DID NOT ACCEPT THE EXPLANATION OF ASS ESSEE AND MADE THE ADDITION ON ACCOUNT OF BOGUS PURCHASES OF RS.13 ,97,750. THE ASSESSEE SUBMITTED BEFORE LD. CIT(A) THAT MISTAKE I S A CLERICAL WHICH SHOULD BE CLARIFIED FROM THE VOUCHERS AND INVOICES. AN EXAMPLE IS ALSO GIVEN AS TO HOW THE ITEM IS TO BE CONSIDERED I N KG AND MT. ASSESSEE THEREFORE, EXPLAINED THAT THERE IS NO MIST AKE IN TOTAL OF THE PURCHASES. THE LD. CIT(A) HOWEVER, DID NOT ACCEPT T HE EXPLANATION OF ASSESSEE AND DISMISSED THIS GROUND OF APPEAL OF ASS ESSEE. 9. AFTER CONSIDERING THE RIVAL CONTENTIONS, I AM O F THE VIEW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEV EL OF THE A.O. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS A CLERICAL MISTAKE IN NOTING THE ITEMS IN KG OR MT. ALL PURCHA SE INVOICES AND MATERIAL HAVE BEEN PRODUCED BEFORE THE AUTHORITIES BELOW. HE HAS ALSO REFERRED TO INVOICES, COPIES OF WHICH ARE FILE D IN THE PAPER BOOK. 10. THE LD. D.R. SUBMITTED THAT THE MATTER MAY BE REMANDED TO THE A.O. FOR RE-CONSIDERATION. 9 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. 11. IN VIEW OF THE ABOVE, IT IS CLEAR THAT ASSESSE E HAS SPECIFICALLY EXPLAINED THE DISCREPANCY IN NOTING TH E PURCHASES MATERIAL INTO KG OR MT. PROPER BILLS HAVE BEEN PROD UCED ON RECORD TO JUSTIFY THE CONTENTION OF THE ASSESSEE. THE A.O. AN D LD. CIT(A) HAVE HOWEVER, NOT GIVEN ANY FINDING ON THE SAME. IT WOUL D, THEREFORE, SHOW THAT THE MATTER REQUIRES RECONSIDERATION AT THE LEV EL OF THE A.O. I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO RE-DECIDE THIS ISSUE BY VERIFYING THE FACTS FROM THE INVOICES BY APPRECI ATING THE EXPLANATION OF ASSESSEE. IN CASE, A.O. HAS ANY DOUB T, HE COULD HAVE VERIFY THE FACTS FROM THE CONCERNED PARTIES AS PER LAW. THE A.O. SHALL GIVE REASONABLE, SUFFICIENT OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. IN THE RESULT, THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ISSUE NO.3 DIFFERENCE IN CLOSING STOCK : 12. THE A.O. NOTED THAT ASSESSEE HAS FURNISHED DET AILS OF OPENING STOCK AND CLOSING STOCK AND HAS SHOWN CLOSI NG STOCK OF RS.88,87,866. BUT AS PER THE TRADING ACCOUNT, CLOSI NG STOCK WAS SHOWN AT RS.86,85,400. DIFFERENCE OF RS.2,02,466 WA S ADDED TO THE 10 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. INCOME OF ASSESSEE. THE LD. CIT(A) DID NOT ACCEPT T HE EXPLANATION OF ASSESSEE AND ALSO CONFIRMED THE ADDITION AND DISMIS SED THIS GROUND OF APPEAL. 13. AFTER CONSIDERING THE RIVAL CONTENTIONS, I AM OF THE VIEW THAT ADDITION IS WHOLLY UNJUSTIFIED. LEARNED COUNSE L FOR THE ASSESSEE POINTED OUT PAGE-30 OF THE PAPER BOOK WHICH IS TRAD ING AND P & L A/C TO SHOW THAT SALES HAVE BEEN DECLARED IN A SUM OF RS.88,87,866 AND CLOSING STOCK IS SHOWN AT RS.86,85,400. PB-43 I S TRADING AND P & L A/C FOR THE PERIOD ENDING ON 31 ST MARCH, 2013 TO SHOW OPENING STOCK OF RS.86,85,400. PB-123 SHOWS THE SAME FIGURE OF ASSESSMENT YEAR UNDER APPEAL OF THE OPENING AND CLOSING STOCK. LEARNED COUNSEL FOR THE ASSESSEE EXPLAINED THAT THERE WAS SOME MIST AKE ON BEHALF OF THE ACCOUNTANT WHICH WAS EXPLAINED BEFORE THE AUTHO RITIES BELOW WHICH HAD NOT BEEN TAKEN INTO CONSIDERATION. 14. IN VIEW OF THE ABOVE FINDINGS AND MATERIAL AVA ILABLE ON RECORD AND SAME OPENING STOCK SHOWN IN NEXT YEAR CL EARLY SUPPORTS THE EXPLANATION OF ASSESSEE THAT THERE IS NO DIFFER ENCE IN THE VALUATION OF THE CLOSING STOCK. THE ADDITION IS WITHOUT ANY J USTIFICATION. I, ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DELETE 11 ITA.NO.711/DEL./2017 SHRI HAZI MOHD. IRFAN, GHAZIABAD. THE ADDITION OF RS.2,02,466. THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 15. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY AL LOWED. ORDER PRONOUNCED IN THE OPEN COURT. 1. SD/- (BHAVNESH SAINI) JUDICIAL MEMBER DELHI, DATED 06 TH NOVEMBER, 2017 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT SMC BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASST. REGISTRAR : ITAT DELHI BENCHES : DELHI.