Astt. Commissioner of Income Tax, Faizabad V. Shri Anand Motwani, Faizabad

ITA 797/LKW/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7626 (ITAT-LUCKNOW)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 31-12-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Bogus purchase
• Section: 133A; 133(6)

Judgement Text

I.T.A. NO.797/LKW/2015 ASSESSMENT YEAR:2011-12 1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI A. D. JAIN, VICE PRESIDENT AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO.797/LKW/2015 ASSESSMENT YEAR:2011-12 A.C.I.T., CIRCLE-FAIZABAD. VS. SHRI ANAND MOTWANI, PROP. M/S DREAMZ, L.G. CHAMBER, JAMINIABAGH, FAIZABAD. PAN:AJUPM 2337 D (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LEARNED CIT(A), FAIZABAD DATED 15/09/2015 PERTAINING TO ASS ESSMENT YEAR 2011- 2012. IN THIS APPEAL THE REVENUE HAS TAKEN THE FOL LOWING GROUNDS OF APPEAL: 1. THE LD. CIT(A) FAIZABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.60,61,916/- MADE ON ACCOUNT OF BOGUS PURCHASE WITHOUT APPRECIATING THE FACTS THAT THE ASSESSEE FIRM FAILED TO FURNISH SUPPORTING EVID ENCES VIZ. BILLS AND VOUCHERS THAT COULD PROVE THE GENUINENESS OF TH E ALLEGED PURCHASES & EXISTENCE OF SUPPLIERS ALSO REMAINED UNVERIFIED. APPELLANT BY SHRI C. K. SINGH, D.R. RESPONDENT BY SHRI ABHINAV MEHROTRA, ADVOCATE DATE OF HEARING 09/01/2019 DATE OF PRONOUNCEMENT 11 / 01 /201 9 I.T.A. NO.797/LKW/2015 ASSESSMENT YEAR:2011-12 2 2. THE LD. CIT(A), FAIZABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING THE RELIEF TO THE ASSESSEE OF RS.4,02,000/- ON ACCOUNT OF PAYMENT MADE THROUGH IMPREST ACCOUNT IGNORING THE FACTS THAT THE PAYMENTS WERE NOT DISCLOSED IN T HE BOOKS OF ACCOUNTS AND ADDITION WAS MADE ON THE BASIS OF LOOS E PAPERS VIZ. ALLEGED DIARY FOUND DURING THE COURSE OF SURVE Y. 3. THE LD. CIT(A) FAIZABAD HAS ERRED IN LAW AND ON FACTS OF THE CASE IN ALLOWING THE RELIEF TO THE ASSESSEE OF RS.9,00,400/- OUT OF SALARY PAID TO STAFF IGNORING THE RATIONAL M ATHEMATICAL FINDINGS GIVEN BY THE AO IN THE BODY OF THE ASSESSM ENT ORDER. 2. AT THE OUTSET, LEARNED D. R. SUBMITTED THAT ASSE SSEE HAD FAILED TO SUBSTANTIATE THE PURCHASES WITH THE BILLS AND THERE FORE, THE ASSESSING OFFICER HAD RIGHTLY MADE THE ADDITION OF RS.60,61,916/- AS THE ASSESSING OFFICER HELD THE PURCHASES TO BE BOGUS AND LEARNED CIT(A) H AS WRONGLY ALLOWED THE SAME. ARGUING GROUND NO. 2 LEARNED D. R. SUBMITTED THAT THE ASSESSING OFFICER HAD MADE ADDITION OF RS.4,02,000/- ON ACCOU NT OF PAYMENTS WHICH WERE RECORDED BY THE ASSESSEE IN HIS DIARY AND LEAR NED CIT(A), WITHOUT RECONCILING THE ENTRIES OF DIARY WITH THE REGULAR B OOKS OF ACCOUNT, DELETED THE SAME. 2.1 AS REGARDS THIRD ADDITION OUT OF SALARY PAID TO STAFF, THE LEARNED D. R. SUBMITTED THAT LEARNED CIT(A) WHILE ALLOWING RELIEF TO THE ASSESSEE HAD IGNORED THE RATIONAL MATHEMATICAL FINDING GIVEN BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. 3. LEARNED A. R., ON THE OTHER HAND, WITH RESPECT T O ADDITION ON ACCOUNT OF BOGUS PURCHASES, INVITED OUR ATTENTION TO THE FI NDINGS OF LEARNED CIT(A) AND SUBMITTED THAT THE PURCHASES WERE MADE FROM TWO PARTIES NAMELY M/S PATAUDI TRADERS, KANPUR AND M/S G.P. STORE, VARANAS I THROUGH THEIR AGENTS NAMELY SHRI DEVENDRA AHUJA AND SHRI MUKESH KUMAR AN D THEIR AFFIDAVITS REGARDING CONFIRMATION OF THE TRANSACTIONS WERE ALS O FILED. IT WAS SUBMITTED I.T.A. NO.797/LKW/2015 ASSESSMENT YEAR:2011-12 3 THAT IF PURCHASES WERE HELD TO BE BOGUS, CONSEQUENT EQUIVALENT REDUCTION SHOULD HAVE BEEN MADE IN THE CLOSING STOCK WHICH WO ULD HAVE NIL EFFECT ON THE PROFITS OF THE ASSESSEE. LEARNED A.R. FURTHER SUBMITTED THAT THE PAYMENTS WERE DULY MADE TO THE PARTIES AND OUR ATTE NTION WAS INVITED TO THE COPY OF ACCOUNTS OF THESE PARTIES PLACED AT PAG ES 32 TO 68 OF THE PAPER BOOK WHEREIN DURING SUBSEQUENT YEARS REGULAR PAYMEN TS WERE MADE TO THESE PARTIES AND NO ADVERSE OBSERVATIONS WERE MADE BY THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS IN THE SU CCEEDING YEARS. THEREFORE, LEARNED A. R. HEAVILY PLACED HIS RELIANC E ON THE ORDER OF LEARNED CIT(A). 3.1 AS REGARDS THE ADDITION OF RS.4,02,000/-, LEARN ED A. R. SUBMITTED THAT ASSESSEE HAD NOTED DOWN THE PAYMENT OF RS.6,000/- E ACH ON VARIOUS DATES WHICH WERE PAID TO THE GRANDFATHER OF THE ASSESSEE FOR MEETING OUT VARIOUS PETTY EXPENSES AND WHICH THE LEARNED CIT(A) HAS HEL D TO BE RELATING TO CASH EXPENSES INCURRED BY THE ASSESSEE DURING THAT PARTI CULAR PERIOD. 3.2 AS REGARDS THE DISALLOWANCE OUT OF SALARY, LEAR NED A. R. SUBMITTED THAT ASSESSING OFFICER HAD MADE DISALLOWANCE OF RS. 17,11,920/- OUT OF SALARY EXPENSES OUT OF WHICH LEARNED CIT(A) HAS ALL OWED RELIEF TO THE EXTENT OF RS.9,00,400/- AND AS AGAINST THE ADDITION SUSTAI NED BY LEARNED CIT(A), THE ASSESSEE GOT RELIEF FROM THE HON'BLE TRIBUNAL I N I.T.A. NO.690/LKW/2015, A COPY OF WHICH WAS PLACED AT PAGES 70 TO 73 OF THE PAPER BOOK. LEARNED A. R. SUBMITTED THAT THE ASSESSING OFFICER HAD MADE THE ADDITION BASED UPON ASSUMPTIONS WHICH THE HON'BLE TRIBUNAL HAD NOT ED IN HIS ORDER AND HON'BLE TRIBUNAL HAD ALSO NOTED IN HIS ORDER THAT N O DEFECT WAS POINTED OUT IN THE BOOKS OF ACCOUNT AND HAD DELETED THE ADDITIO N AND THEREFORE, IT WAS ARGUED THAT THE RELIEF ALLOWED BY LEARNED CIT(A) SH OULD BE UPHELD. I.T.A. NO.797/LKW/2015 ASSESSMENT YEAR:2011-12 4 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE T HROUGH THE MATERIAL PLACED ON RECORD. AS REGARDS THE FIRST ADDITION OF RS.60,61,916/- MADE ON ACCOUNT OF ALLEGED BOGUS PURCHASES, WE FIND THAT BO OKS OF ACCOUNT OF THE ASSESSEE WERE NOT REJECTED DURING THE ASSESSMENT PR OCEEDINGS. THE ASSESSING OFFICER, IN ORDER TO VERIFY THE GENUINENE SS OF THE PURCHASES, WROTE LETTER U/S 133(6) OF THE ACT TO THESE TWO PARTIES A ND THE LETTERS WERE RECEIVED BACK WITH THE REMARKS AS INCOMPLETE ADDRES S AND NOT KNOWN. THE ASSESSEE WAS QUESTIONED REGARDING THE PURCHASES FRO M THESE PARTIES AND ASSESSEE SUBMITTED THAT THE PURCHASES WERE MADE FRO M THESE PARTIES THROUGH AGENTS SHRI DEVENDRA AHUJA AND SHRI MUKESH KUMAR AND ALSO FILED THEIR AFFIDAVIT REGARDING CONFIRMATION OF THE TRANS ACTIONS. THE ASSESSING OFFICER HOWEVER HELD THAT ASSESSEE HAD COOKED UP TH E STORY OF PURCHASING THE GOODS THROUGH AGENTS AND HAD FILED WRONG AFFIDA VITS AND THEREFORE, HE MADE THE ADDITION OF RS.60,61,916/-. THE LEARNED C IT(A) HOWEVER OBSERVED THAT DURING A SURVEY U/S 133A OF THE ACT CONDUCTED BUSINESS PREMISES OF THE ASSESSEE ON 14/12/2010 THE ASSESSEE HAD PROVIDED AL L MATERIAL RECORDS AND HAS ALSO RECONCILED PHYSICAL INVENTORY WITH THE INV ENTORY AS PER BOOKS OF ACCOUNT AND HAS FURTHER NOTED THAT ASSESSING OFFICE R DURING ASSESSMENT STAGE ALSO DID NOT DRAW ANY ADVERSE INFERENCE IN BO OK INVENTORY AND PHYSICAL INVENTORY AVAILABLE. DURING ASSESSMENT PR OCEEDINGS THE ASSESSEE HAD PRODUCED AUDITED BOOKS OF ACCOUNT WHEREIN AUDIT OR HAD NOT MADE ANY ADVERSE COMMENTS ON BOOKS OF ACCOUNT AND THE TURNOV ER OF THE ASSESSEE WAS ALSO DULY ACCEPTED BY COMMERCIAL TAX DEPARTMENT AND PURCHASES AND SALES, AS PER THE ORDER OF COMMERCIAL TAX DEPARTMEN T TALLIED WITH THE PURCHASES AND SALES AS PER BOOKS OF ACCOUNT. WE FU RTHER FIND THAT THE ASSESSEE HAS BEEN MAKING PAYMENTS TO THESE PARTIES IN THE SUBSEQUENT YEARS, A COPY OF ACCOUNT OF THESE TWO PARTIES FOR S UCCEEDING YEAR IS PLACED AT PAGES 32 TO 68 OF THE PAPER BOOK. WE FURTHER FI ND THAT DURING I.T.A. NO.797/LKW/2015 ASSESSMENT YEAR:2011-12 5 SUBSEQUENT YEARS NO ADVERSE FINDINGS WERE MADE BY T HE ASSESSING OFFICER REGARDING PAYMENT TO THESE PARTIES. KEEPING IN VIE W ALL THESE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO INFIRMITY IN THE ORDER OF LEARNED CIT(A) WITH RESPECT TO ALLEGED BOGUS PURCHASES. TH IS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 4.1 AS REGARDS THE ADDITION ON ACCOUNT OF PAYMENTS THROUGH IMPREST ACCOUNT, WE FIND THAT THE ASSESSING OFFICER HAD FOU ND THE PAYMENTS RECORDED IN THE DIARY AND HAS REPRODUCED THE DATES ALONG WITH THE AMOUNTS IN HIS ORDER. THE LEARNED CIT(A), WITHOUT ELABORAT ING ON THE RECONCILIATION OF THE ENTRIES IN THE DIARY AND IN THE REGULAR BOOK S OF ACCOUNT, HAS HELD THAT THE PAYMENTS NOTED IN THE DIARY RELATED TO CASH EXP ENSES INCURRED BY THE ASSESSEE DURING THIS PARTICULAR PERIOD. THIS FINDI NG OF LEARNED CIT(A) IS NOT BASED UPON ANY RECONCILIATION OR ANY FACTUAL VERIFI CATION, THEREFORE, WE DEEM IT APPROPRIATE TO REMIT THIS ISSUE BACK TO THE OFFI CE OF LEARNED CIT(A) WHO SHOULD PASS A FRESH ORDER ELABORATING THE RECONCILI ATION OF ENTRIES RECORDED IN THE DIARY WITH THAT IN THE REGULAR BOOKS OF ACCO UNT. ACCORDINGLY, GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSES. 4.2 AS REGARDS THIRD GROUND OF APPEAL REGARDING SAL ARY PAID TO STAFF, WE FIND THAT ASSESSING OFFICER HAD MADE AN ADDITION OF RS.17,11,920/- OUT OF SALARY OUT OF WHICH THE LEARNED CIT(A) HAS ALLOWED RELIEF TO THE ASSESSEE TO THE EXTENT OF RS.9,00,400/- AND HAD UPHELD THE ADDI TION OF RS.8,11,520/-. WE FIND THAT THE ADDITION SUSTAINED BY LEARNED CIT( A) AMOUNTING TO RS.8,11,520/- WAS DELETED BY HON'BLE TRIBUNAL VIDE ORDER DATED 30/08/2016, A COPY OF WHICH IS PLACED AT PAGES 70 TO 73 OF THE PAPER BOOK. HON'BLE TRIBUNAL RELYING ON THE ORDER OF HON'BLE SUPREME CO URT IN THE CASE OF CIT VS. S. KADAR KHAN SON 352 ITR 480 (SC) HAS ALLOWED RELIEF TO THE ASSESSEE WHEREIN THE HON'BLE SUPREME COURT HAS HELD THAT DUR ING SURVEY THE I.T.A. NO.797/LKW/2015 ASSESSMENT YEAR:2011-12 6 STATEMENT ON OATH CANNOT BE AN ADMISSIBLE EVIDENCE FOR MAKING THE ADDITION. THEREFORE, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE EARLIER ORDER OF HON'BLE TRIBUNAL ON THE SAME ADDITION AND IN VIEW OF THESE FACTS, GROUND NO. 3 OF THE REVENUE IS ALSO DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS PART LY ALLOWED FOR STATISTICAL PURPOSES AND PARTLY DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 11/01/2019) SD/. SD/. ( A. D. JAIN ) ( T. S. KAPOOR ) VICE PRESIDENT ACCOUNTANT MEMBER DATED:11/01/2019 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSISTANT REGISTRAR