Case Law Details
Vimal Coal Private Limited Vs DCIT (ITAT Ahmedabad)
Vimal Coal Pvt. Ltd. challenged an order by the CIT(A) that upheld the addition of Rs. 25.91 lakh to its income for Assessment Year 2017-18, stemming from alleged bogus purchases totaling Rs. 2.47 crore. The revenue authorities had considered these purchases as non-genuine based on incriminating material obtained during a survey of the supplier, M/s HJM Fuels Pvt. Ltd. Despite the assessee’s submission of documentary evidence, including purchase bills, bank statements, and vendor confirmations, the Assessing Officer and CIT(A) rejected the genuineness of the transactions and applied a 10.46% gross profit rate to the disputed amount. However, the ITAT Ahmedabad ruled in favor of Vimal Coal, noting that the evidence provided by the assessee, including TCS and VAT records, sufficiently demonstrated the legitimacy of the purchases. The tribunal found that the revenue authorities failed to provide contradicting evidence to disprove the genuineness of the transactions, leading to the deletion of the addition.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
The present appeal has been filed by the assessee against the order of the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)” for short) dated 22.09.2023 passed u/s 250 of the Income-tax Act, 1961, (hereinafter referred to as “the Act” for short) for the Assessment Year (AY) 2017-18.
2. At the outset itself, it was stated that the solitary issue in the present appeal pertains to addition made to the income of the assessee of profit element embedded in the purchases made by the assessee held to be bogus. The quantum of purchases made by the assessee so treated as bogus amounts to Rs.2,47,76,349/- and 10.46% of the same (GP average of last three years starting from AY 2017-18) was estimated as the profit element embedded in it resulting in addition being made to the income of the assessee amounting to Rs.25,91,606/-.
2.1 The grounds raised by the assessee in this regard before us are as under:-
“Improper Confirmation of Additions Despite Acceptance of Books of Accounts: The learned CIT(A) has erroneously upheld an addition of INR 25,91,606/- equating to 10% of alleged bogus purchases amounting to INR 2,47,76,349/- notwithstanding the formal acceptance of the Assessee ‘s books of accounts under Section 145(3) of the Income Tax Act, 1961.
Confirmation of Addition in Absence of Contradictory Evidence: The decision of the CIT(A) to confirm the addition of INR 25,91,606/- is contended to be baseless, as it lacks substantiation through adverse documentary evidence against the Assessee.
Disregard for Documentary Evidence and Vendor Confirmation: The CIT(A) is alleged to have overlooked the documentary evidence provided by the Assessee and the confirmation of transaction details by the seller party, M/s, HJM Fuels Pvt Ltd, presented during the proceedings before the AO.
Unjustified Double Taxation through Gross Profit-Based Addition: The addition of Gross Profit at 10% on the purchase transactions by the CIT(A) has led to an inadvertent double taxation of the same income, as the income from subsequent sales has already been offered for taxation.
Reservation of Rights: The Appellant reserves the right to add, alter, amend, or modify any of the grounds of appeal during the course of the appellate proceedings.”
3. The primary contention of the ld. Counsel for the assessee before us was to the effect that the assessee had duly discharged its onus of proving the genuineness of purchases made by the assessee to the tune of Rs.2.47 crores and had also pointed out that the incriminating material, based on which the Department treated the purchases to be bogus, could not be given any credence to and had no evidentiary value; and also that the party from whom the purchases were made had confirmed during the present assessment proceedings to all the transactions of purchases being genuine. That none of the facts pointed out by the assessee were controverted by the Revenue and despite so, the Revenue authorities (AO/CIT(A) still went on to hold the purchases as bogus and made addition of gross profit earned by the assessee on the same. The ld. Counsel for the assessee, therefore, contended that the addition made was grossly unjustified and needed to be deleted.
4. The Ld. DR, however, relied on the order of the ld. CIT(A) and stated that in the light of the incriminating material in the possession of the Department, the assessee had miserably failed to discharge its onus of proving the genuineness of the purchases made by the assessee to the tune of Rs.2.47 crores and addition, therefore, made to the income of the assessee by the Assessing Officer and confirmed by the ld. CIT(A) was justified.
5. We have heard the contentions of both the parties carefully and have also gone through the orders of the authorities below. We have also considered various documents pointed out to us during the course of hearing before us placed in paper-book filed by the assessee. On consideration of all of the above, we hold that the addition made in the case of the assessee is not justified and needs to be deleted. The reasoning for the same follows:-
6. The facts relating to the case are that the assessee is engaged in the business activity of trading in Steam Coal. The Department was in possession of information received on account of survey action conducted on one M/s. HJM Fuels Pvt. Ltd. that the said entity was providing accommodation entries and the assessee was one of the beneficiaries of the same. During the course of survey proceedings, a transaction filed in the form of tally document bearing name “Training Module” was impounded. The entries appearing in the said file were noted by the Revenue to be of cash entries for receipt of money and payment thereof; and the Group run by one Shri Mahendra S. Patel was noted to have made application before the Settlement Commission, Additional Bench-II, Mumbai, wherein the entries appearing in “Training Module” had been owned up by the Group and a disclosure of 2% additional income had also been made by the Group. The assessee was also noted to have carried out transactions with M/s. HJM Fuels Pvt. Ltd. during the year. Based on this incriminating material, the assessee was asked to demonstrate the genuineness of transactions carried out by it with M/s. HJM Fuels Pvt. Ltd., to which due reply was filed by the assessee submitting that all the transactions were genuine. Necessary evidences to this effect were also filed. The assessee had also submitted that the incriminating material in the possession of the Department lack credibility, and it was also submitted by the assessee that the Director of M/s. HJM Fuels Pvt. Ltd. had confirmed the transactions with the assessee to the Assessing Officer in response to summons issued to it by the Assessing Officer during the present proceedings carried out on the assessee. The Assessing Officer, however, was not satisfied with the reply of the assessee and held that the assessee had failed to discharge its onus of proving the genuineness of the transactions in the light of the incriminating material in the possession of the Assessing Officer, and, therefore, made addition of the gross profit element embedded in the purchases by applying the average GP of last 3 assessment years @ 10.46% to the total purchases made by the assessee of Rs.2.47 crores resulting in addition of Rs.25,91,606/-. The ld. CIT(A) upheld the findings of the Assessing Officer.
7. In discharge of its onus of proving the genuineness of the transactions by the assessee, the assessment order reveals, the assessee had submitted the following facts duly supported with evidences:-
(i) Copy of purchase bills of M/s. HJM Fuels Pvt. Ltd. along with the details of modes of goods delivery and the contra confirmation ledger confirmation of M/s. HJM Fuels Pvt. Ltd.
(ii) That all payments for the purchases so made were by means of RTGS/Account Payee Cheques and the accounts were settled at the end of the year and there was no outstanding due remaining to be paid to M/s. HJM Fuels Pvt. Ltd.
(iii) Copies of bank statements of the assessee highlighting the transactions reflecting the payment made to M/s. HJM Fuels Pvt. Ltd. during the relevant year were filed.
The above finds mention at page no. 4 of the assessment order wherein the submissions made by the assessee to the Assessing Officer during assessment proceedings is reproduced. Paragraph No. 1 of reply of the assessee brings out the above facts as under:-
“We are in receipt of your notice u/s 142(1) dated 25.10 19 asking us to show-cause as to why the appropriate additions/disallowances should not be made in the hands of the assessee in respect of the transactions carried out with HJM Fuels Pvt Ltd. during the relevant assessment year. Your goodself has mentioned in the notice, that the survey proceedings had been carried out in the case of HJM Fuels Pvt Ltd and on the basis of the information received from the office of DCIT, Central Circle 1(3), Ahmedabad and after analyzing the same, it was gathered that HJM Fuels Pvt Ltd is engaged in providing accommodation entries of bogus bills During the course of the survey proceedings, certain incriminating material/evidences were seized and amongst the incriminating material so seized, was found the ledger account of the assessee. In response to the incriminating material so seized, submission had been made by HJM Fuels Pvt Ltd. before DDIT (Inv.), Unit 1(3), Ahmedabad that all the entries appearing in the seized material are the cash entries for receipt of money and payment the of Your goodself has asked us to explain as to why the appropriate addition/disallowance should not be made in the hands of the assessee in respect of the transactions carried out with the alleged bogus concern ie HJM Fuels Pvt Ltd. We are therefore furnishing our reply in the aforesaid matter with the requisite details for your kind verification and perusal.
1) The assessee is carrying out the business activity of trading in Steam Coal from the premises situated at T. Hiranand Estate. Nr Fruit Market, Naroda Road, Ahmedabad- 380025. As a part of its normal business activity, the assessee had purchased Steam Coal from M/s HJM Fuels Pvt Ltd during the FY 2016-1 7 for subsequent sales of the same to the various parties. We have already submitted the ledger account of HJM Fuels Pvt Ltd, copies of the all the purchase bills alongwith the details of the modes of goods delivery and the contra confirmation ledger account of HJM Fuels Pvt Ltd for A.Y 201 7-18 vide our submission dated 18.1 0.201 9 (Reference: Annexure-9 and Annexure-10 of the submission). The said details were furnished in response to your notice u/s 142(1) dated 05.10.2019 asking us to furnish the above mentioned details. It can be seen from the ledger account of HJM Fuels Pvt Ltd submitted before your goodself, that the entire payments made by the assessee towards the purchase consideration during the relevant assessment year are by means of RTGS/Account Payee Cheques and the account gets settled at the end of the year and there are no outstanding dues remaining to be paid to HJM Fuels Pvt Ltd. We are hereby submitting the copies of the relevant bank statements of the assessee duly highlighting the transactions reflecting the payments made to HJM Fuels Pvt Ltd during the relevant assessment year (Annexure-A).”
(iv) The assessee admittedly is a trader in coal and it had submitted a quantitative tally of all the purchases of coal made by it and sold by it during the year. The assessee had also evidenced sale of coal by M/s HJM Fuels to the assessee from the VAT return and the TCS statement of HJM Fuels, which duly reflected the said sales to the assessee and accordingly had taken Input VAT credit and TCS credit in its return of income filed, both collected from the assessee. These facts find mention in paragraph Nos. 2 to 4 of its submissions made to the Assessing Officer which are as under:-
“2) It is hereby informed that the assessee had purchased 7499.71 metric tonne of Steam Coal from HJM Fuels Pvt Ltd during the FY 2016-1 7. The assessee had made the purchases of Rs. 2,47,76,349/- from HJM Fuels Pvt Ltd during the F.Y 2016-1 7. The entire quantity of purchases made have been duly accounted for in the books of the assessee. We are hereby submitting the details of the purchases made from HJM Fuels Pvt Ltd during the F.Y 2016-17 alongwith quantity and value and the relevant copies of the Purchase Register duly highlighting the purchases made from HJM Fuels Pvt Ltd. We are also submitting the monthwise details of Purchase and Sale Quantity of Steam Coal undertaken by the assessee for the F.Y 2016-17 for your reference. (Annexure-B).
3) It is hereby informed that in respect of the above mentioned transactions of the purchase of goods from HJM Fuels Pvt Ltd. during the A.Y 2017-1 8, M/s HJM Fuels Pvt Ltd had collected TCS on sales of coal to the assessee as per the provisions of the Income Tax Act. The assessee had duly availed the TCS credit of the same, while filing the Income Tax Return and the said transactions are also being duly reflected in the 26AS Tax Credit Statement of the assessee. It is hereby informed that all the transactions of purchase of goods by the assessee from HJM fuels Pvt Ltd during the A. Y 2017-18 are being duly reflected in the 26AS statement and there is no discrepancy as regards the amount of purchases as well as the TCS collected on the same. The transactions as reflected in the 26AS statement duly gets tallied with the details of all the purchase transactions as reflected in the ledger account of HJM Fuels Pvt Ltd which has already been submitted before yourgoodself. We are hereby attaching a copy of the 26AS Tax Credit statement of the assessee for A.Y 2017-18 duly highlighting the details of the purchase transactions from HJM Fuels Pvt Ltd (Ref:Page 43 of Form 26AS) undertaken during the relevant assessment year and the TCS credit availed on the same for your reference. (Annexure-C).
4) As regards the sales of steam coal by HJM Fuels Pvt Ltd to the assessee, it had also collected VAT on the sales made as per the applicable rates under the Gujarat VAT Act, 2006 and the assessee had duly availed the Input Vat Credit of the same for discharging the output VAT liability. It is hereby informed that all the transactions of sales made by HJM Fuels Pvt Ltd to the assessee were duly reflected in the monthly VAT Returns filed by it. We are hereby furnishing a copy of the Vat Input Tax Credit Profile of the assessee for FY 2016-17 taken from the Gujarat Commercial Tax Website, duly reflecting the total sales made by HJM Fuels Pvt Ltd to the assessee during the F.Y 2016-17 and VAT collected thereon and also a copy of VAT Dealer Registration details of HJM Fuels Pvt Ltd for your reference. (Annexure-D). It can be seen from the said Input VAT Credit Profile that there is no discrepancy in the purchase transactions as reflected in the ledger account of the assessee and the corresponding sales transactions by HJM Fuels Pvt Ltd as reflected in the VAT ITC Profile of 2016-1 7 The amount of purchase transactions as reflected in the ledger account of the assessee and the corresponding sales transactions as shown by HJM Fuels Pvt Ltd duly gets tallied and there is no discrepancy with respect to the same.”
9. The assessment order further reveals that the Assessing Officer had accepted the fact of assessee submitting all the above evidences and we find that he does not point out any discrepancy in the same. This is evident from his findings recorded in this regard at page No.11 of the order, wherein he notes the assessee to have submitted copies of bills, invoices, delivery challans, ledger account and bank statement to discharge its onus to prove the genuineness of transactions with M/s. HJM Fuels Pvt. Ltd. The Assessing Officer also notes the fact of an affidavit being filed by the Director of M/s. HJM Fuels Pvt. Ltd. Shri Shailesh Bhikhabhai Vaghela admitting to having made sales to the assessee to the tune of Rs.2.47 crores on sale of Steam Coal having quantities of 7499.71 metric tonnes. The Assessing Officer admits the sales being duly recorded in the regular books of accounts of the assessee and considered while filing the income-tax return for the impugned year. The findings of the Assessing Officer in this regard are reproduced hereunder:-
“On the other side the assessee co. has submitted copy of bills/invoices, Delivery challans, ledger accounts and bank statements to discharge its onus to prove that the transactions made with M/s. HJM Fuels Pvt Ltd are completely genuine. Another fact to note in the matter is that Shri Shailesh Waghela- the director of M/s. HJM Fuels has filed an affidavit in this office wherein he has submitted a ledger account of the assessee company in its books showing transaction to the tune of Rs. 2.47 Cr on sale of Steam Coal having quantity 7499.71 metric tonne. Further it has also been admitted that the sales made to M/s. Vimal Coal Pvt Ltd are as per regular books of account and all such transactions are duly accounted in its books of account and have also been considered while filing Income Tax Return for AY 2017-18.”
10. It is evident from the above that the assessee had sufficiently discharged its onus of proving the genuineness of purchase of coal made by it from M/s. HJM Fuels Pvt. Ltd. with facts and evidences which were remained uncontroverted by the Assessing Officer. The ld. CIT(A), we have noted, has simply relied on the findings of the Assessing Officer. Considering the same , we hold, there is no case /basis with the Revenue for holding that the assessee had failed to discharge its onus of proving the genuineness of the transactions of purchase of coal from M/s. HJM Fuels Pvt. Ltd. to the tune of Rs.2.47 crores.
The orders of the authorities below reveal that their entire basis for holding so rests on the incriminating material found during survey at M/s. HJM Fuels Pvt. Ltd. which was an excel sheet containing details of transactions with various entities which was admitted by the owner of the Group to which M/s. HJM Fuels Pvt. Ltd. belonged to be mere accommodation entries before the Settlement Commission. The Department has noted the transactions in the excel sheet file to be reflecting the cash receipt and cash payment; thus, being in the nature of accommodation entries only with no actual transactions of goods involved.
The assessee, we have noted, had pointed out during assessment proceedings itself that this document was not credible. The assessee had pointed out that the excel sheet in fact reflected entries of cash payments on the debit site and journal entries on the credit side . Having so pointed out, it was further brought to the notice of the Assessing Officer that this fact relating to the incriminating material was not in consonance with the fact admitted by the Group before the Settlement Commission that the incriminating material reflected only cash transactions of receipt and payment and thus pertained to accommodation entries. It was, therefore, submitted that the credibility and evidentiary value of the incriminating material itself raised questions. The assessee pointed out that this incriminating material reflected information pertaining to transactions undertaken only upto 14.09.2016, i.e. not for the entire year. That the journal entries recorded therein which were reflected on the credit side actually reflected entries for payments made by the assessee by means of RTGS/Account Payee Cheques which were all accounted for in the books of the assessee. It was pointed out that treating them as journal entries in the incriminating material itself was misleading, as also the admission by the Group before the Settlement Commission that all transactions reflected therein pertained to cash entries. As for the entries of cash reflected in the debit side pertaining to cash payment made to the assessee by M/s. HJM Fuels Pvt. Ltd., it was submitted by the assessee that there was no concrete evidence ,i.e by way of cash receipt bearing the signature of the authorized person of the assessee or any other documentary evidence to substantiate that the cash had actually been received by the assessee or any other circumstantial evidences to prove that the cash had actually been paid to the assessee. It was, therefore contended that the contents of the so called incriminating material in the possession of the Department lack credibility and evidentiary value and could not be relied upon to arrive at any conclusion whatsoever for the case of the assessee. These facts find mention at paragraph No.5 of the submissions made by the assessee to the Assessing Officer as under:-
“5) Your goodself has mentioned in the notice that certain incriminating material has been seized from the premises of HJM fuels Pvt Ltd and the incriminating material also contains the ledger account of the assessee. You have provided us the details of our ledger account from the incriminating material and the reply given by HJM Fuels Pvt Ltd as regards the seized material in response to the summons issued to it pursuant to the survey proceedings undertaken in its case. The assessee is asked to explain, as to why on the basis of incriminating material so seized, appropriate addition/disallowance should not be made in the hands of the assessee. In response to the same, we are hereby furnishing certain important facts, as regards the incriminating material, for your kind consideration.
a) As per the details relevant to the assessee given by your office, the incriminating material i.e. the ledger account of the assessee under the tally file with the name “Training Module” reflects certain transactions undertaken during the year 2016-17. The said ledger account reflects the entries of cash payments made reflected on the debit side and joumal entries which are reflected on the credit side. The incriminating material reflects the details of the transactions upto 14.09.2016.
b) In respect of the incriminating material so seized and as per the reply given by HJM Fuels Pvt Ltd. in respect of the seized material, in response to the summons issued to it pursuant to the survey proceedings, the copy of which has been provided by your office to the assessee, it itself raises questions on the credibility and the evidentiary value of the incriminating material and whether it should be relied upon for the purpose of proceeding against the assessee. As per the copy of the reply given, it is furnished that all the entries appearing in the seized material i.e. entries in the file name “Training Module” are cash entries for the receipt of money and payments thereof. The assessee, while going through the incriminating material provided to it, found out that the transactions which are recorded as Journl Entries in the incriminating material and which are reflected on the credit side are actually reflecting certain entries for payments made by it towards purchase consideration to HJM Fuels Pvt Ltd. by means of RTGS/Account Payee Cheques, out of all the payments made by the assessee during the year. It must be noted that out of all the payments made by the assessee upto 14.09.2016 towards purchase consideration by means of Account Payee Cheques/RTGS, all the transactions are not being reflected in the incriminating material. It was claimed that the transactions in the incriminating material are entirely cash entries for receipts and payments. From the above facts, it is clear that receipts are by means of Account Payee Cheques/RTGS and are not cash receipts. The incriminating material therefore cannot be relied upon in respect of the fact that the cash receipts claimed, are actually receipts by RTGS/ Cheques. Another important point which requires due consideration is that entries are passed for receipts as Journal Entries instead of passing the same under the head “Receipts”. It must be noted that as per the standard accounting principles, amounts received are to be recorded under the Voucher Type “Receipts”.
c) It is hereby informed, that the entries mentioned on the credit side in the Incriminating Material have already been recorded as receipts in the bank account by HJM Fuels Pvt Ltd as per the contra confirmation ledger account submitted before your goodself. It must therefore be noted that there cannot be dual nature of receipts for a particular transaction. The incriminating material can therefore not be relied upon as the said receipts are claimed as cash receipts which are in fact the receipts in the bank account of HJM Fuels Pvt Ltd. The same can also be verified from the bank statements of the assessee reflecting the payments made to HJM Fuels Pvt Ltd which has been submitted before your goods elf.
d) As stated above, the entries in the incriminating material, which were claimed as cash receipts are actually receipts by RTGS/ Cheques. As per the incriminating material, it is claimed that cash payments have been made to the assessee on the basis of the entries which are being reflected on the debit side of the ledger. As per the details given by your office to the assessee, which have been received by your office from DCIT, Central Circle 1 (3), Ahmedabad as regards the relevant part of the Incriminating material which is relevant to the assessee, it must be noted that as regards the cash payments claimed to have been made, there does not exist any concrete evidence i.e. any cash receipt which bears the signature of the authorized person of the assessee/ any other documentary evidence to substantiate that cash has been actually received by the assessee or any other circumstantial evidence to prove that cash has been actually paid to the assessee. It is kindly requested to provide the details received by your office, if any, which contains any evidence/document or any circumstantial evidence acknowledging the receipt of cash by the assessee. The assessee has never received any cash payments which are claimed to be paid as per the incriminating material. It must be appreciated that merely on the basis of certain entries for payments made which are claimed to be cash payments made without any concrete documentary evidence, passed by a certain person in a ledger account which does not hold any credibility and evidentiary value in respect of the entries reflected therein, it would be unjust to conclude about the correctness of such payments, unless the same is backed by valid documentary evidence to show that cash payments have been actually made.
e) From the above facts, it is amply clear that it would be unjust to take the incriminating maternal as a base against the assessee when its credibility and evidentiary value cannot be trusted upon due to the reasons mentioned above. The incriminating material contains the details of certain transactions upto 14.09.2016 whereas as per the ledger account of HJM Fuels Pvt Ltd already submitted by the assessee, transactions of purchases made by the assesse and payments made for the same, have been carried out for the entire year. Contra Confirmation account of HJM Fuels Pvt Ltd has also been duly submitted by the assessee, which duly reflects the transactions undertaken from 1st April, 2016 to 31st March, 2017. The transactions claimed as cash receipts in the incriminating material ie the ledger account of the assessee, are actually receipts by Cheques/RTGS. Moreover, not all the transactions for payments made by the assessee upto 14.09.2016 are being found in the incriminating material. The payments made as per the incriminating material and which are claimed to be cash payments to the assessee are not backed by any concrete documentary evidence to establish the fact that cash has been actually paid to the assessee. It is quite clear that the ledger account as per the incriminating material seized, appears to be a fabricated account, wherein there appears an intention of the author of the incriminating material to make adjustments of his unaccounted cash, wherein in order to justify the unaccounted cash payments made to some unknown sources, certain payments made by the assessee out of the entire payments made upto 14.09.2016 are being fetched and passed as journal entries claiming the same to be cash receipts which are actually receipts by the mode of RTGS/Cheques and are actually the payments made by the assessee towards purchase consideration, and the source of the receipts is therefore artificially generated for the purpose of justifying the inflow of cash for the cash payments made. All the facts mentioned in detail above duly challenge the correctness of the details mentioned in the incriminating material and the said material could not be taken as a credible evidence to take further action against the assessee.
f) From the above facts and the explanations presented before your goodself, as regards the incriminating material, it can be inferred that the details contained therein cannot be considered to be credible and having evidentiary value. It must be noted that all the aspects like the manner in which the transactions have been recorded in the incriminating maternal, capturing certain transactions instead of all the transactions for payments made by the assessee upto 14.09.2016 by RTGS/Cheques and claiming the same as cash receipts, entries passed for cash payments which are without any concrete documentary evidence to establish that the cash payments have actually been made to the assessee, clearly challenge the correctness of the details of the incriminating material. It must therefore be appreciated that merely on the basis of a fabricated/manipulated ledger account prepared by a certain person, which fails to establish the credentials of the details contained therein, it cannot be taken as legal evidence for carrying out further proceedings. On the basis of above facts produced before your goodself, as regards the entries in the incriminating material, the assessee completely denies the correctness of the incriminating material and all the details contained therein The assessee has already submitted the ledger account of HJM Fuels Pvt Ltd for the F.Y 2016-17 from its books of accounts which duly reflects the transactions of purchases undertaken during the year and the payments made for the same. The said ledger reflects the correct position of the transactions undertaken by the assessee with HJM Fuels Pvt Ltd during the F.Y 2016-17.”
12. The assessment order, we find, does not deal with these factual contentions of the assessee raising questions on the credibility of the incriminating material with the Department. The Assessing Officer, in fact, we have noted, agrees with the assessee that all entries may not be cash entries and he notes that this fact has been revealed from the submissions made by the assessee before him during the assessment proceedings; but thereafter he still goes on to state that the seized material cannot be discarded totally. These findings of the Assessing Officer are at paragraph No.2.5 of his order as under:-
“2.5 In this case the information made available to this office contains incriminating document in the form of “Training Module” which has entries of both cash and non cash transactions and further it is also observed that such ledger account contains both unaccounted and accounted transactions which is evident from the submission made by the assessee company and M/s. HJM Fuels Pvt Ltd as some of the entries appearing in the said impounded ledger account are recorded in books of both the concerns. Further it is also important to note that M/s. HJM Fuels Pvt Ltd made submission before DDIT(Inv.), Unit-1(3), Ahmedabad vide its letter dated 04.05.2017 wherein it stated the entries appearing in the file named “Training Module” are all cash entries for receipt of money and payment thereof. However all the entries may not be cash entries as things have unfolded during the course of assessment proceedings. The seized material in the form of ‘Training Module’ also cannot be discarded totally.”
13. Since the Department has been unable to controvert the contentions made by the assessee that the incriminating material lack credibility and in fact the Assessing Officer agreed with the factual contentions of the assessee which questioned the credibility of the incriminating material, we agree with the Ld.Counsel for the assessee that the said incriminating material was therefore wrongly relied upon by the Assessing Officer for making addition in the hands of the assessee, treating the purchases to be bogus.
14. We have further noted that the Assessing Officer had asked the assessee to examine the Director of M/s. HJM Fuels Pvt. Ltd. if he did not agree with the findings of the investigation that M/s. HJM Fuels Pvt. Ltd. indulged in accommodation entries. To this, the assessee, we have noted, had filed a detailed reply pointing out that they had communicated with the Director of M/s. HJM Fuels Pvt. Ltd. for appearing before the Assessing Officer who had submitted his inability to do so because of his health condition, but at the same time had stated that all necessary documents evidencing the genuineness of the transactions had been filed by him along with his affidavit in this regard in response to summons issued to him by the Assessing Officer u/s 132(1) of the Act. As noted above, these facts have also remained uncontroverted by the Assessing Officer and in fact he has admitted to the Director of M/s. HJM Fuels Pvt. Ltd. having filed an affidavit admitting to having undertaken transactions of sales to the tune of Rs.2.47 crores with the assessee.
In the light of the above, the facts which undisputedly emerge from the above are that:-
(i) the assessee had established with evidence the factum of having made purchases from M/s. HJM Fuels Pvt. Ltd. to the tune of Rs.2.47 crores having furnished copies of bills of purchases and the mode of purchases made, Copy of VAT returns of M/s HJM Fuels Pvt. Ltd reflecting the said sales to the assessee and the copy of the Form No.26AS of M/s HJM Fuels Pvt. Ltd. reflecting the said purchases on which the TCS was collected and the credits of the same were claimed by the assessee was filed. The assessee had also submitted the quantitative tally of the purchases made by it during the entire year substantiated with Purchase Bills and Register and the sales made by it during the year substantiated by the Sales Register. Thus, in effect, on merits, the assessee had duly established the genuineness of the transactions of purchases undertaken by it with M/s. HJM Fuels Pvt. Ltd. The Assessing Officer has admitted to the said fact in his order and has been unable to point out any infirmity in the same.
(ii) The Director of M/s. HJM Fuels Pvt. Ltd. had submitted by way of affidavit of having entered into the transactions of sale of coal to the assessee, which has also been admitted by the Assessing Officer and no infirmity in the said affidavit pointed out by the Assessing Officer.
(iii) The assessee had pointed out discrepancy in the incriminating material found during the survey at M/s. HJM Fuels Pvt. Ltd. which formed the basis with the Department for holding the entire purchase made by the assessee to be bogus and had also pointed out why the said incriminating material could not be treated as credible and sufficient enough to be read adversely against the assessee, to which the Assessing Officer has not countered the same; but has in fact admitted to the lapses/ deficiencies pointed out by the assessee in the said incriminating material. The Assessing Officer however has given no reason for accepting the incriminating material despite the assessee pointing out defects in the same.
Thus, the incriminating material relied upon by the Revenue for making addition, we find was established to be not credible and having no evidentiary value.
15. It is evident from the above that there is no case /basis with the Department for treating the purchases made by the assessee from M/s. HJM Fuels Pvt. Ltd. to the tune of Rs.2.47 crores as bogus. The addition, therefore, made of the profit element embedded in the same to the tune of Rs.25,91,606/- is clearly, therefore, not sustainable on facts itself and the same is, therefore, directed to be deleted. The appeal of the assessee is accordingly allowed.
16. In effect, the appeal filed by the assessee is allowed.
Order pronounced in the open Court on 30/08 /2024 at Ahmedabad.
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