ACIT Vs Sanjay Kumar Kochar (ITAT Raipur)
ACIT vs. Sanjay Kumar Kochar ITA No.99/RPR/2018 (Date of Order : 26.07.2022) relating to deletion of addition on account of Bogus Purchases & Bogus Sales. Entire Addition was deleted.
As regards the infirmities in the vehicle registration numbers as was relied upon by the A.O for supporting his conviction that the assesee had only obtained bogus bills and not made any genuine purchases of the goods in question, we find that the assesee qua the said issue vide his letter dated 20.12.2016 that was filed before the CIT(Appeals), had came forth with necessary clarifications and correct vehicle numbers which matched with the weighment slips at CCI. On a perusal of the aforesaid factual position, we are of the considered view that now when the assessee had corrected the mistakes and provided the correct vehicle numbers which tallied with the weighment slips of CCI, then, there remained no occasion for doubting the authenticity of the assessee’s claim of having purchased the goods in question. As regards the sustainability of the adverse inferences that were drawn by the A.O qua the authenticity of the purchase transactions, for the reason that now when the registration of the sellers in question had been cancelled, therefore, the same belied the claim of the assessee of having purchased goods from the said concerns, we are afraid is a view arrived at on the basis of half-baked facts. As observed by the CIT(Appeals), and rightly so, though the registration of some of the suppliers had been cancelled by the Commercial Tax Department prior to the impugned purchases claimed by the assessee, but then on the said standalone basis it could not have been inferred that the business of the said suppliers was completely closed down, because there was evidence that goods were supplied by the said parties to the assessee through the brokers. Apart from that, as observed by the CIT(Appeals), we find that except for in the case of 4 suppliers registrations in the case of the remaining suppliers was cancelled by the Commercial Tax Department much after the end of the relevant financial year in which the assessee had purchased rice from them. Also, we concur with the view taken by the CIT(Appeals) that for the reason that the suppliers in question had not shown rice sales in their sales tax returns filed with the Commercial Tax Department, adverse inferences as regards the genuineness of the assessee’s claim of having purchased goods from them could not have justifiably been drawn, specifically when supporting documentary evidence was placed on record by the assessee. We are, also, in agreement with the view taken by the CIT(Appeals) that now when the assessee had made payments to the suppliers through banking channels i.e., RTGS/NEFT and A/c payee cheques, therefore, it was incorrect on the part of the A.O in absence of any supporting material to conclude that the amount in question would have been withdrawn and returned to the assessee after deducting commission on the same. Also, we find substance in the view of the CIT(Appeals) that though the A.O had pressed into service the statements of the brokers/accommodation entry provides wherein they had elaborated at length the modus-operandi of providing of bogus bills and accommodation entries, but in the absence of any direct and specific admission or reference by them, therein alleging that they had merely provided bogus bills and had not supplied any goods to the assessee; or that the invoices were false and fabricated, there was no justification on his part to have adopted a generalized approach for drawing adverse inferences in the hands of the assessee on the basis of the said statements. Apart from that, we concur with the observation of the CIT(Appeals) that as the assessee, viz. Shri Sanjay Kumar Kochar in his statement recorded on 16.12.2016 had at no stage admitted of having booked bogus purchases or procured accommodation bills, but on contrary had provided correct registration numbers of the vehicles in which material was transported from the suppliers to CCI, the same, thus, adduced his claim of having made genuine purchases from the aforementioned parties. As regards the support drawn by the A.O from the statement of Shri Suresh Sahu, a transporter who owned vehicle No.CG 04-J-4701 and had claimed that though in the bill (stated to have been issued by him) it was mentioned that goods had been transported to Nagpur, but his vehicles in question did not ply on the Nagpur route and plied on the Orissa route, we find, that as observed by the CIT(Appeals) the same had rightly been rebutted by the assesee by placing on record copy of weighment slips i.e, RST number 1128 of CCI, wherein, the aforesaid truck number was found mentioned on the invoice. Considering the aforesaid facts, we concur with the view taken by the CIT(Appeals) that as the A.O had not controverted the material which was submitted by the assessee during the course of the assessment proceedings, viz. vehicle numbers (which were corrected in the assessment proceeding), bank details, transportation details of trucks, custom clearance details, export sales and domestic sales documents, confirmation from exporters a/w. copies of account, but had chosen to focus more on the modus operandi adopted by the firms/brokers for providing bogus bills/accommodation entries, therefore, in absence of dislodging of the aforesaid supporting documents/materials there was no justification on his part in drawing adverse inferences as regards the authenticity of the purchases in question.
We, thus, in terms of our aforesaid observations, finding no infirmity in the well-reasoned view taken by the CIT(Appeals) as regards the authenticity of the purchases claimed by the assessee to have been made from the aforesaid suppliers/brokers, uphold his view to the said extent.
Adverting to the authenticity of the sale of goods in question, we find that the A.O holding a conviction that as the assessee had merely procured bogus purchase bills and had not made any genuine purchase of goods in question, therefore, there could be no occasion of having carried out any corresponding sales of the same, had thus on a pro-rata basis disallowed the corresponding sales and recharacterized the same as unexplained credits in the books of accounts of the assessee. As we have on the basis of our aforesaid deliberations concluded that the assessee had made genuine purchases, which thereafter, were proved to the hilt to have been sold to the aforementioned buyers i.e., both for export and domestic sales, therefore, finding no basis for drawing of adverse inferences as regards the authenticity of the sale transactions by the A.O., we concur with the well-reasoned view of the CIT(Appeals) who had rightly vacated the said addition. Accordingly, the order of the CIT(Appeals) who had vacated the recharacterization of the duly accounted sales of Rs.11,29,52,261/- of the assessee as unexplained cash credits by the A.O is also upheld. Thus, the grounds of appeal raised by the Revenue are dismissed in terms of our aforesaid observations.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The present appeal filed by the Revenue is directed against the order passed by the CIT (Appeals)-II, Raipur, dated 28.03.2018, which in turn arises from the order passed by the A.O under Sec. 143(3) of the Income-Tax Act, 1961 (for short ‘the Act’) dated 30.12.2016 for assessment year 2014-15. Before us the Revenue has assailed the impugned order on the following grounds of appeal:
“1. “Whether on points of law and on facts and circumstances of the case, the Ld. CIT(A) was justified in considering the bogus purchases of Rs.10,17,58,794/- as genuine and admissible expenditure; as against the findings of the AO that these purchases are nothing but bogus purchases managed through accommodation entries?”
2. “Whether on points of law and on facts and circumstances of the case, the Ld. CIT(A) was justified in giving a finding that the books of account of the assessee as reliable, as against the rejection of the books of account of the assessee by the AO by applying the due provision of law u/s 145(3) of the I.T. Act?”
3. “Whether on points of law and on facts and circumstances of the case, the Ld. CIT(A) was justified in ignoring the findings of the Commercial Tax Department Chhattisgarh, and whose findings regarding the bogus purchases through accommodation entries have been relied upon by the A.O. in his assessment order?.”
4. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in ignoring the affirmation on oath in statements recorded u/s 131 of the I.T. Act by the proprietors of the concerns, during investigation by the Income Tax Department, thereby admitting and confessing on oath that these concerns are bogus entities indulging in accommodation entries and money laundering?”
5. “Whether on points of law and on facts & circumstances of the case, the Hon’ble ITAT was justified in ignoring the ratio of the landmark decision of the Supreme Court in the case of McDowell and Co. Ltd. Vs Commercial Tax Office 154 ITR 148(SC), as the same ration of this landmark decision is squarely applicable to the facts and circumstances of this instant case this assessee?”
6. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in ignoring the ratio of the ITAT Mumbai in the case of Soman Sun City VS. JCIT, as the same ration of this decision is squarely applicable to the facts and circumstances of this instant case of this assessee?”
7. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in ignoring the ratio of the Hon’ble Delhi High Court in the case of CIT vs Arun Malhotra 47 com 385 (Delhi) / [2014] 363 ITR 195, as the same ration of this decision is squarely applicable to the facts and circumstances of this instant case of this assessee?”
8. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in accepting the fresh evidence produced by the assessee without allowing the AO/TPO, proper opportunity to examine the same, thereby violating the provision on law under Rule 46A of I T Rules?”
9. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) was justified in giving a finding which is cont4rary to the evidence on record as the findings of the Sales Tax Department, Chhattisgarh, nonexistence of the alleged entity at the given address, cancellation of registration of alleged entity before the purchases and non-transportation of the material through vehicle as mentioned in purchase bill as relied upon by the AO in his assessment order a finding which is factually incorrect thereby rendering a decision, which is perverse?”
10. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) has erred in law by holding the decision in favour of the assessee and against the revenue though there is no nexus between the conclusion of fact and primary fact upon which without conclusion is based?”
11. “Whether on points of law and on facts & circumstances of the case, the Ld. CIT(A) has erred in allowing the assessee’s appeal that the said transactions are genuine.”
12. “The order of Ld. CIT(A) is erroneous both in law and on facts.
13. Any other ground that may be adduced at the time of hearing.”
2. Succinctly stated, the assessee which is the engaged in the business of trading in rice under the name and style of M/s. Digi Trader, Raipur, a proprietary concern had filed his return of income for the assessment year 2014-15 on 04.11.2014, declaring an income of Rs.15,07,690/-. Subsequently, the case of the assessee was selected for scrutiny assessment u/s.143(2) of the Act.
3. During the course of the assessment proceedings, it was gathered by the A.O on the basis of information received from the Commercial Tax Department, Chhattisgarh that the assessee was one of the beneficiaries who had procured bogus purchase bills from certain accommodation entry providers. Apart from that, it was observed by the A.O that survey proceedings conducted by the Income-Tax Department on certain rice millers and traders of rice and Kanki from 15.03.2016 to 18.03.2016 revealed that various concerns by availing the services of brokers/entry providers had provided bogus bills to rice millers and rice traders. Also, it was observed by the A.O that pursuant to a survey action conducted on Nagarik Sahakari Bank, Raipur the bank accounts which were opened by the brokers/entry providers to facilitate providing of accommodation bills had surfaced. On a perusal of the purchase ledger of the assessee concerned, it was noticed by the A.O that the latter had claimed to have made purchases of rice and Kanki from 17 traders whose names were found in the list of the bogus concerns during the course of aforesaid survey proceedings conducted on the rice millers/traders. After deliberating at length on the various facets of the impugned purchase transactions, viz. (i) statements of the proprietors of bogus concerns recorded u/s.131 of the Act; (ii) enquiries in respect of vehicles through which transportation of rice was claimed to have been carried out; (iii) enquiries in respect of bogus concerns so carried out by the Commercial Tax Department; (iv) statements u/s.131 of the Act of the brokers through whom the assessee had claimed to have made purchases from the aforesaid tainted concerns; and (v) difference in the signatures of the owners of the concerns through whom purchases were claimed to have been made as in comparison to that appearing on the purchase bills and statements recorded on oath, the A.O being of the view that the assessee had failed to fortify his claim of having made genuine purchases of Rs.10,17,58,794/- from the aforementioned 17 parties, thus, after rejecting its books of account u/s. 145(3) of the Act dubbed the impugned purchase transactions as bogus and added the entire amount of Rs.10,17,58,794/- to the returned income of the assessee.
4. Also, being of the view that now when the assessee had not made any genuine purchases in question, therefore, there was no question of sale of the same, the A.O held the corresponding sales on a pro-rata basis as unexplained credits in the books of account of the assessee. Accordingly, the A.O on the basis of his aforesaid deliberations made a further addition of Rs.11,29,52,261/- i.e., by recharacterizing the impugned sales as unexplained credits in the books of account of the assessee. On the basis of his aforesaid observations the A.O vide his order passed u/s.143(3), dated 30.12.2016 determined the income of the assessee at Rs.21,62,18,740/-.
5. Aggrieved, the assessee carried the matter in appeal before the CIT(Appeals). Considering the fact that purchase of goods in question was not only supported by the description of the suppliers in the respective invoices, but also the details as regards the weight, quantity and quality of rice, transportation vehicle nos., names of drivers, bank statement of the assessee showing payments made, confirmations of the brokers and delivery of the goods at the container depot of M/s. Container Corporation of India (CCI), a Government of India undertaking having its address at Inland Container Depot, Near Railway Store Depot, Kapa, Raipur a/w. loading of the goods in the railway wagons for which bills were issued by the railways and thereafter had been cleared by the assessee, the CIT(Appeals) was of the view that the purchases in question could not be said to be bogus. Accordingly, the CIT(Appeals) on the basis of his exhaustive deliberations qua the various facets of the issue in hand, Page 24 to 29 – Para 14 to 22 of his order, vacated the view taken by the A.O that the assesee had not made any genuine purchases. Adverting to the genuineness of the sales as claimed by the assessee, it was observed by the CIT(Appeals) that sale of rice was supported by requisite documentary evidence. It was observed by the CIT(Appeals) that the confirmation of the accounts a/w. account statement of the assessee in the books of account of the exporters duly evidenced the sales made by the assessee. Backed by his aforesaid observations the CIT(Appeals) was of the view that the A.O had wrongly held the sales made by the assessee as bogus. Accordingly, the CIT(Appeals) on the basis of his aforesaid observations vacated the addition made by the A.O and allowed the appeal.
6. The Revenue being aggrieved with the order of the CIT(Appeals) has carried the matter in appeal before us.
7. We have heard the ld. authorized representatives of both the parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial pronouncements that have been pressed into service by the ld. AR to drive home his contentions.
8. As is discernible from the assessment order, information received by the A.O from the Commercial Tax Department, Chhattisgarh a/w. that which had surfaced in the course of survey proceedings conducted on the rice millers and traders of rice and Kanki from 15.03.2016 to 18.03.2016, revealed, that the assessee had claimed to have made purchases aggregating to Rs.10,17,58,794/- from the following 17 tainted parties:
