2019 (10) TMI 438 - AT - Income Tax

Disallowance of sundry creditors - bogus purchases - HELD THAT - The evidences on record clearly show that the purchases made from Mittal Paper Mart are total bogus purchases as Mittal Paper Mart itself was a bogus firm. Even in the statement of accounts of Mittal Paper Mart, there is no receivables from the assessee. Reliance on the order of the Additional Commissioner Grade 2 (Appeal 2) Commercial Tax Department will also do not good to the assessee as we cannot question the wisdom of the Additional Commissioner Appeal , Commercial Taxes Department. The documentary evidences brought on record emanating from the assessment proceedings supported by the remand report establishes only one fact that the credit entries in the name of Mittal Paper Mart P/o Shri Radhey Shyam Mittal is unexplained credit which is supported by evidences on record. Merely because the transactions have been done by account payee cheques would not suffice when the forensic expert s report clearly proves that the account was operated in the handwriting of Shri Puneet Jain, and all deposits and withdrawals were made in the handwriting of Shri Puneet Jain. Onus was upon the assessee to explain the genuineness of the credit entries and since Mittal Paper Mart was creditor of the assessee, Shri Radhey Shyam Mittal appeared before the Assessing Officer in response to the summons issued u/s 131 of the Act for and behalf of the assessee. Therefore, technically, Shri Radhey Shyam Mittal was assessee s own witness. All that is meant by the principle Audi Alteram Partem is that no party should be condemned unheard. Once the evidences are collected by the Assessing Officer have been placed before the assessee for his information, comment and criticism, it meets all the requirements of principles of natural justice. Natural justice certainly includes that any statement of a person before it is accepted against somebody else, that somebody else should have an opportunity of meeting it by way of interrogation or by way of comment does not matter so long as the party charged has a fair and reasonable opportunity to see, comment or criticise the evidences. The statement of Shri Radhey Shyam Mittal prompted the Assessing Officer to make further enquiry from the bank and the evidences collected from bank were referred to forensic expert for verification of handwriting and report of the forensic expert was made available to the assessee on which the assessee did not even care to make any comment. No merits in the submissions of the assessee. Addition is sustained. - Decided against assessee. Addition being unverified sundry debtors - HELD THAT - Such debit entries cannot become income of the assessee. The assessee was showing bogus sales out of bogus purchases and we have confirmed the addition on account of bogus purchases to the extent of ₹ 17.31 crores. Any addition out of the sales made out of the aforesaid purchases would result into double addition. We, therefore, do not find any merit in this addition of debit entry and the same is directed to be deleted. - Decided against revenue

Issues Involved:
1. Validity of the assessment under Section 143(3) of the Income Tax Act, 1961.
2. Disallowance of sundry creditors amounting to ?17,31,25,389.
3. Disallowance of sundry debtors amounting to ?8,58,44,005.
4. Overall assessment and rejection of books of account.
5. Penalty proceedings under Section 271(1)(c) and interest charged under Sections 234A, 234B, and 234C.

Issue-wise Detailed Analysis:

1. Validity of the Assessment under Section 143(3):
The assessee contended that the assessment was arbitrary, unjust, and illegal due to improper service of notices under Sections 143(2), 142(1), and 131. The Tribunal found that the Assessing Officer (AO) did issue a notice under Section 143(2), which was served at the residence of the assessee. This issue was not seriously contested before the CIT(A) and was dismissed as it was not seriously pursued by the assessee.

2. Disallowance of Sundry Creditors:
The AO disallowed sundry creditors amounting to ?17,31,25,389, considering them bogus. The AO issued a notice under Section 133(6) to M/s Mittal Paper Mart and summoned Shri Radhey Shyam Mittal under Section 131, whose statement revealed that the bank account of Mittal Paper Mart was operated by the assessee. The forensic expert confirmed that the handwriting on the pay-in slips and cheques matched that of the assessee's father, Praveen Kumar Jain. The Tribunal upheld the addition, stating that the evidences, including the forensic report, were not challenged by the assessee, and several opportunities for cross-examination were given but not availed by the assessee.

3. Disallowance of Sundry Debtors:
The AO added ?8,58,44,005 to the assessee's income, considering the sundry debtors as not genuine since the notices issued to them were returned undelivered. The Tribunal found merit in the assessee's argument that such debit entries cannot become income. Since the addition of ?17.31 crores on account of bogus purchases was confirmed, any further addition on account of sales from these purchases would result in double addition. Therefore, the addition of ?8,58,44,005 was deleted.

4. Overall Assessment and Rejection of Books of Account:
The assessee argued that the total assessment of ?25,94,15,964 was arbitrary and unjust, and the AO did not reject the books of account, which were duly audited. The Tribunal found that the AO had sufficient evidence to conclude that the purchases from Mittal Paper Mart were bogus. The forensic expert's report and the statement of Shri Radhey Shyam Mittal supported the AO's findings. The Tribunal upheld the overall assessment, except for the addition related to sundry debtors.

5. Penalty Proceedings and Interest Charges:
The assessee contended that the penalty proceedings under Section 271(1)(c) and interest charged under Sections 234A, 234B, and 234C were not according to law. The Tribunal did not specifically address this issue in the judgment, focusing instead on the primary contentions regarding the validity of the assessment and the disallowances of sundry creditors and debtors.

Conclusion:
The Tribunal upheld the addition of ?17,31,25,389 on account of bogus sundry creditors, deleted the addition of ?8,58,44,005 related to sundry debtors, and dismissed the contention regarding improper service of notice under Section 143(2). The appeal was partly allowed, confirming the overall assessment except for the addition related to sundry debtors.

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