Sh. Ashok Kumar v. Principal Commissioner Ofincome Tax

$~6 *IN THE HIGH COURT OF DELHI AT NEW DELHI +ITA 179/2022 SH. ASHOK KUMAR ..... Appellant Through:Mr. S. Krishnan, Advocate. versus PRINCIPAL COMMISSIONER OFINCOME TAX ..... Respondent Through:Mr.KunalSharma,Sr.StandingCounsel for Revenue with Ms. ZehraKhan, Advocate. % Date of Decision:07[th]September, 2022 CORAM:HON'BLE MR. JUSTICE MANMOHANHON'BLE MS. JUSTICE MANMEET PRITAM SINGH ARORA J U D G M E N T MANMEET PRITAM SINGH ARORA, J (ORAL): CM APPL. 27234/2022 Exemption allowed, subject to all just exceptions. Accordingly, present application stands disposed of. ITA 179/2022 1.Present income tax appeal has been filed challenging the order dated27[th]April, 2021, passed by the Income Tax Appellate Tribunal (‘ITAT’) inITA No. 7603/Del/2017 for the Assessment Year (‘AY’) 2013-14. 2.Briefly stated, the facts giving rise to the present appeal are that the appellant-assessee who is engaged in the business of trading in chemicalproducts filed his return of income for the relevant assessment year on 30[th]September, 2013, which was selected for scrutiny assessment leading to thescrutiny of the assessee’s sundry creditors. 3.During the course of the scrutiny, the Assessing Officer (‘AO’) issuednotices to four parties who as per the assessee have supplied material to himduring the period 2013-14. The AO conducted enquiries to verify thepurchases made from the said parties. The AO was not satisfied with thegenuineness of purchases made from three out of four parties and therefore,disallowed the amounts of purchases made from the three parties, whichcould not be verified, treating the same as bogus expenses. This led to anaddition of Rs. 48,01,597/- in the returned income. 4.The assessee contested the assessment order in appeal before theCommissioner Income Tax (Appeals) [‘CIT(A)’], which was dismissed. Theorder of the CIT(A) was challenged before the ITAT which has culminatedin the impugned order dated 27[th]April, 2021, whereby the ITAT hasrestored the issue to the file of the AO for deciding afresh the purchasesmade from the three parties, after taking into consideration the assessee’sstock reconciliation statement along with relevant invoices of sales,documents in support of delivery of goods from purchase parties. Further,the ITAT has directed the assessee to produce the relevant purchase partiesalong with their confirmation before the AO and further, directed the AO topass an order after providing an opportunity of being heard to the assessee. 5.During arguments, the learned counsel for the appellant stated that heis aggrieved by the direction of the ITAT to produce the purchase partiesbefore the AO and use of the expression ‘shall’ in the said direction. He states that the purchases in question pertain to financial year 2012-13 andthe direction to produce the said purchase parties is onerous. He states thatthere is independent corroborative evidence available on record in the formof VAT Returns filed by the assessee during the relevant period, which dulyreflects the purchases made by the assessee from the said purchase parties.He states that the said purchase parties have VAT registrations. He statesthat the assessee shall produce the quantitative details of the sales made bythe assessee during the financial year itself, which proves the quantum ofpurchases made by the assessee. 6.He submitted that he is willing to limit his prayer in the present appealto the extent that the direction of the ITAT in paragraph 7.1 of the impugnedorder which states that the assessee ‘shall’ produce relevant purchase partiesmay be modified to read as ‘may’, so that if the assessee is unable to tracethe said parties after such a long time no adverse inference is drawn againsthim. He states that this modification is necessary to prevent miscarriage ofjustice as it is possible that the assessee may be unable to trace the purchaseparties after a passage of almost a decade. 6.He submitted that he is willing to limit his prayer in the present appealto the extent that the direction of the ITAT in paragraph 7.1 of the impugnedorder which states that the assessee ‘shall’ produce relevant purchase partiesmay be modified to read as ‘may’, so that if the assessee is unable to tracethe said parties after such a long time no adverse inference is drawn againsthim. He states that this modification is necessary to prevent miscarriage ofjustice as it is possible that the assessee may be unable to trace the purchaseparties after a passage of almost a decade. 7.The operative portion of the ITAT order being paragraph 7 & 7.1reads as under:- “7.…In such circumstances, we are of the opinion that thepurchases claimed by the assessee are not free from doubt. Theassesseehastodemonstratesalescorrespondingtothepurchases. In the case relied upon by the assessee, the sales weremade to government department and thus sales were notdoubted, but the instant case it has not been brought on record,whether the sales are made to the government Department orexport sales. If the sales corresponding to the purchases are notdemonstrated, then possibility of the entire purchases beingdoubtful cannot be denied. If the corresponding sales aredemonstrated, then even if delivery of goods from purchase parties is not established, then possibility of purchase of goods incash from another parties, cannot be denied. In the facts andcircumstances of the case, we are of the opinion that withoutreconciliation of purchases and corresponding sales with thehelp of the stock register, sustaining the disallowance of entirepurchases is not justified. Therefore, we restore this issue back tothe file of the Assessing Officer for deciding afresh with thedirection to the assessee to file stock reconsideration statementalong with relevant invoices of sales, documents in support ofdelivery of the goods from purchase parties. 7.1The assessee shall also produce relevant purchase partiesalong with their confirmation. The Assessing Officer may carryout inquiries as deemed fit in the facts and circumstances of thecase and pass order after providing adequate opportunity ofbeing heard to the assessee. The ground raised by the assessee isallowed for statistical purposes. ” (Emphasis Supplied) 8.We have heard the learned counsel for the parties. Keeping in viewthe fact that the purchases in question pertain to FY 2012-13, and it may notbe possible for the assessee to locate the said parties, we modify thedirection in paragraph 7.1 of the ITAT order to the limited extent that theword ‘shall’ will be read as ‘may’: “7.1 The assessee may also produce relevant purchase partiesalong with their confirmation. The Assessing Officer may carryout inquiries as deemed fit in the facts and circumstances of thecase and pass order after providing adequate opportunity ofbeing heard to the assessee. The ground raised by the assessee isallowed for statistical purposes.” (Emphasis Supplied) 9.This shall, however, not absolve the assessee from discharging theonus of satisfying the AO with respect to the genuineness of purchases inquestion through independent corroborative evidence. The AO shall ITA 179/2022Page 4 of 5 consider afresh the documentary evidence produced by the assessee beforethe ITAT in accordance with the directions contained in the ITAT orderexcept to the limited extent modified above. “7.1 The assessee may also produce relevant purchase partiesalong with their confirmation. The Assessing Officer may carryout inquiries as deemed fit in the facts and circumstances of thecase and pass order after providing adequate opportunity ofbeing heard to the assessee. The ground raised by the assessee isallowed for statistical purposes.” (Emphasis Supplied) 9.This shall, however, not absolve the assessee from discharging theonus of satisfying the AO with respect to the genuineness of purchases inquestion through independent corroborative evidence. The AO shall ITA 179/2022Page 4 of 5 consider afresh the documentary evidence produced by the assessee beforethe ITAT in accordance with the directions contained in the ITAT orderexcept to the limited extent modified above. 10.The learned counsel for the Appellant has expressed an apprehensionthat the AO may not consider the evidence placed on the record of the ITATand draw an adverse inference against the assessee and raise a presumptionthat the ITAT did not accept the sufficiency of the said documents. We haveperused the impugned order and it is evident that the ITAT has not rejectedthe said documents or expressed any opinion on the admissibility of the saiddocuments. ITAT has remanded the matter back to the AO to verify the saiddocuments and the issue for a fresh decision. We accordingly direct the AOto consider all the documents produced by the assessee for verification ofthe purchases including the documents filed before the ITAT while decidingthe issue. 11.The present appeal is, therefore, partially allowed with the aforesaiddirections. 12.It is clarified that we have not examined the merits of the present caseand the contentions of the appellant as regard the genuineness of thepurchases shall be considered by the AO on its own merits after perusing theevidence filed and produced before the AO. MANMEET PRITAM SINGH ARORA, J SEPTEMBER 07, 2022/msh MANMOHAN, J ITA 179/2022