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Judgment
Per Raj Kumar Chauhan, Judicial Member:
The appeal of the assessee is directed against the order dated 03.09.2025 of Id. CIT(A)/Addl./JCIT(A)-1, Visakhapatnam, passed u/s 250 of the Income Tax Act, 1961 (hereinafter referred to as "the Act") wherein the addition made vide assessment order dated 03.12.2019 by the Assessing Officer to the tune of Rs.10,22,554/- on account of accommodation entries were confirmed and the appeal of the assessee was dismissed.
Facts in brief as culled out from the impugned order in para 3.1 are as under:
"The assessee company, was incorporated on 10-09-1996 The details of directors of the assessee company during the year under consideration are hereunder:- 1. Sh Vikas Moth, P 79. Block B, Lake Town, Kolkata 700065. 2. Sh. Sanjay Garg, 209, Raja Garden, New Delhi 11 0015. It was engaged, during A Y. 2012-13, in the business of trading. It filed c-return of income vide acknowledgment No 496900121280912 on 28-09-2012 declaring income of Rs. 6,10,920/-. The return was accepted u/s 143(1). Subsequently, information was received from the Investigation wing that the assessee company has received unexplained sums as accommodation entries, during the relevant AY, from a company named M/s Tirumala Realcon Pvt. Ltd. to the extent of Rs. 10,22,554 on account of share premium. On the basis of this information Ld. AO reopened the assessment u/s 147 and issued notice on 26.03.2019 u/s 148. In response to above notice Income Tax Return vide acknowledgment no. 463521141130419 was filed by assessee company on 13-04-2019 for A.Y. 2012-13 UNDER PROTEST. The Copy of the reasons recorded by the Id. AO were provided to the assessee company. Also, objection were filed by the assessee company vide letter dated 13-06-2019, which were disposed off by the Ld. AO vide his order dated 17-06-2019. In response to notices issued u/s. 143(2) and 142(1) of the Act, the AR of the assessee company attended, from time to time and furnished all details, documents and explanation as required by the Ld. AO. The assessee company has submitted that the amount of Rs. 10,22,554/- v/as received on account of sale of plywoods made to M/s Tirumala Realcon Pvt. Ltd. against the Bill No. 1149 amounting to Rs. 4,99,434/- and bill no. 1150 amounting to Rs.5.23,120/-. The assessee company, in order to prove the genuineness of the transactions, has submitted the following documents:- (i) Extract of ledger account of M/s Tirumala Realcon Pvt. Ltd. (ii) Copy of account statement cum confirmation of M/s Tirumala Realcon Pvt. Ltd. (iii) Copy of sale bills, (iv) Copy of gate pass issued by M/s Tirumala Realcon Pvt. Ltd. as evidence of delivery of goods. M/s Tirumala Realcon Pvt. Ltd. also submitted on 25-11-2019 vide letter dated 20-11-2019 that they have purchased plywoods from the assessee company for Rs. 10,22,554/- during F.Y. 2011-12. The copy of financial accounts and ITR wore submitted ns supporting documents. The Id AO issued show cause notice on 01-11-2019 to show-cause ns to why the amount received by the assessee company from M/s Tirumala Realcon Pvt. Ltd. during F.Y. 2011-12 should not be (rented as unexplained and unaccounted cash credit and ultimately made addition of Rs.10,22,554/-."
During the assessment proceedings, the AO has written a letter u/s 133(6) of the Act to M/s Tirumala Realcon Pvt. Ltd. on 19.09.2019 asking for various details. It is stated that the said letter was duly served upon M/s Tirumala Realcon Pvt. Ltd. (purchaser) on 24.09.2019 but the purchaser has not filed any submissions/details on the given date. Accordingly, the assessee company was asked to produce the Director of the assessee company and the purchaser company for cross examination to prove the genuineness of the transaction. The assessee company vide letter dated 21.11.2019 has submitted the reply clarifying that the purchaser M/s Tirumala Realcon Pvt. Ltd. had responded to the letter issued to them u/s 133(6) of the Act by sending a reply via speed post from Kolkata. Further the assessee has clarified that they have sold plywood to M/s Tirumala Realcon Pvt. Ltd. which was delivered to their site at 22, East Topsia Road, Kolkata through a private van. Further, the assessee submitted copy of sale bills and also gate pass issued as evidence of delivering of goods. It was therefore submitted by the assessee that the transaction was very much genuine in relation to their business and as such cannot be considered as unexplained and unaccounted income u/s 68 of the Act.
The Id. AO, however did not agree to the contention of the assessee on the ground that the perusal of the financial accounts of M/s Tirumala Realcon Pvt. Ltd. (purchaser) revealed that M/s Tirumala Realcon Pvt. Ltd. had not traded any items during the year as it is not accounted from the profit and loss account under the head “purchases or sales or closing stock”. It was further observed by the AO that the purchases of plywood by M/s Tirumala Realcon Pvt. Ltd. from the assessee company is not supported by any audited accounts of M/s Tirumala Realcon Pvt. Ltd. as it is not reflected in profit and loss account as purchase, in inventories, in fixed assets or in closing stock etc. Hence, the Id. AO concluded that these facts establish beyond doubt that the purchase of plywood by M/s Tirumala Realcon Pvt. Ltd. is self created story by the assessee company. The AO further concluded that the identity of the party and creditworthiness of party is not in dispute but the assessee has failed to prove genuineness of the transaction carried out by with the purchaser. Hence, the AO proceeded make addition of Rs.10,22,554/- u/s 68 of the Act having been received by the assessee as accommodation entry.
Aggrieved by the assessment order, the assessee filed appeal before the Id. CIT(A) who has dismissed the appeal holding that the reopening of the assessment by the AO was valid u/s 147 of the Act. The Id. CIT(A) has also confirmed the addition of Rs.10,22,554/- u/s 68 of the Act, observing that the assessee has failed to prove the genuineness of the transaction in view of the discussion in para 16 to 17 of the assessment order. The Id. CIT(A) has simply confirmed the observation of the Id. AO with regard failure of the assessee to prove the genuineness of the transaction merely on the ground that the purchase of plywood by M/s Tirumala Realcon Pvt. Ltd. is not shown in the profit and loss account of the purchaser.
Aggrieved by the impugned order, the assessee is in appeal before us and has raised the following the grounds of appeal:
'1. General Ground
The order passed by the learned CIT(A) sustaining the addition of ₹10,22,554 made by the Assessing Officer under section 68, and upholding the validity of reopening under section 147, is bad in law and on facts.
A. Grounds Challenging Reopening u/s 147/148 2.
2.The learned CIT(A) erred in law and on facts in upholding the reopening u/s 147, despite the fact that the Assessing Officer acted mechanically and without independent application of mind to the information allegedly received from the Investigation Wing.
3.The learned CIT(A) failed to appreciate that the reasons recorded by the Assessing Officer were vague, incorrect, and factually erroneous—particularly the assumption that the amount of ₹10,22,554 represented "share premium", whereas the assessee had no such transaction either in its books or in its balance sheet.
4.The learned CIT(A) erred in not appreciating that the reasons recorded were based solely on borrowed satisfaction and lacked the mandatory live-link between material and formation of belief, thereby rendering the reopening void ab initio.
5.The learned CIT(A) failed to appreciate that the Assessing Officer, despite being in possession of the assessee's audited financial statements, alleged escapement of income based on a presumption that is incompatible with the recorded financials.
6.That the reasons recorded lack the mandatory live link between material and formation of belief, and therefore the initiation of reassessment is void ab initio.
7.That the learned CIT(A) erred in holding that the presence of "information" automatically validates reopening, despite settled law requiring independent satisfaction based on demonstrable, tangible material.
8.That the reassessment is invalid as the Assessing Officer wrongly proceeded under the belief that income in the nature of share capital/premium had escaped assessment when no such issue existed in the assessee's case.
B. Grounds Challenging Addition u/s 68
9.The learned CIT(A) erred in law and facts in sustaining the addition of ₹10,22,554 under section 68, ignoring that the amount represented legitimate sales made by the assessee to M/s Tirumala Realcon Pvt. Ltd.
10.The learned CIT(A) erred in upholding the addition despite the assessee furnishing complete documentary evidence, including invoices, delivery gate pass, ledger confirmation, and bank statement, thereby fully discharging the onus under section 68.
11.The learned CIT(A) erred in relying on alleged deficiencies in the buyer's books, although the assessee has no control over the buyer's accounting treatment and the buyer had confirmed the purchase.
12.The learned CIT(A) failed to appreciate that the alleged "non-reflection" of purchases in the buyer's profit & loss account was explained as part of work-in-progress and duly reflected under "Land at Topsia", where additions far exceeding the disputed amount were recorded.
13.The learned CIT(A) erred in upholding the addition without providing proper opportunity for cross-examination or independent inquiry as mandated by principles of natural justice.
C. Other Grounds
14.The learned CIT(A) erred in upholding levy of interest u/s 234A/B/C/D which is consequential in nature.
15.The learned CIT(A) erred in sustaining initiation of penalty proceedings u/s 271(1)(c).
16.The appellant craves leave to add, amend, modify, or withdraw any grounds of appeal at the time of hearing."
Ground Nos. 1 to 8 pertains to the challenge of reopening u/s 147/148 of the Act. Ground Nos. 9 to 13 pertains to the confirmation of the addition of Rs.10,22,554/- by the Id. CIT(A) which were added u/s 68 of the Act.
We have heard the Id. AR and the Id. DR. We first proceed to decide the ground Nos. 9 to 13 which pertains to the addition made in the assessment order and confirmed in the impugned order. The Id. AR on behalf of the assessee has argued that the Id. AO has made the addition on the basis of conjecture and surmises as the AO has failed to consider the sales bills, delivery proof with respect to the transaction in question because the assessee has duly furnished ledger account of the customer, bank statement evidencing receipt, customer confirmation, sale invoices, delivery gate pass and these things were the required things to prove the genuineness of the transaction. It is further argued that onus upon the assessee was duly discharged by filing the necessary details. In that regard, the Id. AR has referred page 185 of the paper book containing confirmation of the account of the seller extracted below as under:
To : Tirumala Realcon Pvt Ltd (Dr) 51, Shakespeare Sarani, 2nd Floor, Kolkata-700 017
From GCL (INDIA) PVT LTD (FY. 2008-2012) 110, COLLEGE STREET KOLKATA- 700012
Dear Sir/Madam,
Date : 1-Apr-2012
Sub: Confirmation of Accounts 1-Apr-2011 to 31-Mar-2012
Given below is the details of your Accounts as standing in my/our Books of Accounts for the above mentioned period.
Kindly return 3 copies stating your I.T. Permanent A/c No., duly signed and sealed, in confirmation of the same. Please note that if no reply is received from you within a fortnight, it will be assumed that you have accepted the balance shown below.
Date Particulars Debit Amount Date Particulars Credit Amount 3-Jun-2011 Bank 4,50,000.00 9-Jul-2011 Bank 4,50,000.00 22-Aug-2011 Sales - 1149 4,99,434.00 22-Aug-2011 Sales - 1150 5,23,120.00 3-Jan-2012 Bank 2,00,000.00 10-Jan-2012 Bank 1,22,554.00
Closing Balance 13,22,554.00 12,22,554.00 2,00,000.00 12,22,554.00 12,22,554.00 I/We hereby confirm the above
It is further submitted that the corresponding bills are placed at page 109, 110 and 111 of the paper book where vehicle number is also mentioned. On perusal of these documents, we are convinced that the primary onus to prove the genuineness of the transaction has been duly proved by the assessee and there is no doubt in our mind that the assessee has succeeded in establishing that he has made the sale to the purchaser M/s Tirumala Realcon Pvt. Ltd.
The Id. DR, on the other hand, has taken us to page 8 para 14.1 of the assessment order extracted below as under:
"14.1The details of above items as per Profit and Loss account and Balance Sheet of M/s. Tirumala Realcon Pvt. Ltd. is detailed below:-
1.Purchases during the year - Nil
2.Sales during the year - Nil
3.Closing Stock- Nil
4.The details of Tangible Fixed Assets as on 31.03.2012 as per Note No.8 of Balance Sheet is given below:-
Sl. No Name of Assets Addition during the year in Rs. Value as on 31.03.2012 in Rs. 1 Leasehold Land 2,46,63,405 2,46,63,405 2 Computers 31,200 26,999 3 Office Equipment 39,500 38,008 4 Motor Car 15,01,900 12,81,851 1.The details of Inventories as on 31.03.2012 is given below as per Note No. 11 of Balance Sheet is given below:-
| Sl. No | Name of Assets | Addition during the year in Rs. | Value as on 31.03.2012 in Rs. |
|---|---|---|---|
| 1 | Land at Baniakhari | 2,62,82,620 | 2,62,82,620 |
| 2 | Land at Topsia | 9,43,74,101 | 21,64,69,538 |
On the basis of above documents, the Id. DR has argued that the AO has rightly made the addition because the purchases of plywood by M/s Tirumala Realcon Pvt. Ltd. from the assessee is not supported by audited account of M/s Tirumala Realcon Pvt. Ltd. as it is not reflected in the profit and loss account as purchase, in inventories, in fixed assets or in closing stock etc. In reply to these submissions of the Id. DR, the Id. AR has clarified and submitted that despite confirmation and evidence, the Assessing Officer rejected the explanation of the assessee regarding genuineness of the transaction solely on the basis that the said purchases was not reflected by the buyer's P&L account. The Id. AO has failed to notice that the assessee has explained that "the purchase was part of project related work-in-progress and recorded under "land at Topsia", where the addition to WIP during the year exceeded Rs.9,00,00,000/-. It is further argued that the AO neither conducted independent enquiry nor provided opportunities of cross-examination and also not disputed the documentary evidence furnished while treating the said sales as unexplained cash credit u/s 68 and added Rs.10,22,554/-. It is further argued that the Id. CIT(A) has not considered the submissions and has simply confirmed the addition on the basis of observation of the AO without considering the submissions of the assessee.
We have considered the rival submissions and examined the record. The question arises before us is whether the sale by assessee is duly proved by documentary evidence which had not been disputed in any manner by the AO? Further can the genuineness of the transaction be disputed merely doubting the purchases made by the purchaser on the ground that the said purchases are not reflected in the audited accounts and not being part of the P&L account of the purchaser? Can an action supported by documentary evidence of the assessee be denied and held to be invalid by inaction on the part of the purchaser? The possible answer is no. In order to prove the genuineness of the transaction u/s 68 of the Act, the assessee was required to discharge primary onus by submitting necessary documents. As observed earlier by us, the assessee has sufficiently discharged the primary onus by proving all the necessary documentary details. The assessee has sufficiently proved the delivery of the goods even by mentioning the name of the vehicle through which the goods were transported. All these documentary evidence has not been questioned or denied by the Assessing Officer during assessment order. Once the assessee has discharged the primary onus of genuineness of the transaction, the Assessing Officer was required to contradict the same by bringing sufficient evidence on record to prove that the genuineness of the transaction has not been established. For these reasons, we are of the considered opinion that the Assessing Officer has made the addition on the basis of conjecture and surmises while ignoring the documentary evidence produced by the assessee. The Id. CIT(A) has not decided the appeal as per the provision of section 250(6) of the Act as the Id. CIT(A) has simply confirmed the assessment order and observation of the AO without considering the valid reasons given by the assessee and the documentary evidence furnished by the assessee in support of the genuineness of the transaction. For these reasons, the ground Nos. 9 to 13 raised by the assessee are decided in favour of the assessee and the addition made by Assessment order is quashed with the direction to the Assessing Officer to delete the addition of Rs.10,22,554/-.
Since we have decided the appeal on merit while deleting the addition in favour of the assessee, we do not deem it necessary to decide the ground Nos. 1 to 8 pertaining to the validity of the reopening of the assessment. In view of our finding on ground Nos. 9 to 13, the decision on ground Nos. 1 to 8 pails into insignificance and rendered academic.
In the result, the appeal of the assessee is allowed.