AO cannot make an addition if the assessee has produced all relevant GST and Billing documents

The Income Tax Appellate Tribunal ruled in favour of an assessee, Smt. Yamuna Mundhra, concerning an assessment for the year 2007-08. The tribunal found that the Assessing Officer (AO) erred in making an addition to the assessee's income. This was because the assessee had provided all relevant GST and billing documents for the purchase of cut and polished diamonds, along with proof of payment via demand drafts. The addition was based on information obtained from a third party without independent verification, which the tribunal deemed insufficient grounds for disallowing the expense.

IN THE INCOME TAX APPELLATE TRIBUNAL “C(SMC)” BENCH, KOLKATA

[Before Shri A. T. Varkey, JM]

I.T.A. No. 568/Kol/2020
Assessment Year:2007-08

Smt. Yamuna Mundhra
(PAN: AIJPM4068B)

Vs. 

Income-tax Officer, Wd-30(4), Kolkata.
Appellant Respondent

Date of Virtual Hearing 17.02.2021
Date of Pronouncement 19.02.2021

For the Appellant Shri Ravi Tulsiyan, FCA
For the Respondent Shri Jayanta Khanra, JCIT, Sr. DR

ORDER

This is an appeal preferred by the assessee against the order of the Ld.CIT(A)-8, Kolkata dated 16.09.2020 for AY 2007-08.

2. The assessee has raised eight grounds of appeal of which ground Nos. 7 and 8 are general in nature so, does not require any adjudication. Ground Nos. 1 and 2 are legal issue challenging the reopening of the assessment proceedings and ground nos. 3 to 6 are in respect of the merits of the addition which are reproduced as under:

“3. That, the Ld. C.I.T.(A) further erred in having upheld the order passed u/s.143(3)/147 ofthe Act in spite of the fact that the Ld. AO did not dispute the authenticity of Invoices issued by the seller of cut & polished diamond with description of weight, rate, GST TIN No. etc. and the details of payments of Rs.21,79,400/- by Demand Drafts and that being so, he has grossly erred in law in upholding the order passed solely on borrowed information and without application of any independent mind.

4. That, the Ld. Revenue authorities went wrong in having disallowed/added the sum of Rs.21,79,400/- to the total income assuming the purchase of diamonds as bogus solelyacting on the alleged statement of one Rajendra Jain during search operation obtained at the back of the appellant and return of notice sent to the said person at the address provided by the assessee when the assessment was based on the statement obtained from that person during search operation, thus establishing his identity.

5. That, the Ld. Revenue authorities erred in suspecting the investment of Rs.21,79,400/- madeon purchase of diamond from M/s.Vitrag Jewels out of her personal capital as bogus and accommodation entry having been provided by one Rajendra Jain of the said firm in spite of the fact that the source of the investment was the appellant's S.B.A/c. duly disclosed in the ROI and sec.69C of the Act applies only when the source remains unexplained, which was not the case of the appellant herein.

6. That, as the addition made in the assessment and upheld by the Ld. CIT(A), resulting in erroneous computation of higher income than disclosed by the appellant in the ROI deserves to be deleted, the interest charged of Rs.6,80,544/- u/s. 234B of the Act was uncalled for and liable to be quashed.”

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