Tribunal allows appeal, deletes disputed cash, purchases additions, emphasizes sales acceptance, rejects books.

The Tribunal allowed the appeal of the assessee, deleting all disputed additions related to cash found during a survey, purchases from multiple parties, and rejection of books of accounts by the AO. The Tribunal emphasized that disallowance of purchases cannot be made when sales are accepted and books of accounts are not rejected. The order was pronounced on 26.02.2020.

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Issues Involved:
1. Validity of the order passed by the CIT(A).
2. Addition of Rs. 9,02,200 on account of cash found during the survey.
3. Addition of Rs. 1,71,95,333 in respect of purchases made from 13 parties.
4. Addition of Rs. 49,36,160 in respect of purchases made from three specific parties.
5. Justification of disallowance of purchases when sales are accepted.
6. Rejection of books of accounts by the AO.

Detailed Analysis:

Issue 1: Validity of the order passed by the CIT(A)
The assessee contended that the order passed by the CIT(A) was erroneous both in law and on facts. However, this ground was not specifically adjudicated upon as it was a general contention.

Issue 2: Addition of Rs. 9,02,200 on account of cash found during the survey
The assessee argued that the cash balance as per the books was Rs. 7,02,030, not Rs. 2,45,290 as considered by the AO. The discrepancy of Rs. 4,45,460 was claimed to belong to a joint venture company and the directors, not the assessee. The Tribunal found that the AO incorrectly picked the figure of Rs. 2,45,290 and ignored the explanation regarding the difference. Consequently, the addition of Rs. 9,02,200 was deemed unsustainable and was deleted.

Issue 3: Addition of Rs. 1,71,95,333 in respect of purchases made from 13 parties
The assessee provided confirmations and income tax returns from the 13 parties in response to notices issued under section 133(6). Despite this, the AO made the addition without rejecting the books of accounts as required under section 145 of the Act. The Tribunal noted that the AO did not doubt the sales made by the assessee and found the purchases to be genuine based on the documentary evidence. Thus, the addition was deleted.

Issue 4: Addition of Rs. 49,36,160 in respect of purchases made from three specific parties
Similar to the previous issue, the assessee provided confirmations and income tax returns from the three parties. The Tribunal observed that the books of accounts were audited and not rejected under section 145 of the Act. Therefore, the addition was deemed unsustainable and was deleted.

Issue 5: Justification of disallowance of purchases when sales are accepted
The Tribunal agreed with the assessee's contention that disallowance of purchases cannot be made when the sales are accepted. This view was supported by various case laws, including:
- Smt. Sudha Loyalka vs. Income Tax Officer, where it was held that sales could not be made without purchases.
- Shri Gems vs. Income Tax Officer, where it was stated that if sales and gross profit are accepted, purchases cannot be considered bogus.

Issue 6: Rejection of books of accounts by the AO
The Tribunal emphasized that no disallowance of purchases can be made if the books of accounts are not rejected. This principle was supported by several case laws, including:
- Manoj Sharma vs. ITO, where it was held that if the quantitative details of stock, purchases, sales, and closing stock are accepted, purchases cannot be added under section 69C.
- CIT vs. Nikunj Eximp Enterprises (P.) Ltd., where the Bombay High Court held that purchases cannot be considered bogus if the books of accounts are not rejected and sales are accepted.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting all the disputed additions, and emphasized that the disallowance of purchases cannot be made when sales are accepted and the books of accounts are not rejected. The order was pronounced on 26.02.2020.

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