TaxTMI 
TaxTMI 
2013 (11) TMI 264
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....ch and seizure action u/s.132 of the Income Tax Act was conducted at the residential premises of Sri Satish S Luthra of Nasik during which certain books of accounts of M/s. Vaishno Steel which were belonging to the assessee were seized. In the statement recorded u/s.131 as per the post search enquiries the assessee also admitted this fact. After receipt of information from the DCIT, Central Circle-1, Nashik relating to the above fact the AO initiated proceedings u/s.153C of the Income Tax Act. 3. During the course of assessment proceedings the AO noted that the assessee has shown sundry creditors amounting to Rs. 4,66,93,594/- in the balance sheet as on 31-03-2004. The AO asked the assessee to submit the details of sundry creditors along with their detailed addresses and ledger extracts and party wise purchases etc. Despite being given sufficient opportunities the assessee did not submit the details as called for by the AO. 4. In order to verify the genuineness of the sundry creditors the AO conducted enquiries by issue of summons to the sundry creditors on the basis of the names and addresses found in the seized materials. The enquiries conducted by the AO by issue of summon....
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.... AO u/s.131 is not correct. Infact none of the parties have responded and the AO has given conclusive findings that the parties/addresses are bogus/not in existence. 2. The assessee has not communicated with the AO/filed any confirmations during the assessment proceedings in respect of the few parties who were ready to give confirmations, as now stated. 3. The purchases/quantitative details are not supported by evidence of any sort. 4. The fact that blank bill books etc of the parties who are shown as Sundry Trade Creditors were seized in the assessee's case is in itself as indicative of the nature of the assessee's activities. In view of the submissions as above, it is requested that the additional evidence may not be accepted by the learned CIT(A)-I, Nashik as The AO has not refused to admit the evidence at any stage during the assessment proceedings. The assessee was not prevented by sufficient cause for the reasons submitted above. The AO has granted sufficient opportunity to the assessee to adduce necessary evidence as discussed above." 7. After considering the submissions made by the assessee and the objections raised by the AO in his remand report the....
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....68 of the Act, I hold that creditors as on 31-03-2004 shown by assessee in his balance sheet amounting in total to Rs. 4,66,594/- as unexplained credits in books of assessee for A.Y. 2004-05. Accordingly, the same amount is added to returned income of assessee. Penalty proceedings u/s.271(10(c) of the Act are initiated separately for concealing income and furnishing inaccurate particulars of income". 7.3 The AO therefore, has invoked Section 68 to deal with the trade creditors. Section 68 is as under : "Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the (Assessing) Officer, satisfactory, the sum so credited may be charges to income tax as the income of the assessee of that previous year". 7.4 In my considered views on the given facts in case of trade purchases Section 68 has no application. Section 68 enacts a deeming provision to deal with cash credits in the books of account of the assessee in a previous year. Such credit, therefore, has to be in cash [259 ITR 428, (Mad)]. Cash credits in the....
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.... to these parties in the subsequent assessment years. The AO has also not found any defect in the books of account, that is why he has not rejected them, nor section 145 applied. He has accepted the book results. Therefore, on the facts and in the circumstances of the case, it is found that the impugned trade creditors are outstanding trade creditors represent the receipt to be of an income nature. However according to the AO since these parties did not respond to the summons, therefore, the credits appearing in their names in the appellant's books of account are not genuine. This understanding of the learned AO of the facts is not correct. The appellant's books of accounts were seized in the search operation in the case of Luthra Group and they were still lying with the AO and were available to him during the assessment proceedings. The appellant's contention is that the transactions which resulted in purchases are appearing in the purchase register and, when sold, these appeared in sales register and stock register, wherever applicable, which have not been doubted by the AO. This contention is found to be correct. Further, it is also found that in the Balance sheet where sundry c....
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....ions of section 68 of the Income Tax Act 1961 is not applicable to the disallowance made by the AO on account of unexplained sundry creditors? 3. The appellant prays the order of the Assessing Officer may be restored. 4. The appellant prays to adduce such further evidence to substantiate his case. 5. The appellant prays leave to add, alter, clarify, amend and or withdraw any grounds of appeal as and when the occasion demands". The assessee has also filed Cross objections with the following grounds : GROUNDS BY ASSESSEE IN CROSS OBJECTIONS : "1. The assessee has filed additional evidence on 18-10-2010 in accordance with Rule 46A of the Income Tax Rules, 1962 and the learned CIT(A) had called for remand report also from the Assessing Officer therefore there is no violation of Rule 46A. 2. Without prejudice to above the Assessing Officer was not justified in making the addition of total sundry creditor u/s.68 of the Act when quantitative stock statement date wise, party wise, was filed more so when sales are accepted purchase cannot be doubted. 3. Without prejudice to above only Gross Profit can be estimated in respect of tainted purchases only. 4. The respo....
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....essee. There is no dispute to the fact that during the course of search in the case of Satish S. Luthra certain books of account belonging to the assessee were found. There is also no dispute to the fact that examination of the seized materials show that blank bills/vouchers pertaining to some of the parties appearing as sundry creditors in the books of the assessee were recovered during search action u/s.132 pertains to Sri Vikas P. Guptha, i.e. assessee. There is also no dispute to the fact that despite sufficient opportunities given, the assessee could not prove to the satisfaction of the AO regarding the genuineness of the sundry creditors appearing in the balance sheet as at 31-03-2004, 31-03-2005 and 31-03-2006. Therefore, the sundry creditors appearing in the books of account, under the peculiar facts and circumstances of the case cannot be accepted as genuine and some addition has to be made. At the same time we find the AO has accepted the sales as genuine and the same has not been disturbed. It is also a fact that the AO has not disturbed the purchase figures and he has proceeded to add the sundry creditors appearing in the balance sheet as unproved liability u/s.68 of th....