TaxTMI 
TaxTMI 
2010 (12) TMI 1108
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....The first dispute is regarding an addition of Rs. 2,09,05,947/- on account of purchases held by the AO as non-genuine. The AO, during the assessment proceedings, noted that the assessee had declared gross profit of Rs. 4,56,44,561/- on a total turnover of Rs. 28,28,88,493/- which gave a gross profit rate of 16.13% against gross profit rate of 10.81 on total turnover of Rs. 26,44,25,962/- in the immediately preceding year. The AO asked the assessee to submit details of purchases exceeding Rs. 2,00,000/- in each case with names and addresses, which were given by the assessee vide letter dated 19-10-2005. The AO, thereafter, issued notices u/s.133(6) of the I.T. Act to the said parties with a view to verify the genuineness of the purchases but the same were returned by the postal authorities with the remark "not known" or "left". The AO, therefore, asked the assessee vide letter dated 25-01-2006 to produce the parties for verification. As per the AO, the assessee sought adjournment to 10-02-2006 vide letter dated 03-02-2006, which was allowed. But, there was no compliance by the assessee and the parties were not produced for verification. The AO, therefore, listed 10 parties in which ....
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.... parties including M/s. Komal Enterprise. A summons was issued to the party's banker HDFC Bank who by their letter dated 13.03.2006 replied enclosing copy of the account opening form. The proprietor of M/s. Komal Enterprise was shown as Shri Pradeep S. Sharma of 50/56, Sutar Chawl, 2^nd floor, Zaveri Bazar, Mumbai-2 and the introducer was Shri P.S. Sharma (i.e. the same party) who is also proprietor of M/s.Venus Enterprises and the accounting opening form shows that cheque of Rs. 40,000/- was drawn on Venus Enterprises and deposited to open this account. 6 Amar Corporation Rs.5,00,500/- Notice u/s.133(6) issued on 13.12.2005 was returned unserved with the remark "not known". A letter dated 25.01.2006 was issued to the assessee highlighting the list of parties to whom the notices could not be served and requesting them to produce the said parties for verification. But the assessee failed to produce and/or to provide the present address of many of these parties including M/s. Amar Corporation. 7 M/s.Royal Enterprises Rs.5,00,500/- Notice u/s.133(6) issued on 13.12.2005 was returned unserved with the remark "not known". A....
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....assessee. It is seen that in most of the cases, the money is withdrawn immediately after deposit. Also some of the transactions of the assessee are not reflected in the bank account which means that bearer cheques were issued and encashed. 10 M/s.Dimple Metal Corporation Rs.19,07,595/- Despite issuing notice as per the new address furnished by the assessee, none appeared. As per the opening form obtained from the banker of the party it is seen that th sole proprietor of the firm is Shri P.C. Jain. But the account has instructions that it will be operated by Shri N.C. Jain only. As in the earlier case some of the cheques have been deposited and cash equivalent has been immediately withdrawn. There are also huge cash deposits. 3.1 In reply to the letter dated 24-03-2006, the assessee vide letter dated 28-03-2006 reconciled the purchase figure in the case of M/s. Malu Steels with supporting evidence. The discrepancy in the case of M/s. Master Steel Utensils P.Ltd. was also reconciled with confirmation from the said party. In respect of the remaining parties, the AO observed that neither their identify was established by the assessee nor their creditworthiness. The AO, t....
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.... out against the assessee on the basis of the enquiries made. The CIT(A), therefore, held that no addition could be made on account of non-genuine purchases and deleted the addition made by the assessee, aggrieved by which the Revenue is in appeal before the Tribunal. 3.4. Before us, the ld. D.R. appearing for the Revenue assailed the order of CIT(A). It was argued that the burden was on the assessee to prove the genuineness of the purchases which had not been discharged by the assessee. The purchases had, therefore, been rightly held as non-genuine. She placed reliance on the following decisions in support of her case : (i) 214 ITR 801 (SC) in the case of Sumati Dayal vs. CIT. (ii) 213 ITR 805 (Bom.) in the case of Smt. Vasantibai N. Shah vs. CIT. (iii) 236 ITR 269 (Madras) in the case of Traders and Traders vs. CIT. 3.5. The learned counsel for the assessee, on the other hand, supported the order of CIT(A). It was argued that all the purchases were accounted along with corresponding sales and, therefore, there could not be any case for concealment of profit. It was also submitted that the AO was not correct in stating in the assessment order....
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.... held as non-genuine are listed at serial nos. 3 to 10 in para 3 earlier. The reason given by the AO for the disallowance of purchases as non-genuine was that the letters issued to the parties had returned unserved and the assessee could not provide the current addresses nor produce the parties. In the cases of serial nos.9 and 10, the AO also noted that the amounts deposited in the bank account of the sellers had been immediately withdrawn in cash and that some of the transactions with the assessee were not reflected in the bank account of the party at serial no. 9. It may be noted here that though the AO had found the purchases in respect of 8 parties at serial nos.3 to 10 as non-genuine but the disallowance had been made only in respect of parties nos.3 to 9 and later the assessment was rectified to make disallowance in respect of party at serial no. 10 also. The CIT(A) has deleted the addition made by the AO on the ground hat the assessee had maintained proper books of account including stock register and the purchases from the said parties were duly entered in the books. The assessee had also given complete quantitative tally to show that the purchases from these parties were ....
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....nt of Hon'ble Supreme Court in the case of Sumati Dayal (214 ITR 801) and the judgment ot Hon'ble Bombay High Court in the case of Smt.Vasantibai N. Shah (213 ITR 805) were in a different context and related to cash credits. The said assessees had declared jackpot winnings in races which, considering the facts and circumstances and applying the test of human probabilities, were not found genuine. In the case of Traders & Traders vs. CIT (236 ITR 269), the creditors had denied the cash credits and no convincing explanation had been given by the assessee and therefore the cash credits were treated as unexplained. The case of the assessee is not a case of cash credit per se. It is a case of trading purchases and sales corresponding to these purchases had been declared by the assessee. Therefore, the purchases could not be said to be bogus. At the most, it could be considered as a case where the purchase prices are not verifiable as the parties were not found and in such cases the books could be rejected and gross profit rate could be estimated. But, the gross profit has to be estimated based on some material. In this case, the assessee has shown a gross profit rate of 16.13% on turnov....
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....case of Hiro Exports (295 ITR 454) in which attribution of 10% of export incentives towards indirect cost has been upheld. We, therefore, find no infirmity in the order of CIT(A) and the same is, therefore, confirmed. C.O.No.29/Mum/09 (By assessee): 5. In the cross objection, the main dispute raised by the assessee is in respect of allowability of deduction u/s.80HHC in respect of DEPB income. The assessee has also mentioned that it had raised certain grounds being ground nos.2.3 to 2.10 (7 grounds) before CIT(A) which were not adjudicated by the latter and, therefore, has requested the Tribunal for adjudication of these grounds also. 6. We first take up the main ground regarding allowability of deduction u/s.80HHC in respect of DEPB income. The AO noted that the export turnover of the assessee during the year was Rs. 26.70 crores. The assessee had also shown DEPB income of Rs. 5,43,20,294/-. The AO further noted that there was loss from the export of goods. The AO, therefore, held that no deduction u/s.80HHC could be allowed as there were no profits from export business. The AO also referred to the Taxation Laws (Amendment) Act, 2005, as per which even if there was loss, ....
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....ck to him for passing a fresh order after necessary examination in the light of the judgment of Hon'ble Bombay High Court in the case of Kalpataru Colours & Chemicals (supra) and after allowing an opportunity of being heard to the assessee. 8. As regards the grounds being ground nos.2.3 to 2.10 before the CIT(A), which were not adjudicated by the latter, the ld. A.R. submitted that the effective grounds were only ground nos. 2.3, 2.7, 2.9 and 2.10 which related to entitlement of deduction u/s.80HHC even when there was no export profit, entitlement of deduction u/s.80HHC in respect of additions/disallowances made by AO while computing the business income, fulfillment of the twin conditions mentioned in the third proviso to sec. 80HHC(3) and the nature of interest income of Rs. 4,02,440/- while computing deduction u/s.80HHC. The other ground was not pressed. The ld. A.R. for the assessee also did not press the ground no.2.10 regarding interest income which has been treated by the authorities below as "income from other sources". This ground is, therefore, also dismissed as not pressed. 9. As regards entitlement of deduction u/s.80HHC even if there is no export profit, the issue....
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....e sustained. He, therefore, deleted the addition made by the AO u/s.154 of the I.T. Act, aggrieved by which the department is in appeal. 13. We have heard both the parties, perused the records and considered the material carefully. The dispute is regarding the rectification order passed by the AO u/s. 154. The AO in the assessment gave finding that purchases from 8 parties were not explained but in the computation he made addition only on account of purchases from 7 parties and the addition in respect of the 8th party, i.e., M/s. Dimple Metal Corporation, was omitted to be added. The AO, therefore, rectified the order and made addition on account of the said party. The CIT(A) has cancelled the addition on the ground that in the quantum appeal he had held that no addition could be made on account of purchases. We have already upheld the order of CIT(A) vide para 3.8 of this order holding that no addition is required to be made on account of bogus purchases. Therefore, we find no infirmity in the order of CIT(A) cancelling the addition u/s.154. The same is, therefore, upheld. 14. In the result, both the appeals of the Revenue are dismissed and the cross objection of the assesse....
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....n that case, the sellers had even admitted before the STO that they had issued bogus vouchers. The Tribunal, however, found that there was no evidence to show that the vouchers were bogus and there was also no material to show that the payments made by the assessee by cheque had been returned to it. The Tribunal deleted the addition which was upheld by the Hon'ble High Court. The case of the assessee stands on a better footing as in this case none of the sellers had stated that the sales to the assessee were bogus. Merely because the parties were not found at the addresses given which may be due to the fact that they may have changed addressed over a period of time, no adverse inference could be drawn against the assessee. This view is supported by the judgment of the Hon'ble Supreme Court in the case of Anis Ahmed & Sons vs. CIT (297 ITR 431) which by the ld. A.R. In that case, the case of the assessee was that it was a commission agent and not a trader. To verify the matter, the AO had issued summons to 10 parties, 5 of which confirmed that the assessee was a commission agent. The remaining 5 parties did not appear as the summons could not be served on them. The AO, therefore, tr....