TaxTMI 
TaxTMI 
2015 (6) TMI 309
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....inted out that only in the case of M/s Aerovision Enterprises letter could be served whereas others could not be found. When the assessee was confronted with the result of 133(6) letters, regarding no response/ postal notings, the assessee pointed out that relevant confirmations from all the creditors had already been submitted. The AO being not satisfied deputed Inspector and his report has been reproduced at page 2 of the assessment order. The Inspector mainly pointed out that the parties were either not available or the information was not available for the same. The AO, accordingly, show caused the assessee as to why these transactions be treated as not genuine. In the mean time, information u/s 133(6) was called for from the banker of the assessee to provide the bank details of the parties to whom payments had been made by the assessee. Upon receipt of this information, summons u/s 131were issued to the bankers of the payment receiving parties and on the basis of the latest addresses made available by them. The AO has tabulated the details at pages 3 & 4 of his order and from these he concluded that most of the cases were controlled by Shri Yogesh Kumar Jain being either partn....
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....es; component wise inward-outward stock details of the 6 items in question; copy of VAT assessment order, month-wise sale purchase detail, summary of closing stock and extracts of stock register. 2.4. Ld. CIT(A), after considering the remand report in regard to each party, observed that identities of parties was established. He, inter alia, observed as under: "It is a matter of record that all these nine parties are having TIN No. and have been assessed to sales tax for the relevant financial year, where their assessed turnover for FY 06-07 is at a much higher figure than the amount for which they have sold goods to the appellant. The PAN, ration card, passport, driving license etc. are also reported to be available on sales tax records. From these documentation and the fact that these parties are having bank accounts where the payments received in the subsequent F.Y. from the appellant has been deposited goes on to establish the identity of these parties." 2.5. He did not accept the AO's conclusion that merely because the parties were not traceable, therefore, the entire purchases could be treated as bogus purchases. But at the same time he was also not fully convin....
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.....8. All this prompted ld. CIT(A) to further examine the transactions with these parties. 2.9. Ld. CIT(A) has observed that during the appellate proceedings it transpired that assessee had incurred overall loss on such transactions relating to purchases from nine parties, which had been sold to various vendors within days of purchasing these items. He noted that the total purchases from nine parties aggregated to Rs. 3,00,51,810/- and had been sold for an amount of Rs. 2,12,03,520/- and part of these purchases were reflected in closing stock for Rs. 32,94,296/-. Thus, these disputed transactions had resulted in gross loss for Rs. 55,53,994/-. Ld. CIT(A) further noticed that from GP provided by the assessee it further transpired that GP rate for A.Y. 2007-08 had declined to 2.67% as against 4.95% in the previous year i.e. in A.Y. 2006-07. Also the GP rate in the following year 2008-09 had marginally increased to 3.89% on account of opening stock being there from these parties and for AY 2009-10 to 4.25%. Thus, there had been a decline of 2.28% in the GP rate from AY 2006-07 and even in AY 2008-09 it remained somewhat low which was attributable to the fact that the closing stock of....
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....Rs. 55,35,994+ Rs. 12,77,202/-). 2.12. Ld. CIT(A) also upheld the AO's action in rejecting the books of a/c and invoking the provisions of section 145. He relied on the decision of Hon'ble Allahabad High Court in the case of CIT Vs. Surjeet Singh Mahesh Kumar 210 ITR 83, wherein it has been held that in case where the provisions of section 145 are attracted, although the assessment is made in manner provided in sec. 144, nevertheless the assessment is made u/s 143(3) of the IT Act. Ld. CIT(A) held as under: "Needless to add that the facts of the case did warrant invoking of section 145(3) leading to rejection of accounts. The AO has in my view only erred in disallowing the entire disputed purchases for Rs. 3.62 crores instead of resorting to a reasonable estimate of income on such disputed transactions. It is also observed that there is nothing wrong in holding only part of the disputed transactions as incorrect and estimating fair & reasonable income on the same and in accepting the undisputed part of transactions in books of accounts as correct. In fact under circumstances as existing in instant case the rejection of the entire books of accounts would have resulted in....
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....mers to whom sales were made are contained at pages 175 to 206. Further, the submissions summarizing amount of purchases, invoices and description of products and corresponding sales made to various customers are contained from pages 207 to 212 of the PB. The remand report of AO is contained at page 217 and in the remand report AO had duly examined the sales-tax records of various suppliers. 7. Ld. DR submitted that ld. CIT(A) has not considered any new source of income and keeping into consideration the entire conspectus of the case concluded that loss incurred was not genuine. He further submitted that ld. CIT(A) did not enhance the income because the final addition sustained by ld. CIT(A) is much less than the addition made by AO. Ld. DR further submitted that from the documents submitted by assessee it cannot be concluded that the impugned purchases were included in the sales-tax returns of the parties. 8. We have considered the submissions of both the parties and have perused the record of the case. The AO had treated the entire purchases from nine parties as bogus and had accordingly made an addition of Rs. 3,62,49,274/-. The total purchase shown by assessee was Rs. 10,....
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.... from the turnover of the assessee. In view thereof on a totality of facts & circumstances & dispassionate weighing of the evidences the addition made by the AO by holding the entire purchases as bogus transactions and disallowing the same is not sustainable." 8.1. Had that been so, ld. CIT(A) would not have ventured any further and simply deleted the addition. But being not satisfied with the overall conduct of assessee, he examined the overall loss on such transactions relating to purchases from nine parties. It is true as noted earlier, that AO had not examined the sales and only disallowed the entire disputed purchases. However, ld. CIT(A) has only examined the sales with reference to the purchases from these parties and came to the conclusion of unique feature that only the disputed transactions had resulted in gross loss. Therefore, though he did not disturb the purchases but after examining the entire bills concluded that loss was wrongly returned by assessee. Under these facts the moot point for consideration is, firstly, whether ld. CIT(A) exceeded his powers and resorted to a new source of income; secondly, whether ld. CIT(A) had made enhancement of income; and thir....
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....ddition can be made merely because gross profit margin shown by assessee is low. In the present case ld. CIT(A) has primarily not accepted the purchases, but at the same he was not agreed with AO that the addition to the extent of entire purchases could be sustained. Therefore, he rejected the sales made by assessee qua these parties only on the ground that there was proximity between the date of purchases and date of sales. Entire conspectus of case has to be taken into consideration to find out the true import of his observations. Keeping in view various aspects including sales of the transactions qua purchases from impugned parties, he rejected the same and applied the g.p. rate on impugned transactions only. 8.5. In our opinion this cannot be held to be a case of rejection of sales, but essentially it is a case of rejection of part purchases and, accordingly, of part sales. In our opinion, keeping in view that the purchases made by assessee being not fully established except identity of parties, particularly in view of the fact that there was no evidence to establish that the impugned purchases were included in the sales-tax returns of the parties, ld. CIT(A)'s conclusion of....