TaxTMI 
TaxTMI 
TaxTMI 
2015 (10) TMI 2250
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....pted as genuine by the learned assessing officer. Thus, the addition so made by learned assessing office and sustained by learned CIT(A) is completely misconceived and misplaced in law and should be deleted, as such. 1.2 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the basic fact that mere non production of creditors cannot be taken as a basis to make and sustain the addition, whereas, all the documentary evidences filed by the appellant company (which were arbitrarily brushed aside) established the genuineness of the transaction of purchase of goods from nine creditors and as such, the addition so sustained is based on suspicion and surmises and is liable to be deleted, as such. 1.3 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the basic fact that transactions with the said nine creditors were also made in preceding assessment year and payments were also made to the said creditors in subsequent assessment year, which stood accepted by learned assessing officer and as such, the addition so made and sustained is based on wholly and completely extraneous and irrelevant considerations and should be....
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....emarks Inspector Report 1. M/s Amar Jyoti Enterprises, C- 21, Shivaji Park, New Delhi-26 40,01,568/- No such firm at this address -do- 2. M/s ASV Garmets (P) Ltd., 405, ABC Complex, 20, Veer Savarkar Block, Shakarpur, Delhi-92 36,00,587/- -do- -do- 3. M/s Bharat Mehta & Co., CB- 10, Ring Road, Naraina, New Delhi 45,03,945/ -do- -do- 4. M/s Gopal Jee Fabrics, K-30, Udyog Nagar, Peeragari, New Delhi 5,94,990/- -do- -do- 5. M/s Harish Enterprise, E-24, Jawahar Park, Laxmi Nagr, Delhi-92 35,13,854/- Left without addres -do- 6. M/s Meenakjshi Textiles, C-107, ABC Complex, 20, Veer Sarvarkar Block, Shakarpur, Delhi-92 35,00,300/- No such firm at this address -do- 7. M/s Ravel Apparels Inc., USB- 107, Mandawali, Faizalpur, Delhi-92 40,01,050/- -do- -do- 8. M/s Sangeeta Traders, E-25, 2nd Floor, Jawahar Park, Laxmi Nagar, Delhi-92 50,00,112/- -do- -do- 9. M/s Surya Traders, 229/28, E-2, Street No. 20, Railway Colony, Mandawali, Delhi-92 70,01,100/- No such firm at this address -do- Total 3,57,17,506/- 5. The AO also mentioned that the notices issued u/s 133(6) of the ....
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....s 125- 134 of the paper book. (2) The observation of the ld. ITO that the Inspector was deputed to make local enquiries and get confirmations from the creditors, it is submitted, is against the facts of the case as the perusal of the order sheet as well as the assessment record clearly reveals that there are no such directions by the ld. ITO to the Inspector. (3) The observation of the ld. ITO that the assessee was confronted with the inspector's report, it is submitted, is against the facts of the case as the purported inspector's report are dated 20-12-2011, 21-12-2011 and 23-12-2011 and -the perusal of the order sheet clearly reveals that the assessee was never confronted with the inspector's report. 4. It is, therefore, submitted that the material gathered at the back of the assessee without confronting the same to the assessee has to be excluded from the consideration or cannot be read in evidence and for this submission respectful reliance is placed on the judgments mentioned in Annexure A. 5. It is further submitted that the perusal of the Inspector's Reports placed on the assessment record clearly reveals that the same have been prepared in one g....
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.... ld. ITO 8. The ld. ITO has not controverted, the fact available on assessment record that the major payments were made by the assessee during the year under consideration itself (page 2) through proper and regular banking channels and the closing balances i.e. balance which remained outstanding as on 31-03- 2009 has also been discharged in the subsequent year, as explained herein above. 9. It is pertinent to mention that one creditor is an incorporated company, whose details are available on the official web-site of the Registrar of Companies. 10. It is, therefore, submitted that the ld. ITO erred in adding the closing balances i.e. balance which remained outstanding as on 31-03-2009. 11. It is submitted that in case the trading results have been accepted or have not been disturbed or the purchases have been accepted, the creditors cannot be added and for this submission respectful reliance is placed on the following judgments: (i) CIT Vs. Ritu Anurag Agarwal (2010) 2 DTLONLINE 134 (Del) in ITA No. 325/2008 decided on 22.07.2009 (Delhi High Court) "As there was no case for disallowance for corresponding purchases, no addition could be made under Section 68 in as ....
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.... these transactions, it is held that there is no such error in the order of the learned CIT(A) which requires correction from us. Thus, this ground is dismissed." (ii) Amritsar Trading Co. vs. ITO, ITA No. 586/Asr/1980 for the asst. yr. 1976-77, wherein the Hon'ble Tribunal, Amritsar Bench held that in a case where purchases of the skins and hides were not doubted by the AO, no addition could be made for the reason that the assessee failed to produce the suppliers who had sold the goods to the assessee. (iii) DCIT vs. Swani Enterprises ITA No. 398/Asr/1999, asst. yr. 1994-95, where purchases made from the suppliers were not fully verifiable, the Tribunal., held that since no defects have been pointed out, trading addition was not called for. The most significant aspect considered by the Tribunal was that there could have no exports without there being purchases. This case related to trading addition and not addition under s. 68 of the Act. 12. It is therefore, most humbly and respectfully prayed that your honour may kindly be pleased to delete the addition. Annexure 'A' Without providing copy of Inspectors Report and cross examination, the same cannot be rea....
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....1971-72 when admittedly the assessee was not given any opportunity to confront the said depositors by way of cross-examination." ITA No. 1035/2009 decided on 22.10.2009 (Del HC) ""The additions made by the Assessing Officer (AO) in reassessment proceedings carried out under Section 147 and 148 of the Income Tax Act were based on the statements of certain villagers, who had sold the land in question to the assessee. However, neither the statements of these villagers were supplied to the assessee nor the assessee was given opportunity to cross- examine those villagers. On this ground, CIT(A) quashed the addition of Rs. 10,07,055/- made by the AO. The Income Tax Appellate Tribunal has upheld this order, in these circumstances, we are of the opinion that no substantial question of law arises and also the fact that the tax effect in this case is only Rs. 4,40,782/-, we are not inclined to interfere with the aforesaid orders- This appeal is accordingly dismissed." CIT vs Rajesh Kumar (2008) 306 ITR 27 (Del) =218 CTR 691= (2008) 172 TAXMAN 74 The Tribunal has on these facts rightly come to the conclusion' that since the revenue relied upon the statement of Maheshwari, it s....
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....ng the course of search of a third party a statement was made to the effect that the impugned loan was an accommodation entry made against cash received - relying on the statement of a third party . Revenue contended that it is a sham transaction by way of which the assessee has introduced its own unaccounted money - statement has not been confronted to the assessee. Held: 'it is discernible that the only material available with the AO to hold that it was accommodation entry was the statement made by a third party, i.e., Shri Praveen Khurana. The said statement, it is apparent, has not been confronted to the assessee as can be seen from the record of fee proceedings submitted before us in the paper book filed on behalf of the assessee. It is an accepted position in law that whenever the Revenue proposes to rely on a material found from a third party, which is adverse to the assessee, the principles of natural justice require the Revenue to confront the same to the assessee.... In fact in such circumstances, the veracity of the statements made by the third party comes in doubt and could not be said to be sacrosanct so as to clinch the issue against the assessee.... Therefor....
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.... admissible material/evidence, unless it is corroborated by direct evidence, i. e. by the person who made the statement or who made jottings on the loose paper. If the Assessing Officer wanted to use such information against the assessee, then he must have examined Dr. Tanna and an opportunity to crossexamine should have been given to the assessee. This is a bare minimum requirement of the principles of natural justice, which has not been complied with by the Assessing Officer. In my considered opinion, no information obtained from outside can be admitted as evidence against the assessee unless such information stands to the test of cross-examination. No doubt, the Assessing Officer is not fettered by technical rules of evidence, yet the basic principles of Evidence Act are applicable to the tax proceedings. Reference can be made to the Supreme Court judgment in the case of Chuharmal v. CIT (1988) 172 ITR 250 (38 Taxman 190). Since Dr. Tanna was neither examined by the Assessing Officer, nor the assessee was allowed an opportunity to cross-examine, in my opinion, the information used by the Assessing Officer suffers from serious infirmity and, therefore, in law cannot be used aga....
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....ly denied an opportunity 10 crossexamine the witness whose testimony the ITO intended to rely against the assessee such an evidence cannot be read against the assessee. Chuharmal v. CIT (1988) 172 ITR 250 (38 Taxman 190) Sana Electric Co. Vs. CIT, (1985) 152 ITR 507(Del) = 43 CTR 287 - In this case the Assessee received cash earlier and the buyer paid later. At ITR page 511 "If seems -that the ITO recorded the statement in the absence of the assessee thus excluding cross-examination by the assessee. This shows that the statement of Shri Sardari Lai has to be excluded from consideration. " Chiranjilal Steel Rolling Mills v. CIT (1972) 84 ITR 222 (P & H) - the Assessing Officer has a power to collect evidence from any source but it is his duty to put it to the assessee before making it basis of assessment. If the assessee denies the information collected by him, it is the duty of the officer to satisfy himself by making independent enquiry from sources considered reliable by him so as to decide whether the information passed on him is true or not. If, as a result of his own independent enquiry he comes to the conclusion that the information received by him is true, he is....
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.... assessee could not be discarded merely on the ground of the disappearance of the sellers. It was further stated that the AO made no investigation from the bank from which the cheques were cleared before drawing adverse inference against the assessee for its inability to produce the creditors. It was argued that merely because the assessee was unable to produce the creditors, as it was not possible to exercise control over them especially when payments were already made to them, no adverse inference should have been drawn. It was further stated that the assessee could not be expected to keep track of addresses of all its creditors specially when payments had already been made. It was pointed out that no material was brought on record to show that purchases were actually made by the assessee by tendering cash which was taken back in cash in lieu of cheque given to the creditors during the immediately succeeding financial year. The ld. CIT(A) asked the remand report from the AO who submitted the interim remand report on 07.01.2013 and significant points mentioned in the said interim remand report were as under: "(i) Notice u/s 131 could not be served by the postal authority who ret....
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....racy of the copy; copies compared with such copies; copies made form or compared with the original; and the oral accounts of the contents of a document given by some person who has himself seen it; (vii) It has been held in CIT v. Korlay Trading Co. Ltd. (1998) 232 ITR (Cal.) that "Where, without filing confirmation letter from the, creditor, the assessee merely mentioned the incometax number of the creditor (which was also not supported by any affidavit from the creditor), the genuineness of the cash credit cannot be said to have been proved by the assessee." (viii) It has also been established in CIT v. Precision Finance (P) Ltd. [1994] 208 ITR 465 (Cal.) that "It is for the assessee to prove identity of creditors, their creditworthiness and the genuineness of the transactions; mere furnishing of the particulars is not enough; mere payment by account-payee cheque is not sacrosanct nor can it make a non-genuine transaction genuine." (ix) It has also been held in CIT v. United Commercial & Industrial Co. (P) Ltd. [1991] 56 Taxman 304/187 ITR 596 (Cal.) that It is necessary to prove prima facie identity of his creditors, capacity of such creditors to advance money and lastl....
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....confirmations of accounts from the sundry creditors. Ld. AO has alleged in the impugned assessment order that confirmations in respect of nine parties as per details given at page 2 of the impugned assessment order was not filed by the assessee, whereas the fact is that assessee filed confirmations from these nine parties as well during the course of assessment proceedings. The total outstanding payment to these trade creditors was Rs. 3,57,17,506/-. PB-311 is copy of the reply dated 14.10.2011 with which assessee filed confirmations in respect of the sundry creditors, and is placed in the file of the Ld. AO. These confirmations filed by the assessee were containing PAN of these sundry creditors and are also placed by the appellant in the paper book submitted before your Honour and are available at PB 125 to 134. Assessee again provided complete last known addresses of these parties to the ld. AO during the course of Remand proceedings, vide letter dated 30.7.2012, and also referred to the copies of the confirmations available on record, and the copies of accounts of these parties for the subsequent year, where the amount outstanding was paid by the assessee to these sundry cr....
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....ntity of creditors, genuineness of transactions and genuineness, of balances was not established. Ld. AO relied on the following judgments in the remand report:- * CIT vs. Korlay Trading Co. Ltd. (1998) 232 ITR (Cal) * CIT vs. Precision Finance (P) Ltd. (1994) 208 ITR 465 (Cal) * CIT Vs. United Commercial & Industrial Co. (P) Limited (1991) 187 ITR 596 (Cal) Respectfully submitted that the above judgments relied on by the Ld. AO do not apply to the case of the assessee, as the impugned addition does not attract the provisions of section 68 of the Act, for the reasons assessee made purchases from these trade creditors, and the purchases made were sold subsequently, to various parties. Neither the purchases made nor the sales made are doubted, and the trading results have been accepted. Books of the assessee are duly audited by the statutory auditors, and, there is also no adverse observation of the statutory auditors Appellant relies on various pronouncements made by various High Courts, and Hon'ble Supreme Court, in this regard, and relied by the appellant in the written submissions placed before your Honour. It is respectfully submitted that these sundry cr....
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....efore, of the opinion that no substantial question of law arises for consideration in this case. The appeal is accordingly dismissed." Hon'ble Tribunal, Amritsar Bench held in the case of Amritsar Trading Co. Vs. ITO in ITA No. 586/ASR/1980, that in a case where purchases of the skins and hides were not doubted by the A 0, no addition could be made for the reason that the assessee failed to produce the suppliers who had sold the goods to the assessee. Where sales supported purchase and payment was made 'through banks, merely because suppliers had not appeared before Assessing Officer purchase could not be rejected as bogus ... Commissioner of Income-tax-I, Mumbai v. Nikunj Eximp Enterprises (P.) Ltd. (2013) 35 taxmann.com 384 (Bombay) December 17, 2012 Section 37(1) of the Income-tax Act, 1961 - Business expenditure - Allowability of [Burden of proof] - Assessment year 2001-02 - Assessing Officer disallowed income of assessee alleging non-genuine purchases from different partiesCommissioner (Appeals) upheld order of Assessing Officer - Assessee filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through account payee ch....
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....nd above had been made during the relevant period. An inquiry was conducted by the revenue on the basis of addresses of suppliers provided by the assessee and, thereafter, the Assessing Officer made an addition of certain amount to the assessee's income on the ground that the assessee had made bogus purchase. On appeal, the Commissioner (Appeals) deleted the addition. On the revenue's appeal, the Tribunal meticulously went through the evidence on record and found, inter alia, that a complete quantitative analysis between purchases made and corresponding sales had been prepared and filed by the assessee before the Assessing Officer and the quantitative analysis made had not been called into question by the Assessing Officer. The Tribunal held that the department having accepted the purchases, it could not have been assumed that the assessee had inflated its purchase by introducing fictitious purchases. The Tribunal also made a particular note of the fact that the statement of 'A' who was the brother of 'T', the source from which the revenue had received information about bogus purchases made by the assessee, had evidently made a statement admitting therein th....
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....ot the purchase: The payments were made through account payee cheques which were duly shown in the books of account and balance sheet, etc. In the subsequent assessment year, the purchase from the same parties were accepted by the department which proved that the parties were in existence during the assessment year under consideration. This was not the case of the department that there was suppression of profit by showing low gross profit rate. The disallowance was made for the reason only that the parties did not appear and were not produced before the Assessing Officer, for which the assessee could not be punished. Eland International (P) Limited Vs. DCIT and Vice versa (2009) 26 DTR 113 (Del) Hon'ble ITAT held that it was clear that the transactions of purchase and sale were recorded in the books of account and these transactions led to profit to the assessee, which was brought to tax. If sales had been effected out of purchases made from these parties, then it could not be said that the purchases were bogus. The finding of bogus sale can only lead to the inference that the corresponding amount should be deleted from the turnover of the assessee. The Assessing Officer ....
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....under:- Ld. AO mentioned in the remand report dated 7.1.2013, that PAN details provided show that in most of cases PAN holder persons are employees of C.A. firms or of the same concerns. In this regard it is submitted that assessee purchased material from these parties, and made payments to these parties through account payees cheques only. Assessee has no mechanism with it, to first find the PAN details, and then to make purchases. Assessee made purchases from the parties in normal course of business, and goods purchased from these parties were subsequently sold, for which sales have been declared by the assessee which have duly been accepted by the Ld. AO. Even the purchases have not been disputed. Ld. AO made addition of the outstanding balances as on 31.3.2009, which were also paid off in the subsequent year. It is submitted that in case there was any doubt to the Ld. AO that these persons have provided a wrong PAN, Id. AO could have called these parties to satisfy any of his doubt, but no adverse view can be taken in this regard, as assessee has no control On any party, as the assessee had made purchases from these parties and have made payments against purchases made to th....
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....e assessee. Not only that the outstanding amount payable of Rs. 40,01,568/- was also paid by the assessee to the said sundry creditor in the subsequent year. Confirmation of outstanding balance of Rs. 40,01,568/- (Refer PB 125) was also filed by the assessee from the said party. We are submitting again a copy of the ledger account of the above party for the subsequent period i.e. for the period 1.4.2009 to 31.3.2010 wherein assessee had transactions of sales to the said party and the amount outstanding by the assessee was also paid off. Copies of the sales bills for sales made to the said party are also enclosed for your kind perusal. Payments made and payments received from the said party are also highlighted in the copy of bank statement being filed with this rejoinder. Thus the transactions entered into with this party are established with these evidences. 2. M/s ASV Garments (P) Limited - Amount outstanding as on 31.3.2009 as payable Rs. 36,00,587/-. With regard to above party, Ld. AO confirmed in the remand report dated 8.4.2013 that the said party was existing at the address provided i.e. D-7, Maharani Bagh, New Delhi, and now the said party changed its address to 405....
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....d by the assessee. It is stated that the PAN exists in the name of Shri Manoj Kumar, who has given his address to the Department as C-397, Chajjupur, Shahdara, Delhi. During the course of remand proceedings assessee provided the bank detail of this party to the Ld. AO, which has been confirmed by the Ld. AO in the remand report. Ld. AO has not disputed that payments made by the assessee were not credited in these parties accounts. Ld. AO obtained the bank statement of this party from Mahamedha Urban Cooperative Bank Ltd. Ld. AO stated that payments received by the above party were transferred to other accounts. In this regard our respectful submission is that assessee was obliged to make payment for the purchases made. Assessee had no concern as to what the creditor does of the payment received by him. It is not objected by the Ld. AO that the payments made by the assessee to this party were not credited in the creditors account. In view of these reasons, when assessee cleared the outstanding of the sundry creditor, there remains no reason to sustain addition in the hands of the assessee firm. It is, therefore, prayed that the addition made may kindly be directed to be deleted. 4....
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....e Rs. 35,00,300/- Ld. AO has alleged in the remand report that he obtained copy of ITR of Shri Dhirendra Pratap Singh who is proprietor of M/s Meenakshi Textiles. Ld. AO alleged that nature of business has been shown as "Legal Professional" under the Code 603 and the sundry debtors have been shown at Nil. In this regard it is submitted that first of all no such material was provided to the assessee, and if any such adverse observation is made by the AO, for which no cross examination has been provided to the assessee, that may kindly be excluded from consideration. Furthermore, it is submitted that it is not the case of the Ld. AO that the said party has denied the payment received from the assessee firm or have denied the sales made to the assessee firm. For the' assessment year under consideration assessee made purchases from the said concern, and the purchases made were sold to various parties for which sales were also declared by the assessee. At the end of the assessment year an amount of Rs. 35,00,300/- was outstanding as payable to the said party against purchases made from them, which was subsequently cleared in the next financial year by the assessee. Assessee made ....
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....f ledger account of the above party for the period 1.4.2009 to 31.3.2010 in the books of the assessee. PB 259-263 are copies of the sales bills raised against sales made to the above party for the period 1.4.2009 to 10.4.2009. 8. M/s Sangeeta Traders - Amount outstanding as on 31.3.2009 as payable Rs. 50,00,112/- Ld. AO has confirmed in Para 9.2 of the Remand Report that Bank details were provided of the above party. In Para 9.4 of the Remand Report Ld. AO confirmed that Bank was also contacted and Copy of the bank statement of the said party was also obtained It is submitted that there is no adverse comments of the Ld. AO that the payments made by the assessee to this party either were not credited in their bank account, or assessee has not made payment to the said party against purchases made. We have placed in the paper book copies of the ledger accounts of the above party for the impugned assessment year and also for the subsequent assessment year, where in the outstanding payment of Rs. 50,00,112/- were made clear. It is submitted that in the subsequent year also, assessee made purchases from the above party, and payment was made of the above amount as well as of the s....
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....owing the opening purchases made, payment made and outstanding balance payable has been placed by the assessee at page 2 of the paper book. The AO made the addition for the reason that assessee could not file the confirmation and the notices u/s 133(6) were received back unserved. Ld. AO also alleged that inspector was deputed at the address provided but these parties were not found at the address provided and therefore, the AO alleged that the genuineness of these creditors was not established. It is submitted that assessee made purchases from these parties and the goods purchased were sold. Ld. AO has not disbelieved the purchases or sales as book results have been accepted by the Ld. AO. It was explained to the Ld. AO during the course of remand proceedings and as well that assessee not dealings with these parties as on date and the amount payable to them was paid through banking channels in the subsequent years. Assessee furnished copies of the ledger account of these parties for the subsequent year as well to show that the payment to all these parties were cleared through banking channel only. All these parties are assessed to tax and this fact has also been confirmed by....
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....hese are assessed to tax and not even a single penny has been paid by the assessee to them against purchases made from them that additions made may kindly be directed to be deleted Assessee relies on the written submission made and various evidences placed on record. Appellant relies on the following judgments and explains how the facts in these case laws are similar to the case of the appellant. Judgments relied upon Assessee's case ACIT vs. Burlingtons, Hon'ble ITAT, Delhi Bench 'A' (2013) 35 CCH 074 Del Trib. - ITA No. 2170/De1/2010 - in Judgment dated 16th January, 2013 - Appeal filed by the Revenue was dismissed 1. In the case of the, assessee, no purchases made are held as bogus by the Ld. AO. Hon'ble ITAT was pleased to delete the additions made in the above case and held as under:- 2. Assessee also filed confirmations from the parties from whom purchases were made. l. Assessee was engaged in the business of manufacturing readymade garments. Assessee made export sales. Assessee claimed purchases of Rs. 44,07,271/- and sales of Rs. 64,02,504/-. 3. Purchases and sales made by the assessee have been accepted by the AO after examining th....
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....the AO. No trading results have been disturbed by the AO and the same have been accepted 5. Hon'bel ITAT noted: 4. Assessee has also furnished copies of the corresponding sales bills. i) Assessee was maintaining complete accounts, including daily item-wise, stock register purchase book sales, sales book, purchase bills and sales books Assessee draws parity from the judgment of Hon'ble ITAT. ii) All payments for purchases have been made by cheques AO disallowed the outstanding credit balances of the sundry creditors for purchases. iii) Department has accepted the purchases. In support assessee produced complete books of accounts before the AO and the purchase and sales were accepted. NO adverse view was taken from the books of accounts produced CIT Vs. Nikunj Eximp Enterprises (P.) Ltd. [2013] 35 taxmann.com 384 (Bombay HC) dated 17.12.2012 Assessee also produced confirmation from parties, copies of their ledger accounts in the books of the assessee, Books of accounts of assessee have not been rejected. copy of the bank statements of the assessee to confirm that all payments were made through A/c payee cheques only. Sales have not been doubted. In....
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....the ground that: Assessee also made export sales Nature of trade of assessee was as such where customers might not always be willing to give complete address. The addition has been made by AO for reason that these creditors did not complied the notice issued by AO or the notice sent by AO were returned back as unserved, therefore in the case of assessee also no addition can be made just for reason merely suppliers did not appear in response to notices issued. All the purchases were recorded in the The AO made the addition for the reason that addresses of certain parties were not available. Parity is drawn from this judgment of High Court that in the case of assessee purchases/sales have been accepted by the Ld. AO, therefore, creditors appearing for purchases made cannot be added to the income of the assessee. Assessee produced the books of accounts which were verified by the AO. There is no means available to the assessee to ensure that such addresses were right. Assessee draws parity from this judgment of Hon'ble High Court. Assessee cannot insist for identification process akin to Know Your Customer (KYC) Rules applied by Banks (a) Purchases/Sales were duly....
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....ither, the purchases nor sales are doubted. Payments made to these Karigars in the subsequent year(s) have not been adversely viewed in the assessment. The appeal filed by the revenue was dismissed. Payment has been made through a/c payee cheque or through sale made to them for which copies of sales bill are placed in the Paper Book. As the sales made by the assessee has been accepted the purchases made stands proved as no sale can be made without purchases. CIT Vs. Jain Exports (P) Lid. (2013) 217 Taxman 54 (Del HC) dated 24 May 2013 In the case of assessee also, confirmation letter of trade creditors were submitted by assessee. In the above judgment Hon'ble High Court gave the finding that credit amount outstanding for several years cannot be held as cessation of trading liability on ground that assessee could not prove genuineness of transaction, where assessee has acknowledge its liability successively over several years The addition has been made by AO for reason that these creditors did not complied the notice issued by AO or the notice send by AO were returned back as was served, therefore in the case of assessee also no addition can be made just fo....
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....quired. However Ld. AO being busy in time barring matters stated that nothing specific is required by him and he will submit his report. He further informed the AR of the assessee (Shri Kailash Mittal, Advocate) that in case any further information shall be required he will give a call before submitting his report. However, Ld. AO neither gave any further opportunity nor asked the AR for any further information. It is submitted that in response to letter dated 5.3.2014, Shri Kailash Mittal, AR of the appellant attended before the Ld. AO three times i.e. on 12th, 14th, and 18th of March, 2014, but neither any presence was marked by him, nor any specific information was asked by him. An affidavit of the AR in this regard is enclosed. It is submitted that in the remand report submitted Ld. AO relied on the remand report submitted by his predecessor on 08.04.2013 to which appellant has already submitted a rejoinder on 15.11.2013 before Your Honour, where in appellant has explained and discussed each and every evidence placed in paper book to justify the payments made by the assessee against the purchases made. It is again reiterated that all sundry creditors in respect of whom Ld. AO....
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....t year, but the glaring fact remained that the assessee miserably failed to produce trade creditors and satisfactorily explaining the reason for their non-production and dispelling the doubts arising from their PANs which on enquiry were found to be pertaining to the employees of the CA firms or the companies in which they were allegedly employed. The ld. CIT(A) further observed that the language, the style, the format, the arrangement of the sentences and the words, the paper used and the design on the papers on which replies were furnished, were exactly the same, in the case of one and all of the confirming parties. The ld. CIT(A) also observed that the assessee did not produce stock register on demand also to substantiate the fact that goods i.e. fabrics received from the so called trade creditors were duly entered into the manufacturing account of the assessee, therefore, in the absence of the stock register it could not be demonstrated by the assessee whether the goods purchased on credit from the so called trade creditors were duly accounted for or not in the books of account. The ld. CIT(A) supported the findings of the AO for the following reasons: "(i) The appellant fail....
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....n 205 CTR 444 (All.) Shree Nashik Panchvati Panjarpole Vs DIT(Exemptions) 26 DTR 113 (Bom.) CIT Vs Ritu Anurag Aggarwal reported in (2012) DTLONLINE 134 (Del.) ITO Vs Zazsons Exports Ltd. reported in 153 ITD 1 (Lucknow 3rd Member) CIT Vs M/s Nikunj Exim Enterprises P. Ltd. 372 ITR 619(Bom) 14. It was further stated that the assessee furnished the confirmations before the AO vide letter dated 05.12.2011 (a reference was made to page no. 443 of the assessee's paper book). The ld. Counsel for the assessee also referred to page nos. 502 & 503 of the assessee's paper book and submitted that the balance outstanding from 50 parties was to the extent of Rs. 52,28,52,754/- but the AO doubted only 9 parties to whom payments were made in the subsequent year. It was further submitted that the AO had the power to summon the parties but no such exercise was done. Therefore, the addition only on the basis of suspicion was not justified. The reliance was placed on the judgment of the Hon'ble Allahabad High Court in the case of Nathu Ram Premchand Vs CIT 49 ITR 561. It was further stated that the assessee vide letter dated 22.12.2011 furnished party wise sales/purchases, expe....
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....ted to the assessee. The ld. Counsel for the assessee referred to page no. 635 of the assessee's paper book which is the copy of letter dated 16.11.2012 written to the AO wherein it was mentioned that all the payments were made to the creditors through banking channel and the same could have been verified from their bank account. He also referred to page nos. 618 & 619 of the assessee's paper book which are the copies of letter dated 07.02.2013 and 20.02.2013 written to the AO during the Appellate Proceedings before the ld. CIT(A) and submitted that the name of the bank account number of the parties which were doubted by the AO were disclosed alongwith their addresses but no further enquiry was made by the AO and all the purchases were accepted. Therefore, the addition made by the AO was rightly deleted by the ld. CIT(A). The reliance was placed on the following case laws: CIT Vs Real Time Marketing (P) Ltd. 306 ITR 35 (Del) Kishinchand Chellaram Vs CIT 125 ITR 713 (SC) Kankaria Textiles Vs CIT 200 ITR 408 (Raj.) 15. In his rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the AO specifically asked the as....
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....QOPS6137H C-21, Shivaji Park, New Delhi-26 2. ASV Garments (P) Ltd. AADCA4442Q 405, ABC Complex, 20, Veer Savarkar Block, Shakarpur, Delhi-110092 3. Bharta Mehta & Co. ATEPK1882B CB-10, Ring Road, Naraina, New Delhi 4. Gopal Jee Fabrics AGGPK2523C Plot No. 650, Near Mundka Mod, Metro Pillar No. 504, (Nasha Mukti Kender Wali Gali), Mundka, New Delhi-110041 5. Harish Enterprises ATEPK1882B E-24, Jawahar Park, Laxmi Nagar, Delhi- 110092 6. Meenakshi Textiles BDBPS4815A Shop No. 12, Sharda Market, Subhash Road, Gandhi Nagar, Delhi-110031 7. Ravels Apparels INC BDBPS4815A USB 107, Mandawali, Faizalpur, Delhi- 110092 8. Sangeeta Traders BQOPS6137H E-25, 2nd Floor, Jawahar Park, Laxmi Nagar, Delhi-110092 9. Surya Traders ATFPXXXx 36, 3rd Floor, Deepak Building, 13, Nehru Place, New Delhi-110019 17. The assessee also disclosed the bank account nos., name of the bank of the parties vide letter dated 07.02.2013 and 20.02.2013 (copies of which are placed at page nos. 618 & 619 of the assessee's paper book). The assessee during the course of assessment proceedings furnished the confirmation of outstanding balance obtained from the said parties but those parties co....
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....her submissions." 18. The aforesaid explanation was not rebutted by bringing any cogent material on record. In the present case, when the purchases from the parties were accepted and the sales made out of those purchases were not doubted, the payments outstanding in the name of those parties were accepted in the subsequent year than there was no reason to doubt the genuineness of the outstanding balance. Moreover, in the present case, the books of account were duly audited by the independent Auditor, those books were accepted by the AO and all the trading results except the outstanding balance in the name of 9 parties to the extent of Rs. 3,57,17,506/- were accepted. In our opinion, the AO at the same time cannot blow hot and cold from the same wind pipe. In the instant case, the AO accepted the trading results and the explanation for fall in the G.P rate furnished by the assessee, so there was no reason for doubting the outstanding balance in the name of sundry creditors when the purchases made from them were duly accepted as genuine. In our opinion, the ld. CIT(A) was not justified in confirming the addition made by the AO. 19. On an identical issue, the Hon'ble Allahabad ....
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....ibunal is a well reasoned order taking into account all the facts before concluding that the purchases of Rs. 1.33 crores was not bogus. No fault can be found with the order dated 30- 04-2010 of the Tribunal." 21. In the present case also the assessee made the purchases of Rs. 52,28,52,754/-. Against the said purchases an amount of Rs. 4,63,08,977/- was outstanding in the name of 50 creditors. The AO doubted outstanding balance of Rs. 3,57,17,506/- in the name of 9 parties. In the instant case the gross profit rate for the year under consideration of the assessee was at 1.97% in comparision to 5.63% in the preceding year. The AO accepted the fall in G.P rate after considering the explanation of the assessee. However, he did not accept the outstanding balances in the name of 9 creditors for a sum of Rs. 3,57,17,506/- and made the addition u/s 68 of the Act. In our opinion, the said addition was not justified because the provisions of Section 68 of the Act relates to the "cash credit", however, the amount in question was on account of outstanding balance of the creditors and the purchases from the said creditors had been accepted by the AO. In the present case, there was no cessatio....