TaxTMI 
TaxTMI 
2016 (1) TMI 744
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....Sales Tax Department for the relevant Assessment Year wherein purchases shown by the assessee is Rs. 62,48,25,339/- and purchase return is only Rs. 23,78,640/- and in the audited trading account purchases shown at Rs. 62,49,49,988/-. Hence, the books of account of the assessee could not be relied upon." 3. Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the order of learned CIT(A). 4. We have considered the rival submissions. We find that this addition was made by the Assessing Officer by making following observations in Para 3 of the assessment order, which is reproduced below for the sake of ready reference: "3. The contention of the assessee is not found acceptable. The books of the assessee were examined. The differences as reconciled by the assessee are only superfluous in nature. From the bills and vouchers and credit notes and debit notes produced for verification, it was noted that the sale transactions are well documented on stationery bearing the insignia of the seller (M/s Escorts). Further the debit notes are on plain paper not having any authentication marks and neither has the assesse....
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....ings, it transpire that the addition made by A.O. on account of difference in the head of purchases account without proper verification of the books of accounts, papers and documents and without conducting proper enquiries. The written submissions mentioned in supra prove that the said difference is explainable on the basis of evidences collected during appellate proceedings and explanation given by appellant on this issue. The addition made by A.O. cannot be said justified, keeping in view of facts mentioned supra. The purchases returns were duly supported by papers/documents and confirmations letters obtained by A.O. u/s 133(6) of I.T. Act directly from M/s. Escorts Ltd. (Principal). The detailed enquiries were conducted by A.O. during appellate proceedings in respect of purchases and purchase returns of vehicles made from M/s. Escorts Ltd. The A.O. has obtained the confirmation letter with Tractor no. chassis no. and engine No. of purchase returns of 1001 Tractors to M/s. Escorts Ltd. by appellant during the period under consideration. It is obvious that the purchase returns of tractors were made out of purchases effected by appellant. The purchase returns cannot be made without....
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....t has shown net purchases (excluding Purchases Return of 1001 Tractors). Looking to 5 these facts the purchase returns of 1001 tractors are duly verifiable from the records of appellant as well as M/s. Escorts Ltd.(Principal). Therefore, the adverse inference drawn by A.O. by making addition ignoring the purchase returns without any basis. Further on examination of written submissions filed by appellant along with papers/ documents during appellate proceedings and remand reports of A.O. reveals that the alleged difference on account of payment collected by appellant from dealers/ distributors on behalf of M/s. Escorts Ltd. Rs. 1,81,54,222/-, reversal of cash discount by M/s. Escorts Ltd. at Rs. 20,83,676/-, in put VAT credit Rs. 1,38,28,703/- dishonouring of cheques issued by appellant to M/s. Escorts Ltd. amounting to Rs. 40,09,243/- are also duly verifiable from the copy of account of M/s. Escorts Ltd. and records of appellant. The papers/ documents i.e. Credit/Debit notes, copy of bank statements of appellant and M/s. Escorts Ltd., payment collected by appellant from dealers on behalf of M/s. Escorts Ltd. (the appellant was duly authorized to collect the payments on beh....
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.... the counter comments of appellant were also obtained which are placed on record. These reports and submissions were examined during appellate proceedings and found that there was no discrepancy/deficiency on these points. Therefore, the additions were made by A.O. which included in total addition of Rs. 37,43,39,152/- is considered improper and unjustified. These transactions in respect of all these points are duly reflected in the regular books of accounts of appellant and M/s. Escorts Ltd. (Principal). The addition on account of opening credit balance appears in the name of M/s. Escorts Ltd. at Rs. 4,12,05,865.50 was made by A.O. while computing the difference in purchases of Rs. 37,43,39,152/-. The copy of M/s. Escorts Ltd. was obtained by A.O. directly u/s 133(6) of I.T. Act from M/s. Escorts Ltd. and the opening debit balance in the name of appellant appears in the books of accounts of M/s. Escorts Ltd. Rs. 4,16,08,728.20. Therefore, there was a difference of Rs. 4,02,863.77 in the books of accounts of appellant and M/s. Escorts Ltd. It is worthwhile to mention here that the credit balance is not tallied with debit balance appearing in the books of accounts of M/s. E....
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....ing receipt will remain a trading receipt even if it is not shown as trading receipt in the books of accounts kept by assessee. 2. CIT Vs. Havells India Ltd. (2012) 253 CTR 271 (Delhi) A.Y. 2005-06: Question of allowance of expenses has to be considered in the light of legal position. Accounting treatment cannot be conclusive. Looking to the above facts & circumstances, I hold that the addition of Rs. 37,43,39,152/- made by A.O. on account of difference between purchases shown in trading account at Rs. 62,49,49,988/- and account of M/s. Escorts Tractor Ltd. of Rs. 99,92,79,140/-, is uncalled for and unjustified. The addition made by A.O. deserves to be deleted. Accordingly, the addition of Rs. 37,43,39,152/- is hereby deleted. Thus the appellant gets relief of Rs. 37,43,39,152/-." 4.2 From the assessment order, as per relevant Para reproduced above and from the observation of CIT(A) in his order, it is seen that the addition was made by the Assessing Officer in respect of purchases return claimed by the assessee by stating that the debit notes are on plain paper not having any authentication mark and there is no evidence of actual movement of stock. We also fin....
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....M/s Escorts Limited. Moreover, it was also explained that purchase return of 1001 tractors and subsequent purchase of same tractors was affected in view of some amendments in VAT rules and in view of this, actual movement is not necessary at least for Income Tax Purposes. Objection may of VAT authorities if the VAT rules require actual movement but even in that situation, the claim of purchase return cannot be rejected when both parties are confirming and there is no evidence of sale outside books or closing stock. Therefore, we do not find any reason to interfere with the order of learned CIT(A). Ground No. 1 is rejected. 5. Ground No. 2 is as under: "2. The CIT(A) has erred in law and on facts by deleting the addition made by the Assessing Officer at Rs. 61,19,427/- on account of carrier fuel expenses and repair & maintenance expenses which was made by the Assessing Officer after rejecting the books of account of the assessee u/s 145 of the Income-tax Act,1961 on the ground that payments are made by the assessee in cash (vide imprest account of Mr. Zafar Khan) to related parties namely M/s. Republic Service Centre. Further, Republic Service Centre has made these payme....