TaxTMI 
TaxTMI 
TaxTMI 
2013 (11) TMI 1605
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....proved purchases and sustained partly by the ld. CIT(A) is raised in the following grounds:- A.Y. Addition made by the A.O.(Rs) Addition sustained by the ld. CIT(A)(Rs) Assessee's ground No. Revenue's ground No. 2005-06 2,73,700/- 28,000/- 1 - 2006-07 26,45,012/- 2,65,000/- 1 1 2007-08 34,24,522/- 3,43,000/- 1 1 2008-09 13,30,906/- 1,34,000/- 1 1 3. The assessee in the present case is a partnership firm which is engaged in the business of dealers and merchants of cloth materials. The returns of income for the years under consideration were filed by it declaring total income of Rs. 4,18,570/-, Rs. 10,84,410/-, Rs. 10,96,473/- and Rs. 11,77,145/- for assessment years 2005-06, 2006-07, 2007-08 and 2008-09 respectively. The returns of income filed for assessment years 2005-06 and 2006-07 were accepted by the A.O. initially u/s 143(1) of the Income Tax Act, 1961 (the Act). In the case of Shri Rakesh Kumar Gupta, one of the suppliers of the assessee firm, a survey u/s 133-A of the Act was carried out on 13/14- 2-2009. In his statement recorded during the course of survey, Shri Rakesh Kumar Gupta stated that he was providing accommodation sales bills for ....
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....tablished before AO and also produced before CIT(A) for verificationsupported by delivery challan. 5) Impugned sellers have confirmed the sales to the assessee in affidavits as well as written communication to the AO. 6) The AO's case is solely based on general statement of Gupta in the year 2009(which was modified by affidavit) without any reference of any specific person. The AO neither carried out any further inquiry with Gupta or assessee nor provide any opportunity to cross examine Gupta inspite of request. 7) As per recent decision of jurisdictional ITAT Mumbai in the case of free India Assurance Services Ltd. vs. DCIT(62 DTR -349-Mumbai year 2011) in similar cases no addition can be made if payments were made by the A/c Payee cheques in case of a accommodation Purchases." It was also submitted as an alternative contention by the assessee before the ld. CIT(A) that the entire purchases treated as unproved by the A.O. could not be added to its total income and the addition on this issue should be restricted only to the extent of some percentage as done by the ld. CIT(A) in the case of other assessees wherein similar issue was involved. 5. After considering the subm....
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..... Since the assessee furnished quantitative tally of purchases, sales and stock, the AO had observed on page 8 of assessment order itself that the assessee might have purchased goods from some other parties and to set right the records, the assessee obtained accommodation purchase bills. Hence, this clearly establishes that there were purchases by the assessee (although now disputed) and its consequent sales, which had been offered for taxation by the assessee. In given facts the AO could not have treated the entire purchases of Rs. 34,24,522/- as unexplained when AO had observed on page 8 of the assessment order itself that these purchases could possibly have been made from other parties. The facts and decision in the case of Free India Assurance Pvt. Ltd. vs. DCIT by the Hon'ble jurisdiction ITAT, Mumbai (62DTR 349-mumbai 2011) did not allow any addition or disallowance in such facts. Thus, the issue to be decided is that in such cases where one party initially denying the sales by general sweeping statement in peculiar circumstances without referring to any specific person after 2 years and that too in survey and the other party affirms of having received the goods and of having....
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....the assessee of such financial year" From the above, it can be seen that addition u/s. 69 cannot be made in the case of the assessee as the purchases effected by the assessee are recorded and accounted in the books of accounts. Here is not a case where the investments/purchases are not recorded in the books of accounts. Therefore, no addition u/s. 69 can be made in the given facts of the case. However, it is true that according to the AO the purchases shown by the assessee from the aforesaid parties are in doubt as the counter parties are stated to be 'accommodation bill provider'. At the same time the sales/closing stock shown by the assessee have not been doubted by the AO. The GP rate disclosed by the assessee is not doubted. It is not the case of the AO that the GP rate is low in comparison of other assessee's or proceeding years. The quantitative tally of purchases and sales / stock could not be rebuted. Similarly the AO had accepted the existences of purchases in quantity, albeit not from the 'Guptas'. Therefore, the logical corollary of this is that purchases have been made by the assessee perhaps may not be from the parties from whom he has shown the purchases as stated ....
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....shown by the assessee are unproved and bogus. Therefore, the addition made on account of disputed purchases of Rs. 34,24,522/- cannot be sustained. As stated above, the one possible logical inference can be that the assessee might have made purchases from open market through these parties (the AO himself had stated so in assessment order) and obtained accommodation bills from the aforesaid concerns which might have resulted in reduced GP on sale of such items as compared to others. There is also possibility of delivery of goods from other party in grey market arranged by the said disputed sellers. Under such facts and in the circumstances of the case, the only addition that can be made is on account of estimation of profits on such purchases covering the GP difference between the purchases made from Manoj Mills, Astha Silk Industries and Shree Ram Sales & Synthetics and other parties and other leakage of revenue, if any. In this case, the dispute is limited to purchases from aforesaid three parties and entire disallowance of purchases from these parties cannot be sustained for reasons discussed in hereinabove and in preceding paras. The judicial pronouncements rendered by Hon'ble H....
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....he relevant material available on record. It is observed that a similar issue involving identical facts has already been considered and decided in favour of the assessee by the Mumbai "I" Bench of this Tribunal in the case of Jeetendra Harshadkumar Textiles (ITA No. 771 & 2211/Mum/2011 dated 21- 11-2012) vide para 8 & 8.1 which read as under:- "8. We have carefully considered the rival submissions in the light of material placed before us. It will be relevant to reproduce the letter received by the AO from Shri Rakesh Kumar Gupta, which is also reproduced in the assessment order: "1 am in receipt of your summons u/s. 131 of the I.T.Act. 1961 in the case of M/s. Jitendra Harshad Kumar Textile Pvt. Ltd. asking me to attend before your goodself with the details of my account with the said M/s. Jitendra Harshad Kumar Textile Pvt. Ltd. for A.Y.2002-03 & 2007-08. As you are aware that my assessing officer had recorded alleged statement u/s. 133A and 131 of the I.T.Act. 1961 1 have been receiving witness summons from all four corners of the city on the ground that I have given accommodation bill, though I have denied the content of the statements recorded by A.O. u/s. 133A & 131 v....
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....Mum/2012 and ITA No. 4012 to 4015 and 4020 to 4021/Mum/2012 dated Ist October, 2013). As the issue involved in the present case as well as all the material facts relevant thereto are similar to the case of Jeetendra Harshadkumar Textiles and M/s Pramit Textiles (supra), we respectfully follow the orders of the co-ordinate Benches of this Tribunal in the said cases and delete the entire addition made by the A.O. on account of unexplained/unproved purchases in all the four years under consideration. Ground No. 1 of assessee's appeal for assessment years 2005- 06, 2006-07, 2007-08 & 2008-09 is accordingly allowed whereas ground No. 1 of the Revenue's appeal for assessment years 2006-07, 2007-08 and 2008- 09 is dismissed. 9. In ground No. 2 of its appeal for assessment years 2007-08 & 2008-09, a common issue raised by the assessee relates to the disallowance u/s 14A read with Rule 8-D of the Act amounting to Rs. 66,715/- and Rs. 1,28,413/- respectively made by the A.O. and confirmed by the ld. CIT(A). 10. During the previous year relevant to assessment years 2007-08 & 2008-09, the assessee had received exempt income (in the form of dividend and long term capital gain) amounting to Rs....