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TaxTMI 
TaxTMI 
TaxTMI 
2016 (8) TMI 1154
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....29.09.2011 Rs.15,95,937/- 22.03.2014 Rs.1,51,49,610/- ITA/715/Mum/2015,AY.2009-10 (By Revenue ): Effective ground(GOA1-4)of appeal,filed by the AO,for the AY.under consideration,is about deleting the addition made u/s.69C of the Act,amounting to Rs. 22.27 lakhs.During the assessment proceedings, the AO found that the sales tax Department,Mumbai had gathered information about the parties who had been only providing accommodation entries, without doing actual business,that the Sales Tax Department had identified over 1100 such hawala operators and over 37,000 beneficiaries of such transaction.He further found that following 11 parties, from home the assessee had claimed to have purchased goods, figured in the said list of suspicious hawala operators. He observed that the Sales Tax Department had conducted independent enquiries in each case of the hawala parties including the aforesaid 11 cases, that the investigation wing of the Income Tax Department had also carried out searches/serveys on the basis of information gathered by the Sales Tax Department. He issued notices under section 133 (6) of the Act to the aforesaid parties to ascertain the genuineness of the....
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....ned by the assessee, that the AO,in his assessment order,had admitted that goods were separately purchased, that the AO had relied upon the affidavits filed by the dealers before the Sales Tax authorities,that no affidavit was made available to the assessee, that the AO did not give opportunity of cross-examining the parties whose statements were relied upon by him for making the additions.The assessee relied upon the case of JMD Computers (320 ITR 6). It was further argued that the conclusion of the assessee about obtaining hawala bills from the 11 parties was based on mere suspicion,that there was no material on record to establish that payment of the impugned purchases had come back to the assessee,that the assessee could not be saddled with the liability arising out of unilateral statement of a person for the said preposition. He relied upon the certain case laws and argued that if the investment/transactions were recorded in the books of accounts and the identity of the vendor was disclosed the amounts could not be included in the total income is unexplained investment,that the purchases from the 11 parties mentioned above were duly recorded in the stock register,that the corr....
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....as no question of adding any income on the ground that the source of the said expenditure had remained unexplained, that both the issues were mutually exclusive.Finally,he held that no addition could be made under section 69C of the Act in the case the consideration.AO's alternative plea that assessee would have made sales out of unaccounted stock also did not find favour with the FAA. He held that the entire sales had been reflected in the books of accounts as well as the purchases, that neither the sales nor the purchases were out of records maintained by the assessee, that provisions of section 69 could be invoked when the assessee had made investment but the same were not found recorded in the books of accounts and the sources thereof were not explain,that in absence of any material brought on record to show that assessee had in fact incurred expenses/made investment which was not entered in the books, no addition could be made under section 69 also. 3.2.He further held that though the addition under section 69/69C could not be made,but,the question remained as to whether any addition/ disallowance was required to be made on account of the purchases from the said 11 parties wh....
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.....03.2016) 5.We have heard the rival submissions and perused the material before us.We find that the AO had directed the assessee to produce the parties from whom the assessee had claimed to have made the purchases, that assessee did not produce the alleged purchasers before him, that the notices sent by the AO, under section 133 (6),were returned back by the postal authorities with the remark that not known, that the assessee had failed to discharge the initial burden of purchase cost upon him,that the AO had accepted the sales. We are of the opinion that once the AO does not doubt the sales corresponding purchases have to be accepted-there cannot be any sales of goods without the purchases. In such circumstances, in our opinion, entire purchases cannot be added to the total income of the assessee nor the provisions of section 69/69C could be invoked.For not discharging the initial burden of proof,the FAA had restricted the addition to 10% of the total purchases. We find that the Hon'ble Gujarat High Court has dealt with the similar issue in the case of Sathyanarayan P. Rathi(351ITR150).In that matter it was found that the assessee was in the business of trading in iron and steel,....
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....ee carried the issue in further appeal before the Tribunal. The Revenue also preferred an appeal against the order of the Commissioner (Appeals). Both these appeals came to be decided by the Tribunal by the impugned judgment. The Tribunal gave further relief to the assessee and refused the addition to the level of 12½ per cent. in pursuance of the various purchases. The Revenue's appeal was dismissed. XXXXXXXX 5. From the record, we noticed that the Commissioner (Appeals) as well as the Tribunal found that the purchase of raw material, in which the assessee was trading, were only made, but not from the disclosed sources. In other words, the case against the assessee was that the purchases were made in the grey market through cash payment and some entries were obtained from certain suppliers who had not sold such goods. 6. The present case, thus, being one of only purchase but not from disclosed sources, it would be only the profit element embodied in such purchase which could be added in the income of the assessee and, thus, rightly so done by the Commissioner (Appeals) and the Tribunal. 7.If this be our conclusion, the only question arises whether such profit el....