TaxTMI 
TaxTMI 
2019 (9) TMI 916
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....he said amount as taxable income is totally baseless and objectionable. The appellate authority ought to have deleted this estimation." 4. The facts of the case in brief are that the Assessing Officer during the course of assessment proceedings specifically has taken out the purchases of Rs. 73,34,227 made under the head "others" for verification and in the absence of names and address of the said other persons/ entities furnished and bills and vouchers in support of the purchases made produced for verification, he came to the conclusion that the parties from whom the assessee claimed to have purchased timber have not been identified by him and therefore, the purchases cannot be genuine. Hence, treated the alleged purchases made from "others" as bogus purchase and accordingly brought the value of the same to tax. 5. Aggrieved by the order of assessment, the assessee preferred appeal to the first appellate authority. During the course of appellate proceedings, the assessee has explained the reason for addition is that the assessee did not identify the sellers. It can be seen that in the notice dated 22.03.2016, the assessing authority has noted that the total purchase as per tra....
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....of Rs. 73,34,227/- has been debited and claimed to have been spent for the purchases made from persons whose identity is not known to. To my understanding; the appellant has not discharged the responsibility casted upon him without which he cannot say that the purchases are genuine. His explanation in this regard as he collected receipts and copy of land tax from some of the owners of the land, is totally irrelevant and of no use unless it is proved that the timber worth of the said amount was actually purchased from these persons. Another argument of the appellant that the difference in the return filed under Kerala Value Added Tax Act, cannot be taken as conclusive proof for suppression of purchase, need not be given much importance as the alleged purchases have not been established with credible evidences and in the absence of same, nothing wrong to rely on another document the appellant himself has filed to another authority towards discharging his responsibility under the said Act. His further explanation that the payments to the sellers were made either through cash or RTGS/NEFT cannot simply be accepted sine no such details in this regard has ever been furnished by him. It....
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.... is within such exceptions." 10. The facts of this issue are that the Assessing Officer has invoked the provisions of section 40A(3) of the Act and thereby, brought to tax a sum of Rs. 2,81,63,141 representing cash purchases made between 08.07.2012 and 31.03.2013 in the absence of satisfactory explanation the assessee had offered in this regard. The said amount was brought to tax according to the Assessing Officer for the reason that bills and vouchers relates to cash purchases had specifically been called for but not been produced for verification. Further reason adduced is that the genuineness of the expenditure incurred in cash is in doubt therefore, the provisions of Section 40A(3) are attracted. The Assessing Officer further has contended that the assessee's proprietary concern, MIS Sthuthi Associates is in Kattakada where there are several banks such as Federal Bank, Syndicate Bank etc. The assessee himself has a current account with Federal Bank, Kattakada. Therefore, non availability of banking facility, business expediency and other relevant factors are not applicable in this case. 11. Aggrieved by the order of assessment, the assessee preferred an appeal before the CIT(....
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....t that the payments were made to many more persons and each payment never exceeded to Rs. 20,000/- c). Payments seems to have been made to bigger suppliers of timbers and not to the smaller venders to whom Rule 6DD may apply. d). It has not been established that owners of the land used to supply standing trees directly to the appellant and thereby the appellant had no other option but to make payment by cash. e). It is also not the case of the appellant that the vendors either insisted for cash payment or refused to accept the payment by cheque or draft. f). The appellant has not established that the business was carried out in the remote rural area where payment by cash is unavoidable. g). Cash payments seems to have made mostly to business groups and entities who may also very well aware of constraints and limitations of the Act on payment and receipt by cash. h). It is not the case of the appellant that the cash payments were made to small farmers and individuals in villages where no banking facility is available. i). The appellant's proprietary concern, M/S Sthuthi Associates is in Kattakada where there are several banks such as Federal Bank, Syndicate Bank et....
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....tock given to the bank is not an audited figure and it is given to avail the CC faculties with the projected figures. It is the settled law that the projected figures which are unreal and furnished to the financial institutions cannot be taken for estimation of income, if the assessing authority has no other corroborative evidences." 16. The facts of this issue are that the difference between value of the stock hypothecated to the bank to avail loan and the value of the stock found reflected in the trading account as on 31.03.2013 has been treated as value of unaccounted stock amounting to Rs. 94,77,500/- and subsequently been brought to tax. According to the Assessing Officer, the stock hypothecated to bank was physically verified by the bank which given loan, on 20.03.2013 and the inspection report of the Bank Officer along with copy of security verification register for the month of March, 2013 has been submitted by the Tamilnadu Mercantile Bank Ltd. Trivandrum Branch to him. Copies of stock statement for the financial year 2012-13 were also furnished to him. perusal of the stock statement submitted to the bank by the assessee as on 31.03.2013 revealed that total stock on that ....
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....rgin for CC facility as per Bank's sanction letter is 25%. Thus, stock of around Rs. 3.35 crores will cover the CC facility of Rs. 2.20 crores and this stock can be considered as enough stock to cover sanctioned limit. Moreover, stock verified by the banker on 20.03.2013 cannot be taken as closing stock as on 31.03.2013 and the bank officer at the time of assessment does not verify the stock register of the assessee. Hence the addition of Rs. 94,77,500/- to the total income is also highly inappropriate and liable to be deleted. The assessee further relied mainly on the following decisions of the Hon'ble High Courts namely, 1. CIT vs Prem Singh Co (163 ITR 434 (Del). 2. CIT vs N.Swamy (2411TR 363 (Mad). 3. CIT vs Veerdip Rollers Pvt Ltd (323 ITR 341 (Guj). 18. In first appeal, the CIT(A) confirmed the addition made by the Assessing Officer by observing as under:- 4.3. I carefully considered the appellant's explanation. His argument is completely centered around the Hon'ble High Courts decisions which he relied on. The Hon'ble High Courts decisions are on closing stock details furnished in a statement to the banks for availing credit facility and that sho....
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....rd. In the present case, the stock is hypothecated to the bank and the bank official physically verified the stock on 20.03.2013 and thus there was a difference between the stock value shown in the stock statement furnished to the bank and the value of stock shown by the assessee in his books of account as on 31.03.2013 at Rs. 94,77,500. Even after giving opportunity to the assessee, the assessee was not able to reconcile the stock difference. In our opinion, when there is a difference in the value of stock shown in the statement given to the bank and the books of account of the assessee, the assessee is bound to explain the differences. In the absence of any explanation furnished by the assessee, the CIT(A) is justified in confirming the addition made by the Assessing Officer. We rely on the judgment of the Hon'ble Madras High Court in the case of Coimbatore Spinning & Weaving Co. Ltd. v. CIT 95 ITR 375 (Mad.)], wherein the Hon'ble Court held as under:- "The practice of exagerating inflation of stocks in statements given to banks to get loan is not shown to exist or that it has been recognised in the commercial circles or by Courts. Even assuming that such a practice exists the ....