TaxTMI 
TaxTMI 
TaxTMI 
2019 (5) TMI 1704
X X X X Extracts X X X X
X X X X Extracts X X X X
....y assessee and further erred by applying GP rate of 0.80% on such estimated turnover. Appellant prays addition so confirmed deserves to be deleted. 2. On the facts and in the circumstances of the case and in law, ld. CIT (A) erred in confirming the disallowance of Rs. 50,000/- out of disallowance of Rs. 1,00,000/- made by ld. AO, without pointing out any specific discrepancy in the books of accounts. It is thus prayed disallowance so confirmed deserves to be deleted. 3. On the facts and in the circumstances of the case and in law, ld. CIT (A) erred in confirming the addition of Rs. 3,00,00,000/- made by ld. AO by alleging the unsecured loans received by assessee as bogus solely on the basis of statements of third parties recorded in some other matter, by some other officers and that too behind the back of assessee, thus the addition so made deserves to be deleted. 3.1. That the ld. CIT (A) further erred in confirming the addition of Rs. 3,00,00,000/- made by ld. AO without providing opportunity to cross examine of persons, whose statements were relied upon for making addition, which is against the principle of natural justice, thus addition so made is not in accordance wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ummons issued where as the discreet enquiry of the Inspector of the Ward revealed that the assessee was not ill and he had been going to his A.R's office regularly. In support of the claim made by the A.R no medical certificate has been submitted. Thus implying that the assessee has been non cooperative and he has been absconding so that by way of investigation the true nature of his business would not be revealed." 2.1. Apart from the conduct of the assessee avoiding the proceedings and enquiry to be conducted by the AO to find out the correctness of the books of account and return of income, the AO further noted that during the year under consideration the assessee has declared turnover of Rs. 10,53,89,705/- and GP of Rs. 3,66,122/- which gives GP rate of 0.35% in comparison to the GP rate of 0.80% declared by the assessee in the immediately preceding year on the turnover of Rs. 3,44,23,099/-. The assessee was asked to give the reason for fall in the GP rate. In response, the assessee explained that the profit rate has declined due to mass supply to M/s. RSWM and as per the terms and conditions for supply, the goods were to be delivered at the door step. Thus the assessee expla....
X X X X Extracts X X X X
X X X X Extracts X X X X
....has to supply goods at the door step and bear the cost of freight, the assessee has incurred an expenditure of Rs. 6,98,586/- on this account. Further, when the turnover of the assessee was increased for more than 3 times, then a marginal decline in GP rate is natural and normal. The AO has not disputed the bulk supply to M/s. RSWM on the condition of supply at door step of the purchaser. Therefore, once the assessee has explained the reason for decline, it cannot be a reason for rejection of books of account. The assessee furnished complete details of closing stock along with its valuation but the AO has disregarded the same on general remarks that assessee was not maintaining item-wise, qualitywise stock register. He has contended that the AO has not pointed out any single defect in the books of account of the assessee but some general and minor remarks were made. The entire turnover of the assessee was duly reported in VAT return and accepted by the Sales Tax Department. Therefore, there was no reason to estimate the turnover without any basis. The ld. A/R has relied upon the decision of Hon'ble Jurisdictional High Court in the case of Malani Ramjivan Jagannath vs. ACIT, 316 ITR....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nother reason for rejecting the books of account found by the AO is non verification of the valuation of closing stock and sale bills. We find that the assessee is not a manufacturer but trader of TMT bars and, therefore, once the quantity of purchase, sale and closing stock is duly recorded in the stock register then the item-wise maintenance of stock register is not a necessary condition. The books of the assessee are audited and no defect was found by the auditors. Further, the entire sales of the assessee were subjected to VAT and were accepted by the Sales Tax Department. Therefore, merely because the assessee has not given the full particulars of the purchaser on the cash sale bills when the quantity as recorded in the books of account is not in dispute, then the sale transactions of the assessee without any other contrary record or finding cannot be doubted. The AO has also doubted the genuineness of the godown rent, however, for rejection of books and estimation of income by applying the GP, the said item is not relevant as it is not part of the trading account. Therefore, we find that the minor adverse remarks by the AO without pointing out a specific and material defect i....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the ld. CIT (A) to Rs. 50,000/- is just and reasonable. He has relied upon the orders of the authorities below. 9. We have considered the rival submissions as well as the relevant material on record. We find that the AO has discussed this issue in para 3 as under :- "3. Disallowance from the expenses debited in profit & loss account. In profit & loss account the assessee has debited the expenses of Rs. 1,58,093/- however during the examination of the books of accounts the none of the expenses could be proved as the bills and vouchers for the expenses debited had not been produced for verification. In absence of the proper bills and vouchers the expenses debited through self made vouchers cannot be considered to be explainable, hence I restrict the expenses in all to Rs. 58,093/- and a sum of Rs. 1,00,000/- is added to the income of the assessee." The assessee has not controverted the findings recorded by the AO that the assessee has not produced any bill/voucher for verification of the AO. Therefore, when the expenditure claimed by the assessee are not supported by the proper bills and vouchers, then the assessee has failed to discharge its onus to establish that t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....considering the report of the AO as well as further investigation carried out by the AO through DDIT, Kolkata Wing, the ld. CIT(A) has confirmed the addition made by the AO. 11. Before us, the ld. A/R of the assessee has submitted that the AO has treated the loan transaction as accommodation entry on the basis of report received from DDIT Investigation Wing Kolkata as well as the statement of Shri Anand Sharma in whose case search was conducted. Further, the AO has observed that the lender companies have no operational income and no interest was charged on unsecured loans given to the assessee. He has referred to provisions of section 68 and submitted that as per the said provisions, an addition can be made by the AO only when the assessee does not offer any explanation or the explanation offered by the assessee is not upto the satisfaction of the AO. The ld. A/R has contended that in the instant case, appellant has not only offered explanation regarding nature and source of credits but also substantiated the same with documentary evidences in the shape of ITRs, Confirmations, Balance Sheet, Bank Statement of lender which were not at all doubted by AO but all such vital evidences....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d. He has relied upon the decision of Hon'ble Supreme Court in case of Andaman Timber Industries vs. CCE, (2016) 15 SCC 785 (SC) and submitted that the statement relied upon by the AO without giving the opportunity of cross examination by the assessee cannot be a basis for assessment order and addition made by the AO. He has also relied upon the following decisions :- M/s. Kota Dall Mill vs. DCIT In ITA No. 997 to 1002/JP/2018 & 1119/JP/2018) M/s. Choice Buildestate P. Ltd. vs. ITO In ITA No. 431/JP/2016) DCIT vs. M/s. Premium Bars (P) Ltd. In ITA No. 143/JP/2017) Thus the ld. A/R has pleaded that the addition made by the AO under section 68 of the IT Act may be deleted. 12. On the other hand, the ld. D/R has submitted that the AO has conducted due enquiry and investigation through DDIT Kolkata and has brought on record the fact that the immediate source of the loan given to the assessee was a transfer of fund from Bank of Baroda, C-Scheme, Jaipur to the loan creditors at their bank at Kolkata. Further it was also brought on record that both these companies were belonging to Shri Anand Sharma who was involved in providing accommodation entries of loans, long t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f the transaction, creditworthiness and identity of the creditor. Thus the identity and capacity of the creditor to advance the money has to be established by producing some cogent evidence. Similarly, the genuineness of the transaction is also required to be established from the fact that the creditor was having the capacity and creditworthiness as well as a reason to advance the money to the assessee. In the case in hand, the assessee has not disputed the fact that the loan creditors have not charged any interest. Therefore, it defies the commercial purpose of transaction. The AO has discussed this issue in para 4 as under :- We further note that during the appellate proceedings before the ld. CIT (Appeals), the AO was again asked to furnish the report and information sought for. The ld. CIT (Appeals) has discussed the relevant facts and issue in para 4.3 as under :- Thus it is clear that the AO has conducted an enquiry during the assessment proceedings and thereafter as per the direction of the ld. CIT (A) a further enquiry was conducted through the DDIT Investigation Wing Kolkata and report of the investigation clearly established that these companies are operated by Shri A....