TaxTMI 
TaxTMI 
2019 (5) TMI 1704
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..../- as against turnover of Rs. 10,53,89,705/- declared by 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 pri....
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.... cause issued, he submitted that the assessee had fallen ill and hence he did not comply with the summons 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....
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....rate, it was submitted that due to the bulk supply to M/s. RSWM with the condition that the assessee 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 dec....
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.... then the reasons explained by the assessee cannot be rejected without any contrary facts or material. Another 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....
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....d wholly and exclusively for the purpose of business of the assessee, therefore, the disallowance restricted 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 no....
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....nsidered without supplying the copy to the assessee. The ld. CIT (A) then asked the AO to submit the report and after 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, ....
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....ing assessee with it amounts to gross violation of the principles of natural justice and renders entire proceedings void. 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 ....
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....n/LTCG. It is settled proposition that as per the provisions of section 68 of the IT Act, the initial burden is on the assessee to establish the genuineness of 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 e....
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....,000/- from Punit Oils & chemicals and of Rs 2,00,00,000/- from Tanish Tradecom Pvt ltd. In order to examine the genuineness of the loan the assessee was asked to give complete address of the loan giving companies. The A.R supplied the address of both the companies and then the letter seeking information u/s 133(6) of the Income Tax Act 1961 were sent. The letter sent to Punit oils & chemicals Pvt Ltd returned unserved. and M/s Tanish tradecom Pvt Ltd received the letter and sent confirmation of the loan in the form of ledger of assessee, however there seemed to be a glitch which lead to the investigation of the bank accounts of the companies regarding the source of the loan provider. the Hence letter u/s 133(6) of the Income Tax Act 1961 was written to the banker of Tanish Tradecom, i.e. manager Karnataka Bank Ltd, Kolkata and for determining the bank account of M/s Punit oils & chemicals ltd banker of assessee, the manager Bank of baroda,Jaipur was contacted. In reply the Bank Manager, Bank of baroda, banker of assessee stated that M/s Punit oils & chemicals had sent the loan to assessee through their bank account maintained in K....
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....s M/s Punit oils and chemical Pvt Ltd & m/s Tanish Tradecom Pvt Ltd are the concerns of same group of directors even the address of the companies is same. 3 Both companies do not have any operational income as it is revealed from the audit report of both companies, Further no interest has been shown to have been charged on the loan. The companies have not shown any interest receipt also in the audit report, then how is it possible that such huge amounts are forwarded for charity especially when the loan giving company does not have plentiful. 4 The DDIT Inv have proved that the both the companies are bogus concerns and are just providing accommodation entries the end sources of which have been the cash deposits in some bank account He has further mentioned in his letter the specific bank account no. 4342000100080301 of Karnataka bank Itd central avenue branch, Kolkata. In case of Punit oils & chemicals ltd which has been used to provide bogus entries. It is the same bank account through which the assessee has received the loan. In case of Document 3 Tanish tradecom the specific bank account has been mentioned as 4342000100080201 ....
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....e judicial pronouncement relied upon by the assessee have been considered but not acceptable since it has been clearly established by making intrinsic enquiries that the credit entries in the name of M/s Punit Oils & chemicals Pvt ltd & of M/s Tanish Tradecom Pvt Itd are bogus and are liable to be added u/s 68 of the Income Tax Act 1961. 11 While introducing the section 68 of the Income Tax Act 1961 the intention of the legislature was to curb the menace of dubious credit entries. Further it may, however, be understood that the view expressed by the Hon. High Court of Allahabad and the Honourable bench of the ITAT, Jaipur are in given facts and circumstances of the case and it does not necessarily mean that in each and every case the facts are identical as such onus on the part of the assessee is not discharged by merely providing the PAN & confirmation of the creditors. In fact, there are enough judicial pronouncements favoring Revenue where it has been acknowledged that the burden does not shift by mere mention of income-tax file number of creditor and it will not suffice and the. genuineness of the cash credit cannot be said ....
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....ntry has been made in the books of the assessee, the ambit of Section 68 is wide and inclusive. Provision applies to all credit entries. The language of Section 68 shows that it is general in nature and applies to all credit entries in whomsoever name they may stand, that is, whether in the name of the assessee or a third party as held in the case of Gumani Ram Siri Rom v. CIT [1975] 98 ITR 337 (Punj. &Har.). Burden of Proof :- As stated above in preceding paras Under Section 68, the onus is on the assessee to offer explanation where any sum is found credited in the books of account and where the assessee fails to prove to the satisfaction of the Assessing Officer, the source and nature of the amount of cash credits, he is entitled to draw an inference that the credit entries represent income taxable in the hands of the assessee. It is not the duty of the Assessing Officer to locate the exact source of the cash credits. The burden to identify the source lies upon the assessee and he is required to explain the genuineness of the credit Document 6 15 Thus from the reasons cited above the loan of Rs 30000000/- is considered to be....
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.... in Kale Khan Mohd. Han if Vs. CIT (supra), pointed out that the onus on the assessee has to be understood with reference to the facts of each case and proper inference drawn from the facts. Here in the case of the assessee the department has discharged its onus of proving the credits to be sham, the assessee has not discharged his liability cast and shifted upon him by way of show cause notice issued to him instead has just sought time to linger on the time barring assessment proceedings. The unsecured loan/cash credits found in the books of the assessee in the name of M/s Punit oils & chemicals Pvt ltd of Rs 100,00,000/- & M/s Tanish Tradecom Pvt Ltd of Rs 2,00,00,000/- are held to be unexplained and are added to the income of the assessee under section 68 of the Income Tax Act 1961. Penalty u/s 271(1)(c) of the Income Tax Act 1961 is initiated for furnishing of inaccurate particulars & concealment of Income. Document 8 4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. During the course of appellate proceedings, the AO vide letter dated 24.03.2017 was requested....
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....er: Document 9 Letter dated 28.08.2017: "1. For verification of creditworthiness and genuineness of M/s Punit Oils & Chemicals Pvt Ltd and M/s Tanish Tradecom Pvt Ltd summons dated 31.07.2017 were issued but same were returned unserved with remarks left". 2. Further, a inspector was deputed to trace the assessec companies and verify the creditworthiness and genuineness of assessee companies. However, the deputed inspector neither could trace the assessee companies our he found any genuine business of the assessee companies. (Inspector Report is being enclosed herewith). 3. Further, a statement of Mr. Torun Kumar Sharma, director of M/s Punit Oils & Chemicals Pvt Ltd and M/s Tanish Tradecom Pvt was recorded on oath on 31.01.2014. In his statement Mr. Tarun Kumar Sharma has stated that these companies are shell company and controlled & managed by Mr. Anand Sharma, a well known entry provider. (The statements of Mr. Tarun Kumar Sharma and Mr. Anand Sharma are being enclosed herewith). This is for information and necessary action at your end." Inspectors Report:- Enquiry Regarding: Sl. No. 1. Inspector's Reports Name of the ....
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.... you the bank account details of other companies from whom various amounts have been received. You are requested to identify these parties. Further you are requested to identify the parties to whom various amounts have been transferred from the above mentioned bank accounts. Please read and understand this question carefully. Ans. sir, it is true that Puneet Oils & Chemical Pet. Ltd. and Tanish Tradecom Pvt. Ltd. are being operated by Shri Anand Sharma for providing accommodation entries. From the details (bank accounts of various parties from whom various amounts have been received by Puneet Oils & Chemical Pvt. Ltd. and Tanish Tradecom Pet. Ltd.) furnished as well as Ans. shown by you, in all certainty it appears that these companies are also paper companies utilised for the purpose of providing accommodation entries. Sir, it will be difficult for me to state the identity (whether they are, beneficiaries or not) of the parties to whom the amounts have been transferred. Q-13. For the purpose of functioning as dummy director in the companies controlled and managed by Shri Anand Sharma, please state the amount of remuneration you rec....