TaxTMI 
TaxTMI 
2020 (3) TMI 207
X X X X Extracts X X X X
X X X X Extracts X X X X
....led to appreciate that in its Return of Income the alleged debtor "M/s. Pamis Tex.Pvt. Ltd." has not shown the assessee as its creditor for A.Yr.2009-10. The Ld.CIT(A) has failed to appreciate that despite numerous opportunities the assessee did not file any documentary evidence. 2) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 28,32,496/- regarding unexplained repayment towards unsecured loans despite the fact that the sources and nature of the amount of repayments of the same were not proved despite repeated opportunities. 3) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition the addition of Rs. 1,39,31,025/- in respect of unexplained advances to suppliers despite the fact that the nature and genuineness of the transactions was not proved by the assessee either during the course of assessment proceedings or during the remand proceedings. 4) It is, therefore, prayed that the order of the Ld.CIT(A)-IV, Surat may be set-aside and that of the Assessing Officer's order may be restored." 3. Brief facts of the case are that the Assessing Off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y of J. V entries. The appellant claimed that the J V entries are pertaining to sale parties whose crossed cheques were directly given to M/s. Pamis Text Pvt Ltd by endorsement for the reason that if these cheques had been deposited in the bank accounts of the appellant with Memon Co - op Bank Ltd , the same would have been adjusted against the over draft from the said bank account. 10.4 As mentioned in this office letter dated 17.01.2013 (para - 6) addressed to the assessing officer, the JV entries pertained to only 5 to 6 parties. Since the number of parties was very small, the assessing officer was directed to obtain the necessary details of cheques from the appellant, so that corresponding enquiries could be made from those parties to ascertain, whether the they were actually the sale parties or not and whether the cheques were actually issued by them or not? 10.5 With the help of details of cheques, the assessing officer was also directed to make enquiries from the Bank whose cheques were utilized for J.V entries to ascertain whether the destination of these cheque was in Pamis Text Pvt Ltd or not ? However, as mentioned in the A.CTs report dated 10.07.2013, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... to issue notice u/s 148 for assessment year 2006- 07 and assessment year 2007-08 and add the unaccounted payment pertaining to each year in that assessment year. It is necessary to mention here that the return of M/s. Pamis Tex P Ltd for assessment year 2006-07 was not sent to this office by the assessing officer on the ground that the same was not available in the system. The same should be obtained (if it was filed in physical form) before completion of proceedings u/s 147 for Asstt Year 2006-07 and 2007-08. This information is necessary to conclusively decide the quantum of addition in each of the years. If the return for Assessment Year 2006-07 was not filed by M/s Pamis Tex P Ltd, details of purchases / sales can be obtained from other authorities to whom such details are required to be reported under any other law. 10.8 Consequently, the addition of Rs. 4,96,27,261/- made in the assessment year 2009-10 will have to be deleted. However, as mentioned in para 10.5 (supra) the appellant Y claim of receipt of Rs. 20,57,079/- from sale parties and payment of the same to M/s. Pamis Tex P Ltd is factually incorrect. The source and nature of this amount of Rs. 20,57,079/- ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re-payment was made to the depositor was submitted by the assessee. Hence, in absence of any evidence the said payment was treated as made from undisclosed sources and accordingly the same was added as unexplained payment. 3. Advances to suppliers 1,39,31,025/ In the balance - sheet, the said amount was shown as advances to supplier. However, the assessee did not furnish any details of the suppliers such as names, addresses, amount, PANs of the suppliers, reasons for advances. In absence of such details, the entire amount of Rs. 1,39,31,025/- was considered as non-genuine and accordingly added the same as unexplained advances to the total income. 3. Aggrieved with the assessment order, the assessee filed an appeal before CIT(A), Surat. In the appeal, the assessee has produced additional evidences for which your honour has called for a remand report after verification of the same and also directed to make available him a copy of return of income download from the ITD module. Addition on a/c of unverifiabie creditor of Rs. 4,96,27,261/- During the course of assessment proceedings in spite of having given number of opportunities to produce the co....
X X X X Extracts X X X X
X X X X Extracts X X X X
....against without giving sufficient opportunities to the assessee to adduce evidence. It is also provided that no evidence shall be admitted unless the Commissioner (Appeals) records in writing the reasons for its admission. It further provides that Commissioner (Appeals) shall not take into account such evidence produced unless the AO has been allowed reasonable opportunity to examine or gross examine such evidence or witnesses produced by the assessee. 6. On verification of the case records, it is seen that the AO had given sufficient opportunities of being heard and produce books of accounts and other evidences in support of his claims in the return of income, but at the fag end of the year i.e. on 28.12.2011 the AR of the assessee submitted a letter furnishing the following details : - 1. PAN 2. CST Number 3. GVAT Number 4. Address of the factory of Pamis Tex, Pvt. Ltd. 5. Audit report of previous year 6. Copies of sale bills received from trade creditor i.e. Pamis Tex. Pvt. Ltd 7. Copy of ledger account of trade creditor. 7. Since, the above details were produced before 3 days of the time b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....turn of income for A.Y. 2009-2010 of M/s. Pamis Tex. Pvt. Ltd. generated from the ITD module is verified and it is seen that the said assessee has shown total debtors of only Rs. 50,23,427/- as on 31.03.2009 whereas the present assessee i.e. M/s. Alfa Synthetics is showing, total creditors of Rs. 5,44,65,103/- which includes Rs. 4,96,27,261/- in the name of M/s. Pamis Tex. Pvt. Ltd. On comparing the credit balance in the balance sheet of present assessee and debtors balance in the books of M/s. Pamis Tex. Pvt. Ltd, the figures are not matching and the difference is also very huge. Moreover, on further verification of the break -up of debtors balance in the books of M/s. Pamis Tex. Pvt. Ltd., for A.Y.2009-10 it is noticed that M/s. Alfa Synthetics is not at all a debtor in the books of M/s. Pamis Tex. Pvt. Ltd., as there is no name of M/s. Alfa Synthetics in the list of debtors of M/s. Pamis Tex. Pvt. Ltd. as on 31.03.2009. 10. The ledger of M/s. Pamis Tex. Pvt. Ltd. in the books of M/s. Alfa Synthetics (Atlas) for A.Y.2009-10 sent by your- honour has also been verified. On verification of the ledger account of M/s. Pamis Tex. Pvt. Ltd, it is seen that there was opening cre....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssessee would have been made from M/s. Pamis Tex. Pvt. Ltd. and thereafter the credit balance was getting reduced as and when the assessee was making payment to M/s. Pamis Tex. Pvt. Ltd. by way of endorsement of other partie's cheques in favour of M/s. Pamis Tex. Pvt. Ltd 11. In addition to above, to verify the authenticity of the creditors amount in the books of assessee, the necessary details were called for from a major creditor, namely M/s. Pamis Tex. Pvt. Ltd. which is said to have been situated at Silvasa by issuing a letter on 06.06.2012, but the same has also returned back unserved with remark, "there is no such party of this name, hence return back to the sender." 12. As per your honour's direction, the assessee was also provided on 06.06.2012 the return of income and audit report and requested it to give its comment/objection, if any, after verification of the same. Since no reply was received, one more letter was written to the assessee on 27.07.2012 requesting it to give its comments/objection, if any, on return of income and audit reports of M/s. Pamis Tex. Pvt. Ltd. but till date no any objection from the assessee has been received which reve....
X X X X Extracts X X X X
X X X X Extracts X X X X
....for your honour's kind consideration" (b) No.SRT/Wd-5(1)/Remand Report/AS/2012-13 Date 25.9.2012 "2. In continuation to earlier remand report dated 30.08.2012, in the above referred case, I would like to add additional comments which have been added here under. 3. In para 2.1, it is to be stated that during the assessment proceedings, the AO had called for contra account of the creditor namely M/s. Pamis Tex Pvt. Ltd. along with the other details for the year under consideration. However, the assessee failed to give the contra account from the books of M/s. Pamis Tex Pvt. Ltd. Therefore, the AO had generated copy of return of income of M/s. Pamis Tex Pvt. Ltd. for A.Y. 2009-10 from the ITD module. The AO had compared the figure of M/s. Pamis Tex Pvt. Ltd. and the present assessee i.e. M/s. Alfa Synthetics and it was found that in the books of M/s. Pamis Tex Pvt. Ltd., debtors were amounting to Rs. 24,28,332/- (over six months old )and Rs. 25,95,095/- (others). Thus, total debtors in the books of M/s. Pamis Tex Pvt. Ltd. were Rs. 50,23,427/- only whereas in the books of the assessee, the assessee has shown creditor (M/s. Pamis Tex Pvt. Ltd.) payable of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Ltd by production of copies of original sale bills, original bank statement, ledger of contra account of M/s. Alfa Synthetics and copies of bills none of which has been produced on behalf of the creditor nor by the assessee during any proceeding and therefore, in absence of all this documents/evidence, the purchase in the hands of the assessee cannot be treated as genuine. The assessee is pleading that it had made purchases from M/sJ Pamis Tex Pvt. Ltd. which are duly recorded in its books and it is not their fault, if M/s. Pamis Tex Pvt. Ltd. has not recorded corresponding sales in its books. The argument of the assessee is baseless because if any assessee claims that he has made some purchase transaction with some entity and entered the same in its books and claim the same in the P & L account/ return of income, then he has to produce all relevant details/ evidences to substantiate his claim of purchase. In such incident, it is onus of the assessee to prove the genuineness of the purchases by producing the relevant details from his books as well as the books of selling party. In this case the assessee in spite of having given numbers of opportunities failed to discharge its onus....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the Ld AO for not accepting the additional evidence is erroneous. The assessee had given all details at the time of assessment proceedings. The AO had been provided the addresses of the creditor including the address of the factory of the creditor. The ' assessee had shown his inability to procure confirmation as he was not in contact with the creditor during assessment proceedings. The creditor was a third party and having no relation other than business relation with the assessee. (b) Reply to para 8 of the remand report The Ld contended that the audit report of Alfa Synthetics does not have the name of the creditor ie Pamis Tex P Ltd In respect of above we would like to submit that the AO was given detailed break-up of creditor along with PAN and address assessment proceedings. (c) Reply to para 9 of remand report The assessee had produced full set of bills of purchase with PAN. GST, CST, address of factory and registered office address of the creditor. Copy of original bills were produced before the L.d. AO during remand proceeding and copies were also submitted to this office. The ITD module is an internal document of the department and the same ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the action taken by the AO its order. If for a moment the presumption of the Ld AO is accepted then also the addition would be only of Rs. 22,97,079/- and not of the total outstanding as added by the Ld AO in its assessment order. II. ADDITION OF REPAYMENT OF UNSECURED LOANOF Rs. 28,32,496 The assessee had repaid an unsecured loan to the tune of Rs. 28,2,496. The liability of Rs. 28, 32,496 is not a liability as on 31.3.2009. Repayment is done by account payee cheque and hence the question of disallowance does not arise. III. ADDITION OF Rs. 1,39,31,025 OF ADVANCE TO SUPPLIERS:- The above amount represents advance paid to supplier and represent asset of the firm in its balance sheet Even if for a moment it is accepted that details of the same were not furnished during assessment proceedings, by no stretch of imagination can an outstanding asset (advance) be added to the income of the assessee....." 11. Thereafter, again another remand report for the third time was received by ld.CIT(A) which is contained in para 9.1 and the same is reproduced below. The ld.CIT(A) further sought comments of the assessee to in respect of third remand report whic....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he Ld contended that the assessee had created bogus ' advances to suppliers' and thereby equalized the assets and liabilities side of the balance sheet. In respect of above we would like to submit that the accounting policy is based on double accounting system'and all transactions have been gone through by debit and credit entries in books. If there is liability by some figure then such figure must be effected asset side of the balance sheet. Hence, every entry must be equalized the credit and debit side of the balance sheet. The contention that a bogus asset was created to compensate a bogus liability goes a long way in self explaining the bigger addition of Rs. 5, 44, 52, 103. Even, if for a moment, it is accepted that bogus debtor was created to compensate for bogus creditor, the core issue arise does such act though cannot pass the test of legality, in anyway affect the real taxable income of assessee. What can be tax is the real income. It would be outside the tax net to tax an alleged bogus debtor of an alleged bogus liability unless it was any given point of time income of the assessee for the year in concern (copy of ledger attached) II. Reply to query ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... It is further submitted that original bills were produced before the Ld AO. Copies of such bill are reproduced before your office. A mere reading of the bills show that the bills are complete . Original bills are again reproduced before yourself. The opening ledger balance of the creditor was Rs. 5,19,24,340 were in the assessee had made payment of Rs. 22,97, 079 . Resulting in a closing balance of Rs. 4,96,27,261. In short the only transaction made in the year was a repayment of Rs. 22, 97, 079. In short if at all an adverse inference can be drawn, if can only drawn on the payment made to the creditor nothing more and nothing less. Further we have submitted the ledger copy of five parties to whom we have sold goods and the payment so received from the five debtors was directly paid to M/s Pamix Tex P Ltd We have also mentioned the reason why the assessee had made payment to M/s Pamix Tex P LTd that the assessee firm was using full cash credit facilities of the bank and any deposit of such cross cheque received from debtors in the bank a/c of the assessee would amount to the bank reducing his excess overdraft and would also amount to delay of two days clearing tim....
X X X X Extracts X X X X
X X X X Extracts X X X X
....confirmed by the assessee at BAR. 13. Since both the parties have agreed that additions have already been made in the respective assessment years i.e. 2006-07 and 2007- 08, therefore, there is no cause left before the ld.DR to challenge this finding recorded by the ld.CIT(A) in this assessment year as the order passed by ld.CIT(A) has already been complied with and now there is no loss to the Revenue. Even otherwise, the ld.DR has failed to substantiate its argument as to how and in what manner the order passed by the ld.CIT(A) on this ground is not sustainable in Law or what impropriety has been committed by the ld.CIT(A). No new facts or circumstances have been brought before us in order to controvert or rebut the findings recorded by ld.CIT(A). Therefore, we find no reasons to interfere or deviate from the lawful findings so recorded by ld.CIT(A), thus we upheld the same and dismiss this ground of appeal. 14. Ground No.2: This ground raised by the Revenue challenging that the ld.CIT(A) has erred in deleting the addition of Rs. 28,32,496/- regarding unexplained repayment towards unsecured loans despite the fact that the sources and nature of the amount of repayment of the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch established that the entire loan has already been repaid by the assessee. Thus, the ld.CIT(A) rightly concluded that the repayment of the loan mentioned that there had been reduction in the liability and unless there is an evidence that these repayment has been bade out of unaccounted income, no addition can be made. It was also held that if the AO feel that unsecured loans were bogus, then in that eventuality the corresponding addition was required to made in the year in which the unsecured loans were taken. No new facts or circumstances have been brought before in order to controvert or repaid the factual findings so recorded by the ld.CIT(A). In the light of above, we do not find any infirmity in the order of ld.CIT(A), accordingly same is upheld, consequently Ground No.2 of appeal of the Revenue is dismissed. 18. Ground No.3: This ground raised by the Revenue challenging that the ld.CIT(A) has erred in deleting the addition of Rs. 1,39,31,025/- in respect of unexplained advances to suppliers despite the fact the nature and genuineness of the transaction was not proved by the assessee either during the course of assessment proceedings or during the remand proceedings. 1....