TaxTMI 
TaxTMI 
2021 (9) TMI 976
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....ficer observed that there was decline in the sale during the year compared to total sales of Rs. 1618.78 crores in A.Y. 2012-13 and total sale of Rs. 1931.82 crores in A.Y. 2011-12. On query, the assessee admitted that during the year he was indulged in circular trading transaction in order to show better turnover. The assessee has admitted that majority of its purchases were merely paper purchase transaction as it was engaged in circular trading activities wherein the bills/invoices change hands without movement of physical goods. Various proprietary concerns were floated through which the circular tradings were carried out. In the circular trading various sale bills would be issued which would be circulated amongst these fictitious concerns and finally they would end up in sales to the assessee by the last entity. The advantage taken by the intermediary were that they discounted the sale bills made by them to the first created entity and obtained loan from bank, through the bill discounting method. From the money obtained from bill discounting they would then make the payment for the last entity from whom they made purchase. From these payments made by the assessee, the entities ....
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....a Enterprise 3432290 Pradip Ltd. Overseas 3439191 Balaji Impex 3699008 Shree Sai Trading Co. 3705425 Pradip Overseas Ltd. 3710638 Shri Enterprise Ram 3549322 S.K Enterprise 3552811 Pradip Overseas Ltd. 355710S Shiv Trading Co. 2744456 Shivraj Traders 2748054 Pradip Ltd. Overseas 2752191 Venkateswara Trading Co. 3923517 Jay Traders 3929222 Pradip Overseas Ltd. 3936069 A.M Enterprise 2399220 Shree Balaji Trading Co. 2403403 Pradip Overseas Ltd. 2408050 Vinayak Enterprise 2998752 Krishna Enterprise 3002550 Pradip Overseas Ltd. 3007382 Shri Ram 3879402 i Enterprise I Balaji Enterprise 3884753 Pradip Oversea: Ltd. 3890940 TOTAL 331794151 33221249 j 33272933 (iii) The appellant sold goods worth Rs. 3,31,79,415/- in circular trading to the first party, who in-turn sold such goods to second party at Rs. 3,32,21,249/- and finally the second party sold such goods to the appellant company (POL) at Rs. 3,32,72,933/-.....
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.... Shivra] Traders 2743054 Pradip Overseas Ltd. 2752191 Venkateswara Trading Co, 3923517 Jay Traders 3929222 Pradip Overseas Ltd 3936069 A.M Enterprise 2399220 Shree Balaji Trading Cc. 2403403 Pntiip Overseas Ltd. 2408050 Vinayak Enterprise 2998752 Krishna Enterprise 3002550 Pradip Overseas Ltd. 3007382 Shri Ram Enterprise 3879402 Balaji Enterprise 3884753 Pradip Overseas Ltd, 3890940 TOTAL 33179415 33221249 33272933 4.3.3 From the above facts of the case, submissions of the appellant and findings in assessment order following facts emerges: (i) The transactions of purchases and sales made by appellant are in the nature of circular trade transactions, where the appellant offered profit in the sale transactions and purchased the same goods through circular trade at some higher value. The appellant furnished sample bills/invoices, where the goods are travelled as sale by the appellant (POL) and received back as purchases by the appellant (POL): In these transactions the purchases value of goods increased by Rs. 93,518/- (sale by POL Rs. 3,31,79,415/- less purcha....
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....y debtors and creditors on 31.03.2009 are Rs. 10.92 crores each. There are only two parties in Sundry creditors. In respect of both these parties 25% disallowance has been made by A.O. There are five parties in Sundry debtors. The appellant has claimed that payments have been made/received in respect of these creditors/debtors in A. Y. 2012-13. Therefore, it is not a case where purchase parties don't exist or have denied having transactions with appellant. The appellant vide letter filed on 09.08.2012 admitted that it was a case of circular transactions. The said letter is reproduced herein under:..............,......,......... ................... it is apparent that both the purchases and sales in this case are bogus and only book entries for purchase/sale have been made. Such transactions may be for the purpose of giving bogus entries to other concerns to help them evade tax or just circular transaction whether the group to generate a fake healthy balance sheet to deceive financial institutions or for some other purpose. Ethical aspects of such an' exercise can be debated and there may be adverse consequences under other acts/rules for such cond....
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....nover of Rs. 13.23 crores. Therefore, addition is sustained to extent of Rs. 9.12 lakhs." 7. " None appeared on behalf of the assessee while as the learned DR vehemently supported the order of the learned AC sno prayed that the same may be sustained. 8. We have carefully perused the materials placed before us and also heard the arguments advanced by the learned DR. Further, perusing the order of the learned CIT(A) we find that the learned CIT(A) after deliberating the issue has made the following findings:- (i) All the parties from whom the assessee had made purchases were assessed to tax and were disclosed in their trading account. (ii) The parties from whom the assessee had made purchases had only wrongly classified in their books of accounts as loan instead of showing the balance due to the assessee as receivable from the assessee as debtors. (iii) In such circumstances, the transactions of the purchases and sales made by the assessee need not be doubted. (iv) However, during the year the assessee had a turnover of Rs. 18.23 Crores with gross profit at 0-04% and net profit at 0.02%. During the subsequent assessment year, the ....
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....lier year on the basis of report submitted by the assessee before the Settlement Commission. On the other hand, ld. counsel has contended that Assessing Officer has not considered the complete submission of the assessee and made the addition unreasonably without giving any reason. The ld. counsel has also submitted that ld. CIT(A) has rightly adjudicated the issue as the facts are identical to the earlier year for which assessee has made submission before the Settlement Commission. 6. Heard both the sides and perused the material on record. During the course of assessment, the assessee has admitted that it was engaged in circular trading wherein the bills/invoices changed hands without movement of physical goods. The Assessing Officer has treated such purchase of Rs. 2,83,77,87,618/- as not reliable and disallowed 5%of such purchases which worked out to Rs. 14,18,89,380/- and added to the total income of the assessee. During the course of assessment and appellate proceedings the assessee explained the complete modus operandi of circular trading transaction which was carried out to show better turnover. Without reiterating the facts as elaborated in this order, it is undisputed f....