TaxTMI 
TaxTMI 
TaxTMI 
2022 (11) TMI 187
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....transactions. B. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of undisclosed income without appreciating the fact that the reasons given by the assessee for receiving credit in their bank accounts from third parties during the assessment proceedings are different that the reasons given during the remand proceedings. C. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of undisclosed income without appreciating the fact that M/s. Mediclaim Lifesciences Pvt. Ltd. and M/s. Friends Trading Limited are closely related parties of the assessee and third parties have credited an amount of Rs.58,12,01,658/ on behalf of these parties and this shows the transaction is sham transaction and the assessee has used colorable device for its undisclosed income. D. The appellant craves leave to amend or alter any ground or add a new ground which may be necessary." 03. Brief facts as noted from the orders of the lower authorities shows that assessee is a partnership firm engaged in the business of trading in pharmaceutical and chemical pr....
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....ot appearing in the sales as it is not received on account of sales. However, assessee did not explain why a sum of Rs. 226,935,531/- is outstanding as debtor. 04. The learned AO examined the Ledger account of both the parties. The Ledger account on analysis were tabulated and page number 6 and 7 of the assessment order. The finding of the AO was that party number 1 supplied goods to the assessee amounting to Rs. 96,237,353/- from 14/6/2014 to 12/9/2014. At that time, the advances outstanding in that account was only Rs. 7,643,199. Assessee made further advances to the above party which resulted into total advance of rupees to crore 36,98,915. Assessee failed to explain what those technical and contractual reasons are and why the consignment did not materialize. He also noted that within 3 days the assessee could realize from the directors of that party number one a sum of Rs. 7,587,000. Accordingly he held that the substantial amounts received from the 3rd party are nothing but the undisclosed income of the assessee. No documentary evidencewas produced by the assessee. The AO further noted that both the parties are closely associated with the assessee. With respect to the second ....
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.... not acceptable. On the basis of the above finding the assessee pleaded before the learned CIT - A to delete the addition. The learned CIT - A held that considering the materials on record and information collected u/s 133 (6) and statement recorded u/s 131 in the remand proceedings he is of the opinion that the nature and source of the said amount is credited in the bank account of the assessee stands explained and substantiated. Therefore, the provisions of Section 68 do not apply. He further held that as there is no material to hold that these amounts as a business receipts addition u/s 28 of the income tax act is also not sustainable. However with respect to 2 parties who did not respond during the remand proceedings u/s 133 (6) of the act amounting to Rs. 1,846,800 addition was confirmed. Therefore,the addition of Rs. 581,201,658/- was deleted. 06. The learned AO is aggrieved with that order and is in appeal before us. The learned AO raised three grounds challenging the deletion of addition of Rs. 581,201,658/-. The learned CIT DR vehemently submitted that the learned CIT - A has erred in deleting the addition in the hence of the assessee u/s 68 of the income tax act. It was ....
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....its bank account which did not belong to the assessee but to somebody else i.e., 2 related parties of the assessee partnership firm. The learned CIT - A believed that if on behalf of somebody else the payment can be made to anybody and everybody confirms, the nature and source of such payment in the hence of the party in whose bank account the sum is credited becomes explained. The learned CIT - A held as Under: - "7. I have considered the facts of the case, the oral arguments of the Learned. ASSESSMENT ORDER as well as written submission of the appellant, material on record and case laws relied upon by the appellant as against the observations and findings of the Assessing Officer in the assessment order and in remand report. The submissions and contentions of the appellant are being discussed and decided as under: 7.1 The first ground raised in this appeal is against addition of undisclosed income amounting to Rs. 58,30,48,458/-. It is contended that the learned Assessing Officer erred in law and in fact by adding Rs. 58,30,48,458/- which is not the income of the appellant. The appellant submitted that it had business connections with two parties, viz., M/s. Friends Trading a....
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....td suffered huge loss of Rs. 27 crores approx in F.Y. 2014-15 (A.Y 2015-16). The assessee put pressure on the aforesaid parties to recover the advances as materials were not supplied to the assessee and took payments from the debtors of the aforesaid parties. The Assessing Officer brought out the observance from the perusal of the books of accounts of the assessee that the assessee made further advances/payments to the aforesaid parties despite the fact that the said parties did not send the consignments. Therefore, the above contention of assessee that there is fear among all the parties & creditors of Medichem Lifesceinces Pvt. Ltd whether the advance given will be received back or not due to such a huge loss and for this reason, assessee started putting lots of pressure on Medichem Lifesceinces Pvt. Ltd. and took direct payment from the debtors of Medichem Lifesceinces Pvt. Ltd and recovered the money paid to them as advance is not found acceptable to the Assessing Officer. The Assessing Officer found the confirmation of M/s. Friends Trading dated 27.12.2017 wherein reference is made to Assessing Officer's notice u/s. 133(6) for furnishing of information in the case of M/s. Viva....
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....ellant Firm. Mr. Deepakbhai N. Panchal, Partner of M/s. Friends Trading in his statement recorded u/s. 131 on 07.09.2018 stated that he could not procure the materials due to sudden global price slashing in petrochemical products in F.Y. 2014-15, and so the money to the tune of Rs. 8,24,93,878/- was returned to M/s. Vivaan Corporation. The balance amount of Rs. 10,18,13,848/-(Rs.18,43,07,726/- less Rs.8,24,93,878/-) was advanced to various parties to source petrochemicals in domestic markets. However, looking at worse situation arising in petrochemical products in domestic market due to global slashing in pricing, the said company had to return back all the advances which was directly paid to M/s. Vivaan Corporation by the parties. 7.1.3 However, considering the fact the reasons for receiving the credits in the bank account of the appellant cited in the assessment proceedings is different from the ones submitted in the remand proceedings, the Assessing Officer held the aforesaid amounts received by the appellant through third parties in a way of circular transactions are totally not acceptable and the CIT(A) may not accept the additional evidence submitted by the assessee and uph....
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....h, Director of M/s. Medichem Life Sciences Pvt Ltd is also recorded u/s. 131 of the I.T. Act wherein, he has confirmed that there was credit Sciences Pvt. Ltd. which were routed through M/s. Vivaan Corporation due to some operational issues in M/s. Medichem Life Sciences Pvt Ltd. In view of the above, the appellant contended that the addition made by the Assessing Officer is not justified and must be deleted. 7.1.6 On careful consideration of the materials on record and perusal of the submission of the appellant with reference to the assessment order and the remand report, it is observed that the sole issued of contention is the nature and source of credits amounting to Rs. 58,30,48,458/- reflected in the HDFC Bank account of the appellant. From the perusal of the assessment order and the remand report, the fact that the above credits have been deposited in the HDFC Bank account of the appellant in the impugned assessment year is not disputed either, by the Assessing Officer nor by the appellant. The identity of the depositors has been verified by the Assessing Officer vide information collected u/s. 133(6) as stated in the remand report. The purpose and reason as to why the thir....
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....as the source and nature of such credits deposited in the HDFC Bank account of the appellant stand explained, the deeming provision of Section 68 is not applicable to the said receipts credited in the bank account of the appellant. As there is no material to hold these amounts, as business receipts, no addition is called for u/s.28 of the income Tax, Act. 7.1.7 However, in the case of two parties, M/s. Azaan Enterprises and Mr. Patel Ishwar Premji, for credit entries of Rs. 14,46,800/- and Rs. 4,00,000/- respectively, amounting to Rs. 18,46,800/- as per the remand report, the above parties have not responded to notice issued u/s. 133(6) and no confirmation has been received from them directly. In the appellate proceedings, there is no submission with regard to credits for Rs. 14,46,800/- in the name of M/s. Azaan Enterprises. Regarding credit entry amounting to Rs.4,00,000/- appearing against the name of Mr. Patel Iswar Premji, the submission that the amount of Rs.4,00,000/- received from the Patel Ishwar Premji on 17.12.2014 has been repaid on 15.01.2015 and that the same can be seen from the bank statement is untenable for want of documentary evidence. Appellant has not produce....