TaxTMI 
TaxTMI 
TaxTMI 
2023 (1) TMI 704
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....account of alleged bogus purchases of Rs. 5,39,15,841/-. Ground no. 5: Addition on account of discrepancy in stock of Rs. 13,76,21,050/-. Ground no. 6: Estimated addition of Rs. 8,05,495/- on account of alleged unaccounted stock of Graphite. Ground No. 7: Addition of Rs. 13,94,071/- in respect of alleged labour job payments. Ground No. 8: Incorrect invocation of provision of section 115BBE of the Act, levying tax @ 60% on the addition made u/s 69 and 69C in respect of ground no. 5 to 7. 4. In the department appeal, the only issue raised is that, Ld. CIT (A) has erred in restricting the addition to 10% of the total alleged purchases as against the entire purchases added by the AO. 5. Ground no. 1 & 2 have not been pressed by the assessee; therefore the same is dismissed as not pressed. 6. In so far as addition on account of alleged bogus purchases of Rs. 5,39,15,841/- and the similar ground raised by the department whereby revenue has challenged that Ld. CIT(A) should not have restricted the addition to the extent of 10% of gross profit rate. 7. Both the parties are agreed that these grounds are identical to the issue involved in the appeals for AY 2014-15 to 2017-18 whi....
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....s. During the relevant previous year, the assessee has traded in food grains and HR plates and Food grains are exempt from GST. In respect of HR plates, GST is chargeable at 18%. However, the assessee has traded in HR plates hence GST has been levied both on purchases and sales and no benefit has been availed by the assessee. Hence there is no question of any savings in GST. 10. The objection of the AO was that, firstly; assessee has not produced the purchase party, secondly; invoices were submitted only on simple basis despite the details, ITR, balance sheet of the parties was not produced, thirdly; SOP was not filed in respect of purchases made from the said third parties; and lastly; assessee had traded any items other than regular business items of these 3 parties. 11. To controvert these objections, firstly; the assessee had submitted that AO has not conducted any inquiry while coming to the conclusion as the parties are not genuine. Secondly; the AO has asked for invoices only on simple basis which is evident from para 12.5 of the assessment order at page 5 and this fact has also been noted by Ld. CIT(A) in para 6.18 at page 28 of his order. Apart from that it was also subm....
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....led in response to query raised by us during the course of hearing by us to furnish the date wise detail of trading account showing the gross profit percentage in respect of alleged bogus purchases and other purchases and apart from that, details of bill wise sales against such alleged bogus purchases for the above captioned assessment years. 14. From the perusal of the same, we find that there is one to one co-relation of exact quantity of purchases as well as sales and also the corresponding GP on such sales. Apart from that, details of purchase order, invoice, delivery challan, material receipt stamp, confirmation, ledger accounts of the bank statements have been submitted before us which has also been filed before the lower authorities and which fact we find that, Ld. CIT (A) has also noted and in the assessment order also which are mentioned from pages 6-8 of the assessment order. Ld. Counsel before us filed item wise registers showing purchases and sales of goods which have also placed in the paper book. Once the source of purchases are from the books of accounts and the payment have been made through banking channel and there is a corresponding sales which matches with the....
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....ay, which fact has been noted by Ld. CIT(A) and has also been demonstrated and filed before us. Thus, there was no working capital or investment which has been blocked for alleged bogus purchases. From the details furnished before us and also before Ld. CIT(A), it is seen that assessee has received sale consideration and immediately from such sale assessee had made purchases and this fact has been noted by Ld. CIT(A) in para 6.27 as noted above. In any case assessee is trading in fabrics which items are exempt from VAT, Octroi etc., therefore, it cannot be presume that assessee has taken accommodation entries of purchases to save VAT of 10% or 12%. Assessee has filed justification for GP rate on these items which is ranging 1.36% to 2.34% and looking into the fact that there is minimum movement of the stock right from the moment purchase to sales and it is in consistent with its gross profit margins showed by the assessee in the earlier and in subsequent years, therefore it cannot be held that assessee's GP rate on these items are low. It is brought on record that overall assessee's GP in trading of all items are ranging between 26.14% to 36.14% and overall GP shown in the trading ....
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....m the system. He further stated that there is huge discrepancy in stock and in the closing balance maintained in computer accounting system as against actual calculation of closing balance. He pointed out following discrepancies in the data taken from the tally accounting system in respect of the period from 01.04.2016 to 31.03.2017 i.e. A.Y. 2017-18 [table (a) and (b) on Pg no 16 of assessment order]: Pg no 16 of A.O. Particulars Opening balance Inward Outward Closing balance Table (a) Total stock 9,62,97,239 4,03,86,542 8,78,10,868 9,82,98,208 Table (b) Carbon America 6,01,87,448 1,38,72,061 4,97,44,801 5,62,36,704 17. The Assessing Officer was of the view that the value of closing balance has to be calculated by applying the formula; opening balance + purchases -sales. He contended that, if the said formula is applied then the value of closing balance would be; i) Rs. 4,88,72,9137- (Rs. 9,62,97,239 + Rs. 4,03,86,542 - Rs. 8,78,10,868) in respect of table (a) and; ii) Rs. 2,43,14,7087- (Rs. 6,01,87,448 + Rs. 1,38,72,061 - Rs. 4,97,44,801 in respect of table (b). AO was of the view that the difference of Rs. 4,94,25,295/- (Rs. 9,82,98,208 -Rs. 4,88,72,913) ....
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.... stock is adjusted for, still the discrepancy is much higher, hence the argument of assessee is not acceptable. He concluded that the assessee has not been able to explain discrepancy in stock. Accordingly, the Assessing Officer added Rs. 13,76,21,050/- (Rs. 4,94,25,295/- + Rs. 3,19,21,996/- + Rs. 3,17,90,089/- + Rs. 2,44,83,670/-) as discrepancy in stock u/s 69 of the Act. 21. The detail reasoning of the AO have been given from pages 20 to 25 of the assessment order. 22. Before the Ld. CIT (A), assessee has filed detail written submission explaining each and every items and objections raised by the AO and have been pointed out that addition aggregating to Rs. 10,58,30,961/- did not pertain to the present assessment year 2018-19, albeit pertain to AY 2017-18 and hence, the same could not have been added in the current year u/s 69. However, the Ld. CIT (A) had simply upheld the order of AO. 23. Before us, Ld. Counsel for the assessee submitted that one very important fact to be noted that survey team has not found any discrepancy in the physical quantity of stock. During the course of assessment proceedings, assessee had submitted the stock register and the reconciliation of the ....
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.... CZ-Carbon 14 mtrs 79495 2,88,534 2 Nos 17,371 2,88,534 9. Euro Carbon 1 5 mtrs 476 6,240 -15 mtrs 10. FMI INC 21,41,294 1,05,18,175 2,13,60,706 18,92,562 11. Formosa 635 kgs 584 3,71,078 1750 kgs 2702 47,28,593 124 kgs 7,974 2,44,855 2261 kgs 2799 49,74,153 12. G. Angeloni SRL 190 mtr 70,663 1,64,640 190 mtr 13. Gansu Hoshi - China 4 Nos 5740 22,963 4 Nos 5740 22,963 14. Gaode Equipment 112sq.mtr 232 26,091 101 sq.mtr 446 45,100 11 sq.mtr 794 2,134 15. Graphite Carbon Technology 5,93,386 5,93,386 16. Graphite - Import 19,071 1,99,052 2,76,609 1,33,486 17. Haoshi Carbon 6 Nos 8 Nos 15,516 1,24,135 -2 Nos ....
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....all the items of the above table a) Rs. 9.82 cr. - Rs. 4.87 cr. (Rs. 9.62 cr. + Rs. 4.03 cr. - Rs. 8.78 cr.) = Rs. 4.95 cr. b) Rs. 9.82 cr.-Rs. 7.38 cr. = Rs. 2.44 c ii) On the basis of figures at Sr. no. 4 c) Rs. 5.62 cr- Rs. 2.43 cr (Rs. 6.01 cr. + Rs. 1.38 cr. - Rs. 4.97 cr.) = Rs. 3.19 cr. 26. From the said chart, Ld. Counsel pointed out that the figures appearing at sr. no. 4 of the chart in respect of 'Carbon of America' are same which have been reproduced by the Assessing Officer in table (b) on Pg no 16 of the assessment order. The manner in which addition of Rs. 3,19,21,996/- is made has been explained on pg no 2; para (ii) of the chart. The addition of Rs. 4,94,25,295/- is the difference between Rs. 9,82,98,208 - Rs. 4,88,72,913. The addition of Rs. 3,19,21,996/- is difference between Rs. 5,62,36,704 - 2,43,14,708. It is evident from the chart that the amount of R.s 5,62,36,704 [closing value of 'carbon of america' (sr. no. 4)] is included in Rs. 9,82,98,208 (total closing value). Hence, amount of Rs. 3,19,21,9967- has been added twice by the Assessing Officer. It is further evident from Pg no 2; para (i) of the chart that the Assessing Officer ha....
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.... 10,51,075 1,70,06,146 7,99,300 2. Ce Tech Co. Ltd -31mtrs 7 242 36,72,600 242 3. CHINA UNION 200mtrs 415 mtrs 15 6,590 320 mtrs 41 13,125 295 mtrs 4. FMI INC 9,27,781 52,38,818 91,96,754 16,35,059 5. Formosa 2175 kgs 2191 47,67,463 6 kgs 1,272 7,950 2169 kgs 2,197 47,67,463 6. Gaode Equipment 11 sq.mtr 194 2,134 3 sq.mtr 720 2,160 8 sq.mtr 177 1,423 7. Graphite - Import 82,858 74,856 61,901 8. Hysung Corporation 3,39,085 15,150 3,30,536 9. JSC Polotsk 1000 mtrs 960 mtrs 436 4,19,411 1955 mtrs 778 15,22,500 5 mtrs 10. Local - Graphite 2,41,65,411 62,18,272 1,11,17,284 2,40,93,516 11. Sichuan Aerospca Tuo Xin &nbs....
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....T(A) and submitted that nowhere the assessee has raised the issue that these discrepancy of the stock is pertaining to earlier year. Further, no reconciliation was furnished before the AO. Thus, all those issue which has been raised by the Ld. Counsel cannot be accepted and in any case the matter should be restored back to the file of AO for proper reconciliation. 32. We have heard the rival submissions and also perused the relevant findings given in the impugned orders as well as material referred to before us at the time of hearing. We find that AO has made addition on the ground that during the survey statement of Shri Vithal Gopal Patil was recorded and the details of stock of raw materials are taken out from the tallied data which are extracted from the stock register provided by him. The relevant show cause notice reads as under:- Tally extract taken from computer for the period 1.4.2016 to 31.03.2017 showed following figures:- (Figures in Rs.) Particulars Opening Balance Inward Outward Closing Balance Grand Total 9,62,97,239 4,03,86,542 8,78,10,868 9,82,98,208 The grand total of closing balance should be 4,88,72,913. However computer accounting system ....
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....ld not have been relied due to various discrepancies and the figures could not tallied due to entry errors. Nowhere there is any defect or discrepancy in the physical stock found and the entries in the regular books of account. The tally data prepared by Vithal Gopal Patil at a rabale godown who was working as a supervisor and keeps record of stock and had made the entire entry without any verification whether the figures entered therein are factual or any discrepancy in physical stock. From the given chart, it is seen that there are inherent discrepancy, for example, there are instances where purchases have not been entered and yet there is discrepancy in opening and closing balance and there is no reconciliation of inward or outward, opening and closing balance. Similarly, there are instances where outward quantity is more than the opening balance and inward. All this shows that certain purchases have not been entered. There are certain other entries where the closing balance is same as opening balance despite there has been outward. This shows that the tally data was not at all reliable and AO should have been verified or asked the assessee to reconcile from the actual books of ....
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....n stock working of 17,378 kgs as per the excel sheet maintained by him. It was submitted that the weight of physical stock was on approximate basis. The Assessing Officer did not agree with the submission of the assessee and concluded that there is discrepancy in stock of 1303 kgs (18612kgs - 17,378kgs). The Assessing Officer applied the rate of Rs. 618.01 per kg and added Rs. 8,05,495/- (1303kgs * Rs. 618.09) u/s 69 of the Act. Ld. CIT (A) has upheld the addition made by AO. 41. Before us, Ld. Counsel submitted that in the case of graphite block, it is practically impossible to conduct physical verification of 18 Metric Tonne of material available in various shapes and sizes within a day or two. The survey team had done verification on approximation basis without actual weighing of physical stock. The weight is usually arrived at by using the input, 'Length x Breadth x Height x Density'. However, the dimension can be accurate the bulk density varies from grade to grade and also within the block itself from one corner to another depend on the method of manufacture of graphite blocks. It is only done on approximation basis. The assessee has recorded the actual stock position of the....
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....he assessee is making out of book payment to M/s. Whiton Chem P. Ltd for labour job work of Rs. 13,54,0717- (Rs. 18,26,277 - Rs. 4,72,206). It was submitted before the CIT(A) that M/s. Whiton Chem P. Ltd had done the machining work so the addition cannot be made in case of assessee. The assessee had availed services of M/s. Whiton Chem P. Ltd and paid them as per the invoices raised by them. The Assessing Officer has made addition u/s 69C of the Act without bringing anything on record that payment has been made to M/s. Whiton Chem P. Ltd. 45. After considering rival submissions and on perusal of the impugned orders as well as material placed on record. We find that assessee had made following submissions which are as under:- The accounting entries in the books of accounts of Whiton Chem P Ltd were pending to be recorded till the date of search/as on the date of search. The pending entries were recorded and updated subsequently post search. There were sales of Rs 3,29,10,916/- and labour income of Rs. 4,72,206/- up to 17/11/2017 as per the audited books of Whiton Chem P Ltd. The amount of labour charges of Rs.18,26,177 as stated by Mr. Rao is value estimated according to him ....