2011 (3) TMI 1830

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....s of Rs. 2,12,551/- effected from M/s. Deepak Enterprises for the reason that the invoice dates fall in the preceding year while the appellant has recorded purchases in current year: Sr. No. Bill No. Amount (Rs.) Date of entry of purchase(in assessee's book) 1 115 59253 4.6.2003 2. 116 41643 10.6.2003 3. 101 111655 4.6.2003 4. Total 212551 The assessee submitted that purchases were recorded upon receipt of goods in current year. The goods were received and consumed during the year under reference. The corresponding purchases were accordingly recorded in the year of stock receipt and consumption. Assuming the AO was right that the purchases ought to have been recorded in the year to which the invoices pertained, still, such recording would have had same impact on assessee's taxable income. In the preceding year, the assessee would have debited purchase with corresponding credit to stock in transit account. Such compensating debit and credit would have had no impact on taxable income. Such stock in transit would have been claimed as cost only upon its receipt and consumption in the current year. In view thereof, the recording and claim of purchase as deduction in....

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....used to admit the said evidence during the assessment proceedings. A copy of this report of the AO was supplied to the appellant for his counter comments and arguments if any. In reply, the appellant filed a letter dt. 13.3.2009 stating therein that letter dt. 26.9.2006 notifying change of address and letter dt. 20.10.2008 from Deepak Enterprises alongwith their confirmation and copy of bank statement are being enclosed herewith. It has thus been argued by the AR of the appellant that the communication claim having been made by the AO vide letter dt. 16.10.2008 has not been received due to change in address of the appellant and thus further claimed that since M/s. Deepak Enterprises vide their letter dt. 20.10.2008 had confirmed the sales made by them to the appellant and also the payment received by cheque from the appellant which is further reflected in the bank statement of the appellant, the addition made may be deleted. 5. The Ld. CIT(A) further held as follows: "On carefully considering the facts and above submissions of the appellant and going through the assessment order as well as the remand report of the AO it is evidence that the appellant during the assessment pr....

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....t admitted. Hence the same are rejected and treated as having no relevance for considering and deciding this ground of appeal. Having not admitted the additional evidences, I do not have any other reason, but confirming the action of the AO in making disallowance of Rs. 2,15,551/- claimed by the appellant as expenditure incurred for purchases which were not proved beyond any doubt before the AO. Therefore, the addition made by the AO of Rs. 2,15,551/- u/s. 68 of the I.T. Act by creating cash credit in the name of Deepak Enterprises obtaining bogus bills, is upheld. This ground is, therefore, decided against the appellant." 6. Aggrieved, assessee preferred an appeal before us and raised the following ground: " 1. (a) On the facts and in the circumstances of the case and in law, the Ld. CT(A) has erred in confirming the addition of Rs. 2,12,,551/- as bogus purchases from M/s. Deepak Enterprises, Delhi" 7. We find that the Ld. CIT(A) observed that in the report of the AO it has been stated that additional evidence produced may not be admitted at the Appellate stage as the assessee has been given sufficient opportunity during the assessment proceedings. Assessee was not prevented....

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....as restored to the file of the AO." Following the ratio of the above said decision, we remit the issue back to the file of the AO for giving a reasonable opportunity to the assessee to produce before the AO all the evidences and thereafter the AO shall consider/re-examine the issue of addition of bogus purchases from M/s. Deepak Enterprises in accordance with law. 9. The next ground raised by the assessee reads is as follows: (b) On the facts and in the circumstances of the case and in law the Ld. CIT(A) has erred in confirming the addition of Rs. 16,33,869/- of interest paid." 10. Following the decision in the case of Abhishek Industries Ltd. 156 Taxman 257, the Ld. CIT(A) held as follows: "Since the appellant having failed to establish the nexus of borrowed money used for the purposes of its business to the extent of the advances made to its sister concern, the claim of deduction to this extent disallowed by the AO is thus justified and upheld. This ground is also decided against the appellant" 11. The Ld. Counsel for the assessee reiterated the contention made before the Ld. CIT(A) which are as follows: "In the above submissions the appellant has contended that adva....