AI Drafter 
TaxTMI 
TaxTMI 
2024 (4) TMI 87
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....sessment order dated 21.12.2018 passed by the AO is erroneous in so far as it is prejudicial to the interests of the revenue to the extent of verification of purchases and examining of applicability of section 40A(3) against cash purchase" is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding that "purchases from M/s Gaja Nand Pardeep Kumar of Rs. 58,42,492/- should have been disallowed as/bogus purchases']and also the observation that "assessee has made cash purchases from open market as the sales have been confirmed; However AO has failed to acknowledge this fact and no disallowance were made as per provision of section 40A(3) of the Act" are factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable. 2.2 That the learned Principal Commissioner of Income Tax has erred in holding that it is a case of "lack of enquiry" and, further failing to appreciate that alleged inadequate enquiry in the manner, suggested without any independent evidence and, without any f....
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....pplication of mind much less independent application of mind and without having any tangible, relevant credible material to form a reason to believe that income of the appellant has escaped assessment therefore the order of assessment u/s 147/143(3) of the Act was without jurisdiction and as such the impugned order is also without jurisdiction. 3. At the outset, it is noted that there is a delay in filing the present appeal by 19 days. In this regard, the assessee has filed an application seeking condonation of delay stating that the period of delay is covered by the decision of the Hon'ble Supreme Court wherein the period of Covid-19 Pandemic was directed to be excluded for the purpose of limitation. It was, accordingly, submitted that the delay in filing the present appeal may be condoned. 4. The ld. DR did not raise any specific objection. 5. In view of the submissions made by both the parties, the delay is hereby condoned and appeal of the assessee is admitted for adjudication. 6. Ground Nos. 3, 4 and 4.1 are not pressed. Accordingly, these grounds are rejected. 7. Ground No.1 is general and needs no adjudication. 8. Apropos Ground Nos. 2 to 2.7, the facts....
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....pinion in place of the decision taken by the AO, and revision u/s 263 is not permitted on a difference of opinion; that this view is supported by the decision of "Spectra Shares and Scrips (P) Ltd.", 2013 (6)...........173 Andhra Pradesh High Court (sic-incomplete citation was given), in which, it was held that merely because of difference of opinion, the Pr. CIT cannot invoke his power u/s 263 once the AO had taken a conscious decision and had acted in accordance with law and had made assessment, the same could not be branded as erroneous by the Commissioner, as simply according to him, the AO should have made further enquiries. The assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of "Quality Steel", 395 ITR 1 (S.C), wherein, it has been held that where two views are possible and the AO had taken one view and the CIT revised the said order on the ground that he did not agree with the view taken by the AO, the assessment order could not be treated as an erroneous order or prejudicial to the interests of the Revenue; that the reason is simple, i.e., that while exercising the revisionary jurisdiction, the CIT is not setting in appeal. The assessee....
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.... 9.2 It was held that evidently, the assessment order was erroneous and so far as it was prejudicial to the interests of the Revenue to the extent of verification of purchases and examination of the applicability of Section 40A(3) against cash purchases. The AO was directed to decide this issue afresh as per law. 9.3 The ld. Counsel for the assessee has contended that the ld. PCIT has erred in passing the impugned order since the AO had accepted the claim of the assessee only on examination of the facts on record and after making possible enquiries, due to which the assessment order could not be termed as either erroneous or prejudicial to the interests of the Revenue; that it was only because the ld. PCIT had an opinion different from that held by the AO, that the impugned order was passed illegally, without establishing as to how the view of the AO was an impossible view in any manner; that the ld. PCIT has failed to appreciate that under the provisions of Section 263 of the Act, an order of assessment cannot be set aside simply to make further enquiries and to thereafter pass a fresh order; that the ld. PCIT has failed to appreciate that surmises, conjectures and suspicion....
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....ition of Rs. 31,37,700/-, u/s 143(3) of the Act on 22.03.2018, a notice (APB 50) was issued to the assessee u/s 133(6) of the Act, asking the assessee to furnish copies of cash book, ledger account and bank statement for the Financial Year 2010-11, relevant to assessment year 2011- 12, copy of account with M/s Gaja Nand Pardeep Kumar, Proprietor Shri Pardeep Kumar for the said party and details of assets purchased/sold alongwith documentary evidences during the said party. The assessee filed reply (APB 51), stating that the assessee had made payment of Rs. 15,50,000/- on 01.11.2010, vide cheque No. 009050 of State Bank of Patiala towards purchase of cotton made on 23.10.2010 from M/s Gaja Nand Pardeep Kumar. Copies of account of M/s Gaja Nand Pardeep Kumar and bank statements were enclosed. On 30.03.2018, a notice (APB 57) u/s 148 of the Act was issued to the assessee. Then, notice u/s 142(1) was issued on 27.08.2018 (APB 64). On 31.10.2018, a summon (APB 65) was issued to Shri Pardeep Kumar, Proprietor M/s Gaja Nand Pardeep Kumar u/s 131 of the Act. On 26/31.10.2018, notice (APB 66-67) was issued to the Market Committee, Dabwali, u/s 133(6) of the Act. On 14.11.2018, a reply (APB ....
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....this case, this office is in possession of certain information that during the Financial Year 2010-11, relevant to assessment year 2011-12, the assessee has carried out unaccounted purchase of Rs. 15,50,000/- from M/s Gaja Nand Pardeep Kumar, NGM-209, Dabwali, District - Sirsa. Vide this (sic) office letter dated 22.03.2018, the assessee was specifically required to explain the details of purchases made from the abovesaid party. In response thereto, the assessee has intimated that he made purchases from M/s Gaja Nand Pardeep Kumar, Proprietor Pardeep Kumar amounting to Rs. 58,42,590/-. As per information received from ITO (Investment), Gurugram, the DDIT (Investigation), Hissar afforded too many opportunities to Shri Pardeep Kumar to appear or file any written reply as regard to purchase made with the parties, but he has neither appeared nor filed any written reply. A letter was sent to him by Registered Post on his residential address i.e., ........2875, Gandhi Memorial Vidhalya, Abohar by specifically mentioning that the entries in the account will be treated as his income from other sources and action will be initiated against him as per provisions of Income Tax Act, but no repl....
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....chases from this firm are bogus purchases and only bills have been raised. Please furnish complete documentary evidence to prove the transaction made with M/s Gaja Nand Pardeep Kumar is genuine and duly accounted for in the books of account.........." 9.10. In its reply (APB 69-78) dated 11.12.2018, the assessee submitted relevant portion at APB 69-70) that; 9.11 Details of purchases made by the assessee from M/s Gaja Nand Pardeep Kumar, with copies of purchase bills have been filed at APB 111-125. 9.12 Copies of transportation bilty of the transporter who had lifted the goods from M/s Gaja Nand Pardeep Kumar, have been filed at APB 111-125. Copies of sale bills have also been enclosed. Copy of ledger of M/s Gaja Nand Pardeep Kumar in the books of the assessee, for the period from 01.04.2010 to 31.03.2011, has been filed at APB 110. 9.13 Copies of relevant pages of bank statement of the assessee, pertaining to State Bank of Patiala has been filed at APB 127-128 and that concerning Punjab National Bank, has been filed at APB 129-132. These bank statements show payments made by the assessee to M/s Gaja Nand Pardeep Kumar against purchases made from M/s Gaja Nand Pardeep K....
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....e as discussed in detail in succeeding paras. It appears that the assessee has made purchases from the grey market at the price much less than the price recorded in the books of account, however, the assessee have obtained bogus higher rate purchase bills from the abovesaid party. The main reason for using the methodology is to suppress gross/net profit from the business activity. Therefore, it is held that the assessee has made purchases of Rs. 58,42,590/- from the open market which he has stated to be purchased form (sic) M/s Gaja Nand Pardeep Kumar at much lower price than the price disclosed in the books of account. The assessee has shown purchased (sic) of 570.26 qtl. Cotton from M/s Gaja Nand Pardeep Kumar for Rs. 58,42,590/-. Out of total purchased, it notice (sic) that assessee has purchased 175.86 qtl. (89.46 + 86.41) cotton J-34 @ Rs. .10931.14 from M/s Gaja Nand Pardeep Kumar, Dabwali on 01.11.2010 and also purchased same type of cotton @ Rs. 9872.85 from M/s Neelkamal Industries, Jaitsar on the same day i.e., 01.11.2010. Therefore, it is clear that assessee has purchased cotton on higher rate of Rs. 1058.29 from M/s Gaja Nand Pardeep Kumar in comparison to the other par....
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....stal authorities with the remark that the addresses were incomplete. Even the Inspector deputed by the Department could not find any of the parties available at the given addresses. The assessee had not been able to produce any confirmations from any of the parties. The assessee had claimed payment by Account Payee Cheques, qua which, on verification, it was found that the cheques were encashed by parties and not by the alleged sellers. Despite these facts, the Tribunal opined that even the parties from whom the purchases had been statedly made were bogus. The purchases themselves were not bogus. It was concluded that the entire quantity of opening stock, purchases and the quantity manufactured during the year had been sold by the assessee, and that therefore, the entire 102514 meters of cloth purchased were sold during the year. Thus, the Tribunal accepted the assessee's contention that the finished goods were, in fact, purchased by the assessee, though not from the parties shown in the accounts. The Tribunal held that it was not the entire amount of purchases, but the profit margin embedded therein, which would be subjected to tax. On appeal, the Hon'ble Gujrat High Court....
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.... element embedded in the entire purchases made, that could have been brought to tax, which is exactly what has been done by the AO. To the same effect, under similar facts and circumstances, the decisions in the following cases : i) 351 ITR 150 (Guj) CIT vs. Sathyanarayan P. Rathi ii) ITA No. 2826/Mum/2013 dated 5.11.2014 Shri Ganpatraj A Sanghavi vs. ACIT iii) 221 Taxman 436 (Guj) CIT vs. Pradeep Shantilal Patel (section 44AF) iv) ITA No. 116/Ahd/2011 dated 30.5.2014 Narpat Singh vs. 1TO v) 355 ITR 290 (Guj) CIT vs. Bholanath Poly Fab (P) Ltd. vi) 152 ITD 874 (Ahd) Dineshbhai Dhansukhlal Mithaiwala vs. ITO vii) ITA No. 2446 & 2447/Mum/2015 DCIT v. Allied Blendes and Distillers (P) Ltd. viii) ITA NO. 5313/Mum/2013 Vishal P. Mehta v. DCIT 9.22 Further, in "Vaghasiya Exports", order dated 27.07.2021 passed by the Mumbai Bench of the Tribunal in ITA No.2288/Mum/2019, it was found that the only addition made was with regard to suspicious purchases made by the assessee from various entities of a tainted group. Specific queries had been raised by the AO requiring the assessee to substantiate the purchased under su....
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....d it was, accordingly, set aside. 10. In the case at hand too, as discussed, we find that in the assessment proceedings, the AO had made necessary enquiries and it was on having considered the stand put forward by the assessee and the evidence produced in support of such stand, that the assessment order was passed. The assessment order expressed the AO's view which was a possible view, taken by the AO with due application of mind. The same has not been shown to be perverse, in any manner. Therefore, "Vaghasiya Exports (supra) is squarely applicable to the facts of the present case. 10.1 In "Rakesh Prabhu Das Doshi Vs PCIT", vide order dated 02.11.2018, passed by the Mumbai Tribunal in ITA No. 4056/Mum/2018, the Tribunal observed that it had been found from the record that while passing order u/s 143(3) read with Section 147 of the Income Tax Act, the AO had considered the factual position with regard to the assessee having made purchases from different persons, who had made additions of Rs. 6,26,847/-. It had been found that the completed assessment had been reopened on the ground of information received from the Investigation Wing of the Department that the assessee had made....
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....quiries independently to ascertain the genuineness of the purchases made by the assessee; that on examining the material made available on record, though the AO was of the opinion that the assessee had failed to prove the genuineness of the purchases made, he found that not only the assessee shown the purchases made in the books of account, the assessee had also recorded the corresponding sales effected; that thus, the AO proceeded to make addition of the profit element embedded in the bogus purchases by estimating the same at 10%; that thus, the AO proceeded to make addition not only having conducting due enquiry to ascertain the genuineness of the purchases made by the assessee, but had also made addition on account of bogus purchases in accordance with the judicial proceedings; that the PCIT had held the assessment order to be erroneous and prejudicial to the interests of the Revenue, primarily for two reasons; firstly, due to non consideration of the decision of the Supreme Court in the case of "N.K.Proteins" (supra) and secondly due to lack of proper enquiry ; that the Tribunal did not agree with the view of the PCIT that it was a case of lack of proper enquiry to find out the....
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....passed by the Chandigarh Bench of the Tribunal in ITA No. 362/CHD/2022. 11. Further, the ld. PCIT has observed that the assessee had made cash purchases from the open market, as the sales had been confirmed, but the AO had failed to acknowledge this fact and no disallowance had been made under Section 40A(3) of the Act. According to the ld. PCIT, it was, thus, a clear case of lack of enquiry due to which the assessment order was erroneous and prejudicial to the interests of the Revenue. We find that as correctly contended, the ld. PCIT's finding that the assessee had made cash purchases from the open market does not have anything on record to support it. Such finding is based merely on surmises and conjectures. This being so, there was no occasion for the ld. PCIT to conclude that the AO had not made disallowances as per the provisions of Section 40A(3) of the Act. In this regard, in "Shri Ganapat Raj A Sanghavi Vs ACIT", vide order dated 05.11.2014, passed in ITA No. 2826/Mum/2013, the Mumbai Bench of the Tribunal held that the copies of bank account collected by the AO showed the assessee to have made the payments to the stated parties by way of account payee cheques, showing ....
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....ell as the re-assessment proceedings. These books are duly audited under the provisions of Section 44AB of the Act. As per the books, there was sale of Rs. 5,17,05,63,370/- and purchase of Rs. 5,18,27,26,557/-. There is no evidence to dispute or controvert any of these transactions. The total purchases of Rs. 5,18,27,26,557/-, includes purchases of Rs. 58,42,590/- made by the assessee from M/s Gaja Nand Pardeep Kumar, Dabwali. Corresponding sales were made, as reflected in the books of account. The books of account maintained by the assessee were not doubted, much less rejected either by the taxing authorities in the assessment and re-assessment, nor were they called into question by the ld. PCIT in the revisional proceedings. The assessee produced the relevant bank statements depicting the payments made to M/s Gaja Nand Pardeep Kumar (APB 127- 132) against purchases made from M/s Gaja Nand Pardeep Kumar. The assessee had shown delivery of the goods and payment of consideration for such delivery, which are the two things required to establish the purchases made. In the absence of any evidence on record to the contrary, purchases amounting to Rs. 58,42,492/- could not be said to be ....
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.... copies of purchase invoices and matrix of stock ledger showing entry exit of materials, copies of bank statements, showing that payments for these purchases had been made through normal banking channels, to establish the genuineness of the purchasers. It was observed that from the record, it was evident that the AO h addition not doubted the sales affected by the assessee and, therefore, it was logical to conclude that when corresponding purchases have been made, the assessee could not have effected sales; that the AO had not brought any evidence on record to conclusively prove that the purchases were bogus; that mere reliance on the information obtained from the Sales Tax Department, or on the statements/affidavits of the twelve parties before the Sales Tax Department, or on the fact that these parties did not respond to notices issued u/s 133(6) of the Act, would not, by itself lead to the conclusion that the purchases were to be treated as bogus, making addition u/s 69C of the Act; that in case the AO doubted the genuineness of the purchases, it was incumbent upon him to cause further enquiries so as to ascertain the genuineness or otherwise all these transactions; that in the ....
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....CIT Vs Nikunj Eximp Enterprises P. Ltd.", 372 ITR 619 (Bom), that in a case of alleged bogus purchases, the theory that the transaction defies human probability cannot be applied to purchases in isolation, but has to be applied to the entire transaction in the light of documentary evidences produced by the assessee; and that where the sales are accepted as genuine, the purchases cannot be disallowed. 12.5 The decision of the Delhi Bench of the Tribunal in the case of "Paramount Residency (P) Ltd. Vs DCIT" rendered in ITA 49707/Del/2014 and that of the Calcutta Bench of the Tribunal in "Ghanshyam Das Agarwal Vs ACIT" passed in ITA No. 1459/Kol/2010, are to the same effect. 12.6 In the case of "Tejua Rohit Kumar Kapadia", the Hon'ble Gujrat High Court, in ITA No. 691 of 2017, dismissed the appeal of the Department as bearing no question of law, holding that the purchases made by the assessee were duly supported by bills and payments were made by account payee cheque and there was no evidence to show that the amount was recycled back to the assessee, particularly when it was found that the assessee, the trader, had also shown sales out of purchases made which also were accep....
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....h" 91 TTJ 993 (Mum), it has been held that if sales are disputed, purchases cannot be disallowed. The following decisions are also to the same effect : i) M/s Beauty Tex ITA 508/JP/2016 ii) Shri Heera Lal Chuni Lal Jain V ITO, order dated 01.01.2016, passed in ITA No.4547/Mum/2014 iii) M/s Imperial Imp & Exp V ITO, order dated 18.03.2016, passed in ITA No. 5427/Mum/2015 iv) ITO V Shri Sanjay V Dhruv, order dated 29.02.2016, in ITA No. 5089/Mum/2014 v) ITO Vs M/s Vaman International P Ltd. order dated 16.11.2016 in ITA No. 794/Mum/2015 vi) CIT Vs M/s Ashish International, order dated 22.02.2011, passed in ITA No. 4299/2009 (Mum) vii) J.R. Solvent Industries (P) Ltd. V ACIT 68 ITD 65 CHD, and viii) Rupesh Chiman Lal V ITO, order dated 30.01.2017 in ITA Nos. 6179-6182/Mum/2016 13.5 Then, it is well settled that the assessee cannot be expected to be after the person with whom he has entered in the business transactions and the assessee's onus is to establish the identity of the party and once the payment has been made through account payee cheque, that identity is well established. 13.6 The following deci....
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....e Hon'ble Supreme Court in the case of Malabar Industries Ltd. V CIT 243 ITR 83 (S.C.). 14. As correctly pointed out, it is seen that the facts and the report of the Investigation Wing of the Department were all available with the AO during the assessment proceedings and there was no new fact having emerged after the passing of the assessment order or any fact that had been skipped by the AO. Proper enquiries had been conducted by the AO and the assessment had been framed thereon. The assessment, therefore, had wrongly been treated by the ld. PCIT as erroneous within the meaning of the provisions of Section 263 of the Act. 14.1 In CIT Vs DLF 350 ITR 555 (Del) it has been held that once the AO had accepted the claim of the assessee on examination of the facts on record and after making all possible enquiries, the assessment order could not be termed as erroneous and prejudicial to the interests of the Revenue; that where two views are possible and the AO has taken a view with which the PCIT does not agree, the assessment order cannot be held to be erroneous and prejudicial to the interests of the Revenue. Similarly, the decision in the case of Garg Brothers Pvt. Ltd. Vs DC....
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....the decision of the Hon'ble Supreme Court in the case of "Sirpur Paper Mills Ltd. Vs CWT, 77 ITR 6 (S.C), it has been held that while exercising revisionary powers, the Commissioner must have an unbiased mind and he must decide the dispute in accordance with the procedure which is consistent with the principle of natural justice and that he cannot permit his mind to be influenced by the dictation of another authority; and that he cannot permit his judgement to be influenced by matters not disclosed to the assessee. The following decisions are also decisions to the same effect: i) 290 ITR 395 (Gau) B & A Plantation & Industries Ltd. vs. CIT ii) 296 ITR 238 (P&H) CIT vs. Sohana Woolen Mills iii) ITA No. 690/Chd/2010 A.Y. 2005-06 dated 9.3.2012 Sh. Jaswinder Singh vs. CIT v) ITA No. 367/Chd/2012 A.Y. 2007-08 dated 7.3.2013 Aarti International vs. CIT vi) 384 ITR 147 (Del) CIT vs. G&G Pharma India Ltd. vii) ITA No. 7785/2015 (Del) dated 13.10.2015 Pr. CIT vs. Rakam Money Matters (P) Ltd. 15.3 It is also settled, as in the case of CIT Vs Leisure Ware Exports Ltd. 341 ITR 166 (Del) that the provisions of Section 263 of the Act ....
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....duced had not been shown to be erroneous, in the absence of making a further enquiry; that it was a case where a view had been taken by the AO on enquiry; that even if this view, in the opinion of the CIT, was not correct, it would not permit exercise of power u/s 263 of the Act; and that in fact, in the case of "Amitabh Bachchan", the Supreme Court had observed that there can be no doubt that where the view taken by the AO is a possible view, interference u/s 263 of the Act is not permissible. SLP filed by the Department against the aforesaid order, stands dismissed, in SLP No. (C)22149/2016, reported in 244 taxman 194 (S.C.). Besides, the following decisions are also to the same effect : i) ITA No. 3205/Del/2017 M/s Amira Pure Foods (P) Ltd. v. PCIT ii) ITA No. 574/Del/2018 dated 19.06.2018 M/s Vidya Prakashan Mandir (P) Ltd. vs PrCIT iii) ITA no. 2539/Del/2018 dated 29.08.2018 Durgesh Autofin P Ltd. Vs Pr. CIT 15.7 Besides, it is also settled that when, as in the present case, the reasons recorded for re-opening the assessment were the same as for which jurisdiction u/s 263 had been invoked, such invocation of the provisions of Section 263 was not t....
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.... "CIT Vs Gabriel India Ltd." 203 ITR 108 (Bom) and "CIT Vs Software Consultants" 341 ITR 240 (Del), it has been held that the revisional authority cannot simply ask the AO to re-examine the matter and that this can be done only after the assessment order is found to be erroneous and prejudicial to the interests of the Revenue. 16.2 In "CIT V Trustees Anupam Charitable Trust" 167 ITR 129, Jaipur (Trib), it has been held that error in the assessment should be one which had depended on fact or law and was not a mere possibility or guess work. 16.3 Where the assessment order has been set aside without giving reasons, it is a vitiated order, as held in : i) 96 ITR 310 (All) CIT vs. Sunder Lal iii) 111 ITR 326 (All) J. P. Srivastava & Sons Ltd. vs. CIT iv) 170 ITR 28 (All) CIT vs. Kashi Nath & Co. 16.4 The following decisions hold that a revisional order cannot be passed unless there is total non-application of mind by the AO : i) 100 ITD 173 (Mum) Mrs. Khatiza S. Oomerbhoy vs. ITO ii) 100 ITD 441 (Kol) Al-Haz Amir Hasan Properties Pvt. Ltd. vs. Asst. CIT iii) 203 1TR 108 (Bom) CIT vs. Gabriel India Ltd. iv) 171 ITR ....
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....sconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1 That the finding that "the AO has failed to verify the genuineness and creditworthiness of unsecured loans" and also the observation that "AO has not called for any ledger documents and confirmation of accounts of the parties from whom the assessee had taken unsecured loan"; However "AO has failed to make any independent enquiry to verify the genuineness of the loans" is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable. 2.2 That further finding that "the AO has failed to verify the genuineness and creditworthiness of sundry creditors and also the observation that "AO has not called for any ledger documents and confirmation of accounts of the sundry creditors"; However "AO has failed to make any independent enquiry to verify the genuineness of the creditors" is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable. 2.3 That al....
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....ct, vague, legally misconceived and untenable. 3. That the learned Principal Commissioner of Income Tax has framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and, vitiated order. 21. At the outset, it is noted that there is a delay in filing the present appeal by 19 days. In this regard, the assessee has filed an application seeking condonation of delay stating that the period of delay is covered by the decision of the Hon'ble Supreme Court wherein the period of Covid-19 Pandemic was directed to be excluded for the purpose of limitation. It was, accordingly, submitted that the delay in filing the present appeal may be condoned. 22. The ld. DR did not raise any specific objection. 23. In view of the submissions made by both the parties, the delay is hereby condoned and appeal of the assessee is admitted for adjudication. 24. The ld. PCIT, by virtue of the impugned order, has held the assessment order to be erroneous in so far as prejudicial to the interests of the Revenue, with regard to the following three issues : i) Genuineness and credit worthiness of unsecured loa....
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....APB-34, in Form No. 3CD, issued by the auditor, as per the requirements of the provisions of Section 44AB of the Act. 26.1 The summary of the unsecured loans has, as such, been tabulated as under: 27. It is seen that during the assessment proceedings, notice (APB 41-44) dated 18.10.2018 was issued u/s 142(1) of the Act. Therein, it was stated that as per the Profit & Loss Account, it appeared that the firm had paid interest and carrying of Rs. 93,82,166/- and bank interest of Rs. 5,41,93,875/-, and had received interest and carrying of Rs. 3,77,10,670/-. The assessee was asked to furnish the rate of interest allowed and charged. Details of tax deducted at source u/s 194A alongwith its payment into the Government account was also required to be furnished. In case no tax had been deducted, the assessee was required to give reasons thereof. The assessee was required to furnish details of loans/deposits accepted/repaid during the year otherwise than by account payee cheques or bank drafts alongwith details of accounts consisting of loans/deposits. The assessee was required to furnish copies of accounts alongwith complete address with PAN, contact number, e- mail Id, etc. in respe....
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.... had been furnished, which had been placed on record after examination. 28. We find that out of total unsecured loans of (APB 72) of Rs. 19,33,54,913/-, loans amounting to Rs. 12,76,80,548/- were pertaining to earlier years and they were brought forward as pending balances. Now, it is well settled that sums pertaining to earlier years, brought forward as pending balance cannot be taxed under the provisions of Section 68 of the Act. It has been so held, inter-alia in the following decisions : i) 152 1TR 583 (Del) CIT vs. Om Prakash Mahajan ii) 301 ITR 384 (Del) CIT vs. Usha Stud Agricultural Farms Ltd. 8. Since it is a finding of fact recorded by the CIT(A) that this credit balance appearing in the accounts of the assessee, does not pertain to the year under consideration, under these circumstances, the Assessing Officer was not justified in making the impugned addition under section 68 of the Act and as such no fault can be found with the order of the Tribunal which has endorsed the decision of the CIT(A). iii) 89 DTR 265 (Del) CIT vs. Jain Exports Pvt. Ltd. "22. We may also add that, admittedly, no credit entry has been made in the b....
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....548/-, has been tabulated as under: 28.3 It has been stated that apart from the loans from DDPL Commodities Pvt. Ltd., assessee has also entered into trading transactions, for which the assessee had maintained a separate trading account, which resulted into 'nil' balance at the end of the year. The details of the purchases made from lender have been filed at APB 313. It has also been stated that apart from the loans taken from Fertichem Cotspin Ltd., too the assessee had also entered into the trading transactions and that for that also, the assessee had maintained a separate trading account, which resulted into a debit balance of Rs. 74,40,279/-, as is available from APB 14. 28.4 The position of unsecured loans from the ten lenders, from whom the amount of Rs. 12,76,80,548/-, being loans pertaining to earlier years brought forward as pending balance, stands tabulated as under: 28.5 It is seen that the unsecured loans received are from group entities. That being so, no adverse inference with regard thereto can be drawn against the assessee, as held in the following decisions, under similar facts and circumstances : i) ITA No. 112/2018 dated 07.08.2018 Pr CIT vs M/s....
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....ments and confirmation of accounts of the sundry creditors during the assessment proceedings; that the AO had also failed to make any independent enquiry to verify the genuineness of the creditors; that the assessee had submitted ledger accounts and confirmation of accounts related to the sundry creditors only in response to the notice issued u/s 263; that therefore, the assessment order was erroneous and prejudicial to the interests of the Revenue; that the AO should bring the same on record and make independent enquiry and cross-examination to verify the genuineness and credit worthiness of the sundry creditors. 29.1 As per the balance sheet (APB 7 read with APB 12-13), the closing balances of sundry creditors during the year is of Rs. 9,42,87,205/-. The details thereof, i.e., the name of the party alongwith its copy of ledger placed in the Paper Book, the opening balance, the purchase made during the year, the payment made during the year/other adjustment, if any and the closing balance with regard to these sundry creditors had been tabulated as under: 29.2 It is seen that vide notice (APB 41-44) dated 18.10.2018, issued u/s 142(1) of the Act, the AO asked the assessee to ....
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....l "As there was no case for disallowance for corresponding purchases, no addition could be made under Section 68 in as much as it is not in dispute that the creditors outstanding related to purchases and the trading results were accepted by the AO. We are, therefore, of the opinion that no substantial question of law arises for consideration in this case. The appeal is accordingly dismissed." ii) 205 CTR 444 (All) CIT vs. Pancham Dass Jain 3. We have heard Shri Shambhoo Chopra, learned standing counsel for the Revenue. He submitted that as the respondent-assessee was unable to produce the alleged creditors the provisions of s. 68 of the Act was squarely attracted in the present case and the assessing authority has rightly added the two amounts at the hands of the respondent-assessee. According to him s. 68 of the Act also covers up the case of purchases made on credit. 4. The submission is misconceived. The Tribunal has recorded a categorical finding of fact based on appreciation of materials and evidence on record that the AO had accepted the purchases, sales as also the trading result disclosed by the respondent-assessee. It had record....
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....se that sales were effected from the purchases made and, thus, the purchases could not be out-rightly termed as bogus. Therefore, we are of the view that the facts of the two cases are distinguishable. In absence of displacing the finding of the learned CIT(A) and the fact that the assessee showed profit from these transactions, it is held that there is no such error in the order of the learned CIT(A) which requires correction from us. Thus, this ground is dismissed." xii) 310 ITR 99 (AT) (SB) (Del) Manoj Aggarwal vs. DCIT "For example, in the case of credit purchases, the account of the supplier is credited with the amount payable. In such a case, where the purchase is allowed as expenditure, it may not be possible for the Assessing Officer to again call upon the assessee to prove the nature and source of the credit, for the reason that the purchase itself was allowed as expenditure only on being satisfied that it was a genuine purchase on credit. Implicitly, the nature and source of the amount credited has also to be taken as having been explained satisfactorily. Another possible argument can be that in such a case, the amount credited is not a cash credit in th....
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....e's reply (APB 67-69) before the ld. PCIT, the assessee has filed evidence, ledger account of the sundry creditors in the assessee's books of account, from where, it is evident that payment was made to them by the assessee through the banking channels in the subsequent years. The summary of such payments made by the assessee in the subsequent years is at APB 73-76 and the copy of ledger accounts has been furnished at APB 243-311. 29.10 From the above, we are of the considered opinion that the purchases having been duly accepted, adverse inference against the assessee was wrongly drawn with regard to sundry creditors u/s 68 of the Act. The ld. PCIT evidently erred in holding that the AO had failed to verify the genuineness and credit worthiness of the sundry creditors. The ld. PCIT further went wrong in observing, in the face of the evidence produced by the assessee, that the AO had not called for any ledger documents and confirmation of accounts of the sundry creditors. The ld. PCIT further went wrong in holding that the AO had failed to make any independent enquiry to verify the genuineness of the creditors. The impugned order in this regard is also set aside and revers....
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....called for, in order to maintain consistency, too for the reason that adverse inference was drawn against the assessee in this regard only on the ground that copy of Partnership Deed had not been placed on record. The following decisions are to the same effect : i) 358 ITR 295 (SC) CIT vs. Excel Industries Ltd. ii) 308 ITR 161 (SC) CIT vs. J. K. Charitable Trust iii) 266 ITR 99 (SC) CIT v. Berger Paints iv) 394 ITR 449 (SC) Godrej & Boyce Manufacturing company Ltd. vs. DCIT 30.1 Otherwise too, as rightly contended, both the payments, i.e., either on account of remuneration paid to partners, or on account of interest paid to partners is taxable in their respective hands and not in the hands of the assessee. Therefore, no adverse inference under the provisions of Section 263 of the Act could have been drawn. 30.2 As such, here also, we find the grievance of the assessee to be justified. We hold that the ld. PCIT has erred in holding that the AO had failed to check whether all the payments made to partners were in accordance with the Partnership Deed and the Income Tax Act. The ld. PCIT also went wrong in observing that the AO had not even cal....
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....it is prejudicial to the interests of the revenue to the extent of genuineness and creditworthiness of unsecured loans, verification of sundry creditors and payments made to the partners' is based on fundamental misconception of facts and provisions of law and thus not in accordance with law and, therefore untenable. 2.1. That the finding that "the AO has failed to verify the genuineness and creditworthiness of unsecured loans" and also the observation that "AO has not called for any ledger documents and confirmation of accounts of the parties from whom the assessee had taken unsecured loan"; However "AO has failed to make any independent enquiry to verify the genuineness of the loans" is factually incorrect, legally misconceived, contrary to evidence on record; and in any case is vague, based on surmiseful considerations; and therefore unsustainable. 2.2 That further finding that "the AO has failed to verify the genuineness and creditworthiness of sundry creditworthiness of sundry creditors" and also the observation that "AO has not called for any ledger documents and confirmation of accounts of the sundry creditors"; However "AO has failed to make any indepe....
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....me jurisdiction u/s 263 of the Act; and thus order on this ground alone deserve to be quashed as such. 2.9 That various other adverse findings recorded in the notice u/s 263 of the Act and, also in impugned order are factually incorrect, vague, legally misconceived and untenable. 3. That the learned Principal Commissioner of Income Tax has framed the impugned order without granting sufficient opportunity to the appellant and therefore the order made is illegal, invalid and vitiated order 34. At the outset, it is noted that there is a delay in filing the present appeal by 19 days. In this regard, the assessee has filed an application seeking condonation of delay stating that the period of delay is covered by the decision of the Hon'ble Supreme Court wherein the period of Covid-19 Pandemic was directed to be excluded for the purpose of limitation. It was, accordingly, submitted that the delay in filing the present appeal may be condoned. 35. The ld. DR did not raise any specific objection. 36. In view of the submissions made by both the parties, the delay is hereby condoned and appeal of the assessee is admitted for adjudication. 37. Ground No. 3 is ....
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....y allowed. Order pronounced on 04.03.2024. ============= Document 1 (1) All the purchases made from Gaja Nand Pardeep Kumar duly accounted in the books. (2) Detail of purchases made from Gaja Nand Pardeep Kumar together with copies of purchase bills are enclosed. Coples of transportation bility of transporter who has lifted the goods from Gaja Nar Pardeep Kumar is enclosed. Copy of sales bills are also enclosed. Coples of Gaja Nand Pardeep Kumar in the books of assessee is enclosed. 5) Copies of relevant pages of bank statements showing the payments to Gaja Nand Pardeep Kumar against the purchases from Gaja Nand Pardeep Kumar is enclosed (6) Coples of C form issued to Gaja Nand Pardeep Kumar is enclosed. (7) It is further submitted the main business of the assessee firm is Trading in Cotton. Assessee firm after receiving the order from various spinning mills, procured the goods and supply the same to spinning mills. Purchases made from Gaja Nand Pardeep Kumar is sold on one to one basis to various spinning mills. Detail is as under PURCHASES FROM GAJA NAND PARDEEP SALELENINAY PARTNERIMAL K KUMAR PARTY OF BAD CITY. AMOUNT DATE OF ....
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....02,507 2,39,66,159 12,76,80,548 (Sr. No. 1 to 10) Document 3 Lenders from whom no fresh loans has been received by appellant during the year under consideration 11 Anand Bang HUF 70,425 0 4,226 0 74,651 (113) 12 Anirudh Sharda U/G 16,23,764 0 1,94,852 19,485 17,99,131 Pankaj Sharda (115) 13 Chander Kanta W/o 3,00,000 0 45,000 4500 40,500 3,00,000 Mahabir Parshad Rathi (117) 14 Devki Nandan Rathi 2,00,000 0 30,000 3,000 27,000 2,00,000 HUF (119) 15 Jay Singh (121) 9,00,000, 0 81,000 8100 0 9,72,900 16 Mahabir Prasad Rathi 3,00,000 0 45,000 4500 40,500 3,00,000 HUF (122) 17 Mohini Kalani W/o 5,46,179 81,927 8,193 0 6,19,913 Shiv Dutta (123) 18 Nirmala Bang (125) 72,964 0 4,378 0 0 77,342 19 Pushpa rani Jhanwar (126) 16,83,648 0 2,52,547 25,255 0 19,10,940 20 Radha Devi Bang (128) 70,787 0 4247 0 0 75,034 21 Rashmi Aggarwal (129) 5,78,385 0 34,703 3470 0 6,09,618 22 Sarveswar Bang HUF 73,552 0 4413 0 0 ....
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....Karta namely Lalit Mohan Sharda is 3,00,000 3,01,575 partner of appellant Sister in Law (Bhabhi) of Partner namely Sh. Lalit Mohan Sharda 13,00,000 4,76,95,193 Partners of appellant are director 5,00,000 5,04,500 Grand Daughter of brother of Partner namely Sh. Lalit Mohan Sharda vii) AL Maheshwari viii) Ferticem Cotspin Ltd. (Note 2) ix) Jhamb Trading Company Narayan Parshad Rathi & x) Sons HUF Total 50,00,000 54,48,125 2,16,00,000 3,20,00,000 80,000 1,00,00,000 1,04,90,500 6,00,000 8,01,85,624 12,76,80,548 Document 6 Sr. Name 31.3.2011 31.3.2012 31.3.2013 No. i) Anju Sharda 9,77,980 31.3.2014 31.3.2015 31.3.2016 31.3.2017 32,40,088 1,03,61,614 1,41,08,667 10,68,249 31.3.2018 20,40,390 W/o Pankaj Sharda ii) Priyanka 40,88,912 0 13,02,795 5,58,463 10,23,011 1,12,62,855 0 0 Sharda W/o Mahesh Sharda Devi ° ° ° iii) Lalit Sharda ☠HUF iv) Sushila Sharda v) DOPL Mohan 1,17,21,201 49,20,597 54,11,244 $4,13,897 1.25,02,214 Commodities (P) Lad vi) Amnhka 17,29,281 85,810 0 ° 3,01....
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.... of assesse for the period 1.4.2014 to 31.3.2015 (112B-112D) iii) Copy of ledger account of assessee in the books of Lalit Mohan Sharda HUF for the period 1.4.2014 to 31.3.2015 (112E-112M) Sushila Devi Sharda (Sister in Law (Bhabhi) of Partner namely Sh. Lalit Mohan Sharda) Evidence (page of Paper Book) i) Copy of ledger account of Sushila Devi Sharda in the books of assessee for the period 1.4.2014 to 31.3.2015 (108) 3,01,575 DDPL Commodities (P) Ltd. (Loan Account) (Partners of appellant 4,76,95,193 are director) PAN AADCD6759K Address: Plot No. 660, Udhyog Vihar, Phase V, Gurgaon Haryana Assessing Officer: Ward 1(1), Gurgaon Evidence (Page of paper book) i) Copy of acknowledgment of return of income for the financial year 2014-15 relevant to assessment year 2015-16 (101) ii) Copy of ledger account of DDPL Commodities Pvt. Ltd. in the books of assessee for the period 1.4.2014 to 31.3.2015 (102) iii) Copy of ledger account of assessee in the books of DDPL Commodities Pvt. Ltd. for the period 1.4.2014 to 31.3.2015 (103-106) Anushka Sharda (Grand Daughter of brother of Partner namely Sh. Lalit Mohan Sharda) Evide....
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.... 9 Ganesh Cotton Industries- Vijapur (148) Gheru Lal Bal Chand- Abohar (149) ° 1,91,73,321 1,59,89,590 33,96,438 0 24,23,408 1,85,70,000 6,03,321 1,18,89,518 41,00,072 19,57,686 14,38,752 2,341 24.21,067 10 Gheru Lal Bal Chand- Sri Ganga Nagar 12,64,894 (150) 0 0 12,64,894 11 12 13 Hira Lal Patni & Company- Arvi (151) India Cotton Industries- Tankara (152) Jeenum Cotton Pvt. Ltd. - Morbi (153- 154) 0 44,52,730 24,50,558 20,02,173 ° 72,34,746 57,76,504 14,58,242 O 1,01,61,373 84,40,854 17,20,519 14 15 16 17 2222 18 19 Kailas Cotton Industries- Rajula (155) Kailash Traders- Dhuri (156-158) Kamal Ginning Industries-Soyala Kishori Lal Om Parkash- Bhatinda (159) Lakshmi Ginning Industries- Soyala (160-162) 20,74,153 19,00,000 1,74,153 0 1,86,46,384 1,83,68,549 2,77,835 0 18,44,987 16,50,517 1,94,470 0 ° 34,72,967 2,57,17,578 33,34,760 1,38,207 2,40,63,878 16,53,700 Mayank Ramnik Lal Shah (Broker)- Ahmedab (163) 1,09,120 20 Manoj Cotton Oil & General Mill....
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.... 46 Shri Saikrupa Cotspin-Pulgaon (230) 0 85,23,582 84,23,582 1,00,000 47 Smit Broker-Rajkot 4,95,000 9,96,650 5,94,665 8,96,985 46 Sujal Corporation-Ahmedabad (231-2,65,500 17,79,925 8,39,760 12,05,665 232) 47 Suresh Jain Industries -Nandgon 1,60,036 1,77,38,221 1,77,98,257 1,00,000 Khandeshwar 48 Swaminarayan Cotton And Oil 0 58,98,168 53,90,119 5,08,049 Industries Sathamba (233) 49 Swastik Cotex-Sanosara (234-235) 0 1,03,32,270 88,67,916 14,64,354 50 Tirupati Cottex - Jasdan (236) 0 63,39,346 61,42,939 1,96,407 51 Tirupati Fibers Ginning & Pressing- 2,90,803 Dalwel (237) 64,75,744 63,11,871 4,54,476 52 Vaibhav Vaani Cottex-Abohar (238) 0 51,83,609 44,35,306 7,48,303 53 Vardhman Cotton (Refundable) A/c 11,29,727 10,87,482 0 22,17,209 Bhatinda (239-240) 54 Vardhman textiles Ltd. Ludhiana (241) 53,93,494 3,36,56,197 3,81,78,460 8,71,230 55 Wasudeo Pressing Factory-Wardha 0 15,02,246 19,168 14,83,078 (242) 56 DHL Express (India) Pvt. Ltd.- Jaipur 8,111 47,704 27,916....