TaxTMI 
TaxTMI 
TaxTMI 
2025 (9) TMI 904
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.... Industries. The assessee has shown total sundry creditors of INR 6,77,21,342/- which includes INR 3,48,88,095/- under the title "Retail Creditors Control account". In order to examine the genuineness of these creditors, AO issued notice u/s 133(6) of the Act to 27 parties out of which notices issued to 20 parities amounting to INR 2,78,20,495/- were returned back for the reason "wrong address/incomplete address/non-existed" etc. The AO thereafter, discussed each of the parties to whom notices were sent and reached to the conclusion that these parties are non-existent and made the addition of INR 3,50,94,758/- as bogus creditors. 3. Against the said order, assessee preferred an appeal before Ld. CIT(A) who vide impugned order dt. 01.12.2016, after considering the submissions of the assessee, dismissed the appeal of the assessee. 4. Aggrieved by the said order of Ld.CIT(A), assessee filed appeal before the Tribunal where the Tribunal vide its order dated 18.07.2018 in ITA No.399/Del/2017 [Assessment Year 2012-13] deleted the additions and allowed the appeal of the assessee. Aggrieved by the said order, Revenue preferred appeal before Hon'ble Delhi High Court and the Hon'ble Co....
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....s bad in law and against the facts and circumstances of the case. 3. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in charging interest u/s 234A, 234B and 234C of Income Tax Act, 1961. 4. That the appellant craves the leave to add, modify, amend or delete any of the grounds of appeal at the time of hearing and all the above grounds are without prejudice to each other." 7. Since all grounds of appeal pertaining to the addition of INR 3,50,94,758/- made by the AO by alleging the creditors as nongenuine therefore, all the grounds of appeal are taken together for adjudication in the line of the directions given by the Hon'ble High Court. 8. Before us, Ld.AR of the assessee submits that in the instant case total amount appearing as closing balances in the balance sheet was added in the hands of the assessee. It is submitted by Ld.AR that the Tribunal in its order dated 18.07.2018 observed that there were opening balances of INR 1,60,19,598/- and no expenses were claimed to the extent of this amount during the year therefore, no addition could be made. He further drew our ....
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....ion to page 17 of paper book wherein trading results from FYs 2005-06 to 2014-15 are tabulated, a perusal of the same reveals that G.P rate was ranging between 1.88% to 4.13% during these years and if this purchase is added to the gross profit, the resultant GP would be impossible in the line of trade. It is further argued by Ld.AR that neither the sales were doubted nor trading results were doubted. Once sales were accepted, it cannot be said that goods were not purchased and thus, there is no question of making disallowance of purchase made. He, therefore, prayed for the deletion of the addition and submits that even no disallowance could be made u/s 37(1) of the Act. 11. On the other hand, Ld. Sr. DR supports the orders of the authorities below and filed a detailed written submissions wherein following arguments taken by the Revenue:- Revenue's stand i) On the Onus to Prove the Genuineness of Creditors: It is respectfully submitted that the addition of Rs. 3,50,94,758/- made by the Assessing Officer and confirmed by the Ld. CIT(A) is legally and factually sound. The entire addition arose from the assessee's failure to discharge her statutory bur....
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.... assessee's reliance on VAT returns and the fact that books were audited under section 44AB cannot substitute the requirement under the Income-tax Act to prove the genuineness of transactions recorded in the books. Similarly, acceptance of sales by VAT authorities does not imply acceptance of sundry creditors unless supported by verifiable evidence. (vi) On Estimation of Profits and Rejection of Books: This is not a case where the AO rejected books of account and made a best judgment assessment. Instead, it is a case of specific unverified liabilities. The assessee's attempt to invoke GP-based estimation principles is inapplicable, as the books themselves were relied upon for sales, but the liabilities shown therein lacked evidentiary support. Therefore, the claim that purchases should be estimated or accepted on profit margin consistency is legally untenable. (vii) On Judicial Precedents Relied Upon by the Assessee: The assessee has cited several judgments relating to low GP, rejection of books, or additions made solely on the basis of non-service of summons. However, these cases are distinguishable. In the present case, the AO conducted....
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....pect to the purchase made by the assessee and disallowed by AO. However, the Hon'ble High Court has not made any adverse comments on the other observations made by the Tribunal with respect to the genuineness of the creditors. 13. From the perusal of the facts, we find that AO has not made the additions towards the purchase made during the year from the parties alleged as bogus but made additions of the closing balance of 27 creditors as is evident from the chart reproduced herein above. As per this chart, there was gross opening balance of INR 1,90,88,538/- as appearing in the accounts of all the 27 parties. In the same chart, purchases made from these parties was claimed to have been made of INR 2,08,52,538/- out of which the purchases made from M/s. Erica Enterprises Pvt. Ltd. of INR 27,22,638/- were accepted by the AO who had made the addition of INR 5,50,000/- only with respect to the difference in the balance as per assessee and as per the said party. Ld.AR submits the copy of ledger account of this parties for subsequent AY wherein INR 5,50,000/- was paid through Account Payee Cheque. Thus, total purchase made from M/s. Erica Enterprises Pvt. Ltd. could not be held as bog....
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....overall facts of the case and also considering the facts that entire outstanding balances were squared off by making payment in subsequent years in cash to these parties, we are not unable to accept the contentions of the assessee intoto and therefore, as against total addition of INR 3,50,94,758/-, we direct the AO to consider the credits to the extent of INR 2,08,52,538/- being the amount of purchase made during the year and claimed the expenditure in the light of the judgement of Hon'ble Jurisdictional High Court. It is further directed that out of the purchase made from alleged 27 parties of INR 27,22,638/- made from M/s. Erica Enterprises Pvt. Ltd. could not be doubted therefore, the remaining purchase of INR 1,81,29,900/- could be considered as purchase which was claimed as expenses and for which assessee has not able to discharge the burden of proving the genuineness of the parties. To sum up the issue and in the larger interest of justice, we hold that disallowance @ 25% of the remaining purchase of INR 1,81,29,900/- would be reasonable to meet the end of justice for any possible leakage of revenue. Accordingly, we direct the AO to disallow a sum of INR 45,32,475/- (25% of ....