TaxTMI 
TaxTMI 
2026 (2) TMI 1086
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....) of the Act was also issued in response to which the assessee filed certain details. 3. During the course of assessment proceedings the Assessing Officer asked the assessee to furnish the details of sundry creditors. From the details submitted by the assessee, the Assessing Officer noted that an amount of Rs. 1,33,22,499/- was shown under 'trade payables'. He, therefore, issued notice u/s 133(6) of the Act to 12 sundry creditors, the details of which are as under: Sr No Name Pan1 Nature of Business Opening Balance Amount Paid During the Year Closing Balance 1. Amairaa Jewels AAVFA2853Q Silver Jewellery - 26,53,815 21,20,928 2. Bottom Line Media Pvt Ltd AADCB6239Q Air Ticket Booking - 12,44,206 2,03,250 3. Deccan Cans & Printers Pvt Ltd AAACD1511C Printing & Stationery - 19,04,973 1,10,423 4. Horizon Jewels AEJPB4124P Silver Jewellery - 37,45,039 20,534 5. JWT (J. Walter Thompson) AAACH1463M TV advertisement - 35,19,460 3,30,530 6. Neelum Narang ABZPN5726A Silver Jewellery - 41,63,537 11,48,407 7. P. N. Gadgil Jewellers Pvt Ltd ....
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....lance Purchases During the Year Closing Balance 1. Horizon Jewels AEJPB4124P Silver Jewellery - 37,65,573 20,534 2. JWT (J. Walter Thompson) AAACH1463M TV advertisement - 38,49,990 3,30,530 3. P. N. Gadgil Jewellers Pvt Ltd AAHCP4162E Silver Jewellery 32,079 30,60,598 1,68,952 4. Radha Kishan & Sons ALSPG8515D Silver Jewellery - 1,82,69,849 29,48,511 5. Shree Balaji Enterprises ABSFS0442F Courier Charges - 15,40,190 2,20,111 6. Sil Creation AGNPJ1527E Silver Jewellery - 27,56,309 5,92,442 7. Tools Marcom Pvt Ltd AADCT9361P Advertisement Exps - 35,82,988 79,700 8 Visual Atmosphere AFPPP6154E Display Material - 17,35,200 9,74,700 3,85,60,697 74,56,408 4.6 Accordingly, an amount of Rs 3,85,60,697/- is disallowed as being unsubstantiated claim of expenses. Additionally, since assessee has furnished no reconciliation of sundry balances of Rs 6.99 Lakhs, the said amount is also added to the total income of the assessee as unreconciled sundry balances. S....
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.....99 lakhs on account of unreconciled sundry creditors was also challenged. So far as the allegation of the Assessing Officer that the assessee did not give the trail of money is concerned, it was argued that the assessee had made payment to the larger extent and only Rs. 74.56 lakhs was outstanding against purchase of Rs. 3.85 crores. 8. Based on the arguments advanced by the assessee, the Ld. CIT(A) / NFAC taking a holistic view directed the Assessing Officer to estimate the income @ 8% of the turnover and further directed to make addition of Rs. 10,30,490/- u/s 40(a)(ia) of the Act over and above the net income @ 8%. The reasons given by the Ld. CIT(A) / NFAC read as under: Decision: 6. The appellant is engaged in trading of gold ornaments. During assessment, the appellant disallowed purchases totalling Rs. 3,85,60,697 on the ground that large sums were shown as payable as on the end of the previous year and also because inquiries made by the AO with the sellers by issuing notice u/s 133(6) did not yield any result. The relevant part of the assessment order is reproduced below: "Most of the sundry creditors have either been unreachable or chose not t....
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....esaid amount." 6.4 Based on the above the AO made an addition of Rs. 6,99,000 on account of doubtful trade liability. 6.5 During assessment, the AO called for details of "other expenses" of Rs. 2,32,91,178. The AO found that on expenses totalling Rs. 67,71,619, the appellant either did not deduct TDS or TDS deducted was lower. The AO invoked section 40(a)(ia) and disallowed 30% of the expenses. Thus an addition of Rs. 20,31,486 was made. 6.6 The details of disallowance presented in the assessment order is analysed below: Amount paid TDS deducted Tax deductible for contract 1% or 2% Shortfall 1 Centric technologies Limited AAACA9231C Digital marketing expenses 2,30,337 4,607 4,607 2 Franchise India Brands Limited AABCF3125F Participation charge for exhibition, providing space 30,702 0 0 3 Grand Hyat Mumbai AAECS6336E Lodging and Boarding 1,40,207 0 0 4 Inox leisure limited AAACI6063J Screen advertising 1,46,490 2,930 2,930 5 Media edge: CIA India Private Limited AACCM7365H ....
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....nover. Grounds 1 to 4 are partly allowed. Ground 5 is general. 9. Aggrieved with such order of the Ld. CIT(A) / NFAC, the assessee is in appeal before the Tribunal by raising the following grounds: 1. In law and in the facts and circumstances of the appellant's case, the hon'ble CIT(A) has erred in concluding book results as not reliable and adopting a holistic approach by considering net income @ 8% of turnover based on the benchmark rate provided in section 44AD. Thus, the said order is bad in law and deserves to be annulled. 2. In law and in the facts and circumstances of the appellant's case, the hon'ble CIT(A) has erred in not adjudicating the specific grounds raised against the addition of Rs.3,85,60,697 and Rs.6,99,000, which were originally made by the ld. A.O. on account of unsubstantiated purchases and unreconciled liabilities, which clearly demonstrated unreasonable and unwarranted action without basis and on pure assumption or presumption as the outstanding balance were substantially low, thereby depriving the appellant of a clear finding on merits. Thus, the order passed in violation of the judicial discipline deserves to be quashed....
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....f the details as asked by the Assessing Officer and non-production of the parties from whom the purchases were made has estimated the income @ 8%. Therefore, the order of the Ld. CIT(A) / NFAC being a reasoned one, the same should be upheld and the grounds raised by the assessee be dismissed. 14. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and Ld. CIT(A) / NFAC and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. It is an admitted fact that the assessee during the course of assessment proceedings did not prove the genuineness of purchases / expenses and sundry balances. The assessee was unable to produce the parties from whom it has made the purchases nor could file the details such as purchase order, bills, GRN, VAT return establishing genuineness of purchases, statements of bank accounts establishing trail of funds, copies of returns filed along with balance sheets, Profit and Loss Account, computation of income, tax audit reports etc to establish the genuineness of the parties. No efforts were made by the assessee to establish the purchases to the extent of ....