TaxTMI 
TaxTMI 
2026 (8) TMI 1730
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....e the same would be considered while adjudicating the grounds raised on merits. 4. No arguments were advanced in support of Ground Nos. 4, 5 and 6 raised by the assessee. Hence the same are hereby dismissed as not pressed. 5. The Ground Nos. 7 to 13 raised by the assessee are challenging the disallowance made under section 40A(3) of the Act in the sum of Rs 3,46,18,360 on account of purchases made by the assessee and treating them as bogus. The interconnected issue involved therein is challenging the addition made under section 68 of the Act in respect of trade payables in the sum of Rs 2,20,68,360. 6. We have heard the rival submissions and perused the materials available on record. The assessee is engaged in the business of export of garments and had exported garments to M/s Skystar International General Trading during the year under consideration. The return of income for the assessment year 2018-19 was originally filed by the assessee company on 9-10-2018 declaring total income of Rs 3,42,420. Based on the specific information as flagged by the risk management strategy formulated by CBDT through insight software under the head "High Risk CRI / VRU cases", the case of t....
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....olation of provisions of section 40A(3) of the Act and accordingly made disallowance under section 40A(3) of the Act. 7. The Learned AO further proceeded to make addition under section 68 of the Act in respect of balance outstanding in sundry creditors account qua this party i.e. Decent Trading and Exim as unexplained credit separately in the sum of Rs 2,20,68,360. 8. The additions / disallowance made by the Learned AO was upheld by the Learned CITA. 9. We find that the Learned AO had alleged that M/s Decent Trading and Exim is a bogus concern and is merely providing accommodation bills without actual delivery of goods. But the Learned AO had categorically accepted that the goods reflected in the impugned purchase bills were actually purchased and exported by the assessee. In fact, the assessment order specifically records that since the garments stood exported, the purchases of Rs 3,46,18,360 were in fact made though allegedly from some other unidentified parties. The Learned AO had accepted the purchase register and sales register containing item wise quantitative details. Further, the books of accounts have not been rejected under section 145(3) of the Act nor has any g....
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.... which is a prerequisite of the section. Hence we have no hesitation to hold that the disallowance made under section 40A(3) of the Act by the revenue suffers from various factual and legal infirmities and is accordingly deleted. 11. The next addition made is in respect of outstanding liability standing in the name of the Sundry Creditor M/s Decent Trading and Exim in the sum of Rs 2,20,68,360 as on 31-3-2018 which was sought to be treated as unexplained credit under section 68 of the Act. There is absolutely no finding given by the Learned AO that there was any receipt of sum of money from the said party during the year, which is a basic pre-requisite for applicability of section 68 of the Act. Admittedly no sum of money was received during the year from M/s Decent Trading and Exim by the assessee. Hence the provisions of section 68 of the Act per se cannot be applied in the instant case. A purchase transaction is an expenditure entry and the corresponding credit to the supplier is merely the accounting effect of such purchase. It is not a cash credit within the meaning of section 68 of the Act. In this regard, reliance has been rightly placed by the Learned AR on the decision ....
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....ever, the AO further inquired this matter through on the spot field inquires by the Inspector, who submitted that none of the parties exists at the given address and the inquiries with the nearby shops revealed that nobody is aware about these parties. The report of the Inspector forms part of the assessment order. On the basis of detailed enquiries, the AO came to the conclusion that the assessee has managed to obtain the signatures of these parties, but actually these parties does not exists at the given address. The AO has further observed that (i) the receiver's signature are not affixed on the delivery challans of the purchase from these parties. (ii) the mode of transport for delivery of these goods is not mentioned on the purchase bills of these parties whereas the purchases invoice of other parties contains the lorry number etc.(iii) Major portion of purchases are still shown outstanding in the list of sundry creditors. On the basis of all these facts, the AO has held that the assessee has merely obtained accommodation entries for these purchases. If at all such purchases have been made from some other party, to make corresponding sales, the same would obviousl....