2015 (11) TMI 1526 - AT - Income Tax

Addition made on account of alleged bogus purchases - Held that - As pointed out by us in the facts of the present case the assessee had admitted to the addition of the purchases made from the aforesaid parties before the Assessing Officer and in view thereof no further verification was made by the Assessing Officer. Once the assessee had prevented the Assessing Officer from carrying on any exercise of any kind of verification then on a later date the assessee cannot take the stand that no such addition is warranted in the absence of any verification exercise carried out by the Assessing Officer. The assessee has failed to furnish the confirmation from the parties and the Sales Tax Dep artment has not been able to trace the said parties. In the absence of any confirmation being filed by the said parties or the evidence of the bank statement of the said parties having been placed on record by the assessee to prove its case merely because such view has been taken in any other decision the same cannot be applied where the assessee has not discharged its onus. Even before us the assessee has not furnished any evidence of payment except for making the statement that the amounts were paid by way of cheques. In view thereof we find no merit in the said stand of the assessee. - Decided against assessee. Addition under section 68 - Held that - Both the lower authorities had time and again asked the assessee to furnish the complete details in respect of loan creditors but the assessee failed to furnish the details and before the Assessing Officer he admitted that the same may be added as his income. In the absence of the assessee having filed the necessary bank details and the income-tax acknowledgements of filing the return of income the creditworthiness of the creditors as well as the genuineness of the transaction could not be proved and hence we uphold the order of CIT(A) in confirming the aforesaid addition - Decided against assessee. Addition made on account of stock valuation - Held that - Assessee submitted that due to large number of items involved it was not practical to maintain day-to-day stock register. Though the assessee claims that the stock register was prepared on the basis of physical verification but no proof of physical verification was filed before the Assessing Officer hence the Assessing Officer made lump sum addition. Before the CIT(A) the claim of the assessee was that no such addition could be made since the books of account were audited under section 44AB of the Act. The CIT(A) upheld the addition holding that though the books of account were audited under section 44AB of the Act but considering the fact of bogus purchases unexplained creditors which were the subject matter of earlier grounds of appeal the books of account could not be held to be reliable and where the assessee was not maintaining stock register to make tally of stock was impossible. Therefore the disallowance made by the Assessing Officer was held to be justified. - Decided against assessee.

Issues Involved:
1. Addition of Rs. 74,73,020 on account of alleged bogus purchases.
2. Addition of Rs. 15,65,000 under Section 68 of the Income-tax Act.
3. Addition of Rs. 2,00,000 on account of stock valuation.
4. Levy of interest under sections 234A, 234B, and 234C of the Income-tax Act.

Detailed Analysis:

Issue 1: Addition of Rs. 74,73,020 on Account of Alleged Bogus Purchases
The assessee declared a total income of Rs. 15,92,820, engaged in trading hardware and fittings with a turnover of Rs. 1,98,64,239 and a gross profit of Rs. 28,95,578. During assessment, the Assessing Officer (AO) identified purchases amounting to Rs. 74,73,020 from parties listed as hawala dealers by the Sales Tax Department. The AO requested the assessee to produce these parties and provide supporting documents like delivery challans and octroi receipts, which the assessee failed to do. Consequently, the AO treated these purchases as bogus and added the amount to the assessee's income.

Before the CIT(A), the assessee argued that since the sales were genuine, the purchases should not be disallowed. However, the CIT(A) held that the onus was on the assessee to substantiate the purchases with corroborative evidence, which was not done. The CIT(A) also noted that the assessee admitted to the addition before the AO. The CIT(A) upheld the addition under Section 69C of the Act, treating the purchases as unexplained expenditure.

The Tribunal found that the assessee failed to produce any corroborative evidence, such as transport receipts or octroi receipts, to support the purchases. The Tribunal dismissed the assessee's plea of matching principles due to the lack of stock details and corroborative evidence. The Tribunal upheld the addition of Rs. 74,73,020 as bogus purchases, treating it as unexplained expenditure under Section 69C.

Issue 2: Addition of Rs. 15,65,000 under Section 68 of the Income-tax Act
The AO noted that the assessee had accepted unsecured loans totaling Rs. 50,05,000 from six creditors but failed to provide bank account extracts and income-tax acknowledgements for loans amounting to Rs. 15,65,000. The AO added this amount under Section 68 as unexplained credit, which the assessee admitted to during assessment.

Before the CIT(A), the assessee did not provide any further details to substantiate the loans. The CIT(A) upheld the addition, noting the absence of evidence to prove the creditworthiness of the creditors and the genuineness of the transactions. The Tribunal agreed with the CIT(A) and upheld the addition of Rs. 15,65,000 under Section 68 due to the lack of necessary documentation and admission by the assessee.

Issue 3: Addition of Rs. 2,00,000 on Account of Stock Valuation
The AO found that the assessee did not maintain a day-to-day stock register, making it impossible to verify the correctness of the stock value. The AO made a lump sum addition of Rs. 2,00,000. The CIT(A) upheld the addition, considering the unreliability of the books of account due to bogus purchases and unexplained creditors.

The Tribunal dismissed the assessee's plea that the addition could not be made without rejecting the books of account, upholding the addition of Rs. 2,00,000 on account of stock valuation.

Issue 4: Levy of Interest under Sections 234A, 234B, and 234C
The assessee contested the levy of interest under these sections, which the Tribunal found to be consequential. The Tribunal dismissed this ground of appeal as well.

Conclusion
The Tribunal dismissed the appeal of the assessee, upholding the additions made by the AO and CIT(A) on account of bogus purchases, unexplained credits, and stock valuation discrepancies, along with the consequential levy of interest under Sections 234A, 234B, and 234C.

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