2013 (8) TMI 592 - AT - Income Tax

Addition on account of bogus sale of amount Rs.20, 58, 255/- - Assessee had made claim that the scrap of 18, 970 kgs. was sold for Rs.20, 58, 245/- in cash - This scrap was stated to have been purchased from Times International on four different dates in October 2004 to December 2004. The payment for the same remained outstanding. The payment was shown as made in May 2005 - The Proprietor of Times International Shri Mohd. Karim has also not produced details before Assessing Officer as evident from Note Sheet noting - The assessee has claimed that it has sold this brass scrap in cash on 23.12.2004 and 25.12.2004 and payment was shown as received in cash. These alleged sales are claimed to have been made to persons located at Delhi but no full name and address was given in these sale bills - Held that - There was no sufficient storage facility available with the assessee to accommodate such huge quantity of brass scrap as the shop of assessee located in Manav Lane in Shanker Gali Kali Masjid Delhi. Assessee s claim regarding purchase of scrap is not established - Assessee has failed to produce any credible evidence to establish that cash sales were effected of brass scrap. The surrounding circumstances with regard to not debiting cartage expenses and other expenditure like salary or wages also show that there was no man-power available with the assessee to deal with the huge quantity of brass scrap. The assessee s claim that transportation charges made to the Thelawalas is not recorded in the books of account makes the claim of assessee of sale of brass scrap as more doubtful. Thus the assessee has failed to produce any credible evidence to establish the cash sales of the brass scrap. There is mismatch of dates appearing on the sale bills. Bill nos. 67 and 68 are dated 27.12.2004 and 28.12.2004 respectively while bill nos. 69 an 70 are dated 23.12.2004 and 25.12.2004. These facts also show that sales transactions were a covered up action of the assessee and were not genuine. There is no scope to treat this mistake as clerical mistake. Considering all records and factual aspects the addition of Rs.20, 58, 255/- is confirmed Decided against the Assessee. Addition of Rs.7, 51, 946/- made on account of purchases shown from Shiva Sanitary Jam Nagar Held that - Onus was on the assessee to prove the genuineness of the purchases debited in the books of account - The investigation made by the Assessing Officer shows that the party was bogus and non-existent. Further this fact has also been proved by the investigations made by the ADIT (Inv.) Rajkot. The assessee has simply expressed surprise but has not proved the purchases debited in the books of account. The investigation further proves that the assessee was indulging in providing accommodation entries Decided against the Assessee. Only the peak amount in respect of the cash deposited with bank account in Indus ind Bank Rs.33, 40, 657/-and cheque amounting Rs.15, 30, 450/- be added ignoring the explanation of the assessee that only commission @ 1 % need to be added Held that - Assessee has claimed that these were the third party cheques and cashed for 1% commission. However no details even names and addresses of such parties were provided to the income-tax authorities to substantiate the claim - Addition of the peak amount only of this concealed bank account held with Indus Ind Bank Ltd was completely justified - The source of the deposits as well as the destination of the withdrawals remains unknown and unexplained. The possibility of the same money being used for deposits as well as withdrawals cannot be ruled out Decided against the Assessee.

Summary

Issues Involved:
1. Addition on account of bogus sale.
2. Disallowance of expenses related to Shiva Sanitary, Jam Nagar.
3. Addition due to cash deposits in the bank account with IndusInd.
4. Addition due to other clearings in the bank account with IndusInd.

Detailed Analysis:

1. Addition on account of bogus sale:
The Assessing Officer (AO) made an addition of Rs.20,58,255/- for bogus sales, which was confirmed by the CIT (A). The assessee claimed to have sold brass scrap in cash but failed to provide credible evidence or details of the buyers. The CIT (A) noted the improbability of the sales given the narrow lanes where the shop was located and the large quantity of scrap involved. The AO's investigation revealed discrepancies in the purchase and sale transactions, including the non-existence of the purported seller, Times International. The assessee's inability to provide cartage expenses and the discovery of concealed bank accounts further supported the conclusion that the sales were bogus. The Tribunal upheld the CIT (A)'s decision, dismissing the assessee's appeal on this ground.

2. Disallowance of expenses related to Shiva Sanitary, Jam Nagar:
The AO disallowed expenses of Rs.7,51,946/- for purchases from Shiva Sanitary, Jam Nagar, as the entity was found to be non-existent. The assessee claimed ignorance about the supplier, stating that purchases were made through a salesman in Delhi. The AO's investigation, corroborated by the ADIT (Inv.), Rajkot, confirmed that Shiva Sanitary was a fictitious entity. The Tribunal agreed with the CIT (A) that the onus was on the assessee to prove the genuineness of the purchases, which was not done. The Tribunal upheld the addition, dismissing the assessee's appeal on this ground.

3. Addition due to cash deposits in the bank account with IndusInd:
The AO added Rs.15,30,450/- as undisclosed income due to unexplained cash deposits in the assessee's IndusInd Bank account. The CIT (A) directed the AO to work out the peak balance of the bank account and restrict the addition to that amount, considering the possibility of the same money being used for deposits and withdrawals. The Tribunal upheld the CIT (A)'s decision, finding no merit in the assessee's claim that the deposits were third-party cheques cashed for a 1% commission, as no details were provided to substantiate this claim.

4. Addition due to other clearings in the bank account with IndusInd:
The AO added Rs.33,40,657/- as undisclosed income for other clearings in the IndusInd Bank account. Similar to the cash deposits, the CIT (A) directed the AO to consider only the peak balance. The Tribunal upheld this approach, noting that the assessee failed to provide any credible evidence to support the claim that these were third-party transactions for commission income.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the CIT (A)'s decisions on all grounds. The additions for bogus sales, disallowed purchases, and unexplained bank deposits were confirmed, with the CIT (A) directing the AO to restrict additions to the peak balance for bank deposits. The assessee's failure to provide credible evidence and the discovery of concealed bank accounts were critical factors in the Tribunal's decision.