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2018 (11) TMI 1637 - AT - Income TaxBogus purchases - non production of books of accounts and persons in support of her claim - CIT(A) in restricting the disallowance to 30% - HELD THAT - The assessee proving genuineness of expenses submitted various details such as copy of agreement copy of account for labour contractors and various agreements along with copy of the bank statement showing that the expenses were paid to account payee cheques and bank statements of contractors were also produced showing the credit of the said cheques. The assessee also furnished copy of the bills accounts confirmation letters and contra accounts of recipient showing the tally of payment details which again supports the claim of the assessee. CIT(A) issued notices to some suppliers and they confirmed the transitions and filed relevant details. The assessee also filed details of expenses and the addresses of the suppliers before the AO. We agree that merely because relevant vouchers have not been submitted for verification the books of accounts cannot be rejected only on this ground. We also agree to the conclusion drawn by CIT(A) that the disallowance of 30% of claimed expenses is suffice to meet the ends of justice as this amount covers all the possible leakage of revenue in consequent to the non availability of the relevant vouchers and other documents for verification by the Revenue authorities. Therefore we are inclined to hold that the conclusion drawn by the CIT(A) in restricting the disallowance to 30% of total claim is quite correct and justified. Addition on account of alleged sundry creditors proved bogus - CIT(A) issued notices u/s. 133(6) to nine major parties/sundry creditors and all the parties replied to the notice and copies of their replies were verified - HELD THAT - CIT(A) was right in holding that without any concrete material or evidence showing unexplained or unaccounted income of the assessee introduced in the cover of sundry creditors the addition made by the AO merely on the basis of suspicion presumption and assumption cannot be held as sustainable. CIT(A) has called the assessee to submit all the details of transaction with each and every creditor which was submitted by the assessee and reproduced by the ld. first appellate authority in para (c) at pages 6 to 11 of the first appellate order. CIT(A) issued notices u/s. 133(6) of the Act to nine major parties/sundry creditors and all the parties replied to the notice and copies of their replies were verified by the ld. CIT(A) in the subsequent paras of impugned order which shows the exercise and examination undertaken by the ld. CIT(A) before granting relief to the assessee. CIT(A) referred to the ratio of the decision in the case of CIT vs. Navendram Ahuja 2005 (2) TMI 95 - MADHYA PRADESH HIGH COURT and thereafter recorded as finding that the addition/disallowance made on the basis of presumption and assumption is not sustainable and correct in view of the absence of concrete and sustainable allegation and evidence or adverse material against the assessee Addition of amount deposited in bank account remained unexplained - HELD THAT - Assessee deposited cash amount to these three bank accounts and the source of the same has been explained as the amounts received on account of advances received from the prospective buyers of flats/units in the two projects of the assessee. Ld. CIT(A) has also considered and noted the amount of 1, 02, 29, 487/- which is the impugned amounts deposited to the said three bank accounts of the assessee. These factual findings have not been controverted by the AO or ld. DR during arguments before us. Therefore these factual findings supports the conclusion arrived by the CIT(A) that the amounts added and assessed as unexplained sundry creditors includes the impugned amount of 1, 02, 29, 487/- which was deposited to the three bank accounts of the assessee therefore the same cannot be treated as unexplained bank deposits in absence of any adverse or positive incriminating evidence or material. - Decided against revenue.
Issues Involved:
1. Disallowance of ?11,27,363/- out of purchases. 2. Restriction of addition to ?11,27,363/- against original addition of ?37,57,877/- on account of unaccounted purchases. 3. Deletion of addition of ?1,34,64,877/- on account of alleged bogus sundry creditors. 4. Deletion of addition of ?1,02,29,487/- on account of unexplained bank deposits. Detailed Analysis: Issue 1 & 2: Disallowance and Restriction of Addition on Account of Unaccounted Purchases The assessee contended that the disallowed expenses were incurred for a housing project approved by the Government of Gujarat. These expenses were shown as work in progress in the books of accounts. The assessee provided supporting documents, including sample bills, vouchers, and contra accounts. The CIT(A) issued notices to some creditors, who confirmed the transactions, and restricted the disallowance to 30% of the total claimed amount, i.e., ?11,27,363/-. The assessee argued that the entire disallowance should be deleted, citing decisions from ITAT Allahabad and ITAT Hyderabad. The Revenue argued that the assessee failed to produce books of accounts or any supporting persons, making the claim unexplained. The AO's disallowance was based on the non-production of vouchers and supporting documents. Upon review, it was noted that the AO's approach was casual, and the CIT(A) had rightly restricted the disallowance to 30% to cover possible revenue leakage due to non-availability of vouchers. The Tribunal upheld the CIT(A)'s decision, dismissing both the assessee's and Revenue's grounds on this issue. Issue 3: Deletion of Addition on Account of Alleged Bogus Sundry Creditors The Revenue argued that the assessee failed to produce books of accounts or any supporting persons, making the claim of sundry creditors unexplained and bogus. The AO added the entire amount of sundry creditors shown in the balance sheet. The assessee provided detailed information about the creditors, including agreements, bank statements, and confirmations. The CIT(A) issued notices to major creditors, who confirmed the transactions. The CIT(A) found no concrete material to prove that the sundry creditors represented unaccounted income and deleted the addition. The Tribunal observed that the AO had no adverse findings or evidence to show that the sundry creditors were bogus. The CIT(A)'s detailed verification and findings were upheld, and the Revenue's ground on this issue was dismissed. Issue 4: Deletion of Addition on Account of Unexplained Bank Deposits The Revenue contended that the assessee failed to explain the source of deposits in three bank accounts, amounting to ?1,02,29,487/-. The AO added this amount as unexplained deposits. The assessee explained that the deposits were advances from buyers for housing projects, supported by regular books of accounts and bank statements. The CIT(A) verified the details and found that the deposits were related to advances received from buyers, which were shown as sales in subsequent assessment years. The Tribunal noted that the CIT(A) had called for and verified all details, confirming that the deposits were not unexplained. The amounts added as unexplained sundry creditors included the deposits in question. The Tribunal upheld the CIT(A)'s findings, dismissing the Revenue's ground on this issue. Conclusion: Both the appeals of the Assessee and the Revenue were dismissed, with the Tribunal upholding the CIT(A)'s decisions on all issues. The disallowance was restricted to 30% of the claimed expenses, and the additions on account of bogus sundry creditors and unexplained bank deposits were deleted.
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