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2014 (4) TMI 927 - AT - Income TaxDeletion on account of bogus sundry creditors Held that - There was no evidence to show that purchases were paid from disclosed sources of money - assessee had failed to produce any purchase bill or records in support of the purchases - Out of the three creditors, M/s. RVPL was not only not existing during the period when assessee claimed to have made purchases for it, but it had also denied any transaction with the assessee at all. It s Directors even stated that they were willing to pay 50% of the money to the Tax Department, if the assessee was willing to pay the amount shown as payable to them. Assessee was given an opportunity for producing the creditors and examining them. Assessee did not avail such opportunity there was no fault in the order of AO for coming to a conclusion that the transactions, effected to the extent of the credit balances in the names of these three parties were not genuine and were bogus - assessee had definitely effected purchases, but not to the extent shown by it, as proved by the existence of bogus creditors AO had not at any point of time stated that he was making the addition under section 68 of the Act - He never considered the amount as unexplained cash credit - He simply disbelieved the purchases to that extent thus, CIT(A) fell in error, when he deleted the addition and directed a best of judgment assessment after rejecting the books, especially when AO had not done so thus, the addition made for bogus sundry creditors is upheld Decided in favour of Revenue. Addition of bogus loan credit Held that - The assessee had discharged the primary onus resting on her, by producing confirmation letters, PAN of the concerned parties - CIT(Appeals) has clearly brought out that concerned parties were having sufficient capital balance as on 31.03.2008 for justifying it - This has not been rebutted by the Revenue thus, there is no reason to interfere with the order of CIT(A) Decided against Revenue.
Issues Involved:
1. Deletion of an addition of Rs.1,70,85,846/- on account of alleged bogus sundry creditors. 2. Deletion of an addition of Rs.4,60,000/- for alleged bogus loans. Issue-wise Detailed Analysis: 1. Deletion of an Addition of Rs.1,70,85,846/- on Account of Alleged Bogus Sundry Creditors: The Revenue challenged the deletion of an addition made by the Assessing Officer (AO) concerning alleged bogus sundry creditors amounting to Rs.1,70,85,846/-. The AO identified three sundry creditors: M/s. Rajputana Vanijya Pvt. Ltd. (RVPL), M/s. Classic Sales Agency (CSA), and M/s. Shree Mangalam Enterprises (SME). Upon verification, the AO found discrepancies and inconsistencies with these creditors. - M/s. Rajputana Vanijya Pvt. Ltd. (RVPL): The AO discovered that RVPL was incorporated only after the period during which the assessee claimed to have made purchases. The director of RVPL denied any transactions with the assessee and stated that the ledger filed by the assessee was not genuine. The AO concluded that no credit balance existed in the name of RVPL. - M/s. Classic Sales Agency (CSA): The AO could not locate CSA at the given address. The proprietor, Shri Sunil Das, denied any knowledge of the assessee and stated that he was a radio mechanic, not a supplier of goods. The AO noted that the assessee failed to provide purchase bills or vouchers to support the claimed transactions. - M/s. Shree Mangalam Enterprises (SME): The AO found that SME was run by Shri Ajay Jalan, who filed a return indicating no business activity. The AO concluded that the credit balance with SME was also non-genuine. The AO provided the assessee with an opportunity to produce these creditors for examination, which the assessee did not utilize. Consequently, the AO determined that the purchases were not correctly reflected and considered the creditors as bogus, resulting in an addition of Rs.1,71,24,938/-. The Commissioner of Income Tax (Appeals) [CIT(A)] found that the assessee had substantiated the export sales with documentary evidence and argued that the purchases should also be considered genuine. The CIT(A) concluded that the AO should have resorted to an estimation of income rather than disallowing the entire credit amount. The CIT(A) directed a net profit estimation and deleted the addition of Rs.1,70,85,846/-. Upon appeal, the Tribunal noted that the AO had not accepted the purchases as genuine and highlighted the discrepancies found during verification. The Tribunal disagreed with the CIT(A)'s approach, stating that the AO had not rejected the books of accounts but had disallowed the purchases equivalent to the bogus trade creditors. The Tribunal reinstated the addition of Rs.1,70,85,846/- made by the AO, allowing Ground No. 1 of the Revenue. 2. Deletion of an Addition of Rs.4,60,000/- for Alleged Bogus Loans: The AO added Rs.4,60,000/- as bogus loans, questioning the creditworthiness of the lenders despite the assessee providing Permanent Account Numbers (PANs) and confirmations. The AO argued that the lenders' incomes were below the taxable limit, and their creditworthiness was not established. The CIT(A) found that the assessee had discharged the onus by providing confirmations and PANs. The CIT(A) noted that the lenders had sufficient capital balances to justify the loans. The Tribunal upheld the CIT(A)'s decision, agreeing that the addition of Rs.4,60,000/- was rightly deleted as the Revenue did not rebut the provided evidence. Ground No. 2 of the Revenue was dismissed. Conclusion: The appeal by the Revenue was partly allowed. The Tribunal reinstated the addition of Rs.1,70,85,846/- for bogus sundry creditors but upheld the deletion of Rs.4,60,000/- for alleged bogus loans. The order was pronounced in the open court on 28th November 2013.
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