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TMI Blog1996 (1) TMI 162X X X X Extracts X X X X X X X X Extracts X X X X ..... ired into these transactions and found that except M/s Marwal Traders, the other two parties, viz., M/s New Rai Enterprises and M/s Shimla Traders, were not assessed to sales-tax and their addresses were also incomplete, moreover, the payments to these parties were also shown in cash. The assessee was asked to produce these parties, but it was informed by the assessee that the said parties were not traceable. The AO went ahead with the enquiry and requested the Dy. Director of Income-tax, Investigation, Jaipur, to conduct a survey under s. 133A of the Act. The survey revealed that M/s New Rai Enterprises and M/s Shimla Traders did not exist at all. In case of M/s Marwal Traders, its sales-bill book for the month of March, 1985 were impounde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransactions, 5 transactions were through cash. So far as the cash transactions are concerned, it was in violation of the provisions of s. 40A(3) and even the identity of the receipient was not established. So far as the transaction through cheque is concerned, a copy of the cheque indicates that it was a bearer cheque and not a crossed cheque. As such, even the payment through one cheque was on the footing of cash payment and the provisions of s. 40A(3) were applicable. Hence, even if it is viewed otherwise, by taking into consideration the provisions of s. 40A(3), the addition of Rs. 86,500 appears to be well in order. In view of all these, the addition in question, being in order, stands confirmed." Thus, the addition of Rs. 86,500 was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... im and hence he strongly supported the orders of both the lower authorities. As regards not invoking the provisions of s. 40A(3) by the AO, Shri Singh had nothing to say in particular. 6. We have heard the parties and considered the material before us. Apparently it may seem to be a simple case of trading addition. However, in view of certain submissions made on behalf of both the sides, the matter gives rise to some pertinent issues. 7. We take up the first contention of Shri Singhvi. It was contended that only gross profit rate should have been applied and the addition should have been to that extent only. 8. Let us assume that the impugned purchases in this case are bogus what can be the causes and effects? Either corresponding bog ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he legitimate way of removing the entry would be, as every student of accountancy would agree, is to do what has been omitted to be done or undo what has been wrongly done. 11. Now, so far we were only assuming that the purchases are bogus. Coming to the facts of the case, were the purchases worth Rs. 86,500 really bogus? There is no doubt about it. The investigations got done by the AO leave hardly any doubt about it. The failure on the part of the assessee to show cause strengthens the Department's case. This stoic silence of the assessee also blunts the assessee's argument that Shri Hukamchand's statement was recorded at its back. It may have been recorded at its back, but the results thereof were informed to the assessee and that is w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 86,500 by invoking the provisions of s. 145(2). On appeal, the learned CIT(A) discussed in detail and confirmed the findings of the AO with respect to the spurious character of the transactions. On these findings at the first instance he confirmed the addition. This is evident from the very opening sentences of the operative part of his order in para 3.2 which are as follows: "After due consideration, it appears that the plea of the appellant cannot succeed in as much as the initial burden in regard to proving the genuineness of the purchases was on the appellant. The same was not discharged". 14. Then he goes on to discuss the various findings of the AO. After discussing the findings, the learned CIT(A) refers to s. 40A(3) and thi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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