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TMI Blog2012 (9) TMI 258X X X X Extracts X X X X X X X X Extracts X X X X ..... uring and trading of M.S.Rounds, M.S.Flats, M.S.Angles and other steel products. It follows mercantile system of accounting. For the Assessment Year under consideration it filed its return of income on 8.8.2008 on a total income of Rs. 32,22,420. The return was processed u/s.143(1) on 28.5.2009. Subsequently it was taken up for scrutiny. The Assessing Officer during the course of scrutiny assessment verified the payments had been made to one M/s.Tirupati Steel Enterprises and enquiries were conducted and information collected u/s.133(6) for verifying whether the said M/s.Tirupati Steel Enterprises could supply the M.S.Steel Rods and angles to the assessee for the purpose of carrying out its manufacturing activities. After various discussion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ati Steel Enterprises on day of enquiry i.e sometime in December 2010. The assesee did the business with the said party in the financial year 2007-08 & 2008-09 and thereafter discontinued w.e.f 18.03.2009 and during that time office of M/s. Tirupati Steel Enterprises was situated in the address provided to the Learned Assessing Officer, probably the assessee might have left the premises during the time the enquiry was made. In para 5-Vl the Learned Asst. Commissioner of Income Tax has mentioned that out of total payment of Rs. 90,00,000 made to M/s. Tirupati Steel Enterprises Rs. 10,00,000 was paid to MIs. Swastik Ingot and thus manipulated the ledger copy. The Appellant to submitted that this is general practice in business that on reques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses but has also added opening balance of Rs. 1,24,77,426, which was brought forward from previous year which is in no way connected with current year's transactions. The addition of opening balance is unfair and unjust. Further prima facie the sales of Rs. 13,12,155 made to the said party, should have also been adjusted before considering the transactions as ingenuine. Further the materials received from MIs. Tirupati Steel Enterprises were used for manufacturing activity of the unit. The same were entered in the prescribed register prescribed by Central Excise & Customs Department and the informations were also being sent regularly to Central Excise & Customs Department in ER-I Monthly Return. The crossed cheques were issued in the name o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upati Steel Enterprises were the purchases used for claiming the CENVAT credit as a second buyer when the original bills were raised indicating the user buyer being the assessee. Therefore, the payment made to M/s.Tirupati Steel Enterprises were against the purchases made at the cost which also would have remained the same which option if the assessee was to buy from the original manufacturer with excise duty component would have been taken care of by the assessee at the time of sale of M.S.Angles and rods after manufacturing. There is no loss of revenue therefore holding the amount owed to M/s.Tirupati Steel Enterprises as bogus for purchases cannot be established when the assessee has been able to establish and correlate the CENVAT amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led to the finding that the party M/s.Tirupati Steel Enterprises is only a name lender and could not have sold the purported purchases claimed by the assessee. The technicality of obtaining the CENVAT credit cannot supersede the finding insofar as the Assessing Officer has indicated that they are paper entries only. He, therefore, prayed that the disallowance be confirmed. 6. We have heard the rival contentions of the parties and perused the material available on record. Considering the facts and circumstances of the case, we are inclined to find that the purchases could not be bogus if they have participated in the sales or in the closing stock. Paper entries are part of the books of account and the Excise authorities have accepted the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts of the assessee's case have not been considered by both the authorities below in its proper perspective. The arrangement which is allowable under law by Excise authorities has been misconstrued to the extent that the very sales which has been accepted as genuine by the authorities below including the excise duty component as was taken care of under the Excise Duty Act was for purchases only. We do not find any infirmity in the contentions of the learned Counsel for the assessee which were also before the learned CIT(A). In view of the above, the appeal filed by the assessee is allowed. The impugned order of the learned CIT(A) and the residual addition made holding it as bogus purchases is directed to be deleted. 7. In the result, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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