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TMI Blog2014 (11) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... ics was in use - The AO has not given any finding in respect of the nature of activity carried out by the assessee by such plant & machinery - the AO has failed to give a finding on material aspect and ignored the fact that right from the year 1999 the plant & machineries belonging to M/s.Ashok Synthetics was in use. The purchases made by the assessees from the relevant four parties, quantity-wise as well as value-wise have been found to have been recorded in the books of account, the payment for such purchases has been found to have been made by crossed cheques and duly recorded in the books of account, the sales corresponding to such purchase have been found recorded in the books of account and it is so because Revenue has not doubted the genuineness of the sales, rather has accepted the same, there is no allegation of suppression of value of closing stock or of the sales quantity-wise or value-wise and there is no allegation of inflation of purchases also - there could not be any addition on any account - even the addition sustained by the CIT(A) on the basis of peak of purchases is not sustainable – Decided against revenue. - I.T.A. No. 2126/Ahd/2008 - - - Dated:- 30-10-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the relevant portions read as under:- 6. The decision of the Ld.CIT(A), Surat deleting the addition on account of purchases of ₹ 3,14,37,602/- made from M/s.Ashok Synthetics is not acceptable. The Ld.CIT(A), Surat has erred in accepting the validity of various arguments submitted by the assessee in support the genuineness of alleged purchase transactions made with M/s.Ashok Synthetics of Hisar. He has omitted the most important fact the said supplier was not all in existence in F.Y. 2003-04 in which the transactions were claimed to be made. 7. The AO had correctly made the addition in view of factual analysis of transactions made with M/s.Ashok Synthetics by the assessee which reveals that (1) Notice u/s.133(6) issued to the alleged supplier party returned unserved. The Income-tax unit of Hisar had already found the supplier as non-genuine. The assessee, also could not produce any one in the whole proceedings who could confirm the transactions and supply of goods. (2) The Inspector had inquired on the address of Surat, obtained from the bank account of M/s.Ashok Synthetics and nobody had been found on that addresses. Thus, it looks very suspicious like a web ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the payments were duly credited into the accounts of the suppliers. He further submitted that the assessee is an exporter and all accounts related to sellers have been accepted by the Excise Department was well as Income Tax Department. Therefore, he submitted that the AO was not justified in making the addition. He further relied on the decision of Coordinate Bench (ITAT Ahmedabad Bench A ) rendered in the case of Shri Totaram B.Sharma vs. ITO (cross-appeals) in ITA Nos.2239 2291/Ahd/2004 for AY 2001-02 dated 25/01/2008. He submjitted that the decision of the Tribunal in the case of Totaram B.Sharma travelled to the Hon ble Gujarat High Court in Tax Appeal Nos.1344 and 1355 of 2008, dated 09/02/2010, wherein the Jurisdictional High Court has upheld the decision of the Tribunal. He submitted that the AO has wrongly applied the judgement of the Hon ble Delhi High Court rendered in the case of CIT vs. La-Media reported at (2001) 250 ITR 575 (Del). He submitted that the Hon ble Delhi High Court in the subsequent judgement rendered in the case of CIT vs. Hi Lux Automotive (P.) Ltd. reported at (2009) 183 Taxman 260 (Delhi) has upheld the decision of the Tribunal. He submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uineness/ingenuineness of the transactions, existence / non-existence of the above firm (M/s.Ashok Synthetics). In response thereto, the Assistant commissioner, Central Excise, Division Hisar has submitted photo copies of show-cause notice, issued to M/s.Ashok Synthetics regarding availing of deemed credit of ₹ 12262846/- @ 8.63%, when the above firm was not in existence because its proprietor had died in 1999 and no body had obtained fresh Central Excise Registration. Show cause notice further reveals that on 27.04.2002 Smt.Veena Tuteja w/o.Shri Satish Tuteja as its proprietor and gave land, building, plant and machinery belonging to M/s.Ashok Synthetics to M/s.Kashish Textiles on rent for two years. M/s.Kashish Textiles was allotted Central Excise Registration on plot no.53, Sector 27-28, Hisar. Again in June 2003, Smt.Veena Tuteja w/o.late Sh.Ashok Kumar Tuteja entered into an agreement with M/s.Parnami Chemicals and gave plant, land building and machinery at plot No.53, Secto 27-28, Hisar belonging to M/s.Ashok Synthetics to M/s.Parnami Chemicals on rent for a period of five years. M/s.Parnami Chemicals took physical possession of land, building, plant and machinery in Ju ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeal Nos.1344 1355 of 2008(supra). The AO has not given any finding in respect of justifiability of the reopening of the assessment in the assessment order dated 28/12/2007. Therefore, we do not find any infirmity in the order of the ld.CIT(A). We find that the AO has made addition on the basis of the information received from the Central Excise Department in respect of the supplier of the assessee; namely M/s.Ashok Synthetics as per the reference received from the Central Excise Department, it is stated that the Proprietor of M/s.Ashok Synthetics had died in 1999. It is also stated that Smt.Veena Tuteja, wife of Shri Ashok Tuteja had entered into an agreement with M/s. Kashish Textiles with Shri Satish Tuteja as its proprietor and gave land, building, plant and machinery belonging to M/s.Ashok Synthetics to M/s.Kashish Textiles on rent for 2 years. It is further stated that M/s.Kashish Textiles was allotted Central Excise registration on plot no.53, Sector 27-28, Hisar. Again in June 2003, Smt.Veeena Tuteja wife of Ashokumar Teteja entered into an agreement with M/s.Pranami Chemicals and gave plant, land building and machinery at plot no.53, Sector 27-28, Hisar belonging to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from the year 1999 the plant machineries belonging to M/s.Ashok Synthetics was in use. The assessment has been made substantially on the basis of information given by the Central Excise Authorities in respect of the supplier of the assessee-firm. The AO has observed vide para-15 of his assessment order as under:- 15. It is observed from the analysis of bank statements of the assessee and M/s.Ashok Synthetics and cheques issued by both parties that, in fact, the money has been actually circulated and routed through their accounts. Evidently, the ultimate beneficiary of the money circulation is our assessee. Apparently all cheque payments made by the assessee firm get deposited in the bank account of M/s.Ashok Synthetics, maintained at Surat. Maintenance of bank account in Surat, instead of Hisar itself is doubtful. It is reflected that the concern was just a facilitator for some big parties like our assessee. From the same account, M/s.Ashok Synthetics had issued cheques to some common names in the garb of payments for fabrics purchase. However, all cheques in cross ( a/c payee cancelled ) had been routed through shroffs (cheque discounters), who had exchanged those cheques w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the corresponding sales in quantity as well as in value (if sold), and if not sold, then has accounted for the quantity as well as the value of such purchases in its closing stock and, on the other hand, has accounted for the payments for such purchases as well as receipt against sales (corresponding to such purchases) in the books of account. In other words, once the Assessing Officer is unable to trace the seller or assessee is found to be not in a position to furnish evidence satisfactory for Assessing Officer to establish that the purchase from the persons from whom the assessee has claimed to have made and had paid the purchase price, in fact, were made from those very persons, the Revenue, without fail, considers such purchases as bogus or unverifiable and proceeds to make addition to the extent of such purchase on the ground that investment in such purchases has been made from undisclosed sources. 9.2. The approach of the Revenue, in our opinion, and as explained hereunder, being contrary to the accounting system as well as the law, is not sustainable. (i) First of all, let us consider the Effect of so-called bogus/ingenuine purchases with the help of an example a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Purchases Nil Nil C.stock 50 Gross profit 150 150 In the above situation, though there is closing stock of ₹ 50/- only (being as per cost price), sales being of ₹ 100/- only, yet the G.P. is ₹ 150/- which is a quite absurd result. Hence, one forgets to see that if there are no purchases (in the above example), then how there can be any sale or closing stock and since the revenue always accepts the sales and the closing stock, nonacceptance of the purchases, which are duly accounted for in the books, is not justified. The credit for such purchase has to be given. In the above example No.I or II, as the case may be, if the Assessing Officer is allowed to make an addition of ₹ 100/- as undisclosed investment, then the Assessee s income will be net profit + ₹ 100, without any credit for the purchases which is not justified either under the law or under the normal accounting system. Therefore, we are of the opinion that there is no justification for such addition. Addition, in such case, can be made only in the circumstances and for the reasons stated as under:- First of all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment or on account of undisclosed sales or undisclosed profit on the ground that some purchases are considered to be bogus or ingenuine only for want of availability of the seller. 10. From the above discussion, we are of the opinion that in a given case, if Until the Revenue establishes such fact by cogent material. 11. Coming to the present case, admittedly, the purchases made by the assessees from the relevant four parties, quantity-wise as well as value-wise have been found to have been recorded in the books of account, the payment for such purchases has been found to have been made by crossed cheques and duly recorded in the books of account, the sales corresponding to such purchase have been found recorded in the books of account and it is so because Revenue has not doubted the genuineness of the sales, rather has accepted the same, there is no allegation of suppression of value of closing stock or of the sales quantity-wise or value-wise and there is no allegation of inflation of purchases also. In view of these facts, we are of the opinion that there could not be any addition on any account. Consequently, even the addition sustained by the CIT(Appeals) on t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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