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TMI Blog2015 (4) TMI 95X X X X Extracts X X X X X X X X Extracts X X X X ..... ses were disallowed. However in case in hand the Assessee could not prove the sale and purchases by placing any credible material on record. Thus CIT(A)'s action of restricting the addition cannot be upheld and therefore in the present facts, the AO was justified in making the addition and therefore we uphold the action of the AO. - Decided against assessee. - I.T(SS). A. Nos. 256 & 270/AHD/2011 - - - Dated:- 26-3-2015 - Shri Mukul Kr. Shrawa And Shri Anil Chaturvedi JJ. For the Appellant : Shri S.N. Soparkar with Urvashi Shodhan, A.R. For the Respondent : Shri Subhash Bains. CIT/D.R. ORDER Per Shri Anil Chaturvedi,A.M. 1. These two appeals, one filed by the Assessee and the other filed by the Revenue, are against the order of CIT(A)-II, Ahmedabad dated 21.12.2010 for A.Y. 2006-07. 2. The relevant facts as culled out from the material on record are as under. 3. Assessee is a company stated to be a member related to Pratibha group and engaged in the business of manufacturing of cotton yarn, knitted fabrics and trading in textile goods having its factory at Pithampur and offices at Indore and Mumbai. In this case search and seizure operation u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld CIT(A) erred in law and in facts in restricting the addition at 25 % of ₹ 2,62,21,805/- made on account of bogus purchase holding that the assessee had maintained the quantitative details of purchases and sales and also the assessee has made sales of the corresponding goods and brought the money in the books which is offered for taxation, ignoring that the unexplained expenditures made out of books by the assessee are covered by the provisions of section 69C of the IT Act, whereby such unexplained expenditure which is deemed to be the income of the assessee is not allowed as deduction under any head of income. 3. On the facts arid circumstances of the case and in law, it is prayed that the order of the Ld CIT(A) be set aside and that of the Assessing Officer may be restored. 5. The issue in the grounds raised by Assessee and Revenue being interconnected are considered together. 6. During the course of survey proceedings u/s 133A at the business premises of the assessee located at Acme Plaza, Andheri, Mumbai, Shri E. C. Peethambaran, the Branch manager in the statement recorded had stated that he had no evidence to prove that materials alleged to have been purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch according to the A.O indicated that no genuine concerns existed at the given addresses. He further concluded that the purchases through debit note was an afterthought. He therefore concluded that the amount which was returned back by Mr Bagrecha in cash have been utilized for making out of books purchases and thus was hit by the provisions of Section. 69C of the Act as the Assessee had not satisfactorily explained the source of expenses of purchases and is therefore to be considered as income and further as per proviso to section inserted by Finance (No. 2) Act, 1998, w.e.f. 1.04.1999, no deduction can be allowed in respect of such expenditure. . He also noted that Assessee had admitted a sum of ₹ 3,58,96,924/- for A.Y. 07-08 as unaccounted income due to bogus purchase claims (and consequent inflation of expenses) on the basis of facts emerging from survey at Mumbai office and confession statement of Shri E.C. Peethambaran. He accordingly considered the purchases to be fictitious and added ₹ 2,99,03,076/- to income. Aggrieved by the order of AO, Assessee carried the matter before CIT(A) who decided the issue by holding as under:- 5. I have considered the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. He further submitted that there cannot be sales without the purchases and if the purchases are considered to be fictitious then there cannot be sales and also profit from its sale. He further submitted that the additions have been made by the AO by purely relying on the statement of Shri E.C.Peethambaran u/s 133A of the Act and it is settled law that a statement recorded u/s 133A has no evidentiary value. He further placed reliance on the decision of Ahmedabad Tribunal in the case of Totaram Sharma vs. ITO (ITA No 2239 2291/A/2004 order dated 25.1.2008. He further submitted that the aforesaid decision of the tribunal has also been upheld by Hon'ble High Court in the case of ITO vs Totaram Sharma (Tax Appeal No 1344 of 2008 order dated 9.2.2010). He further submitted that the entire amount cannot be disallowed and for this proposition he relied on the judgments rendered in the claim of Sanjay Oilcake Industries vs. CIT (2009) 316 ITR 274, CIT vs. Bholanath Poly Fab Pvt.Ltd (2013) 355 ITR 290 (Guj). He further submitted that Hon 'ble Gujarat High Court in the case of CIT vs Gujarat Ambuja Exports (2014) 43 taxmann.com 244 (Guj) has upheld the addition of 5% of the purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see for A.Y. 07-08 has admitted a sum of ₹ 3.58 crore as unaccounted income due to bogus purchase claims on the basis of facts emerging from survey and confession statement of Mr. Peethambaran. Before us, it is assessee's submission that the goods have indeed been purchased and have been sold and the transaction was of trading nature and it has maintained the quantitative records of the same. However from the perusal of the audited Profit and loss account for the period ended 31st March 2006, placed at paper book no 13 to 30 it is seen that trading activity of purchase and sale of the goods has not been disclosed though the same is mandatorily required to be disclosed as per Schedule VI of the Companies Act, 1956. Here it would be relevant to reproduce the relevant portion of Schedule VI of the Companies Act,1956, which were applicable to the Assessee at the relevant time, requiring the disclosure to be made as under:- Part II to Schedule VI of the Companies Act, 1956 Requirements as to the Profit Loss Account: 3.The Profit Loss Account shall set out the various items relating to the income and expenditure of the company arranged under the most convenient he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made in cash which were unaccounted and therefore the Hon'ble High Court has held that there was no basis for arriving at such conclusion. It was further noted by the Hon'ble High Court that Tribunal had recorded that the purchases made from 4 parties were recorded and the genuineness of the sales were not doubted by the Revenue. However in the present case, the facts are different and therefore the ratio of decision is not applicable. Similarly the ratio of the decision in the case of CIT vs Ambuja Exports (supra) are also not applicable because in that case the facts were that the stock register was properly maintained and the impugned purchases were reflected in such stock register and thus when there were internal contradiction in the statements of the supplier of goods and in such circumstances the Tribunal had reduced the addition to 5% of the amount in question. The ratio of the decision in the case of CIT vs. Bholanath Poly Fab Pvt.Ltd (supra) is also not applicable to the facts of the case because in that case the Hon'ble High Court has noted that Tribunal was of the opinion that the purchases may have been made from bogus parties, nevertheless, the purchases ..... X X X X Extracts X X X X X X X X Extracts X X X X
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