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TMI Blog2015 (7) TMI 564X X X X Extracts X X X X X X X X Extracts X X X X ..... n the Audited Financial Statements e) Not an iota of evidence was found/impounded during survey either in the premises of the appellant's or in the premises of the the supplier's place. F) No dispute about payment by the banking channel G) no rejection of books of account . 3. That whether the Ld. CIT(A) was justified in confirming addition of Rs. 40 lacs as a bogus purchase,even when there were no purchases from the alleged parties, just based on not specifically taken in Grounds even though it was taken in the submission. 4. That whether the Ld. CIT(A) was justified by restoring back to A.O. theaddition of Rs. 16782274/- on account of DEPB license even though theevidence was fully explained. 5. That whether the Ld. CIT(A) was justified by confirming the addition of Rs. 14097079/- made u/s 40A(3) even when the section was not Applicable to the exceptional circumstances 6. Whether the Ld. CIT(A) was justified ini confirming the disallowance ofRs. 35000/- u/s 43B for PF & ESI without appreciating the evidence on record." 2. Ground no. 1 is general in nature and the same is not pressed by the assessee. Accordingly no finding is required in respect of ground no. 1 and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Books of Accounts which were duly audited as per the provisions of the Companies Act and Tax Audit. There were no qualifications in the Auditor's reports nor was defect pointed out by the Auditors. Even the authorities below have accepted the accounts of the assessee and made the addition merely on the presumptions and assumptions on the basis of the statement recorded from for persons during the survey. The additon made on the basis on third party statement without giving an opportunity for cross examination to the assessee is not sustainable. He has further submitted that even in the statements recorded u/s 133A, it has not been stated by any of the four persons that they have given accomodation entries to the assessee. The statement is vague and general and no specific allegation against the assessee has been made. On the same date a survey was carried out at the place of the assessee and the statement were recorded, wherein, the assessee stated and clearly shown the record that the supply were made by these parties and there was no incriminating documents found during the survey to suggest bogus transaction. The assessee categorically denied the allegations vide its letter da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent to the survey took place on 31.03.2006 and accepted the purchases from these parties. Therefore, when the Assessing Officer has accepted the purchases in respect of of these parties for the A.Y. 2005-06 then the purchase cannot be denied merely on the basis of statement recorded in survey without specific allegation of any accomodating entries and bills by these parties to the assessee. He has referred the statement of these four parties and stated that all the statements are stereo type which is not possible because all these parties were not at single place but at different places . The assessee already submitted the quantitative details of export unit placed at page no. 44 and 45 of the paper book, there was no discrepancy found in the quantititative details filed by the assessee and also recorded in the Books of Accounts, therefore, when all the details of manufacturing unit are matching along with opening and closing stock then the purchases cannot be treated as bogus. 3.4 On the other hand, the Ld. DR has submitted that the Assessing Officer has recorded in the assessment order that cross examination was demanded by the assessee at the fag end of the assessment proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine and then submit his report on the addition of purchases in para 6.4 as under: "During the course of appellate proceedings, the A/R. of the appellant made a submission on 6.03.2010 stating that opportunity to cross examine those 4 parties on whose statements the entire additions is based has not been granted and the A/R cited various case laws on the subject wherein it has been held that assessment framed by ignoring the principles of natural justice or by relying on any statement or document for which the appellant has not been given an opportunity to cross examine is bad in law. After considering the submissions of the A.R., I called upon the A.O to grant an opportunity to the appellant for cross examination and then submit his remand report on the addition of purchase of Rs. 24,73,00,784/- and the disallowance of Rs. 1,40,97,079/- u/s 40A(3) of the Income Tax Act. The remand report was called on 18.05.2010 and the same was submitted by the A.O. on 12.01.2011." 3.6 Thus it is clear that the CIT(A) accepted the contention of the assessee that opportunity for cross examination should have been granted to the assessee and in the absence of the cross examination, the statem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he absence of cross examination of these four parties the remand report cannot be treated as a proper and complete report on the matter. Much stress has been given by the Assessing Officer in the remand report as well as by the CIT(A) that the assessee failed to produce the proof of transportation of goods, delivery challan etc. We note that the assessee has explained before authorities below that the delivery of goods were directly made by the suppliers at the port for the purpose of export, therefore, there was no question of payment of transport charges separately by the assessee. We note that the assessee has placed on record the details and shown from the purchase bills that purchases are matched with the export sale in the case of the trading of goods for the purpose of export and therefore, there is no scope of any doubt about the purchases which are directly matching to the sale (export). Even otherwise, when the sales and all other quantitative details and figure regarding stock are accepted by the Assessing Officer then in the absence of any direct evidence showing the non genuineness of purchases in question, the addition is not sustainable on the basis of assumption and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any verification. 4.4 On the other hand, the Ld. DR had relied upon the orders of authorities below. 4.5 We have considered the rival submissions and relevant material on record. The assessee produced the details of DEPB licenses as well as the details of DEPB of group companies. The Assessing Officer without verification of the record has made the addition of the amount by treating the same as bogus purchases. It is pertinent to note that when the assessee filed all the relevant details as well as evidence of duty drawback received from the custom authorities then prima facie the assessee has proved its claim of receipts. Once the assessee has discharged its onus by producing the necessary evidence, the burden is shifted to the Assessing Officer to disapprove the evidence produced by the assessee in support of his claim. Even otherwise the evidence produced by the assessee are the documents issued by the custom authorities and, therefore, there is no scope of any manipulation or manufacturing of evidence. Accordingly, in the facts and circumstances of the case when the assessee has clearly made out his case that the amounts recorded in the charts found during the survey was rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed the details of the parties as well as the payments and submitted that the payment was made for embroidery and fabrication work of the garments through M/s Rose Enterprises and each payment is less than Rs. 20,000/- 5.3 On the other hand, the Ld. DR has relied upon the orders of authorities below and submitted that except the ledger account, the assessee has not produced any evidence to show that each payment is less than Rs. 20,000/-. It appears that the assessee has divided the payment to show each payment is less than Rs. 20,000/- to circumvent the provisions of section 40A(3). 5.4 We have considered the rival submissions and relevant material on record. As per the details filed by the assessee prima facie it appears that each payment made is less than Rs. 20,000/-. Further the authorities below have not verified and examined this fact that whether this payment was made for work of embroidery and fabrication of garments. For the year under consideration if each payment is less than Rs. 20,000/- then provisions of section 40A(3) is not applicable. The amendment brought to this section vide Finance Act 2008 w.e.f 01.04.2009, is not applicable to this year and if each payment i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e trading account of the assessee supported by stock record, has not been rejected by invoking section 145 (3) of the Act .It is respectfully prayed with pain and anguish that the orders of the revenue authorities below, vitiated with perversity of fact and law, may be quashed 3. On the facts and the circumstances of the case Id. CIT (A) has misdirected himself on facts and law in sustaining the various additions made by the A.O. in complete disregard of the undisputed facts that the accounts of the assessee regularly maintained are audited under the Companies Act as well as uls 44AB of the IT Act and complete stock records accounting for the production and consumption have been maintained from year to year. 4. On the facts and the circumstances of the case the Id. CIT (A) has erroneously sustained the disallowance of Rs. 22,36,05,346/- out of manufacturing expenses on grounds which are factually incorrect, irrelevant and contradictory. 5. On the facts and the circumstances of the case the Id. CIT (A) has erred in sustaining the disallowance of Rs. 29,98,81,013/- on account of transfer entries made in the books of accounts, as reproduced vide para 4.2 of the impugned appellate o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . From the detail submitted by the assessee, the Assessing Officer noted that the assessee has shown the manufacturing expenses amounting to Rs. 28,68,96,446/- in the month of March which is abnormally high in comparison to the other Month's expenses. Accordingly the assessee was asked to explain the major part of manufacturing expenses incurred in the month of March. In compliance to the said query the assessee submitted the revised monthly details without giving the break up of the units. In the revised statements, the expenses for the month of March was shown at Rs. 6,3291,100/-. Finding the discrepancy in the two set of details filed by assessee, the Assessing Officer made addition of difference between the figures of manufacturing expenses for the month of March in the two set of details amounting to Rs. 22,36,05,346/-. The assessee challenged the action of the Assessing Officer before the CIT(A) but could not succeed. 10.2 Before us, the Ld. Authorized Representative of the assessee has submitted that the manufacturing expenses were incurred on manufacture of T-shirts, Ladies Dress etc. all these goods were recorded in the stock register. The stock register including the det ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies. When the assessee has explained the reasons for difference the Assessing Officer ought to have examined the explanation and other relevant record. Further without disputing the difference of the expenses in the two set of details in respect of other eleven months, the Assessing Officer took the figure of difference only in respect of month of March despite the fact that the said difference was distributed for the other eleven months. In view of the above facts and circumstances of the case that we are of the opinion that this issue has not been properly examined by the Assessing Officer. Accordingly we set aside this issue to the record of the Assessing Officer for proper verification of the fact and consideration of explanation of the assessee and then decide the same as per law. 11. Ground no. 5 is regarding disallowance of transfer entries made in the Books of Accounts. 11.1 The Assessing Officer noted that there is a long list of sundry creditors in the balance sheet. The assessee was asked to furnish the copies of ledger accounts of the sundry creditors. The Assessing Officer found that various debit and credit entries were only transfer entries running into crore of ru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and explanation before the Assessing Officer during the remand proceedings. When there was no cash credit except on current account payments received which were settled in the next year by way of goods sold. Payments were made to parties by way of Cross cheque/ transfer mode of payment. These have already been verified in the subsequent Assessment Year i.e. 2008-09 and 2009-10, therefore, no addition can be made when the payment is accepted in the subsequent years. 11.4 On the other hand, the Ld. DR has relied upon the orders of authorities below and submitted that the assessee failed to discharge its onus to explain the cash credit in the Books of Accounts. Thus the authorities below are justified in making the addition on account of unexplained credit to the sum in question. 11.5 We have considered the rival submissions as well as relevant material on record. The Assessing Officer made the addition of unexplained cash credit as the assessee failed to explain and file the details regarding the seven creditors selected by the Assessing Officer having outstanding in their names and their ledger account shows the inter transfer entries between parties. On appeal, the assessee furni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tstanding balances to be paid by the assessee, therefore, the Assessing Officer has to decide this issue on proper examination and consideration of all the relevant facts. 12. Ground no. 6 is regarding addition on account of unexplained purchases. 12.1 During the course of assessment proceedings, the assessee was asked to furnish the details of sundry creditors along with copies of ledger accounts of the selected parties. The assessee vide letter dated 19.11.2009 submitted the ledger accounts of those parties. The Assessing Officer noted that the entries reveals only purchases right from April, 2006 to March, 2007. No single payment was made. Accordingly the Assessing Officer treated the balance in respect of five parties as bogus purchase and added to the total income of the assessee . 12.2 The assessee challenged the action of Assessing Officer before CIT(A) but could not succeed as the CIT(A) relied upon the order for the A.Y. 2006-07 in respect of of addition on account of bogus purchases. 12.3 Before us, the Ld. Authorized Representative of the assessee has submitted that the purchases and sale as well as closing stock are duly reflected in the Books of Accounts and there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 7 is regarding disallowance on account of bogus purchaes of the earlier years. 13.1 The Assessing Officer disallowed a sum of Rs. 2,38,11,081/- on account of bogus purchases from Jupiter Overseas on the ground that the purchaes from the said party was disallowed for A.Y. 2006-07 being bogus purchases. The CIT(A) confirmed the disallowance by following the order for A.Y. 2006-07. 13.2 We have considered the rival submissions and relevant material on record. Since the issue for A.Y. 2006-07 has been decided in favour of the assessee, therefore, the disallowance made by authorities below relying upon the orders for A.Y. 2006-07 is not sustainable and accordingly deleted. 14. Ground no. 8 is regarding disallowance of interest u/s 234A, 234B & 234C. 14.1 The levy of interest u/s 234A, 234B and 234C is mandatory and consequential and no separate finding in this regard is required. 15. For the A.Y. 2008-09 the assessee has raised following grounds:- 1. Whether the Ld.CIT(A) was justified by passing the suo motu ex-parte order dt. 28.03.12 not on the date of non- compliance i.e. 09.03.12 as stated in the order but later on a different date i.e. after a gap of 20 days. 2.Whether t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her hand, the Ld. DR has relied upon the orders of authorities below and submitted that when the assessee has failed to appear before the CIT(A) despite repeated notices then the CIT(A) is justified in upholding the action of Assessing Officer. 16.4 Having considered the rival submissions as well as relevant material on record. We note that even if the Assessing Officer was not satisfied with the book results of the assessee, the adoption of GP at 10% as against the GP of the assessee for the earlier years at 2.3% is not justified. We find that the Assessing Officer has not brought out any comparable or prevailing GP in the trade for adopting the TP at 10%. Further the Assessing Officer has completely over looked the relevant fact of GP for all other AYs of the assessee. Accordingly the issue is required to be considered by the CIT(A) on merits by considering all these aspects, though the assessee did not appear before the CIT(A), however, the impugned order of CIT(A) is very cryptic and without examination of any fact or relevant aspect of the matter. In the facts and circumstances of the case and in the interest of justice, we set aside the impugned order of CIT(A) and remit the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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