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TMI Blog2015 (10) TMI 2250X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs informed that the confirmation of the said nine parties are filed before the Hon'ble CIT(A)and bank statement of the assessee for the year under consideration, perusal of which clearly reveals that all the payments were made to the parties through regular banking channel . In the present case, when the purchases from the parties were accepted and the sales made out of those purchases were not doubted, the payments outstanding in the name of those parties were accepted in the subsequent year than there was no reason to doubt the genuineness of the outstanding balance. Moreover, in the present case, the books of account were duly audited by the independent Auditor, those books were accepted by the AO and all the trading results except the outstanding balance in the name of 9 parties to the extent of ₹ 3,57,17,506/- were accepted. In our opinion, the AO at the same time cannot blow hot and cold from the same wind pipe. In the instant case, the AO accepted the trading results and the explanation for fall in the G.P rate furnished by the assessee, so there was no reason for doubting the outstanding balance in the name of sundry creditors when the purchases made from them we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction of purchase of goods from nine creditors and as such, the addition so sustained is based on suspicion and surmises and is liable to be deleted, as such. 1.3 That the learned Commissioner of Income Tax (Appeals) has further failed to appreciate the basic fact that transactions with the said nine creditors were also made in preceding assessment year and payments were also made to the said creditors in subsequent assessment year, which stood accepted by learned assessing officer and as such, the addition so made and sustained is based on wholly and completely extraneous and irrelevant considerations and should be deleted, as such. 1.4 That the learned Commissioner of Income Tax (Appeals) has further grossly erred in relying on the judgments totally inapplicable to the facts of the case of the appellant company. 1.5 That the learned Commissioner of Income Tax (Appeals) has erred in law and on facts in sustaining addition in the hands of assessee company, without giving any fair and proper opportunity of being heard to the appellant company. Thereby, violating the principles of natural justice. 2. That the learned Commissioner of Income Tax (Appeals) h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -do- 3. M/s Bharat Mehta Co., CB- 10, Ring Road, Naraina, New Delhi 45,03,945/ -do- -do- 4. M/s Gopal Jee Fabrics, K-30, Udyog Nagar, Peeragari, New Delhi 5,94,990/- -do- -do- 5. M/s Harish Enterprise, E-24, Jawahar Park, Laxmi Nagr, Delhi-92 35,13,854/- Left without addres -do- 6. M/s Meenakjshi Textiles, C-107, ABC Complex, 20, Veer Sarvarkar Block, Shakarpur, Delhi-92 35,00,300/- No such firm at this address -do- 7. M/s Ravel Apparels Inc., USB- 107, Mandawali, Faizalpur, Delhi-92 40,01,050/- -do- -do- 8. M/s Sangeeta Traders, E-25, 2nd Floor, Jawahar Park, Laxmi Nagar, Delhi-92 50,00,112/- -do- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the facts on record; as the confirmations of the creditors were filed during the course of assessment proceedings vide letter dated 14-10-2011, which is available at page 113 of assessment record and the confirmations of the creditors are available at page 90 to 99 of the assessment record and this fact is verifiable from the assessment record, which has already been called for by your honour. Copy of all the confirmations are placed at pages 125- 134 of the paper book. (2) The observation of the ld. ITO that the Inspector was deputed to make local enquiries and get confirmations from the creditors, it is submitted, is against the facts of the case as the perusal of the order sheet as well as the assessment record clearly reveals that there are no such directions by the ld. ITO to the Inspector. (3) The observation of the ld. ITO that the assessee was confronted with the inspector's report, it is submitted, is against the facts of the case as the purported inspector's report are dated 20-12-2011, 21-12-2011 and 23-12-2011 and -the perusal of the order sheet clearly reveals that the assessee was never confronted with the inspector's report. 4. It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he year under consideration itself; and in support thereof bank statement for the year under consideration are at page 17-124 of the paper book and ledger account of the parties are at pages 3-16 of the paper book. 7. The ld. ITO has unqualifiedly accepted the trading account of the assessee, which includes the purchases made from these nine parties during the year under consideration, thereby clearly meaning that the purchases from these nine parties stands accepted by the ld. ITO 8. The ld. ITO has not controverted, the fact available on assessment record that the major payments were made by the assessee during the year under consideration itself (page 2) through proper and regular banking channels and the closing balances i.e. balance which remained outstanding as on 31-03- 2009 has also been discharged in the subsequent year, as explained herein above. 9. It is pertinent to mention that one creditor is an incorporated company, whose details are available on the official web-site of the Registrar of Companies. 10. It is, therefore, submitted that the ld. ITO erred in adding the closing balances i.e. balance which remained outstanding as on 31-03-2009. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales have been effected out of purchase made from these parties, then, it cannot be said that the purchase were bogus. The finding of bogus sale can only lead to the inference that the corresponding amount should be deleted from the turnover of the assessee. The AO has also not rejected the books of account to estimate profit on these transitions in case it was a firm finding that purchase and sales were bogus . In absence of displacing the finding of the learned CIT(A) and the fact that the assessee showed profit from these transactions, it is held that there is no such error in the order of the learned CIT(A) which requires correction from us. Thus, this ground is dismissed. (ii) Amritsar Trading Co. vs. ITO, ITA No. 586/Asr/1980 for the asst. yr. 1976-77, wherein the Hon'ble Tribunal, Amritsar Bench held that in a case where purchases of the skins and hides were not doubted by the AO, no addition could be made for the reason that the assessee failed to produce the suppliers who had sold the goods to the assessee. (iii) DCIT vs. Swani Enterprises ITA No. 398/Asr/1999, asst. yr. 1994-95, where purchases made from the suppliers were not fully verifiable, the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax authorities were wrong and incorrect. Such an issue can only be determined after examination of the accounts of both the parties and after affording the assessee the right to cross examine the wholesale dealers concerned,. . . Shree Nirmal Commercial vs. CIT (2009) 308 ITR 406 (BOM) = (2008) 218 CTR 581 * The Tribunal was also wrong in confirming the penalty levied by the ITO in the year 1985, relying upon the purported statements made by the depositors to some other proceedings before some other officers sometime in the year 1971-72 when admittedly the assessee was not given any opportunity to confront the said depositors by way of cross-examination. ITA No. 1035/2009 decided on 22.10.2009 (Del HC) The additions made by the Assessing Officer (AO) in reassessment proceedings carried out under Section 147 and 148 of the Income Tax Act were based on the statements of certain villagers, who had sold the land in question to the assessee. However, neither the statements of these villagers were supplied to the assessee nor the assessee was given opportunity to cross- examine those villagers. On this ground, CIT(A) quashed the addition of ₹ 10,07,055 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of his powers under O, 16, r. 10 of Cr. P. C; where the officer does not do so, no inference can be drawn against the assessee. Hon'ble Supreme Court in case of Prakash Chand Nahta v. Union of India Ors, (2000) 163 CTR (SC) 310 - (2001) 247 ITR 274 (SC) held that crossexamination of the witness is must before the Department relies on the statement of the witness for making addition. Yamuna Synthetics (P) Ltd. V DOT, (2004) 3 SOT 35 (DEL) = (2004) 91 TTJ 69 - AY 1995-96 1996-97 - The assessee has received the impugned amounts through banking channels - during the course of search of a third party a statement was made to the effect that the impugned loan was an accommodation entry made against cash received - relying on the statement of a third party . Revenue contended that it is a sham transaction by way of which the assessee has introduced its own unaccounted money - statement has not been confronted to the assessee. Held: 'it is discernible that the only material available with the AO to hold that it was accommodation entry was the statement made by a third party, i.e., Shri Praveen Khurana. The said statement, it is apparent, has not been confront ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition that what is apparent is real state of affairs and the ones to prove the contrary lies on the person who alleges that apparent is not the real one. Reference can be made to the two decisions of the Hon'ble Supreme Court in the case of CIT v. Daulatram Rawatmull (1973) 87 ITR 349 and in the case of CIT v. Durga Prasad More (1971) 82 ITR 540. The xerox copy of the loose paper and part of the statement on the basis of which addition has been made are nothing but the mere information received by the Assessing Officer from his counterpart in Mumbai. Such information cannot be considered as admissible material/evidence, unless it is corroborated by direct evidence, i. e. by the person who made the statement or who made jottings on the loose paper. If the Assessing Officer wanted to use such information against the assessee, then he must have examined Dr. Tanna and an opportunity to crossexamine should have been given to the assessee. This is a bare minimum requirement of the principles of natural justice, which has not been complied with by the Assessing Officer. In my considered opinion, no information obtained from outside can be admitted as evidence against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice has been underlined by the Bombay High Court in Vasanji Ghela and Co. v. CST [1977] 40 STC 544. It is trite law that cross-examination is the sine qua non of due process of taking evidence and no adverse inference can be drawn against a party unless the party is put .on notice of the case made out against him. He must be supplied the contents of all such evidence, both oral and documentary, so that he can prepare to meet the case against him. This necessarily also postulates that he should cross-examine the witness hostile to him. ITO v. Cloth Distributor (1989) 34 TTJ (Ahd.) 115 - if there assessee has been unjustly denied an opportunity 10 crossexamine the witness whose testimony the ITO intended to rely against the assessee such an evidence cannot be read against the assessee. Chuharmal v. CIT (1988) 172 ITR 250 (38 Taxman 190) Sana Electric Co. Vs. CIT, (1985) 152 ITR 507(Del) = 43 CTR 287 - In this case the Assessee received cash earlier and the buyer paid later. At ITR page 511 If seems -that the ITO recorded the statement in the absence of the assessee thus excluding cross-examination by the assessee. This shows that the statement of Shri S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der creditors was a reality. (vii) Trading and P L account for the year assailed. (viii) Summary of transactions with the trade creditors impugned by the AO. 7. On the basis of the aforesaid documentary evidences, the assessee sought to establish that the credit transactions with the current sundry creditors were genuine. It was also submitted that if an assessee took care to purchase material by way of account payee cheques from a third party and subsequently, three years after the purchase, the said third party did not appear before the AO for any reasons like cessation of business, change of place of business etc., pursuant to notices, the claim of the assessee could not be discarded merely on the ground of the disappearance of the sellers. It was further stated that the AO made no investigation from the bank from which the cheques were cleared before drawing adverse inference against the assessee for its inability to produce the creditors. It was argued that merely because the assessee was unable to produce the creditors, as it was not possible to exercise control over them especially when payments were already made to them, no adverse inference should have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd to be in existence. (iv) The law relating to necessity of documentary evidence for expenditure can be stated as follows: (v) A person who claims that he has incurred certain expenditure is expected to have some, documentary evidence; (vi) In the absence of the above he is expected to say how he has incurred the expenditure and why there is no documentary proof for such expenditure, and' if he has any satisfactory evidence to show that documentary evidence has been lost or destroyed, he may take recourse to secondary evidence, viz., certified copies or attested copies of such documents, or copies made from the original by the mechanical processes which in themselves ensure the accuracy of the copy; copies compared with such copies; copies made form or compared with the original; and the oral accounts of the contents of a document given by some person who has himself seen it; (vii) It has been held in CIT v. Korlay Trading Co. Ltd. (1998) 232 ITR (Cal.) that Where, without filing confirmation letter from the, creditor, the assessee merely mentioned the incometax number of the creditor (which was also not supported by any affidavit from the creditor), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 52,20,22,518/- Consumable Purchases ₹ 8,30,236/- Total Purchases ₹ 52,28,52,754/- Assessee firm made purchase of Fabrics from various concerns, and at the end of financial year i.e. as on 3.3.2009, total Sundry Trade creditors were outstanding for an amount of ₹ 4,63,89,077/-. Besides domestic sales, exports sale was made by the assessee firm (to countries. i.e. USA and UAE). Assessee firm also incurred expenses on Printing Dyeing, fabrication, cutting, knitting etc. For the impugned assessment year, Assessee firm filed its return of income declaring an income of ₹ 11,82,236/-. Purchases, sales, expenses incurred in manufacturing, amount received by the assessee as export incentives, foreign exchange fluctuation were not in dispute and the same have been accepted by the Ld. AO as can be seen from the impugned assessment order. During the course of assessment proceedings Ld. AO asked the assessee to file confirmations of accounts from the sundry creditors. Ld. AO has alleged in the impugned assessment order that confirm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Assessee were placed on record. b) In certain cases, direct confirmation was' sent to the Assessing Officer u/s 133(6) which has been omitted to be recorded. c) Subsequent payment to all such creditors in the month of April-June, 2010 through banking channels was also placed on record. Thus it is submitted that the addition of ₹ 3,57,17,506 should be deleted. 3. The Appellant craves leave to add, alter, delete or modify the aforesaid grounds of appeal during the Appellate proceedings. In the impugned order Ld. AO alleged that assessee was, confronted with some Inspector's report. In this regard our respectful submissions are that as per information provided to us by the appellant, no such report was confronted to the appellant. No opportunity of cross examination of the Inspector was allowed to the assessee during the course of assessment proceedings. Therefore, no cognizance can be taken of any such report which has been obtained by the Ld. AO at the back of the assessee. Ld. AO made the impugned addition alleging that the liabilities were not finally determined and identity of creditors, genuineness of transactions and genuine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here that even the purchases made have not been disbelieved by the ld. AO. Accounts of the assessee are audited by the statutory auditors, and no defect was pointed out by the statutory auditors as well. Ld. AO has accepted the profit declared as per return. Ld. AO has doubted the identity of these sundry-creditors. It is submitted that when the purchases and sales have been accepted as genuine, where the question remains that these parties were not genuine? No sales can be made without purchase. If sales have been affected out of purchase made from these parties, then, it cannot be said that these parties were bogus. The AO has not rejected the books of account of the assessee, and has accepted the sales and purchases declared by the appellant Hon'ble Delhi High Court in the case of CIT Vs. Anurag Agarwal (2010) 2 DTLONLINE 134 (DEL) IN ITA NO. 325/2008 decided on 22.7.2009 held as under: As there was no case for disallowance for corresponding purchases no addition could be made under section 68 in as much as it is not in dispute that the creditors outstanding related to purchases and the trading results were accepted by the AO. We are, therefore, of the opinion th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... [2009] 180 TAXMAN 485 (DELHI) JANUARY 16, 2009 Section 143 of the Income-tax Act, 1961 - Assessment - Additions to income - Assessment year 1998-99 - Assessee was .engaged in business of trading in computer parts - On basis of information received from Assessing Officer of one 'T', at whose premises a raid was conducted by department, that assessee had made bogus purchases from certain parties, Section 143 of the Income-tax Act, 1961 - Assessment - Additions to income - Assessment year 1998-99 - Assessee was .engaged in business of trading in computer parts - On basis of information received from Assessing Officer of one 'T', at whose premises a raid was conducted by department, that assessee had made bogus purchases from certain parties, FACTS The assessee was engaged in the business of trading in computer parts. The department had received information from the Assessing Officer of one 'T', at whose premises the department had carried out a raid, that the assessee had made bogus purchases from certain parties. During the assessment proceedings, the assessee was asked to identify and produce confirmation of parties from whom purchases of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee had discharged the primary onus. Moreover, the payments were made through account payee cheques which were duly shown in the books of account. No defect was found in the books of account submitted by the assessee. On the brokers the assessee had no control and if they became hostile, then the assessee could not be punished. The Commissioner (Appeals) had in principle accepted the genuineness of the payment made to the brokers. The payment towards brokerage/commission was made for rendering the services through account payee cheques. Some brokers had appeared and for non-appearance of the remaining brokers, the assessee could not be punished. Therefore, the order of the Commissioner (Appeals) was set aside and the entire amount paid towards brokerage/commission was allowed. As regards addition for bogus purchases from the material available on record, it appeared that the Tax Audit Report and books of account were accepted by the Assessing Officer without pointing out any defect, Accordingly, the sale was accepted by the department. The sale could not be made without making purchase, in other words, when there was a sale, certainly there was a purchase. Sale was acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was not justified and required to be deleted - Held, yes Dy. CIT v. Kirtilal Kalidas Jewellers (P.) Ltd. (2012) 54 SOT 529 (Chennai)(Trib.) During assessment proceedings, Assessing Officer found that for some of purchases effected by assessee, no details or address of vendors were available in, purchase vouchers. He, therefore considered such-purchases to be non-genuine and an addition was made on that account. Since purchases were recorded in books of account of assessee and were also shown in its stock, in such circumstances merely because those purchases did not carry full addresses of vendors, could not be a reason to treat said purchases as unexplained. Therefore, impugned addition made by Assessing Officer was to be deleted. (A.Y. 2008-09) In view of the above legal position, no addition is attracted in the case of the appellant. Appellant firm filed written submissions and the paper book during the course of appellate proceedings, on which a remand report was called from the Ld. AO. Assessee has been provided a copy of interim remand report dated 07.01.2013 and the other remand report dated 08.04.2013. Our respectful submissions on the obser ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t are as unde 1. M/s Amar Jyoti Enterprises - Amount outstanding as on 31.3.2009 as payable ₹ 40,01,568/- With regard to above party, it is respectfully submitted that during the year under consideration assessee made purchases for an amount of ₹ 4,26,82,061/- and made payment during the year for an amount of ₹ 4,13,58,173/-. There was an opening credit balance of ₹ 26,77,680/-. as on 1.4.2008 and closing credit balance of ₹ 40,01,568/- payable by the assessee to the said party as on 31.3.2009. Ld. AO has accepted the entire purchases made by the assessee, and there is no dispute for making payment to the said party as no adverse view is taken in respect of payments made to this party during the impugned assessment year. It is submitted that no payment was made by the assessee in cash to the said party Ld. AO stated in the Remand report that party was not found at the address C-21, Shivaji Park, New Delhi-26. and the PAN allotted is in the name of Shri Ranjit Singh, 213, Vardhman Tower, Preet Vihar Delhi-92. It is submitted that in case there was any doubt to the Ld. AO about this party, ld. AO could have verified these facts from the Ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entered into with the sundry creditor are executed. In any case just for the reason that the party was not found at the address available with the assessee, cannot be a reason to make addition in the case of the appellant. During the impugned assessment year Assessee made purchases for an amount of ₹ 1,53,97,212/- from the said party and made payment for an amount of ₹ 1,30,56,625/-. There was an opening credit balance of ₹ 12,60,000/- and closing credit balance of ₹ 36,00,587/- payable by the assessee to the said party. Ld. AO has accepted the entire purchases made by the assessee, and there is no dispute for making payment to the said party. The outstanding payment of ₹ 36,00,587/- was paid to the said party in the subsequent financial year. We are submitting herewith copy of the ledger account of the above party for the subsequent period 1.4.2009 to 31.3.3010 wherein assessee had made payment of the outstanding balance payable to the said party. Payments made are also highlighted in the copy of bank statement being filed with this rejoinder. Thus the transactions entered into with this party are established with these evidences. 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AO that the payments made by the assessee to this party either were not credited in their bank account, or assessee has not made payment to the said party against purchases made. We have placed in the paper book copies of the ledger accounts of the above party for the impugned assessment year and also for the subsequent assessment year, where in the outstanding payment of ₹ 35,13,854/- were made clear. It is submitted that in the subsequent year, assessee made sales to this party, and also received payment against sales made to them. The Copies of the sales bills for sales made to the said party are enclosed, which confirm that the outstanding payment was adjusted against sales made to the said party. In view of these evidences placed on record, which substantially prove that the outstanding payment was cleared in the subsequent year, the addition made may kindly be directed to be deleted. PB 242 is copy of ledger account of the above party for the period 1.4.2009 to 31.3.2010 in the books of the assessee. PB 243-251 are copies of the sales bills raised against sales made to the above party for the period 1.4.2009 to 10.4.2009 . PB 273 is copy of the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been shown as Legal Professional under the code 603 and the sundry debtors have been shown at Nil. In this regard it is submitted that first of all no such material was provided to the assessee, and if any such adverse observation is made by the AO, for which no cross examination has been provided to the assessee that may kindly be excluded from consideration. Furthermore, it is submitted that it is not the case of the Ld. AO that the said party has denied the payment received from the assessee firm or have denied the sales made to the assessee firm. For the assessment year under consideration assessee made purchases from the said concern, and the purchases made were sold to various parties for which sales were also declared by the assessee. At the end of the assessment year an amount of ₹ 40,01,050/- was outstanding payable to the said party against purchases made from them, which was subsequently cleared the next financial year by the assessee. Assessee made sales in the subsequent assessment to the said party. Copies of the bills for material sold to the said party in the subsequent years are enclosed, which confirm that the outstanding balance payable to them was cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wali, Delhi-92, but he found that the said address was not correct, It is submitted that it is not the case of the Ld. AO that the said party has denied the payment received from the assessee firm or have denied the sales made to the assessee firm. For the assessment year under consideration assessee made purchases from the said concern, and the purchases made were sold to various parties for which sales were also declared by the assessee. At the end of the assessment year an amount of ₹ 70,01,100/- was outstanding as payable to the said party against purchases made from them, which was subsequently cleared in the next financial year by the assessee by making payment and sales made to them. Copies of the bills for material sold to the said party in the subsequent years are enclosed, which confirm that the outstanding balance payable to them was cleared in the subsequent year. In view of these evidences placed on record, which substantially prove that the outstanding payment was cleared in the subsequent year; the addition made may kindly be directed to be deleted. PB 266 is copy of ledger account of the above party for the period 1.4.2009 to 31.3.2010 in the books of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 08-09 and 2009-10 along with copy of account opening form was called from the banks. Ld. AO has also confirmed that jurisdictional assessing officer of sundry creditors parties were requested to-provide the ITR details filed for Assessment Year 2009-10. Though, the Ld. AO made some adverse observation in the case of M/s Meenakshi Textiles but nothing contrary is brought on record that M/s Meenakshi Textiles and Ravels Apparels INC have denied the transaction with the assessee firm It is submitted that the action taken by the AO to make enquiry with the banks and with assessing officers confirms the existence of these parties and their identity therefore, there is no logic to make addition in the hands of the assessee when assessee has made genuine payments to these parties against the purchases made from them and the purchases and the sales have been accepted by the Ld. AO. It is submitted that assessee has purchased the material from these parties and was not under any obligation to keep track after the dealings were complete by making the payments for the purchases made. The PAN numbers provided by these parties cannot be doubted by the assessee as assessee has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f accounts which were produced by the assessee before the AO and were examined by the AO during the course of assessment proceedings. Books of accounts of the assessee are duly audited by the Statutory chartered accountants. 4. No cross examination by assessee. Additions have been made solely based on statement of few parties. 6. Assessee has also made payments of all purchases through account payee cheques only. CIT VS. JMD COMPUTERS COMMNICATIONS (P) LIMITED (2009) 180 TAXMAN 485 (DEL) - JUDGMENT DATED 16.01.2009 The AO made addition on the basis of information received from the AO of One 'T', that assessee made bogus AO asked the assessee to file confirmations from parties from whom purchases were made and also conducted enquiries, and made addition on account of bogus purchases. 1. In assessee's case also AO doubted the veracity and, genuineness of outstanding trade sundry creditors to the extent the amount which was outstanding payable as on close of the year. However, there was no dispute about the transactions, or making payments to these sund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Confirmation letter has been filed by the supplier As the sales made by the assessee has been accepted the purchases made stands proved as no sale can be made without purchases. Copy of invoice for purchase and copy of bank statement indicate tha purchases were in fact made. Hon'ble High Court held that merely supplier has not appeared before Ld. AD and Ld. CIT(A), one cannot conclude that the purchases were not made by the assessee and therefore appeal filed by the department was dismissed The assessee also provided details of the bank accounts of the 4 parties out of the 7 parties. However the AO was having ample power to call details of Bank Accounts of these suppliers CIT vs. Pancham Das (2006) 5 CTR (All.) 444 dated 21.08.2006 Books of account of assessee not rejected. In the above judgment Hon.ble High Court of Allahabad upheld the finding of the Hon'ble Tribunal that when credits in the accounts of the persons on account of purchases made and if these purchases made are not bogus though the name of suppliers may be wro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eans available to the assessee to ensure that such addresses were right. Assessee draws parity from this judgment of Hon'ble High Court. Assessee cannot insist for identification process akin to Know Your Customer (KYC) Rules applied by Banks (a) Purchases/Sales were duly recorded by assessee in his books of accounts which were verified by the AO as books of accounts were produced by assessee. There is no mandatory requirement in the business of jewellery to maintain books of accounts in accordance with KYC rules of banks, (b) The obtaining of address before making purchase/sales cannot be insisted by any prudent businessman as any businessman while making purchase is suppose to obtain a bill for the purchases made and to obtain a receipt in case cash payment is made or no receipt is required if payment is made only through A/c payee cheque or bank draft only. The appeal filed by the revenue was dismissed Once the possession or delivery of goods is taken and the payment is made no businessman can be expected to keep a track as to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT Vs. Jain Exports (P) Lid. (2013) 217 Taxman 54 (Del HC) dated 24 May 2013 In the case of assessee also, confirmation letter of trade creditors were submitted by assessee. In the above judgment Hon'ble High Court gave the finding that credit amount outstanding for several years cannot be held as cessation of trading liability on ground that assessee could not prove genuineness of transaction, where assessee has acknowledge its liability successively over several years The addition has been made by AO for reason that these creditors did not complied the notice issued by AO or the notice send by AO were returned back as was served, therefore in the case of assessee also no addition can be made just for reason nearly supplier did not appear in response to notice issued. In this caseAO has received confirmation only from one party In the case, AO disallowed the outstanding credit balances of the sundry creditors for purchases AO has issued notices u/s 133(6) of the act to creditors, for verifying the credit balance outstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in case any further information shall be required he will give a call before submitting his report. However, Ld. AO neither gave any further opportunity nor asked the AR for any further information. It is submitted that in response to letter dated 5.3.2014, Shri Kailash Mittal, AR of the appellant attended before the Ld. AO three times i.e. on 12th, 14th, and 18th of March, 2014, but neither any presence was marked by him, nor any specific information was asked by him. An affidavit of the AR in this regard is enclosed. It is submitted that in the remand report submitted Ld. AO relied on the remand report submitted by his predecessor on 08.04.2013 to which appellant has already submitted a rejoinder on 15.11.2013 before Your Honour, where in appellant has explained and discussed each and every evidence placed in paper book to justify the payments made by the assessee against the purchases made. It is again reiterated that all sundry creditors in respect of whom Ld. AO made the impugned addition were paid off in the subsequent year by making payment to' them, through banking channel or sales made to them. Therefore, it is wrong on the part of Ld. AO to state that the paym ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from their PANs which on enquiry were found to be pertaining to the employees of the CA firms or the companies in which they were allegedly employed. The ld. CIT(A) further observed that the language, the style, the format, the arrangement of the sentences and the words, the paper used and the design on the papers on which replies were furnished, were exactly the same, in the case of one and all of the confirming parties. The ld. CIT(A) also observed that the assessee did not produce stock register on demand also to substantiate the fact that goods i.e. fabrics received from the so called trade creditors were duly entered into the manufacturing account of the assessee, therefore, in the absence of the stock register it could not be demonstrated by the assessee whether the goods purchased on credit from the so called trade creditors were duly accounted for or not in the books of account. The ld. CIT(A) supported the findings of the AO for the following reasons: (i) The appellant failed to produce the parties and their latest addresses. (ii) Summons could be served only on M/s Gopaljee Fabrics. In the cases of other persons the letters came back un-served with the remarks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... NE 134 (Del.) ITO Vs Zazsons Exports Ltd. reported in 153 ITD 1 (Lucknow 3rd Member) CIT Vs M/s Nikunj Exim Enterprises P. Ltd. 372 ITR 619(Bom) 14. It was further stated that the assessee furnished the confirmations before the AO vide letter dated 05.12.2011 (a reference was made to page no. 443 of the assessee's paper book). The ld. Counsel for the assessee also referred to page nos. 502 503 of the assessee's paper book and submitted that the balance outstanding from 50 parties was to the extent of ₹ 52,28,52,754/- but the AO doubted only 9 parties to whom payments were made in the subsequent year. It was further submitted that the AO had the power to summon the parties but no such exercise was done. Therefore, the addition only on the basis of suspicion was not justified. The reliance was placed on the judgment of the Hon'ble Allahabad High Court in the case of Nathu Ram Premchand Vs CIT 49 ITR 561 . It was further stated that the assessee vide letter dated 22.12.2011 furnished party wise sales/purchases, expenses and the reason for fall in G.P rate which had been accepted by the AO. It was also stated that in the said letter dated 22.12.2011, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter dated 16.11.2012 written to the AO wherein it was mentioned that all the payments were made to the creditors through banking channel and the same could have been verified from their bank account. He also referred to page nos. 618 619 of the assessee's paper book which are the copies of letter dated 07.02.2013 and 20.02.2013 written to the AO during the Appellate Proceedings before the ld. CIT(A) and submitted that the name of the bank account number of the parties which were doubted by the AO were disclosed alongwith their addresses but no further enquiry was made by the AO and all the purchases were accepted. Therefore, the addition made by the AO was rightly deleted by the ld. CIT(A). The reliance was placed on the following case laws: CIT Vs Real Time Marketing (P) Ltd. 306 ITR 35 (Del) Kishinchand Chellaram Vs CIT 125 ITR 713 (SC) Kankaria Textiles Vs CIT 200 ITR 408 (Raj.) 15. In his rival submissions the ld. DR strongly supported the orders of the authorities below and further submitted that the AO specifically asked the assessee to produce the creditors from whom purchases were made and also confronted the report of the Inspector regarding nonav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... C-21, Shivaji Park, New Delhi-26 2. ASV Garments (P) Ltd. AADCA4442Q 405, ABC Complex, 20, Veer Savarkar Block, Shakarpur, Delhi-110092 3. Bharta Mehta Co. ATEPK1882B CB-10, Ring Road, Naraina, New Delhi 4. Gopal Jee Fabrics AGGPK2523C Plot No. 650, Near Mundka Mod, Metro Pillar No. 504, (Nasha Mukti Kender Wali Gali), Mundka, New Delhi-110041 5. Harish Enterprises ATEPK1882B E-24, Jawahar Park, Laxmi Nagar, Delhi- 110092 6. Meenakshi Textiles BDBPS4815A Shop No. 12, Sharda Market, Subhash Road, Gandhi Nagar, Delhi-110031 7. Ravels Apparels INC BDBPS4815A USB 107, Mandawali, Faizalpur, Delhi- 110092 8. Sangeeta Traders BQOPS6137H E-25, 2nd Floor, Jawahar Park, Laxmi Nagar, Delhi-110092 9. Surya Traders ATFPXXXx 36, 3rd Floor, Deepak Building, 13, Nehru Pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... did not had any business transactions with these parties after the financial year 2009-10, except M/s Gopal Jee Fabrics Your honour are therefore requested to kindly accept the closing balance of the said nine parties as genuine and in case your honour are unable to accede to the request of the assessee, the reasons and basis for the same may kindly be communicated to the assessee to enable the assessee to make further submissions. 18. The aforesaid explanation was not rebutted by bringing any cogent material on record. In the present case, when the purchases from the parties were accepted and the sales made out of those purchases were not doubted, the payments outstanding in the name of those parties were accepted in the subsequent year than there was no reason to doubt the genuineness of the outstanding balance. Moreover, in the present case, the books of account were duly audited by the independent Auditor, those books were accepted by the AO and all the trading results except the outstanding balance in the name of 9 parties to the extent of ₹ 3,57,17,506/- were accepted. In our opinion, the AO at the same time cannot blow hot and cold from the same wind pipe. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In our view, merely because the suppliers have not appeared before the Assessing Officer or the CIT(A), one cannot conclude that the purchases were not made by the respondent-assessee. The Assessing Officer as well as CIT(A) have disallowed the deduction of ₹ 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is a well reasoned order taking into account all the facts before concluding that the purchases of ₹ 1.33 crores was not bogus. No fault can be found with the order dated 30- 04-2010 of the Tribunal. 21. In the present case also the assessee made the purchases of ₹ 52,28,52,754/-. Against the said purchases an amount of ₹ 4,63,08,977/- was outstanding in the name of 50 creditors. The AO doubted outstanding balance of ₹ 3,57,17,506/- in the name of 9 parties. In the instant case the gross profit rate for the year under consideration of the assessee was at 1.97% in comparision to 5.63% in the preceding year. The AO accepted the fall in G.P rate after considering the explanation of the assessee. However, he d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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