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TMI Blog2016 (1) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmation by the seller i.e. M/s Escorts Limited. Moreover, it was also explained that purchase return of 1001 tractors and subsequent purchase of same tractors was affected in view of some amendments in VAT rules and in view of this, actual movement is not necessary at least for Income Tax Purposes. Objection may of VAT authorities if the VAT rules require actual movement but even in that situation, the claim of purchase return cannot be rejected when both parties are confirming and there is no evidence of sale outside books or closing stock - Decided against revenue Addition on account of carrier fuel expenses and repair & maintenance expenses - rejection of books results - - CIT(A) deleted the addition - Held that:- In the present year, the fuel expenses is 36.87% and repairs and maintenance expenses is 6.32% and the same was 40.68% and 4.51% in assessment year 2006-07 and 44.38% and 5.58% in assessment year 2007-08. Since the expenses claimed by the assessee in the present year is at par with such expenses in preceding two years and no adverse material has been brought on record by the Assessing Officer for making this disallowance and the same was made on this arbitrary b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further the debit notes are on plain paper not having any authentication marks and neither has the assessee furnished any such irrefutable evidence, whereby such paper can be relied on. There is evidenced no actual movement of stock. Accordingly sales return and purchase returns have not taken place at all from the books of a/c and supporting vouchers and bills it is noted that the assessee has premeditated this whole exercise of purchase return at the advent of the VAT implications and as a result has not shown these purchases in its final accounts and in turn has grossly suppressed its turnover and corresponding income. The assessee was afforded many opportunities to explain this difference in books arid in its profit and loss account which the assessee has tried to buttress with many figures and facts, but has however failed to address the basic issue of movement of stock supported by foolproof documentation. In all this view, the claim of the revenue holds correct. There were also certain unsigned unstamped bills shown as purchase bills. In view of such discrepant evidences, the claim of the revenue is substantiated. Further, the assessee has also made a submission th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of tractors were made out of purchases effected by appellant. The purchase returns cannot be made without accepting the corresponding purchases of 1001 tractors. These purchases were recorded as per purchase returns in the books of appellant and duly verified from the books of accounts, papers/documents available with appellant for the period under consideration. The purchase and purchase returns could also be verified from the records of principal M/s. Escorts Ltd. These purchases and purchase returns or recorded in the books of accounts of M/s. Escorts Ltd. as sales and sale returns made to appellant during the period under consideration. These figures of sales and sales returns on 1001 tractors duly reflected in M/s. Escorts Ltd. and can be verified from statement of account of appellant appearing in the books of accounts of M/s. Escorts Ltd. These verifications were made by A.O. during remand proceedings and he confirmed that there was no discrepancy found in this respect of purchase returns of 1001 tractors. The A.O. has mentioned in his remand report that the debit note were signed by Sri Rajesh Kumar in respect of purchase returns were made by appellant and he has further m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant from dealers on behalf of M/s. Escorts Ltd. (the appellant was duly authorized to collect the payments on behalf of M/s. Escorts Ltd. from dealers distributors), cash discount, in VAT from the copy of account of appellant in the books of accounts of M/s. Escorts Ltd. and the copy of account of M/s. Escorts Ltd. in the books of accounts of appellant. In the VAT Order passed by the Trade Tax Department is also verifiable from information collected u/s 133(6) of I.T. Act, 1961 from Trade Tax Department. During appellate proceedings, the A.O. has mentioned in his remand report that the appellant has claimed dishonouring of cheques amounting to ₹ 72,09,273/- before A.O. during scrutiny assessment proceedings. Now during appellate proceedings the appellant claimed the dishonouring of cheques amounting to ₹ 40,09,243/-. The appellant has explained the reasons of the said difference that there is difference of ₹ 32,00,000/- only in the list of dishonored cheques produced before A.O. during assessment proceedings and documents produced during appeal, the cause of difference is that we have received a cheque from M/s Escorts Ltd. for ₹ 32,00,000/- on 29.06.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d M/s. Escorts Ltd. It is worthwhile to mention here that the credit balance is not tallied with debit balance appearing in the books of accounts of M/s. Escorts Ltd. In remand proceedings the A.O. has mentioned in detailed and reconciled the opening balance. The appellant has furnished the written submissions and explained that the said difference is still under reconciliation for want of certain debit and credit entries made in appellant and M/s. Escorts Ltd., in its account. The difference in opening balance did not effect the position of purchases, purchase returns in respect of vehicles effected during the period under consideration. The opening balance is carried forward of previous year i.e. A.Y. 2007-08 dosing balance. Therefore, if any, action is required to be taken in the concerned previous year. Looking to these facts the addition made by A.O. of ₹ 4,12,05,864/- on account of opening balance of M/s. Escorts Ltd. reflected in the books of accounts is totally unwarranted and uncalled for. The same is considered improper and unjustified. As mentioned the appellant has maintained proper records of purchases/purchase returns, sales/sales returns, direct and indir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by stating that the debit notes are on plain paper not having any authentication mark and there is no evidence of actual movement of stock. We also find that the seller in the present case is a reputed company M/s Escorts Ltd. As against this, a categorical finding has been given by learned CIT(A) that the purchase returns were duly supported by papers and documents and confirmation letters obtained by Assessing Officer u/s 133(6) of the Act directly from M/s Escorts Ltd. He has also observed that the Assessing Officer has obtained the confirmation letter with tractor number, chassis number and engine number of purchase returns of 1001 tractors to M/s Escorts Ltd. by the assessee during the present year. Thereafter, he has observed that it is obvious that the purchase returns of tractors were made out of purchases effected by assessee. Thereafter, he has stated that the purchase returns cannot be made without accepting the corresponding purchases of 1001 tractors. Thereafter, he has given a finding that the purchase and purchase returns could also be verified from the records of M/s Escorts Ltd. Thereafter, CIT(A) has observed that as per a certificate provided by M/s Esco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee in cash (vide imprest account of Mr. Zafar Khan) to related parties namely M/s. Republic Service Centre. Further, Republic Service Centre has made these payments and not the assessee hence the payments should be allowed to M/s. Republic Service Centre and not to the assessee. The Ld. CIT(A) also ignored the fact that during assessment proceeding as well as remand proceedings the assessee could not produce counter foil of cheque through which payment was made by the assessee. 6. Learned D. R. of the Revenue supported the order of Assessing Officer whereas Learned A. R. of the assessee supported the order of learned CIT(A). 7. We have considered the rival submissions. We find that the disallowance was made by the Assessing Officer on the basis that the payment of fuel expenses was made by M/s Republic Sales Corporation and M/s Republic Sales Centre. It was explained by the assessee before the Assessing Officer also that the expenses were not incurred actually in cash but since the fuel is taken from M/s Republic Sales Centre, a sister concern of the assessee, the assessee firm was debited by them and the assessee furnished a copy of account of M/s Republic Sales Centre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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