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TMI Blog2010 (4) TMI 1113X X X X Extracts X X X X X X X X Extracts X X X X ..... ur and chemicals. For this, assessee has raised the following ground No.1:- 1. That on facts and circumstances of the case, the learned CIT(A) has erred in sustaining the disallowance of purchases of colour chemicals, even though the appellant company had fully discharged its onus of proving the purchases by submitting complete documentary evidence of purchase as well as receipt of the goods in the form of purchase bill, delivery challan, inward records, payment by account payee cheques etc. and there being no evidence against the appellant company, the impugned addition has to be deleted in total. 3. The brief facts leading to the above issue are that the assessee is engaged in business activity of dyeing and printing of gray cloth on job-work basis and its raw materials i.e. colour and chemicals. During the course of survey operation u/s.133A of the Act conducted on the business premises of the assessee on 25-07-2002, an additional income of ₹ 10 lakh was offered. The assessee disclosed this offered income in the return of income and along with return audited accounts in Form No.3CA and 3CD were filed. The return was processed u/s.143(1) of the Act and subsequent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chemicals issued by you, you were depositing the account to payee cheques given by you by the purchasing party in your bank account and after the clearing of cheques you used to re-pay cash to the purchasing party after deducing commission of 25 paise at per 100 rupees. However, you have not shown this income in your Income Tax return. Please explain as to whether the statement given by you before the Asst. Commissioner of Income-tax Circle-4, Surat is correct and you confirmed the same as correct. A.4 Yes, I do confirm that whatever sated is true and correct. Q. 7. Have you given such accommodation bills to M/s. Aman Prints Pvt Ltd also. If yes, give the details of amount of bills and year of issue of the same? A.7 At present, I do not remember that in which year the bills were issued to Aman Prints Pvt Ltd. and for what amount the same were issued. Though, the modus operandi was the same and I do confirm that bogus bills were issued by me from my proprietary concern M/s. Pooja Dye Chem and from my wife Smt. Sandhya Panwala had also issued such bogus bills from M/s. Abhi Dyes, her proprietary concern. Q.8 Please state that the amount of bills issued by yo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Totaram B Sharma Proprietor of Super Therm in Tax Appeal No.1344 1355 of 2008, wherein the Hon ble High Court has confirmed the order of the Tribunal by holding as under:- 10. We have considered the submissions made by Mr. Naik and also perused the orders passed by the authorities below. First of all, it is to be recorded that, in the order passed by the Assessing Officer, the Assessing Officer has started the discussion on the issue of bogus purchases and ultimately came to the conclusion that though the purchases can be said to be genuine, the payments, however, for such purchases were made by the Assessee in cash, which is unaccounted for. As such, there is no basis for arriving at this conclusion. The CIT (Appeals) has considered these transactions of purchases, which are of small in nature and arrived at peak of ₹ 5,05,800/-. However, the Tribunal has made detailed analysis of the facts and after making certain propositions which are relevant in support of these transactions, the Tribunal has recorded that the purchases made by the Assessee from four different parties are duly recorded, payment for such purchases are also found to be recorded and Revenue has not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with Punjab National Bank. No doubt the assessee has maintained his internal control procedure to check the purchase of the colours and chemicals but the parties i.e. Shri Rohit P Panwala proprietor of M/s. Pooja Dye Chem and Smt. Sandhyaben proprietor of Abihi Dyes clearly admitted that these parties are directly giving only accommodation entry and nothing else. Even it was admitted that after the receipt of account payee cheques, the cash is returned to the assessee-company after deducting commission paid, which is a distinguishing feature in the present case from the case law preferred by the Ld. counsel for assessee of this Tribunal and Hon ble jurisdiction High Court before us. In the present case, the assessee could not establish the actual uses of the material, which is purchased from other parties, since this fact is not established, we cannot reach to a conclusion. The second aspect that the purchase made from other parties, other than the parties who has issued accommodation bills, the rates of colours and chemicals are reasonable and comparable with the market price. This burden is entirely on the assessee to establish these two aspects and in the absence of the same, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rk-in-progress either in the closing stock or in the opening stock of any of the years. According to the AO taking into consideration the opening and closing stock in progress together it cannot be said that the result remain neutral and does no have any effect on the profit loss of the assessee-company. The assessee also pleaded that job-work and the entire work-inprogress belongs to other parties and it is not his closing stock and even not showing work-in-progress. The company was not having any ready goods in hand at the end of the year. The AO has not accepted the plea of the assessee and made addition of work-in-progress at ₹ 2,89,095/-. The CIT(A) deleted the addition taking the principle of consistency and also the fact that the assessee-company is not the owner of work-in-progress for the reason that the job-work of processing of goods supplied it to by the customers, the ownership remains with the customers only and it is not the stock of the assessee-company. For this, CIT(A) given the following finding in page 6 and 7 of his appellate order:- .any payment by a company by way of advance or loan to any concern in which the shareholders was a member and in wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of M/s. Vipul Industries, the company giving the loan is beneficially entitled to 20% shareholding in he appellant company. 9. After hearing the rival contentions and going through the case records we find that the assessee is engaged in processing the material of outside parties and does no have its own stock. The assessee is consistently following the same system of accounting i.e. it has not declared any work-in-progress neither in the opening stock nor in the closing stock of any of the years. We find that CIT(A) has rightly deleted the addition by taking the principle of consistency and even the opening stock along with the closing stock, if disturbed will not make any material difference in the profit loss account and particularly more so when the goods do not belong to the assessee and these belongs to customers. In view of the facts and circumstances, we confirm the order of CIT(A) deleting the addition. This issue of Revenue s appeal is dismissed. 10. The next issue in this appeal of Revenue is against the order of CIT(A) deleting the addition made by Assessing Officer by invoking the provision of Section 2(22)(e) of the Act. For this, Revenue has raised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant is not the owner of the material which it receives for processing and therefore, there could be no justification for including the said amount as work in progress. In view of this, addition on account of work in progress is directed to be deleted. 12. Ld. SR-DR stated that the CIT(A) has admitted the additional evidence in violation of Rule 46A of I.T. Rule, 1962, as the evidence was admitted without providing opportunity of examination of the same to the Assessing Officer. Accordingly, she stated that this issue needs re-examination at the level of AO. On the other hand, Ld. counsel for the assessee stated that this deposits pertains to earlier year and as per provision of Section 2(22)(e) of the Act, any payment by company by way of advance or loan to any concern in which the shareholders was a member and in which he had substantial interest will be included as dividend and a person shall be deemed to have a substantial interest if he is at any time during the previous year entitle to not less than 20% of the income of such concern. It was submitted that conditions laid down by the said section is in respect of any payment of loan during the year. However, in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w we have also confirmed the deletion, penalty u/s.271(1)(c) of the Act cannot survive. As regards the penalty on this two item deleted by CIT(A), we confirm the order of CIT(A) deleting the penalty. This issue of Revenue s appeal is dismissed. Now we shall take up assessee s appeal in ITA No.535/Ahd/2007. 16. The only issue in this appeal of the assessee is against the levy of penalty confirmed by CIT(A) u/s.271(1) of the Act for alleged bogus purchases added. For this, assessee has raised the following effective ground No.1:- 1. That on facts and circumstances of the case, the learned CIT(A) has erred in sustaining the penalty us.271(1)(c) as levied by the AO in respect of the addition made for alleged bogus purchases, without appreciating that the appellant had fully discharged its onus to prove he purchases and even then the addition has been sustained only on estimated basis, without any concrete evidence, which needs to be deleted as being bad-in-law. 17. Since we have already set aside the issue of bogus purchase to the file of Assessing Officer in ITA No.534/Ahd/2007, this penalty levied by the Assessing Officer and confirmed by CIT(A) will not survive and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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