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TMI Blog2017 (5) TMI 915X X X X Extracts X X X X X X X X Extracts X X X X ..... operative Consumer Federation [2011 (8) TMI 258 - ITAT MUMBAI] wherein it is held that in absence of contrary material placed by the Revenue for no such liability exist in the books of account or the assessee has obtain any benefit by case or any other manner merely because said liability was more than 5 years old it cannot be said that there was cessation of liability. Therefore, we are of the view that CIT(A) is justified in deleting the same. - Decided in favour of assessee. - ITA NOS. 7299/Mum/2014, 7154/Mum/2012, 7300/Mum/2014, And I.T.A. No. 7627/Mum/2014 - - - Dated:- 18-5-2017 - SHRI D.T. GARASIA, JM AND ASHWANI TANEJA, AM For The Appellant : Shri MC Omi Ningshen (DR) For The Respondent : Shri Nishit Gandhi, (AR) ORDER PER D.T. GARASIA, JUDICIAL MEMBER: The above appeals relate to Assessment Years 2008-09, 2009-10 and 2010-11. Three appeals are by the department and one appeal is by the assessee. 2. The following grounds are raised by the assessee in his appeal: 1. The Id CIT (A) erred in sustaining the disallowance of ₹ 43,63,221/- made u/s 40A(3A) of the IT Act. 2. The Id CIT (A) erred in not appreciating that no separate d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... returned as unserved . The appellant was shown the notice which returned unserved and was asked to furnish the latest address of M/s Navkar Enterprises. The appellant submitted that the above party was not traceable, hence he was not able to get the new address as well account confirmation which details was earlier asked to the assessee by the A.O. In the meantime, to collect more details about M/s Navkar Enterprises, the department wrote letter to the Bank Manager, Bank of Baroda, Takurdwar Branch and out Bank Manager, Canara Bank, Thane Kopri Colony (East) Branch and obtained photocopies of both the sides of the cheques issued to M/s Navkar Enterprises towards purchase consideration. On the basis of the entries found in the assessee s Bank Book, it was found that the cheques issued to M/s Navkar Enterprises were encashed by various other entities. As per details found on Page 4 of the assessment order and that from the photocopies of the cheques it was evident that most of the cheques issued were Cross Bearer Cheques and not Account Payee Cheques . Besides giving rise to conclusion of bogus purchases, in the view of the A.O., this also gave rise to contravention of Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... k. The assessee has though disputed the addition but no evidence is produced and no document is produced to show that the purchases were made from Navkar Enterprises and Shreeji lmpex. Therefore, the natural question arises that if purchases were not made from these parties then how was the sale made. But it is undisputedly proved by the investigations and findings of the AO that books of account are full of bogus entries on account of purchases and payments for purchases and, therefore, they cannot be the basis for computing correct income of the assessee. Therefore, the books of account cannot be relied but the profit has to be estimated on the basis of turnover or any other suitable basis. The A.O. has not disputed the stock and sales and assessee has also claimed that after impounding of books quantity wise stock and purchase/sales were tallied to the last Kg. The A.O. has not made any further comments in the remand report on the submissions of the assessee that stock and quantity of purchase and sales have been tallied by the assessee. Therefore, if entire purchases are treated as bogus then the correct income cannot be computed because it gives rise to almost 80%margin on sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales also and the assessee has purchase the quantity from other parties and all the closing stock is admit. Therefore, this sale has been made the Assessing Officer has also observed that the assessee has purchase the paper @ and selling stock at higher rate 45 to 55 per kg and this gave a very huge profit margin. Therefore, to reduce profit margin the assessee has shown higher payment against the import and supports the same with import bills lesser amount and excess stock imported is covered up by local bills and purchases are inflated and that way he was encashing the Cross Bearer Cheques to bogus party. The Ld. AR submitted that the assessee has purchase the paper from the local market and he has made sales of the paper. Therefore, only profit element should be added he relied on various judgements which reads as under: Sr. No. Copy of Judgments 1 Balaji Textile Industries P Ltd v Third Income Tax Officer [1994] 49 ITD 177 2 CIT v Simit P Sheth [2013] 356 ITR 451 (Gujarat) 3 CIT v Bholanath Poly Fab P Ltd [2013] 355 ITR 290 (G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e suppliers of steel to the assessee and made their statements on oath to the effect that they had not supplied the steel to the assessee but had only provided sale bills. In turn, they were receiving small commission. The Assessing officer concluded that the total purchase of ₹ 41,04,903/- cumulatively made from the three parties were bogus. He thus treated such purchases as bogus purchases and added the entire amount of ₹ 41,04,903/- to the gross profit of the assessee. He also rejected the books of account and estimated the assessee s business profit at ₹ 5 lakh. The Commissioner (Appeals) held that the assessee had made purchases from other parties in the open market. Therefore, he retained 30 per cent of the purchases cost as the probable profit of the assessee. He reduced the additions from ₹ 41,04,903/- to ₹ 12,31,471/- and deleted the balance of ₹ 28,73,432/-. While doing so, he deleted the addition of ₹ 5 lakhs as made by the Assessing Officer on the ground that the addition on account of bogus purchases had already been made. The Tribunal was of the opinion that twelve and half per cent of the disputed purchases should be retained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 2,13,99,331/- and the bogus purchase is ₹ 3,35,16,688/- in assessment year 2009-10 and 2010-11 respectively. 11. In the result, departmental appeal filed in ITA No. 7299, ITA No. 7300 and ITA No. 7154 are partly allowed. 12. Ground No.2 The facts of this case are that certain creditors outstanding on 31st March 2009 the A.O. ask for confirmation which the assessee failed to file. The assessee has taken the contention that the assessee was asked to file the confirmation in respect of outstanding Sundry Creditors because out of above party some suppliers were from abroad and they included party on serial No. 3 are unable to give the confirmation letter because that party is staying abroad and they have given they are unable to give the confirmation letter. The assessing Officer was not satisfied with the reply and he added ₹ 15,38,837/- against five parties which reads as under: Sr. No. Party s Name Rs. 1. Akashita Trade Ltd. 10,92,250/- 2. Amarjit Co. 20,800/- 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 14. We have heard the rival contention of both the parties. We find that the A.O. observed that the assessee ask to fail the confirmation in respect of outstanding Sundry Creditors but the assessee failed to file the confirmation letter the non-filing confirmation as the supplier were from abroad and the Assessing Officer was of a view non-filing of confirmation attracts provision of Section 41(1). We find that in the case of ITAT Mumbai in case of Maharashtra State Co-operative Consumer Federation 13 Taxman 163 Mumbai wherein it is held that in absence of contrary material placed by the Revenue for no such liability exist in the books of account or the assessee has obtain any benefit by case or any other manner merely because said liability was more than 5 years old it cannot be said that there was cessation of liability. Therefore, we are of the view that CIT(A) is justified in deleting the same. In the result Departmental appeal ground No. 2 dismissed. 15. ITA No. 7627/Mum/2014 During the course of hearing Ld. AR submitted that the assessee has raised the ground regarding disallowance of ₹ 43,63,221/- u/s 40A(3A) of the IT Act. The Ld. AR has not pressed i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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