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TMI Blog2019 (2) TMI 1468X X X X Extracts X X X X X X X X Extracts X X X X ..... is not sustainable, as section 69C provides that where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. When the assessee has provided all the evidences of the payment and the payments are recorded in the books of account, they are not liable to be added u/s. 69C of the Act. Furthermore, the transaction from some of the parties have also been accepted in the subsequent assessment year. It is also not the case that any sales corresponding to the purchases/transactions has been disallowed or doubted. - Decided in favour of assessee. X X X X Extracts X X X X X X X X Extracts X X X X ..... ed notice on 10.02.2015 to sundry creditors to verify the genuineness of the parties from whom certain purchases were made. Since no response was received, he passed the order on 02.03.2015 adding the amount involved of ₹ 9,95,50,211/- as unexplained expenditure u/s. 69C of the Act. The A.O.'s order in this regard read as under: 6. Further, the notices u/s 133(6) dated 10.02.2015 were issued to the following sundry creditors to verify the genuineness of the parties from whom certain purchases were made by the assessee for the relevant period. However certain parties either did not respond or remained unserved hence a show cause was issued dated 19.02.2015 to the assessee to produce these parties "personally" on or before 27.02.2015 before the undersigned to verify its genuineness. The content of the show cause notice is as follows: Sr No Name of the Party Section Date of issue Expected date of reply Present status 1 M/ Shri Shyam Products 133(6) 10.02.2015 19.02.2015 Reply not received. 2 M/s Bhawani Silicate Industries 133(6) 10.02.2015 19.02.2015 Reply not received. 3 M/s Vikas Oil Proteins 133(6) 10,02.2015 19.02.2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed additional evidences before the ld. CIT(A). The ld. CIT(A) noted that the remand report was obtained from the A.O., wherein the A.O. objected to the acceptance of additional evidence. The ld. CIT(A) overruled the A.O. and held that the assessee has submitted the confirmation from the parties, their ledger accounts and bank statements for payments. He did not find any reason not to accept the confirmation from these parties. 5. Further, the ld. CIT(A) referred that for the A.Ys. 2013-14 and 2014-15 the A.O. has accepted the transaction with these parties. The order of the ld. CIT(A) is as under: 9.1 On the other hand, the appellant submitted that the AO has not given sufficient time to prove the genuineness of the creditors from whom the purchases were made and thereby substantiating the expenditure. The appellant filed additional evidences which were forwarded to the AO for remand report. The AO has held that in the additional evidences the appellant has not provided any submission in relation to the various parties and of the view that the confirmation in the form of additional evidences are not reliable in his opinion and, therefore, additional evidence under Rule 46A may n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t no addition can be made u/s. 69C of the Act when the copies of the bank statement and ledger copies are filed. He further referred to several case laws for the proposition that where the A.O. has not made any enquiry to ascertain the genuineness of the transaction, no addition can be made.Lastly, the ld. Counsel of the assessee submitted that on similar issue, in the subsequent years, no disallowance has been made u/s. 69C of the Act. Hence, he referred to several case laws that no addition in the impugned A.O.'s order is justified. 9. We may gainfully refer to the submissions and the case laws referred by the ld. Counsel of the assessee in this regard as under: 5.During the year, the A.O. had sent the notice under section 133(6) to following parties from whom purchases were made during the year. The A.O. disallowed the total purchases from the following parties totaling to ₹ 9,99,50,171/- Sr no Name of the creditors Amount (in Rs) 1 Shri Shyam Products 26,19,800 2 Bhawani Silicates Industries 44,00,837 3 Vikas Oil Industries 3,00,02,928 4 Yogi Industries 1,66,31,513 5 Om Industries 60,24,568 6 Arihant Enterprises 19,36,884 7 Chetna Oil Trading 3,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ches of the Assessee (Refer page 81 to 86 of the paperbook) •The extract of the bank statement suggest that the payments have actually been made by the Assessee. {Refer page 87 to 106 of the paperbook) •In view of the above, it can be concluded that AO has failed to appreciate the fact that all the payments were made through banking channels and no reason arises for questioning the genuineness of the party. •The contention of Department that addition should be made on account of non-receipt of reply from the party is erroneous in view of the recent decision of Mumbai Tribunal in case of Fancy Wear vs ITO (167 ITD 621) wherein it has been held that no addition can be made merely because of non-receipt of reply to notice issued under section 133(6) of the Act. 8.Vikas Oil Proteins The party had provided a confirmation letter to assesse, wherein they had confirmed that purchases were made by the Assessee and stating that all necessary information/ documents had been filed with the AO. (Refer page 109 to 110 of the paperbook) The ledger accounts and the extract of the bank statement suggested that the payments have actually been made by the Assessee. (Refer page 11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party clearly quashes the claim of the AO of not having documents of record. {Refer page 151 to 152 of the paperbook) •In addition to the above, the ledger accounts and the extract of the bank statement indicates that the payment for purchases have actually been made by the Assessee. (Refer page 153 to 168 of the paperbook) 11.Arihant Enterprises •The party had provided a confirmation letter to the assessee, confirming that purchases were made by the Assessee. Further, the said letter confirmed that the party had provided all necessary information/ documents with the AO on 2 March 2015. (Refer page 171 to 172 of the paperbook) •Further, the contention of department that no submission was available on record is erroneous as the registered AD and reply letter by the party directly submitted to the AO clearly suggest that the notice was duly served on the party and also has been complied with in due time. Accordingly, the claim of AO that no submission was on record is baseless. (Refer page 169 to 170 of the paperbook) •The ledger accounts and the extract of the bank statement substantiate that the purchases and payments have actually been made by the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsaction with Maruti Packers is as under, the aforesaid can be verified from the ledger account enclosed in the compilation: Particulars Amount (Rs) Amount (Rs) Opening balance 9,64,017 Add: Purchases 38,10,667 5% VAT on Purchases 1,90,533 40,01,200 Miscellaneous receipt 1,38,070 Sub-total 51,03,289 Less: Payments made during the year 37,36,174 Closing balance 13,67,115 In the remand report, the AO had accepted the in the books of Maruti Packers, the debit balance as on 31 March 2012, for the Appellant was ₹ 13,67,115. Further, the AO had stated that as per ledger account of the Appellant in the books of Maruti Packers, the sales to the Appellant during the relevant year amounted to ₹ 40,01,202, which ties up with the purchases recorded by the Appellant (ie Purchases ₹ 38,10,667 +VAT on purchases ₹ 1,90,533). Further, the extract of the bank statement substantiate that the payments for purchases have actually been made by the Assessee. (Refer page 275 to 334 of the paperbook) In view of the above discussions and documents submitted, we wish to submit that the payments made were genuine purchases and the CIT(A) was correct in deleting t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) was not available during the time of assessment but was necessary to prove the genuineness of the parties. Non-service of notice is not ground to make addition on account of bogus purchases 20.The assessee wishes to submit that the AO is not justified in making an addition under section 69C merely because of non-receipt of reply in response to notice issued under section 133(6) of the Act and reliance is placed on the decision of Mumbai Tribunal in case of Fancy Wear vs ITO (167 ITD 621) (Refer page 363 to 370 of legal paperbook). 21. Further, the jurisdictional Hon'ble Bombay high court in case of Nikunj Eximp Enterprises (372 ITR 619) (Refer page 371 to 373 of legal paperbook), it was held that merely because suppliers had not appeared before AO purchase could not be treated as bogus no addition was warranted. 22.The above decision was followed in case of Prabhat Gupta (ITA 227/M/17) dated 21 December 2017 (Refer page 374 to 398 of legal paperbook)wherein it was held that non- service of notice issued under section 133(6) of the Act was not a ground to raise addition of bogus purchases when sufficient evidence was provided by the assesse. No addition can be ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and gross profit rate it meant that assesse had made genuine purchases for which there was corresponding sales and hence no addition would be warranted.30.For the above contentions, we wish to place reliance on the following decisions: •Geolife Organics vs ACIT (ITA 3699/Mum/2016) dated 5 May 2017 (Refer page 445 to 457 of legal paperbook) •Eagle Impex (ITA 5697/M/10) (Refer page 458 to 471 of legal paperbook) Similar issue in subsequent years where no disallowance made under section 69C of the Act 31.The assesse wishes to submit that the AO for AY 2013-14 had issued similar notice under section 133(6) to few parties from whom assessee had made purchases in the year under consideration. Subsequent to the issue of notice the following parties had replied to the notice alongwith following documents: i. Chetna Trading Pvt Ltd (refer page 341 to 344 of the paperbook) •Copy of letter sent by AO under section 133(6) of the Act •Copy of registered AD •Copy of tracking details of reply submitted by Chetna Oil Trading to AO ii. Maruti Packers (refer page 345 to 346 of the paperbook) •Copy of letter sent by AO under section 133(6) of the Act »Cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the A.O. in the remand proceedings. The details have also been made available to us in the paper book. From the same, we find that all the necessary confirmations of the transactions are available. All the payments are through banking channels. No discrepancy in this regard is noted. 11. We further note that the other planks made by the ld. Counsel of the assessee are also cogent that the assessee has provided the copies of the bank statements for all the additions proposed to be made u/s.69C of the Act. Hence, the additional unexplained expenditure as mandated in section 69C is not sustainable, as section 69C provides that where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year. In this regard, we note that when the assessee has provided all the evidences of the payment and the payments are recorded in the books of account, they are n ..... X X X X Extracts X X X X X X X X Extracts X X X X
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