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TMI Blog2019 (7) TMI 170X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO. - Revenue vide ground no.1 is dismissed. Additions on account of mismatch of closing stock - survey proceedings conducted by Revenue u/s 133A - HELD THAT:- Assessee on its part has duly submitted complete details and in our considered view CIT(A) has rightly deleted the addition as were made by the AO on estimated basis. However , the DR has pointed out that the closing stock for AY 2006-07 was 90,928 Kg of different types of chemicals dealt in by the assessee as on 31.03.2006, while for AY 2007-08 , the opening stock as on 01.04.2006 was taken as 92,788 Kg. of chemicals instead of taking closing stock of preceding year as opening stock and to this extent owing to specific defect being pointed out by learned DR , we are remitting the matter back to the file of AO for limited verification of this differential in closing stock of AY 2006-07 and opening stock of AY 2007-08 and for make additions to income accordingly, if any as per mandate of the applicable provisions of the 1961 Act. Addition on account of low GP ratio declared by the assessee - HELD THAT:- AO has brought on record comparative analysis of GP ratio of competitor from the same locality. AO has also note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to part relief granted by learned CIT(A) to the assessee. Addition of expenses by disallowing 25% of the certain expenses - HELD THAT:- DR supported the orders of authorities below. After hearing both the parties and after carefully going through orders of authorities below and material on record, we are of the view that the assessee could not bring on record cogent material to prove/substantiate its contention that these expenses were incurred wholly and exclusively for the purposes of the business of the assessee. Thus, proper supporting/explanation and justification of incurring these expenses wholly and exclusively for the purposes of business of the assessee is not forthcoming. The onus was on the assessee which it failed to discharge. The personal usage of these expenses for the benefit of partners/family members of the partners cannot be ruled out. We donot find any merit in the appeal of the assessee which stand dismissed. Disallowance of depreciation on car - additions to the income of the assessee by disallowance of 25% on depreciation on car - HELD THAT:- No serious contentions were raised by the assessee even before tribunal to substantiate /justify that c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m/2011, I.T.A. No. 3763/Mum/2011 - - - Dated:- 24-6-2019 - SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER For the Assesee : Shri. Sanjay Parikh For the Revenue : Shri. Rajeev Gubgotra (DR) ORDER PER RAMIT KOCHAR, Accountant Member These cross appeals, filed by assessee as well as by Revenue, being ITA No. 3786/Mum/2011 ITA no. 3763/Mum/2011 respectively both for assessment year 2007-08 are directed against the appellate order dated 25.02.2011 in appeal no. CIT(A)-33/IT/1364/2009-10 passed by learned Commissioner of Income-tax (Appeals)-33, Mumbai (hereinafter called the CIT(A) ), the appellate proceedings had arisen before learned CIT(A) from the assessment order dated 29.12.2009 passed by learned Assessing Officer (hereinafter called the AO ) u/s 143(3) of the Income-tax Act, 1961 (hereinafter called the Act ). Since both the appeals emanates from the same appellate order passed by learned CIT(A) and involves common issues, they are taken together and disposed off by this common order. 2. The grounds of appeal raised by assessee in memo of appeal filed with the Income-Tax Appell ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 41 (1) for purchases made from m/s Anil Enterprise. Your appellant request your honor that the officer to delete the said addition of ₹ 4,86,522/-. 8.Your appellant craves leave to add, to amend and /or to alter any of the grounds of appeal, if need be. 3. The grounds of appeal raised by the Revenue in the memo of appeal filed with the tribunal in ITA no. 3763/Mum/2011 for AY 2007-08, reads as under:- 1. On the fact and circumstances of the case and in law, the Ld Commissioner of Income-tax (Appeals ) has erred in deleting the addition of ₹ 62,41972/- by giving a finding that VAT/MVAT netted sales figure is reconciled on the basis of working as per Sec. 145 A which were not provided during the assessment proceeding and thereby admitting additional evidence in contravention of Rule46A. 2. On the facts and circumstances of the case and in law, the Ld. Commissioner of Income-tax (Appeals ) erred in granting relief of ₹ 5,00,000/- on account of addition made to closing stock without considering the fact that no register was maintained by the assessee as specified in the Audit report. 3. On the facts and circumstances of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted during the course of survey operations that books of accounts are available in computer software programme. The statement on oath of Shri. Vipual Thosani, partner of the assessee was recorded by Revenue on 25.02.2019 who stated that the said books of accounts for the relevant period are available in computer software and the same was verified by the Revenue during survey operations. However, physical copies of the said regular books of accounts were not found for relevant period during survey operations. The assessee had given print out of purchases and sales register to the survey team for verification with the computer software . Based upon above factual matrix, the AO concluded that the assessee is not maintaining regular books of accounts. 4.2 The first addition is made by the AO in assessment framed u/s 143(3) of the 1961 Act vide assessment order dated 29.12.2009 on account of difference in sales as per print out taken from computer and sales declared by the assessee in the audited books of accounts for the relevant period, and the difference was noted as under:- A.Y Sales as per print out taken from computer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... As per Balance Sheet ₹ 15,37,99,179/- 4.4 The AO was not satisfied with the reply furnished by the assessee and was of the view that the assessee has not produced evidences of payment of VAT nor the same were shown in Balance Sheet and P L account as payable. The AO also observed that during survey item-wise sale for the above period were taken as per annexure on which total sales were reflected in the account at ₹ 16,00,41,149/- Thus, AO was of the view that the assessee has not offered any satisfactory explanations with respect to the differences in sales and also with respect to the payments of MVAT/CST. This led AO to make additions to the income of the assessee to the tune of ₹ 62,41,972/-, vide assessment order dated 29.12.2009 passed by the AO u/s 143(3) of the 1961 Act. 4.5 Being aggrieved by an aforesaid additions made to income of the assessee by the AO vide assessment order dated 29.12.2009 passed u/s 143(3) of the 1961 Act, the assessee filed an first appeal with learned CIT(A). After considering the submissions of the assessee , learned CIT(A) was pleased to accept the contentions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore Assessing Officer already. It is note worthy that a survey was conducted in the case on 24.02.2009 when accounts for A.Y 2007-08 were already completed and return was filed and sales figure in computer as per bills were found at ₹ 16 crores. Hence, it cannot be assumed that the appellant has tried to suppress the sales figures with the help of VAT as VAT figures were also finalized by that time and were reflected in the ledger account already closed. Working as per clause 12(b) of 3CD has been furnished as under : Given below is the working as per section 145A which is self explanatory. J.V.Chem (India) A.Y.2007-08 Clause 12(b) of 3CD The assessee follows Exclusive method for Accounting of VAT in relation The effect on Profit/Loss due to deviation from Sec 145A is calculated here below: Gross Profit as per Books 3,261,313.00 Add:- Vat on Sales 5,895,978-00 Add:- Vat on Closing Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in rebuttal submitted that there is no mismatch between the sales recorded in the computer printouts and sales as is reflected in the audited financial statements. It was explained by learned counsel for the assessee that the difference was only on account of MVAT/CST which was reflected in the Balance sheet after adjusting Input Tax Credits on Purchases and MVAT/CST deposited by the assessee with Government. It is explained that the assessee is following exclusive method of accounting which is a permissible method as approved by ICAI for accounting sales wherein sales are shown net of MVAT/CST. Our attention was drawn to page no. 29 of the paper book wherein letter dated 17.03.2009 filed on 18.03.2009 by the assessee with the AO during the course of assessment proceedings is placed and it is submitted by learned counsel for the assessee that complete details of sales and purchases as per register duly reconciled with Balance Sheet as on 31.03.2006, 31.03.2007 and 31.03.2008 along with challans for sales tax paid were filed before the AO . It was submitted that survey u/s 133A was conducted by the revenue on 24.02.2009 . Our attention was drawn to page no. 42-44 of the paper book ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tained by the assessee for impugned period were not found at registered office nor were these regular books of accounts were found at sales office . These facts are vigorously disputed by the assessee. The assessee has consistently claimed that its business premises was very small of 180sq feet and 15 people were to be accommodated during survey operations in such a small office space. Regular Books of accounts were produced but these books of accounts were scattered by survey team all over the office which led to confusions and non finding of relevant books of accounts. The assessee , however , had also submitted that books of accounts are available in computer software programme. The statement on oath of Shri. Vipual Thosani, partner of the assessee was recorded by Revenue on 25.02.2019 who stated on oath that the said books of accounts for the relevant period are available in computer software and the same were verified by the Revenue during survey operations. The assessee had claimed to have given print out of purchase and sales register to the survey team for verification with the computer software . Based upon above factual matrix, the AO concluded that the assessee is not ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f sales and purchases as per register duly reconciled with Balance Sheet as on 31.03.2006, 31.03.2007 and 31.03.2008. Reference is also drawn to page no. 38/39 of the paper book wherein the assessee has submitted before the AO during course of assessment proceedings explanation for difference in sales as per sales register of ₹ 16 crores and as per P L account of ₹ 15.37 crores which was explained before the AO to be on account of accounting of sales , MVAT/CST on exclusive method basis. The assessee in the aforesaid reply dated 08.12.2009 refuted allegation of Revenue that no day to day stock records were maintained. This is also consistent stand of the assessee that stock records in electronic form through its accounting software is duly maintained on day to day basis. The assessee submitted in this reply dated 08.12.2009 that computerised accounts of its business operations is maintained and day to day stock register is available. It is claimed that the assessee has personalised specialised software which enable it to update stock data automatically and hence it is claimed that stock data was maintained on day to day basis . The assessee also claimed that it is under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ales , MVAT/CST and stocks , which stood already disclosed/reported to Revenue vide tax-audit report as well while filing computation of income in return of income filed with Revenue. The income tax return along with computation of income filed with Revenue as well tax-audit report were all before the AO during the course of assessment proceedings. Under these factual matrix of the case before us, we do not find any justification and merits in the contention of the revenue and we are of the considered view that proper explanations were given by the assessee during the course of the assessment as well appellate proceedings before the learned CIT(A) and in our considered view, the Ld. CIT(A) rightly deleted the additions as were made by the AO and we do not find any merit in the appeal filed by the Revenue vide ground no.1 and we are inclined to dismiss ground number 1 of the Revenue‟s appeal. The appellate order of learned CIT(A) stood confirmed on this ground. The Revenue fails on this ground. We order accordingly. 5. We come to the next issue rasied by Revenue in its appeal filed with tribunal which is regarding additions of ₹ 5 lacs made by the AO on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stock, vide assessment order dated 29.12.2009 passed by the AO u/s 143(3) of the 1961 Act. 5.3 Aggrieved by an assessment framed by the AO vide assessment order dated 29.12.2009 u/s 143(3) of the 1961 Act , the assessee filed first appeal with learned CIT(A). It was explained that proper stock reconciliation were submitted between physical stock and book records, proper stock records were maintained and quarterly return of stock were filed for availing Modvat credit under Excise Rules and Law . It was also submitted by assessee before learned CIT(A) that even if there is discrepancies in stock found on the date of survey on 24-03-2009, the additions cannot be made for impugned AY 2007-08 . The Ld. CIT(A) was pleased to grant relief to the assessee vide appellate order dated 25.02.2011, by holding as under:- 6.1 In the appellate proceedings the appellant has submitted submission stating that they are filing quarterly return of stock for Modvat credit under Excise Rules and Act. Further the appellant has submitted that they maintain proper stock records which was available both at the time of survey and at the time of scrutiny. In support of the same copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titative details of chemicals dealt with by the assessee is placed which is part of tax-audit report. Our attention was also drawn to page no. 33 of the paper book wherein inventory of opening and closing stock was submitted by the assessee before the AO during assessment proceedings vide letter dated 26.11.2009. Our attention was also drawn to page no. 39 of the paper book wherein letter dated 08.12.2009 filed by the assessee before the AO during assessment proceedings is placed, wherein it was categorically refuted by the assessee as to allegation of the Revenue that no stock registers were maintained. The assessee has submitted that it is maintaining computerised accounts for its business operations and the day to day stock register gets updated on recording of purchase and sales data as the assessee claimed to be using personalised accounting software. Our attention was also drawn to page no. 45 to 49 of the paper book wherein quarterly returns under Excise Laws and Rules were submitted before the Superintendent of Central Excise. Our attention was also drawn to page no. 132-139 of the paper book filed by the assessee, wherein copy of assessment order dated 31.12.2010 passed by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of quantitative details of stock by the assessee. There was some mismatch in physical stock vis-a-vis stock as per stock register as on the date of survey on 24.02.2009 which is reproduced in para 5 of this order by us . However, the AO was not able to correlate this mismatch to the year under consideration as to how the additions are warranted in the year under consideration viz. AY 2007-08 for physical stock taken on 24.02.2009, as the discrepancies were found during the course of survey on 24.02.2009 which pertains to AY 2009-10. It is understandable if the said income due to differential in stock is brought to tax for AY 2009-10 by invoking provisions of Section 69 , 69A, 69B , 69C or other applicable provisions of the 1961 Act but how the said income could be brought to tax in AY 2007-08 without specific defects/reasoning being pointed out by the AO and correlating the said income to AY 2007-08 cannot be accepted . The onus was on the AO to correlate the said income to AY 2007-08 and to bring to tax in AY 2007-08. Secondly, the AO could not specify defects in the books of accounts/stock records which could be attributable or co-related to bringing to tax , income during the im ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO observed that assessee has shown turnover of ₹ 15,37,99,177/- and declared Gross Profit of ₹ 32,61,314/- which translates to GP Ratio of 2.12% on against GP ratio of 2.96% declared in AY 2006-07. The GP ratio declared in the AY 2005-06 was still higher at 3.26%, The AO observed that partners of the assessee are also doing the same kind of business in the individual capacity under the name of style of M/s. Kunal Enterprises and M/s. Meecham Enterprises. The AO observed that assessee has shown following turnovers and GP ratio for last three years , as under:- A.Y. Gross Sales Gross profit G.P Ratio 2007-08 ₹ 15,37,99,177/- ₹ 32,61,314/- 2.12% 2006-07 ₹ 8,98,38,152/- ₹ 26,63,059/- 2.96% 2005-06 ₹ 5,96,88,795/- R s. 19,50,915/- 3.26% 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal in ITA no. 8866/Mum/2011 vide orders dated 27.04.2016 and prayers were made by learned DR to sustain GP additions made by the AO for AY 2007-08 as the factual matrix has remained the same for this year under consideration. It is brought to our notice by learned DR that the assessee‟s GP is consistently falling over the years and assessee is consistently showing low GP ratio over the years. The GP ratio for the last three years declared by the assessee is reproduced hereunder:- A.Y. Gross Sales Gross profit G.P Ratio 2007-08 ₹ 15,37,99,177/- ₹ 32,61,314/- 2.12% 2006-07 ₹ 8,98,38,152/- ₹ 26,63,059/- 2.96% 2005-06 ₹ 5,96,88,795/- ₹ 19,50,915/- 3.26% 6.5 Our attention was also drawn by learned DR to paper book / page no. 171 wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y.2006-07 Increase by Rs. Reason Total sales 15,37,99,177 8,98,38,151 6,39,61,026 Purchases 14,53,76,414 8,78,29,120 5,75,47,294 Transport charge 22,81,007 12,86,808 9,94,199 Increase in sales and purchases, as along with with increase in transportation cost. Commission 17,30,871 5,66,009 11,64,861 Due to increase in purchases/ sales As it is quite clear from the above table, gross profit margin were squeeze on account of increase in expenses, hike in price of goods procured for trading and the same hike could not be pass on to the customer due to stiff competition , hence no increase in margin on turnover, hence th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over increasing over years which is against normal business patterns .Net profit ratio declared by the assessee is also abysmally low . We have also observed that the AO made comparative analysis with assessee‟s competitor M/s. Parekh Industrial Corporation who was also trading in chemical in the same area on the same locality and in whose case , an assessment was framed u/s 143(3) of the 1961 Act who has declared higher GP ratio of 8.91% , as detailed hereunder: A.Y. Gross Sales Gross Profit Percentage 2007-08 ₹ 1,81,56,617 ₹ 16,18,241/- 8.91% 2006-07 ₹ 1,70,79,125 ₹ 12,76,389/- 7.47% As could be seen the said Parekh Industrial Corporation has not only shown GP ratio of 8.91% for AY 2007-08 but it‟s GP ratio was increasing with increase in turnover. While the assessee is showing just the opposite. The assessee has give justification for fall in G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0.39 2011-12 1.79 0.38 2012-13 1.13 0.24 2013-14 2.24 0.39 2014-15 2.04 0.3 2015-16 2.77 0.37 And in support of his argument the assesses placed on record copy of assessment order for AY 2010-11, 2011-12 and 2012-13. DR for revenue relied upon the order of authorities below. 5. We have considered the rival contention of the parties and perused the material available on record. The assessee has not challenged the reopening of the assessment. We have seen that during the scrutiny/re-assessment proceeding, the assesses was asked to file re-conciliation of purchases with purchase register along with supporting bills and vouchers and stock register of purchase during the relevant year. The assessee submitted necessary document and information, consisting documents/stock register ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at various discrepancies/inconsistencies in the accounts were noted by tribunal while confirming additions towards low GP for AY 2006-07 . In the instant year under consideration before us , the AO has highlighted various inconsistencies in the assessment order framed for AY 2007-08. The AO had estimated GP ratio @3% of sales which in our considered view is vary fair and reasonable . The competitor of the assessee from the same locality in the same business namely Parekh Industrial Corporation declared higher GP Ratio of 8.91%. Estimation of GP requires some guess work but the same should be in the realm of fairness and reasonability and should not be unconscionable. The decision of the AO to estimate GP ratio of the asessee is @3% of sales is very fair and reasonable. The decision of Hon‟ble Supreme Court in the case of Kachwala Gems is relevant. We do not find any reason to disturb the additions as were made by the AO on account of low GP ratio and appellate order passed by learned CIT(A) is cryptic and is not sustainable in the eyes of law as no valid justification for such an abysmally low GP could be answered by learned CIT(A) while on the other hand the AO has brought o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that assessee has filed statement during the course of assessment proceedings before the AO of the commission paid exceeding ₹ 50,000/- which totalled to ₹ 16,23,108/- on which TDS was deducted and the amount did not match with P L Account because the assessee has not given the details of commission of less than ₹ 50,000/- but these commissions are reflected in the ledger account . The learned CIT(A), however, disallowed commission paid of ₹ 1,07,762/- on which no TDS was deducted and appeal was partly allowed by learned CIT(A), vide appellate order dated 25.02.2011 passed by learned CIT(A). 7.3 Both assessee and revenue are aggrieved by the appellate order passed by learned CIT(A) and have come in an appeal before the tribunal. The Ld. DR submitted that Ld. CIT(A) has disallowed an amount of ₹ 1,07,762/- towards commission owing to non deduction of income-tax at source on these commissions, while remaining commission paid of ₹ 6,21,879/- which was earlier disallowed by the AO out of total commission disallowed of ₹ 7,79,641/- was allowed by learned CIT(A). The Ld. Counsel for the assessee submitted that the commission amount shown ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted details of commission paid of above ₹ 50000/- during assessment proceedings before the AO , which is placed on record in paper book at page 55. The AO added and disallowed commission based on differentials of commission figures in statement furnished vis-a-vis books of accounts . The other reasons for disallowance of commission paid was increase in commission expenses in the year under consideration vis-a-vis preceding year. While making additions towards fall in GP ratio, the AO also cited increase in commission expenses in the year under consideration vis-a-vis preceding year as one of the reasons. We have already sustained additions owing to fall in GP ratio in preceding para‟s of this order. We have observed that learned CIT(A) held that there is no differential in books of accounts vis-a-vis statement furnished by the assessee. The learned CIT(A) had observed that the assessee had furnished statement in which commission exceeding ₹ 50000/- was shown and hence there is no differential if the commission upto ₹ 50000/- is also taken into account. We have observed that the Ld. CIT(A) has rightly made additions by disallowing commission expenses of ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ismissed. We order accordingly. 9. The next ground being ground number 3 raised by assessee in memo of appeal filed with tribunal relates to addition of ₹ 84,944/- made by the AO of various expenses by disallowing 25% of the following expenses , for which the assessee did not submitted any details, the details of expenses are as under:- Sr. No. Head of expense Amount debited 1 Telephone charges including mobile expenses of the partners 95805 2 Office expenses 69268 3 General expenses 45832 4 Sales Promotion 18550 5 Conveyance 110322 Total 339777 The AO observed that the assessee has not submitted supporting evidences in support of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y used for the purposes of the business of the assessee . It is also observed that car is registered in the individual name of partners and personal usage of the car for benefit of partners/family members cannot be ruled out and hence this addition is sustained. Ground No. 4 raised by the assessee in memo of appeal filed with tribunal stands dismissed. We order accordingly. 11. Similar is the fate of disallowance of expenses towards warehousing charges(₹ 36,943/-) and Hamali Charges(₹ 25,088/-) challenged by the assessee vide ground no. 5 and 6 raised by the assessee in memo of appeal filed with tribunal. The additions were made towards warehousing charges of ₹ 36,943/- by the AO which were later confirmed by learned CIT(A). The assessee did not furnished details of the party to whom these warehouse charges were paid which led AO to disallow 25% of warehousing charges totalling ₹ 1,47,775/-, leading to disallowance of ₹ 36,943/- The learned CIT(A) also disallowed the said expenses considering the said disallowance to be reasonable. The assessee has now filed an second appeal before tribunal and we find that no serious contentions were raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against which assessee has come in appeal, while rest of the additions as were made by the AO were deleted by Ld. CIT(A) which has aggrieved Revenue. The Revenue has also come in appeal before the tribunal being aggrieved by part relief being granted to the assessee by learned CIT(A) , vide ground number 6 raised by Revenue in memo of its appeal filed with tribunal. Thus, both assessee and revenue being aggrieved by the decision of learned CIT(A) has come in an appeal before tribunal. There were two additions made u/s 41(1) by the AO wrt M/s Jay Ambe Enterprises and M/s Anil Enterprises but since dispute wrt additions made u/s 41(1) of the credit balance outstanding to the credit of Jay Ambe Enterprises has attained finality between rival parties, we will restrict our discussions to additions made wrt credit of M/s Anil Enterprises u/s 41(1) towards purchases of drums made by the assessee from said party. It was observed by the AO during the course of assessment proceedings that an amount of ₹ 19,22,834/- stood credited to the account of M/s Anil Enterprises during the year under consideration. The notice u/s 133(6) was issued by the AO to M/s Anil Enterprises to verify the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The copy of remand report was forwarded by learned CIT(A) to the assessee for rebuttal. The assessee in rebuttal to remand report submitted before learned CIT(A) that the said party M/s Anil Enterprises is a regularly trading party and the purchase transactions with said party are also going on till today while filing reply on 24.02.2011. The assessee also submitted copies of bills and as well copies of bank statements to prove that all payments were made through banking channel. The assessee also submitted confirmation of ledger account of Anil Enterprises as it appears in its books of accounts as well assesee‟s ledger as it appears in the books of M/s Anil Enterprises. The learned CIT(A) observed that assessee is dealing regularly with Anil Enterprises and even today that there are dealing between both the parties . The payments were made through bank channel and the assessee had submitted confirmation. The learned CIT(A) observed that the said party is supplying drums for packing chemicals sold by the assessee . The learned CIT(A) observed that M/s Anil Enterprises is the only party who is supplying drums to assessee for packing chemicals but the said party has chosen not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... April 2007 onwards till 19.03.2008 is placed. It was claimed that merely because the party has not appeared before the authorities below, no additions can be made. 12.4. We have considered rival contentions and perused the material on record. We have observed that the assessee is trading in chemicals. The assessee is buying drums from M/s Anil Enterprises which are used for packing chemicals . The assessee has made purchases to the tune of ₹ 19,46,088/- from the said party during the relevant period. The AO in order to verify genuineness of these purchases issued notice u/s 133(6) during assessment proceedings . The said notices returned unserved by postal authorities with remark Not Known‟ . The assessee was called upon by the AO to prove genuineness of these purchases and to prove this creditor. The assessee filed confirmation from this party but could not produce this party before the authorities below. In appellate proceedings before learned CIT(A), the learned CIT(A) called for remand report from AO with respect to additional evidences filed by the assessee. The summons were issued by AO u/s 131 to the said party namely M/s Anil Enterprises in Remand Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easons that M/s Anil Enterprises did not authenticate transactions directly. No further enquiries were made by the authorities below to obtain independent data to prove that higher prices for drums was charged by Anil Enterprises. The learned CIT(A) rightly held that in the instant case Section 41(1) cannot be invoked as the dealing with said party continued even after the end of previous year and also that payments were all made through banking channel. Thus, this addition in our considered view is not sustainable in the eyes of law as the liability has not ceased to exist as on 31.03.2007 as the trading dealings of the assessee with the said party M/s Anil Enterprises continued even after closure of previous year and secondly payments were made through banking channel. The assessee has proved consumption of drums for packing of chemicals. The confirmations obtained by assessee from this party were filed. The invoices received from said party was filed. The stock register was filed. Thus, even on the ground of inflated price of the drums, additions are not sustainable as there is no incriminating material before the Revenue to come to conclusion that prices were inflated by Anil E ..... X X X X Extracts X X X X X X X X Extracts X X X X
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