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TMI Blog2019 (9) TMI 916X X X X Extracts X X X X X X X X Extracts X X X X ..... also they do not have dates. DR further submitted that these receipts were not produced before the AO for verification. In our opinion, these receipts need to be verified at the ends of the AO. Hence, in the interest of justice and equity, we remit this issue to the A.O. to examine it afresh and if the assessee is able to prove the reasonable cause for making such cash payments, the same may be deleted. Further the amount paid towards bogus purchases by way of cash cannot be once again considered u/s 40A(3) of the I.T.Act, which amounts to double addition. To that extent the assessee gets relief. With these observations, the issue is remitted to the A.O. for fresh consideration. Stock difference - difference between value of the stock hypothecated to the bank to avail loan and the value of the stock found reflected in the trading account - HELD THAT:- In the present case, the stock is hypothecated to the bank and the bank official physically verified the stock on 20.03.2013 and thus there was a difference between the stock value shown in the stock statement furnished to the bank and the value of stock shown by the assessee in his books of account as on 31.03.2013 at ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed to have purchased timber have not been identified by him and therefore, the purchases cannot be genuine. Hence, treated the alleged purchases made from others as bogus purchase and accordingly brought the value of the same to tax. 5. Aggrieved by the order of assessment, the assessee preferred appeal to the first appellate authority. During the course of appellate proceedings, the assessee has explained the reason for addition is that the assessee did not identify the sellers. It can be seen that in the notice dated 22.03.2016, the assessing authority has noted that the total purchase as per trading and profit and loss account is ₹ 11,38,66,879. The amount now disputed would come under the said figure and it is the normal pattern in the timber business that there are purchases from different sources and the suppliers did not insist for any purchase bill. However, while considering the trading account, it can be seen that corresponding sale is accounted therein and in any case, any difference in the return filed under Kerala Value Added Tax Act (KVAT Act) cannot be taken as conclusive proof of suppression of purchase, as done in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the said amount was actually purchased from these persons. Another argument of the appellant that the difference in the return filed under Kerala Value Added Tax Act, cannot be taken as conclusive proof for suppression of purchase, need not be given much importance as the alleged purchases have not been established with credible evidences and in the absence of same, nothing wrong to rely on another document the appellant himself has filed to another authority towards discharging his responsibility under the said Act. His further explanation that the payments to the sellers were made either through cash or RTGS/NEFT cannot simply be accepted sine no such details in this regard has ever been furnished by him. It is not the case of the appellant that the purchases made from others had rightly been accounted and sold or included in the closing stock. This is possible only when the appellant is able to furnish quantity wise purchase, sale and closing stock details. Having not furnished the same at any point of given time, the appellant cannot say that the purchases are genuine. It is also not the case of the appellant that the corresponding sale is accounted rightly in the trading ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ought to tax according to the Assessing Officer for the reason that bills and vouchers relates to cash purchases had specifically been called for but not been produced for verification. Further reason adduced is that the genuineness of the expenditure incurred in cash is in doubt therefore, the provisions of Section 40A(3) are attracted. The Assessing Officer further has contended that the assessee s proprietary concern, MIS Sthuthi Associates is in Kattakada where there are several banks such as Federal Bank, Syndicate Bank etc. The assessee himself has a current account with Federal Bank, Kattakada. Therefore, non availability of banking facility, business expediency and other relevant factors are not applicable in this case. 11. Aggrieved by the order of assessment, the assessee preferred an appeal before the CIT(A). Before the CIT(A) it was submitted by the assessee that the assessee is not in agreement with the Assessing Officer and his explanation in this regard is that an amount of ₹ 2,81,63,141 has been added to the total income on the allegation that there are 82 instances of cash purchases throughout the year from 08.07.2012 to 31.03.2013. It can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not been established that owners of the land used to supply standing trees directly to the appellant and thereby the appellant had no other option but to make payment by cash. e). It is also not the case of the appellant that the vendors either insisted for cash payment or refused to accept the payment by cheque or draft. f). The appellant has not established that the business was carried out in the remote rural area where payment by cash is unavoidable. g). Cash payments seems to have made mostly to business groups and entities who may also very well aware of constraints and limitations of the Act on payment and receipt by cash. h). It is not the case of the appellant that the cash payments were made to small farmers and individuals in villages where no banking facility is available. i). The appellant's proprietary concern, M/S Sthuthi Associates is in Kattakada where there are several banks such as Federal Bank, Syndicate Bank etc. The appellant himself has a current account with Federal Bank, Kattakada. Therefore, non availability of banking facility, business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dited figure and it is given to avail the CC faculties with the projected figures. It is the settled law that the projected figures which are unreal and furnished to the financial institutions cannot be taken for estimation of income, if the assessing authority has no other corroborative evidences. 16. The facts of this issue are that the difference between value of the stock hypothecated to the bank to avail loan and the value of the stock found reflected in the trading account as on 31.03.2013 has been treated as value of unaccounted stock amounting to ₹ 94,77,500/- and subsequently been brought to tax. According to the Assessing Officer, the stock hypothecated to bank was physically verified by the bank which given loan, on 20.03.2013 and the inspection report of the Bank Officer along with copy of security verification register for the month of March, 2013 has been submitted by the Tamilnadu Mercantile Bank Ltd. Trivandrum Branch to him. Copies of stock statement for the financial year 2012-13 were also furnished to him. perusal of the stock statement submitted to the bank by the assessee as on 31.03.2013 revealed that total stock on that date was of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cility of ₹ 2.50 crores to be given to Shaji. The margin for CC facility as per Bank's sanction letter is 25%. Thus, stock of around ₹ 3.35 crores will cover the CC facility of ₹ 2.20 crores and this stock can be considered as enough stock to cover sanctioned limit. Moreover, stock verified by the banker on 20.03.2013 cannot be taken as closing stock as on 31.03.2013 and the bank officer at the time of assessment does not verify the stock register of the assessee. Hence the addition of ₹ 94,77,500/- to the total income is also highly inappropriate and liable to be deleted. The assessee further relied mainly on the following decisions of the Hon'ble High Courts namely, 1. CIT vs Prem Singh Co (163 ITR 434 (Del). 2. CIT vs N.Swamy (2411TR 363 (Mad). 3. CIT vs Veerdip Rollers Pvt Ltd (323 ITR 341 (Guj). 18. In first appeal, the CIT(A) confirmed the addition made by the Assessing Officer by observing as under:- 4.3. I carefully considered the appellant's explanation. His argument is completely centered around the Hon'ble High Courts decisions which he relied on. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... On the other hand, the learned Departmental Representative strongly supported the orders of the lower authorities. 20. We have heard the rival submissions and perused the material on record. In the present case, the stock is hypothecated to the bank and the bank official physically verified the stock on 20.03.2013 and thus there was a difference between the stock value shown in the stock statement furnished to the bank and the value of stock shown by the assessee in his books of account as on 31.03.2013 at ₹ 94,77,500. Even after giving opportunity to the assessee, the assessee was not able to reconcile the stock difference. In our opinion, when there is a difference in the value of stock shown in the statement given to the bank and the books of account of the assessee, the assessee is bound to explain the differences. In the absence of any explanation furnished by the assessee, the CIT(A) is justified in confirming the addition made by the Assessing Officer. We rely on the judgment of the Hon ble Madras High Court in the case of Coimbatore Spinning Weaving Co. Ltd. v. CIT 95 ITR 375 (Mad.)], wherein the Hon ble Court held as under:- T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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