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TMI Blog2020 (3) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... the alleged debtor "M/s. Pamis Tex.Pvt. Ltd." has not shown the assessee as its creditor for A.Yr.2009-10. The Ld.CIT(A) has failed to appreciate that despite numerous opportunities the assessee did not file any documentary evidence. 2) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition of Rs. 28,32,496/- regarding unexplained repayment towards unsecured loans despite the fact that the sources and nature of the amount of repayments of the same were not proved despite repeated opportunities. 3) On the facts and circumstances of the case and in law, the Ld.CIT(A) has erred in deleting the addition the addition of Rs. 1,39,31,025/- in respect of unexplained advances to suppliers despite the fact that the nature and genuineness of the transactions was not proved by the assessee either during the course of assessment proceedings or during the remand proceedings. 4) It is, therefore, prayed that the order of the Ld.CIT(A)-IV, Surat may be set-aside and that of the Assessing Officer's order may be restored." 3. Brief facts of the case are that the Assessing Officer(AO) made additions of Rs. 4,96,27,261/- on account of unveri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to sale parties whose crossed cheques were directly given to M/s. Pamis Text Pvt Ltd by endorsement for the reason that if these cheques had been deposited in the bank accounts of the appellant with Memon Co - op Bank Ltd , the same would have been adjusted against the over draft from the said bank account. 10.4 As mentioned in this office letter dated 17.01.2013 (para - 6) addressed to the assessing officer, the JV entries pertained to only 5 to 6 parties. Since the number of parties was very small, the assessing officer was directed to obtain the necessary details of cheques from the appellant, so that corresponding enquiries could be made from those parties to ascertain, whether the they were actually the sale parties or not and whether the cheques were actually issued by them or not? 10.5 With the help of details of cheques, the assessing officer was also directed to make enquiries from the Bank whose cheques were utilized for J.V entries to ascertain whether the destination of these cheque was in Pamis Text Pvt Ltd or not ? However, as mentioned in the A.CTs report dated 10.07.2013, the appellant did not submit any details of sales to these concerns nor did it furnish t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted payment pertaining to each year in that assessment year. It is necessary to mention here that the return of M/s. Pamis Tex P Ltd for assessment year 2006-07 was not sent to this office by the assessing officer on the ground that the same was not available in the system. The same should be obtained (if it was filed in physical form) before completion of proceedings u/s 147 for Asstt Year 2006-07 and 2007-08. This information is necessary to conclusively decide the quantum of addition in each of the years. If the return for Assessment Year 2006-07 was not filed by M/s Pamis Tex P Ltd, details of purchases / sales can be obtained from other authorities to whom such details are required to be reported under any other law. 10.8 Consequently, the addition of Rs. 4,96,27,261/- made in the assessment year 2009-10 will have to be deleted. However, as mentioned in para 10.5 (supra) the appellant Y claim of receipt of Rs. 20,57,079/- from sale parties and payment of the same to M/s. Pamis Tex P Ltd is factually incorrect. The source and nature of this amount of Rs. 20,57,079/- has not been established. Therefore, the addition of Rs. 4,96,27,261/- is substituted by this addition of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... undisclosed sources and accordingly the same was added as unexplained payment. 3. Advances to suppliers 1,39,31,025/ In the balance - sheet, the said amount was shown as advances to supplier. However, the assessee did not furnish any details of the suppliers such as names, addresses, amount, PANs of the suppliers, reasons for advances. In absence of such details, the entire amount of Rs. 1,39,31,025/- was considered as non-genuine and accordingly added the same as unexplained advances to the total income. 3. Aggrieved with the assessment order, the assessee filed an appeal before CIT(A), Surat. In the appeal, the assessee has produced additional evidences for which your honour has called for a remand report after verification of the same and also directed to make available him a copy of return of income download from the ITD module. Addition on a/c of unverifiabie creditor of Rs. 4,96,27,261/- During the course of assessment proceedings in spite of having given number of opportunities to produce the confirmation account, PAN, Address of the trade creditor i.e. Pamis Tex. Pvt. Ltd., the assessee did not furnish any such details, but at the fag end of the year i.e. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Commissioner (Appeals) shall not take into account such evidence produced unless the AO has been allowed reasonable opportunity to examine or gross examine such evidence or witnesses produced by the assessee. 6. On verification of the case records, it is seen that the AO had given sufficient opportunities of being heard and produce books of accounts and other evidences in support of his claims in the return of income, but at the fag end of the year i.e. on 28.12.2011 the AR of the assessee submitted a letter furnishing the following details : - 1. PAN 2. CST Number 3. GVAT Number 4. Address of the factory of Pamis Tex, Pvt. Ltd. 5. Audit report of previous year 6. Copies of sale bills received from trade creditor i.e. Pamis Tex. Pvt. Ltd 7. Copy of ledger account of trade creditor. 7. Since, the above details were produced before 3 days of the time barring date - 31.12.2011, the AO was not in position to verify the genuineness of the creditor whether it was genuine or not. He was also not in position to call for confirmation directly from the office of the creditor shown at Mumbai and factory address shown at silvasa in very short time of 2/3 days. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96,27,261/- in the name of M/s. Pamis Tex. Pvt. Ltd. On comparing the credit balance in the balance sheet of present assessee and debtors balance in the books of M/s. Pamis Tex. Pvt. Ltd, the figures are not matching and the difference is also very huge. Moreover, on further verification of the break -up of debtors balance in the books of M/s. Pamis Tex. Pvt. Ltd., for A.Y.2009-10 it is noticed that M/s. Alfa Synthetics is not at all a debtor in the books of M/s. Pamis Tex. Pvt. Ltd., as there is no name of M/s. Alfa Synthetics in the list of debtors of M/s. Pamis Tex. Pvt. Ltd. as on 31.03.2009. 10. The ledger of M/s. Pamis Tex. Pvt. Ltd. in the books of M/s. Alfa Synthetics (Atlas) for A.Y.2009-10 sent by your- honour has also been verified. On verification of the ledger account of M/s. Pamis Tex. Pvt. Ltd, it is seen that there was opening credit balance of Rs. 5, 19,24,340/- and during the year the assessee had made payment of Rs. 22,97,079/- keeping the closing balance of Rs. 4,96,27,261/-. Thus, at the end of the year, the closing credit balance in the name of M/s. Pamis Tex. Pvt. Ltd was Rs. 4,96,27,261/-. It is worthwhile to mention here that during the year, assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the books of assessee, the necessary details were called for from a major creditor, namely M/s. Pamis Tex. Pvt. Ltd. which is said to have been situated at Silvasa by issuing a letter on 06.06.2012, but the same has also returned back unserved with remark, "there is no such party of this name, hence return back to the sender." 12. As per your honour's direction, the assessee was also provided on 06.06.2012 the return of income and audit report and requested it to give its comment/objection, if any, after verification of the same. Since no reply was received, one more letter was written to the assessee on 27.07.2012 requesting it to give its comments/objection, if any, on return of income and audit reports of M/s. Pamis Tex. Pvt. Ltd. but till date no any objection from the assessee has been received which reveals that the assessee has accepted the figures of return of income and audit report of M/s. Pamis Tex Pvt. Ltd. 2. Disallowance of Unexplained Payment to depositor-Rs. 28.32.496/- The AO, during the assessment proceedings, observed that the assessee had made repayment of unsecured loan of Rs. 28,32,496/- and therefore the assessee was asked to furnish evidences ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mely M/s. Pamis Tex Pvt. Ltd. along with the other details for the year under consideration. However, the assessee failed to give the contra account from the books of M/s. Pamis Tex Pvt. Ltd. Therefore, the AO had generated copy of return of income of M/s. Pamis Tex Pvt. Ltd. for A.Y. 2009-10 from the ITD module. The AO had compared the figure of M/s. Pamis Tex Pvt. Ltd. and the present assessee i.e. M/s. Alfa Synthetics and it was found that in the books of M/s. Pamis Tex Pvt. Ltd., debtors were amounting to Rs. 24,28,332/- (over six months old )and Rs. 25,95,095/- (others). Thus, total debtors in the books of M/s. Pamis Tex Pvt. Ltd. were Rs. 50,23,427/- only whereas in the books of the assessee, the assessee has shown creditor (M/s. Pamis Tex Pvt. Ltd.) payable of Rs. 4,96,27,261/-. Thus, there was no matching of figures of creditors in the books of Alfa Synthetics & debtors in the books of M/s. Pamis Tex Pvt. Ltd. Therefore, the AO had come to the conclusion that the assessee firm has shown bogus outstanding balance in the name of M/s. Pamis Tex Pvt. Ltd. Thus, treated the creditor of Rs. 4,96,27,261/- in the name of M/s. Pamis Tex Pvt. Ltd. as bogus one had added the same to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /sJ Pamis Tex Pvt. Ltd. which are duly recorded in its books and it is not their fault, if M/s. Pamis Tex Pvt. Ltd. has not recorded corresponding sales in its books. The argument of the assessee is baseless because if any assessee claims that he has made some purchase transaction with some entity and entered the same in its books and claim the same in the P & L account/ return of income, then he has to produce all relevant details/ evidences to substantiate his claim of purchase. In such incident, it is onus of the assessee to prove the genuineness of the purchases by producing the relevant details from his books as well as the books of selling party. In this case the assessee in spite of having given numbers of opportunities failed to discharge its onus to produce the all relevant evidences from the books of M/s. Pamis Tex Pvt. Ltd or independently verifiable evidence. To sum up I will again re-iterate that after verification of the documents and looking to the facts and circumstances of the case, Alfa Synthetics is not a debtor in the books of M/s. Pamis Tex Pvt. Ltd. and M/s. Pamis Tex Pvt. Ltd. is not a creditor in the books, of Alfa Synthetics and therefore the creditor as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. (b) Reply to para 8 of the remand report The Ld contended that the audit report of Alfa Synthetics does not have the name of the creditor ie Pamis Tex P Ltd In respect of above we would like to submit that the AO was given detailed break-up of creditor along with PAN and address assessment proceedings. (c) Reply to para 9 of remand report The assessee had produced full set of bills of purchase with PAN. GST, CST, address of factory and registered office address of the creditor. Copy of original bills were produced before the L.d. AO during remand proceeding and copies were also submitted to this office. The ITD module is an internal document of the department and the same was not produced before us for but the fact that even the A Y 2009-10 module of the creditor does not have the name of the assessee in its list of debtors goes a long way in proving that the creditor may have not shown the sales to the assessee in his books of accounts or that the creditor may have squared up his accounts in the preceding previous year i.e. A Y 2009-10 or preceding years. For a moment if this probability of this possibility is accepted then also the addition as termed in the curre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... III. ADDITION OF Rs. 1,39,31,025 OF ADVANCE TO SUPPLIERS:- The above amount represents advance paid to supplier and represent asset of the firm in its balance sheet Even if for a moment it is accepted that details of the same were not furnished during assessment proceedings, by no stretch of imagination can an outstanding asset (advance) be added to the income of the assessee....." 11. Thereafter, again another remand report for the third time was received by ld.CIT(A) which is contained in para 9.1 and the same is reproduced below. The ld.CIT(A) further sought comments of the assessee to in respect of third remand report which is contained in para 9.2 and is reproduced below: "9.2 The appellant's comments in respect of the same were received on 01.08.2013. the same are reproduced herein under:- "2. The case of the assessee was selected for scrutiny. Notices were served on time. The AR of the assessee attended the hearing before the learned AO and submitted the requisite details. In course of the assessment proceedings, the AO examined that the assessee had shown a trade creditor of Rs. 5, 44, 65,103 in the name of M/s Pamix text Pvt Ltd . The AO requested confirmati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sate a bogus liability goes a long way in self explaining the bigger addition of Rs. 5, 44, 52, 103. Even, if for a moment, it is accepted that bogus debtor was created to compensate for bogus creditor, the core issue arise does such act though cannot pass the test of legality, in anyway affect the real taxable income of assessee. What can be tax is the real income. It would be outside the tax net to tax an alleged bogus debtor of an alleged bogus liability unless it was any given point of time income of the assessee for the year in concern (copy of ledger attached) II. Reply to query no. 2 of remand report regarding purpose of loan of Rs. 60, 83,406/-. The assessee had submitted that secured loan of Rs. 60,83,406/- is a cash credit loan from Memom Co-op Bank Ltd. The loan is an old cash credit loan taken for the purpose of business. III. Reply to query no. 3 of remand report regarding addition of repayment of unsecured loan of Rs. 28, 32, 496/- The assessee had repaid an unsecured loan to the tune of Rs. 28, 32, 496/- The liability of Rs. 28, 32, 496/- is not a liability as on 31. 3. 2009. Repayment is done by account payee cheque and hence, the question of disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bmitted the ledger copy of five parties to whom we have sold goods and the payment so received from the five debtors was directly paid to M/s Pamix Tex P Ltd We have also mentioned the reason why the assessee had made payment to M/s Pamix Tex P LTd that the assessee firm was using full cash credit facilities of the bank and any deposit of such cross cheque received from debtors in the bank a/c of the assessee would amount to the bank reducing his excess overdraft and would also amount to delay of two days clearing time as during such period there always remains pressure from M/s Pamix Tex P Ltd to pay all dues immediately. VI Reply to query no. 7 of the remand report regarding requirement of section 41(1) Sec. 41(1) applies where a trading liability was allowed as a deduction in earlier year in computing business income and the assessee has obtained benefit in respect of such trading liability in later year by way of remission or cessation of the liability. In this regard, we would like to submit that the assessee had purchased goods from M/s Pamix Tex P Ltd in A Y 2006-07 and made whole payment of outstanding amount in subsequent years. This is not a case of remission or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovert or rebut the findings recorded by ld.CIT(A). Therefore, we find no reasons to interfere or deviate from the lawful findings so recorded by ld.CIT(A), thus we upheld the same and dismiss this ground of appeal. 14. Ground No.2: This ground raised by the Revenue challenging that the ld.CIT(A) has erred in deleting the addition of Rs. 28,32,496/- regarding unexplained repayment towards unsecured loans despite the fact that the sources and nature of the amount of repayment of the same were not proved despite repeated opportunities. 15. During the course of assessment proceedings the ld.Authorised Representative(AR) of the assessee asked to explain the source of repayment of unsecured loan of Rs. 28,32,496/- which was shown in preceding year but paid during the year under consideration. It was held by the ld.AO that the assessee firm or ld.AR of the assessee has not filed any explanation. And it was further held by the ld.AO that since neither the assessee nor the ld.AR could file any explanation or reply, therefore, it is clear that the assessee firm has paid the said amount from its undisclosed sources, therefore, an addition of Rs. 28,32,496/- was made by the AO on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of ld.CIT(A), accordingly same is upheld, consequently Ground No.2 of appeal of the Revenue is dismissed. 18. Ground No.3: This ground raised by the Revenue challenging that the ld.CIT(A) has erred in deleting the addition of Rs. 1,39,31,025/- in respect of unexplained advances to suppliers despite the fact the nature and genuineness of the transaction was not proved by the assessee either during the course of assessment proceedings or during the remand proceedings. 19. During the assessment proceedings the ld.AO held that the assessee has made repayment of unsecured loan which was outstanding in previous year, but not explained the source of repayment, therefore it is clear that the said amount was paid by the assessee firm from its undisclosed source or from conceal income for that reason penalty proceeding u/s.271(1)(c) of the IT Act was initiated separately. The ld.AO further stated that on verification of balance sheet it is found that the assessee has shown an amount of Rs. 1,39,31,025/- as Advance to Supplier. Therefore, during the course of assessment proceeding vide letter dated 29.11.2011 and vide order sheet entry dated 14.12.2011 the assessee was requested to sub ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment proceedings, the assessee could not furnish the list of suppliers to whom the firm had paid advances, thus, additions were made. Although, during the appellate proceedings the ld.CIT(A) has sought Remand Reports from the AO and after appreciating said factual findings had rightly concluded that in comments filed dated 01.08.2013 the assessee has mentioned that the above amount is not advanced to the supplier, but in fact debtors of the assessee and the audited report has wrongly mentioned it as advance to suppliers. Therefore, in such circumstances it was rightly concluded by the ld.CIT(A) the if AO doubted the source of these payments, the addition should have been made of the corresponding liability, which has been used to finance this advance. In any case, an item on the asset side of the balance sheet can be added in the hands of the assessee unless the corresponding liability to finance the asset has been brought found to be consequently the additions were rightly deleted. In the light of above, we do not find any infirmity in the order of ld.CIT(A), accordingly same is upheld, consequently Ground No.3 of appeal of the Revenue is dismissed. 23. In the result, appe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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