9911796707
TMI Blog2020 (8) TMI 235X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has shown sundry creditors of Rs. 2.35 crores which is almost 23% of the total purchase of Rs. 9.75 crores. Therefore, to get the clear and true picture of business activities of the assesseee, he issued notice u/s 133(6) to the sundry creditors and parties from whom heavy purchase have been made by the assessee company. He noted that most of them were returned back as unclaimed/left/no such person/no such address, etc. by the postal authorities. The AO gave the list of such persons/parties, the details of which are as under:- S. No. Party name Total Purchases during the year amount (Rs.) Sundry creditors for amounting Rs. Notice u/s 133(6) sent on letter returned - back on 01 Om Overseas 15,51,079/- 14,61,819/- 28.10.2015 04.11.2015 02 Gupta Trading Co. 1,60,29,348/- 53,62,350/- 28.10.2015 2.11.2015 03 Jindal Enterprises 1,99,68,491/- 69,50,867/- 28.10.2015 2.11.2015 04 Shree Ram Traders 11,71,740/- 11,00,000/- 28.10.2015 04.11.2015 05 Soraya paper and marketing pvt ltd 9,45,380/- 1,72,260/- 28.10.2015 Reply not received 06 Vipin sales india 96,96,336/- 54,50,000/- 28.10.2015 04.11.2015 07 Vishnu marketing 19,44,206/- 17,97,4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses should be added to the income of the assessee. Referring to various decisions, the AO estimated the GP @ 30% of the total unverifiable purchases of Rs. 5,75,55,073/-. However, taking into consideration the average GP for the last 3 years @ 3.16%, he adjusted the GP rate @ 27% of such unverifiable purchases and added back the amount of Rs. 1,55,39,870/-. 5. Before the CIT(A), the assessee challenged the action of the AO in making addition of Rs. 1,55,39,870/-. It was submitted that the company is registered with VAT department for VAT and Central Sales Tax Liability. The company filed before the AO its quarterly VAT returns, the monthwise/partywise sales details and purchase details. The company also filed the quantitative details of each item of purchase, sale, opening stock and closing stock. The company also filed the bank statements to substantiate that payments were made to the creditors against purchases. The gross profit of the above two years were also filed before the AO. Various details were brought to the notice of the CIT(A) substantiating that the purchases are genuine. It was submitted that the creditors have filed their confirmations and the assessee had made pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party 56,29,703/- 7,23,833/- Account finally sq off in AY 2014-15- Accepted by revenue 71-72 9. He submitted that this position has been accepted by the Revenue and the return filed by the assessee has been accepted although u/s 143(1). It was submitted that by the time the Inspector was deputed by the AO, the assessee had closed down its business. Further, the directors of the assessee company appeared before the AO in response to summons u/s 131(1) and their statements were recorded and they have confirmed the business activity of the assessee company. So far as the various allegations made by the AO in the body of the assessment order is concerned, the ld. Counsel rebutted each of the allegations. So far as the report of the Inspector that no business activity was noticed at the premises of the company is concerned, he submitted that the report of the Inspector is without any local witness. Further, the Inspector visited the spot on 25th January, 2016 and, by that time, the company had already closed its business and this fact was brought to the notice of the CIT(A). So far as the allegation of the AO that the report of the Inspector was confronted to the directors and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchases of Rs. 9.75 crores, the AO has accepted the purchases to the tune of Rs. 4 crore and has doubted only purchases of Rs. 5.75 meaning thereby that the assessee was in business. Further, the sales has been accepted and without purchases there could not have been any sales. Referring to various decisions, the ld. Counsel for the assessee submitted that the AO, without bringing on record any comparable instance and without considering the past records had made huge addition by estimating the profit at 30% on purchases which is highly an absurdity and without any basis and the ld.CIT(A) also was not justified in reducing the same to 25%. The ld. Counsel filed the following chart to substantiate the GP of the preceding and succeeding year which is as under: A.Y Gross Turn over Gross Profit G.P 2012-13( Immediately previous year) 3,48,63,147/- 7,29,765 2.9% 2013-14( Impunged Year) 9,93,23,196/- 30,75,363/- (better results) 3.10% accepted by AO 2014-15(nextyea) 8,62,24,688/- 36,92,4571- 4.28% 11. The ld. Counsel for the assessee, referring to the decision in the case CIT vs. Cavinkare Pvt. Ltd., 263 taxman 740 (Mad) submitted that the Hon'ble High Court has held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attention of the Bench to various defects pointed out by the AO. He submitted that the purchases shown by the assessee from various parties were proved by the AO to be non-genuine and bogus. Further, he has only made estimated addition of the GP at 27% which has been reduced by the CIT(A) to 25%. He submitted that under the peculiar facts and circumstances of this case, the addition sustained by the CIT(A) is fully justified and, therefore, the same should be upheld and the grounds raised by the assessee should be dismissed. 15. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and CIT(A) and the paper book filed on behalf of the assessee. We have also considered various decisions cited before us. We find, the AO, in the instant case, on the basis of non-reply to notice u/s 133(6) by the trade creditors and the report of the Inspector, found that the purchases to the tune of Rs. 5,75,55,703/- is unverifiable. Since, according to the AO, the entire purchase cannot or should not be added back and only the profit element embedded in such purchases should be added, after considering the average GP rate of last three years at 3. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no reopening of assessment u/s 147 or 263 has taken place. 17. We find, the Jaipur Bench of the Tribunal in the case of Kedia Exports Pvt. Ltd. (supra), has held that once the past year results have attained finality and not in dispute, the same can form the basis for estimating the GP rate for the current year. The rejection of books of account by invoking the provisions of section 145(3) of the Act shall lead to the estimation of income of the assessee based on some reasonable and proper criteria. The relevant observation of the Tribunal at para 14 reads as under:- "14. We have heard the rival contentions and perused the material available on record. For the year under consideration, the assessee has declared total turnover of Rs. 3,17,37,004/- with a gross profit of 10.04%. The A.O. has considered the purchases to the tune of Rs. 50,79,735/- made from these three parties as unverifiable. The A.O. consequently rejected the books of account of the assessee by invoking provisions of Section 145(3) of the Act and made disallowance of 25% of the aforesaid purchases. Hence, the A.O. has made addition of Rs. 12,69,933/-. Though, the assessee has challenged the action of the A.O. bef ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
