9911796707
TMI Blog2023 (4) TMI 367X X X X Extracts X X X X X X X X Extracts X X X X ..... ee to submit reconciliation statement, showing differences and items of differences, between audited books of accounts and unaudited books of accounts at survey, about stock and cash in hand. One more opportunity should be given to the assessee to explain the differences in stock and cash in hand, hence this issue may be remitted back to the file of the assessing officer for limited purpose to examine the reconciliation statement. The assessee is directed to submit before the assessing officer, the reconciliation statement, showing differences and items of differences, between audited books of accounts and unaudited books of accounts at survey, about stock and cash in hand. For statistical purposes, the ground no.1 of the assessee is treated as allowed. Rejection of books of accounts u/s 145(3) - assessee submitted that books of accounts of the assessee were audited and the AO without pointing out any mistake in the audited books of accounts rejected the books of accounts u/s 145(3) - HELD THAT:- As during survey unaccounted stock and cash was detected by the survey team which remained to be explained and incorporated in the books coupled with unverifiable purchase rend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of alleged unaccounted stock or goods/investments and unaccounted cash to the extent of Rs.1,20,99,549/- and Rs.4,06,485/- respectively, without considering the right and proper perspectives the explanations substantiated by the cogent, credible and authentic evidences along with the audited books of accounts placed on the records of the AO to establish the fact of non-existence of any unaccounted stock or goods and/or cash and hence, liable to be quashed. (2) On the facts and in the circumstances of the case as well in law, the CIT (Appeals)-1, Surat erred in confirming the action of the AO to invoke the provisions of Section 145(3) of the Act to reject the audited books of accounts, without pointing out any specific defect or discrepancy in the books of accounts and method of accounting consistently followed by the appellant and hence, liable to be struck down. (3) On the facts and in the circumstances of the case as well in law, the CIT (Appeals)-1, Surat erred in confirming the addition made by the AO on account of alleged unaccounted purchases of goods to the extent of Rs. 54,26,422/- and hence, not justified. (4) On the facts and in the circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/- per meter of Rs.1,85,23,187/-. As per written submission made by your authorized representative in my office on 10.12.2012, you have included details of stock of cloth at item no. (3) of 112 are details on page no.6 of covering letter. As per details which are numbered from page 1 to 335, page no. 25 to 30 covers the details of stock maintained by you from 01.04.2009 to 31.03.2010 under the head of General Stock Register (meters) . It shows the stock of cloth in meters maintained day to day basis of; opening stock, Grey cloth purchase, cloth sent to mill for processing and balance of stock of cloth on each day. More particularly on page no. 30 of stock register as referred above, the stock of cloth as on 17.02.2010 20.02.2010 is reflected of at 3,12,878.13 meters. During the course of survey proceedings you have disposed on oath that there, was stock of Rs.1,85,23,187/- which comes to 11,57,699 meters at the rate of Rs. 16 per .meter as acknowledged by you in inventory S.F. 1/1 signed by you on that day. In this way, your stock of cloth was 11,57,699 meters on the day of survey i.e. on 18.02.2010. Your stock of same day i.e. 17.02.2010 and 20.02.2010 shows the total stock of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d figure). In support of retraction made by the assessee in his Affidavit, the complete set of books of accounts are produced herewith for verification of the day to day purchase of raw materials and finished goods, the raw materials i.e. Grey Cloth sent to milts for printing, day to day the finished goods returned back from the mills, sales of finished goods recorded day to day and accordingly the closing stock of Grey Cloth and finished goods at the time of survey as also at the end of the financial year. In furtherance to his retraction, I am also furnishing herewith all the purchase bills, gate passes, challans as also payments made for purchases from various parties and job work charges for the value addition work of printing done by the mills. Thus, form the above record, which was available on the very day of survey, proves beyond doubt that there is no purchases made outside the books of accounts and hence, there is no case of investment in alleged unaccounted stock of goods. As a matter of fact, the Question No. 14 itself is a vague and baseless in as much as the concerned authorized officer has referred the actual stock in quantity and its quality as per books of accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acity of the godown and also the shop is not at all sufficient to store physically stock of the goods of the quantity derived by the authorized officers at 19,13,921 mtrs. (as per Annex. SF 1/1) so as to reach the figure of disclosure at their desired level. V. The rate mater taken at Rs.16/- taken for all kinds of stock of goods is also baseless and more speculation of the authorized officers, moresowhen there is no evidence found during the course of survey as to the sale of finished goods (ready suits) at the rate of Rs.16/- per meter nor any evidence available with the officers as to the same rate of Rs.16 per Mtr. applied for grey cloth (Taka) of 14,24,196 Mtrs. As a matter of fact, from the purchase bills and sales bills furnished herewith, you will find the true fact as to the rate per Mtr. which is very below the speculative rate of Rs.16/- per Mtrs. taken by the Authorized officers. These itself proves beyond doubt that the disclosure obtained by the authorized officers is in the garb of unaccounted investment in stock of goods and unaccounted cash. In the light of the above illegalities, I have to request you to consider in the true and right perspectives the regula ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rimary evidences which are still available on record and copies of same are given to assessee, if demanded as per law. Now these primary evidences cannot be disowned/altered or misrepresented by making an affidavit as in case of assessee. The main issue of an affidavit is that disclosure of unaccounted income was made forcefully. The contention made through an affidavit is not acceptable because in any case, person has grievance, then he will not keep silence and make such deposition after 822 days. In this situation an affidavit made after 822 days is nothing but after thought and no evidential value to take note of it. This affidavit is selfserving statement on part of assessee. While offering explanation in respect of unaccounted stock, reply dated 15.03.2013 assessee states that the assessee retracted the statement given on 19th Feb 2010 which is not found acceptable for reasons described in foregoing paras. The other contentions of having made that no purchase out of books, statement under undue coercion, mental torture, threaten and harassment have remained only allegations to brush aside tax liability. 7. The assessing officer noted that all legal procedure of impounding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... below: 7.1.1 Considering the factual matrix of the case, I find that statement was made voluntarily having no traces of threat or coercion and based on discrepancies notices at the time of survey about excess stock cash. No timely retraction was made by AO or rather no grievance against irregularity or coercion has been expressed except filing an affidavit after 822 days of survey. Above all in the affidavit the assessee has made scores of allegation without having produced any corroborative evidence to back them up, so affidavit is nothing but a self-serving document devised by assessee to avoid his legitimate tax liability. Inventory of cash stock prepared at the time of survey was duly confronted to the assessee at the time of survey he only made a voluntary disclosure of income, so there is no violation of Board's instruction F.No.286/2/2003 IT (Inv.II). At the time of survey, admittedly books were incomplete [Q.N0.6 9] and therefore, subsequently were prepared audited will not help the cause of the assessee. The very fact that excess stock cash found at the time of survey has not been incorporated in the books of a/c will make these (books) unreliable inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts, vide decision of the apex court in Pulkngode Rubber Produce Co. Ltd. v. State of Kerala [1973] 91 ITR 18 ; (ii) In contradistinction to the power under section 133A, section 132(4) of the Income-tax Act enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Income-tax Act. On the other hand, whatever statement is recorded under section 133A of the Income-tax Act is not given any evidentiary value obviously for the reason that the officer is not authorised to administer oath and to take any sworn statement which alone has evidentiary value as contemplated under law, vide Paul Mathews and Sons v. CIT [2003] 263 ITR 101 (Ker.); (iii) The expression such other materials or Information as are available with the Assessing Officer contained in section 158BB of the Incometax Act, 1961, would include the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcess cash, there should not be any addition. The Ld. Counsel also stated that cash book was not prepared up to the date of survey, therefore it was an excess cash. The Ld. Counsel also stated that audited books of accounts were produced before the Assessing Officer during the assessment proceedings and the Assessing Officer did not find any mistake so far excess cash of Rs.4,06,485/- is concerned, therefore there should not be addition on account of excess cash. Besides, Ld. Counsel also submitted that in so far excess cash of Rs.4,06,485/- is concerned, the department does not have power to take statement on oath. 17. On the other hand, Learned Departmental Representative (Ld. DR) for the Revenue submitted that Assessing Officer can take a statement during the survey proceedings; however there is a bar to take statement on oath. That is, to take statement is permitted, but statement on oath is not permitted. However, just to administrate the oath at the time of taking the statement does not vitiate the contents of the statement. No doubt, there is no provision in section 133A of the Act to take a statement on oath, however there is a provision to take statement and just becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whereas ld CIT(A) sustained addition based on retraction of the statement. The ld DR pointed out that both the lower authorities made/sustained addition based on documents and evidences and based on retraction of statement. Both the authorities, in their respective orders, have discussed the issue based on documents and evidences and based on retraction of statement. Thus, Ld. DR pointed out that issue of retraction of statement was there before the Assessing Officer and as well as before ld CIT(A), hence Ld. CIT(A) has not taken different stand. The Ld. DR pointed out that Ld. CIT(A) has also discussed the documents and evidences, in his order, which is evident with para para 7.1.1, the ld. CIT(A), wherein he held as follows: .Inventory of cash stock prepared at the time of survey was duly confronted to the assessee at the time of survey he only made a voluntary disclosure of income, so there is no violation of Board s instruction F. No. 286/2/2003- IT(Inv.II). At the time of survey, admittedly books were incomplete [Q.No.6 9] and therefore, subsequently books of a/cs were prepared audited will not help the cause of the assessee .. 20. Therefore, Ld. DR pointed o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wash. Hence we do not agree with the argument of ld Counsel to the effect that restriction was not made at earlier stage because in assessee s family, a relative had died and the responsible person who is going to retracted the statement got disturbance and therefore delay has occurred to retract the statement . Hence, we are of the view that such restriction is invalid. 23. We note that Hon`ble Supreme Court in the case of Dr. Partap Singh v. Director of Enforcement 155 ITR 166(SC) held that illegality of the search does not vitiate the evidence collected during such illegal search. The Hon`ble Supreme Court in the case of Pooran Mal v. Director of Inspection (Inv.) 93 ITR 505 (SC) held that even though the search and seizure were in contravention of provision of section 132, material seized would liable to be used against person from whose custody it was seized. Hence, the documents found in survey can be used against assessee even if statement on oath is retracted by the assessee. In assessee`s case the addition was made by AO based on the documents and evidences collected during survey.We also note that such admission on oath can be retracted by the assessee only if the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... resh on merits in accordance with law. The assessee is directed to submit before the assessing officer, the reconciliation statement, showing differences and items of differences, between audited books of accounts and unaudited books of accounts at survey, about stock and cash in hand. For statistical purposes, the ground no.1 of the assessee is treated as allowed. 26. In the result, ground no.1 raised by the assessee is allowed for statistical purposes. 27. Ground No.2 raised by the assessee relates to rejection of books of accounts under section 145(3) of the Act. 28. We have heard both the parties. The Ld. Counsel for the assessee submitted that books of accounts of the assessee were audited and the Assessing Officer without pointing out any mistake in the audited books of accounts rejected the books of accounts under section 145(3) of the Act which is not tenable in the eye of law. On the other hand, Ld. DR for the Revenue submitted that during the course of survey unaccounted stock and cash were deducted by the survey team which remained to be explained and incorporated in the books of accounts. Besides, there were unverified purchases in the case of the assessee whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer on account of alleged unaccounted purchase of goods of Rs.54,26,422/-. 31. Brief facts qua the issue are that for verification of purchases of grey cloth i.e. raw material of business, notices u/s 133(6) of the I.T. Act, 1961 were issued. Out of these, in 36 cases notices returned unserved by postal authorities and in 50 cases the notices u/s 133(6) were served but there was no confirmation from each party. In view of these, assessee was asked to explain the same vide AO notice dated 04.03.2013. In response to show cause notice for unexplained amount of expenses of purchases, the submission dated 16.03.2013 furnished copies of ledgers of parties from whom purchases are made. These details are from page no. 26 to 71 of submission. It is pertinent to note that there is no copy of bank statement provided by the assessee in which name of party who sold the grey cloth and accepted payment through cross account payee cheque or draft is reflected in it. From the copy of ledger from the books of assessee no conclusion can be drawn for satisfying the genuineness of transactions. The copies of ledgers are signed by assessee only and not by the party who sold grey cloth to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. Shree Sankheswer Syndicate Rs. 3,81,240/- 4. Jay Veer Textiles Rs. 3,84,948/- 5. Pramukh Enterprise Rs. 5,27,686/- 6. Jay Veer Fabrics Rs. 5,70, 588/- 7. Ambica Fabrics Rs. 2,57, 397/- 8. Jay Fabrics Rs. 2,55,720/- Total Rs.28,82,709/- (i)Amount of purchases proposed to be disallowed vide show cause notice dated 04.03.2013 Rs.5,12,93,518/- (ii)Considered as 10 confirmations received from party of Purchases from the date of issue of show cause till date of order. Rs.47,98,575/- (iii)Considered on account of written submission made on 18.03.2013 Rs.28,82,709/- Therefore, assessing officer made net disallowance at (Rs.5,12,93,518 - Rs.47,98,575- Rs.28,82,709 ) Rs.4,36,12,234/- 32. On appeal, the ld. CIT(A) has corrected apparent mistak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat books of a/cs were incomplete, and not showing true/correct affairs of the business therefore and as already upheld by me the action of the AO in rejecting the book results by invoking the provision of Sec. 145(3) of the Act was fully justified. 10.3 Before me, Id. AR has claimed that the assessee not only produced/ furnished purchase Bills, Ledger A/c copies, delivery challans, Name Address of parties with PAN confirmation but also filed copies of cheques (before me as addl. evidence) to prove that payments were made by A/c payee cheque. On being enquired by AO in remand proceedings from concerned Bank about the name of party. Bank A/c No., Name Branch of Bank in whose a/c these cheques ultimately got deposited, State Bank of Patiala informed the names of party, Name of Bank Branch without A/c No. The AO has enclosed the copy of Bank's reply with Remand Report wherein he has mentioned that Bank has not confirmed the payment details about 5 parties aggregating payments of Rs.9,22,624/-. Thus claim of the appellant is not entirely true. On the other hand, since the AO issued notices u/s,133{6) of the Act, he has all the more reason to doubt the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns that the AO could not complete his verification about the genuineness of purchases. In respect of payments by account payee cheques, the necessary information except 5 parties to whom Rs.9,22,624/- was paid have been filed by the assessee. From verification of material available on record, copies of confirmation were not found. Merely because purchase Bills, invoices. Purchase Register have been produced before AO (which he has denied), the ingenuine .purchase cannot ipso facto becomes genuine. Ld.AR has also misdirected himself while alleging that AO wrongly applied provision of 69C. In fact AO has nowhere referred about this section and in fact made disallowance out of purchases treating them unverifiable. Finding of excess stock cash by itself is good ground for rejection of books of a/c especially when such excess stock cash has not been incorporated in the books. Hence, the action of the AO u/s. 145(3) of the Act was rightly held justified in earlier paras. The books of accounts found at the time of survey were incomplete these books have been prepared subsequently; therefore, not finding any discrepancy has a very little significance. It was held in the case of ACIT Vs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (i) M/s. Bholanath Poly Fab P. Ltd. Vs. ITO in ITA No. 137/Ahd/2009 (ii) M/s. Raj Exports Vs. ACIT, in ITA No. 1827/Ahd/2005 (iii) M/s. Sanket Steel Traders Vs. ITO, in ITA No. 2801/And/2008 (iv) Smt Sajjandevi B. Jain Vs. ITO, OSD-1, in ITA No. 609/And/2009 (v) ACIT Vs. Kulubi Steel, in ITA No. 1568/And/2008 10.6 In the case of Viiay Proteins Ltd. (supra) a large number of adverse facts were brought on record, namely, that blank bill books and signed cheque books of a number of persons were found and seized from the assessee. Besides this, in that case payments were made by cross cheques and not by account payee cheques and it was established that cheques were encashed by party itself and accordingly money had come back to the assessee. No such extreme adverse facts are present in the case under It was held that in such circumstances, onus to prove purchases was on the assessee, which could be discharged 'strong, cogent and clinching evidence in view of denial by all the parties and-coupled with other circumstantial evidences. Yet, it was held that the whole amount could not be treated as undisclosed income as the material had been received by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CAS-II/58/TRFD/11-12 14.02.2013 (d) M/s. Rameshchandra I. Gandhi 2003-04 CAS-II/TFR/126/13-14 24.02.2014 (e) M/s. Sundry Exports Ltd. 2003-04 CAS-II/49/TFRD/12-13 24.12.2012 10.9 It is pertinent to refer to the decisions of jurisdictional High Court in the case of GIT Vs. Sathyanarayan P. Rathi (Guj) 351 ITR 150 CIT Vs. Bholanath Poly Fab Pvt. Ltd. (2013) 355 ITR 290 (Guj) wherein it was held that based on facts on record, the Hon'ble ITAT came to right conclusion that the assessee did purchases goods sold them, therefore, as a natural corollary, not the entire amount covered under such purchases but the profit element embedded therein would be subjected to tax. It was held that parties had not supplied the goods as named by the assessee but were purchased from open market. The Hon'ble High Court upheld the disallowance sustained by Hon'ble ITAT @ 12.5% out of such purchase amount observing that there was no reason to interfere in the order of ITAT. Hence, the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee to produce these parties, before the Assessing Officer to establish the genuineness of the purchases. None of the parties was produced by the assessee before the Assessing Officer, therefore genuineness of the transactions are not proved. The ld. DR also stated that Ld. CIT(A) has confirmed the addition at the rate of 12.5% which is quite reasonable in the case of bogus purchases, therefore order of the ld. CIT(A) should be upheld. 35. We have heard both the parties. We note that Co-ordinate Bench of ITAT, Surat in the case of Pankaj K. Chaudhary, in ITA No.1152/AHD/2017, dated 27.10.2021 has sustained the addition on bogus purchase/unverified purchases at the rate of 6% of the bogus purchases. The finding of the Co-ordinate Bench is reproduced below: 12. We have heard the submission of ld.CIT-DR for the Revenue and the ld. Authorised Representative (AR) of the assessee. We have also gone through the various documentary evidences furnished by assessee. The ld. CIT-DR for the Revenue supported the order of AO. The ld. CIT-DR submits that Investigation Wing, Mumbai made a search on Bhanwarlal Jain Group. During the search and after search, the Investigation Wing made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made any independent investigation. The AO reopened the case of the assessee on the basis of third party information without making any preliminary investigation. The AO received vague information about providing accommodation entry by Bhanwarlal Jain Group. No specific information about the accommodation entry obtained by assessee was received by AO. There is no live link between the reasons recorded qua the assessee. Therefore, the re-opening is invalid and all subsequent action is liable to be set aside. 15. On account of additions of bogus purchases, the ld.AR submits that in the original assessment, the assessee filed its complete details of purchases to prove the genuineness of expenses. The AO accepted the same in the assessment order passed under section 143(3) on 10.03.2009. During re-assessment, the assessee again furnished complete details about the genuineness of purchases. The assessee filed confirmation purchases invoices, accounts of the parties, bank statement of assessee showing transaction to the banking channel. The AO has not made any comment on the documentary evidence furnished by assessee. The AO solely relied upon the statement of third party and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve considered the submissions of the parties and have gone through the order of the lower authorities. We have also deliberated on each and every case laws relied by both the parties. We have also examined the financial statement of all the assessee(s) consisting of computation of income and audit report. We have also gone through the documentary evidences furnished in all cases. Ground No.1 in assessee s appeal relates to the validity of reopening. The ld AR for the assessee vehemently argued that the AO reopened the case of the assessee on the basis of third party information, and without making any preliminary investigation, which was vague about the alleged accommodation entry by Bhanwarlal Jain Group. And that there was no specific information about the accommodation entry availed by the assessee. There is no live link between the reasons recorded qua the assessee. We find that the assessee has raised objection against the validity of the reopening before the AO. The objections of the assessee was duly disposed by AO in his order dated 09.02.2015. The assessee raised ground of appeal before ld CIT(A) while assailing the order of AO on reopening. The ld CIT(A) while considering ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estigation wing Mumbai. No independent investigation was carried by the AO. The AO has not disputed the sale of the assessee. The AO made no comment on the evidences furnished by the assessee. We further find that ld CIT(A), while considering the submissions of the assessee accepted the lapses on the part of the AO and noted that no sale is possible in absence of purchases. The Books of the assessee was not rejected by the AO. The ld CIT(A) on further examination of the facts and various legal submissions find that Ahmedabad Tribunal in Bholanath Poly Fab Private Limited (supra) held that in the such cases the addition of bogus purchases was sustained to the extent of 12%, on the observation that the assessee may have made purchases from elsewhere and obtained the bills from impugned supplier to inflate Gross Profit Rate. The ld CIT(A) by considering the overall facts, concluded that the 100% disallowance of purchase is not justified. We also find that the ld.CIT(A) also considered the decision of jurisdictional High Court in Mayank Diamonds Pvt. Ltd. (supra) and compared the fact of the present case with the facts in Mayank Diamonds Pvt Ltd (supra) and noted that assessee in that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the disputed transaction, to prevent the possibility of revenue leakage. Therefore, considering overall facts and circumstances of the present case, we are of the view that disallowances @ 6% of impugned purchases / disputed purchases would be sufficient to meet the possibility of revenue leakage. In the result the ground No. 2 of appeal raised by the assessee is partly allowed and the grounds of appeal raised by revenue are dismissed. 22. In the result the appeal of revenue is dismissed and the appeal of the assessee is partly allowed. 36. Therefore, respectfully following the binding precedent of Co-ordinate Bench (supra), we are of the view that addition should be sustained at the rate of 6% of bogus purchases instead of 12.5% of the bogus purchases. Therefore, we direct the Assessing Officer to sustain addition @ 6% of bogus purchases. 37. In the result, ground no.3 raised by assessee is partly allowed. 38. Ground No.4 raised by the assessee relates to addition to Rs.19,46,000/-, on account of unexplained cash credit under section 68 of the Act. 39. The Ld. Counsel for the assessee, at the time of hearing submitted that all loans were repaid in the sub ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
