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TMI Blog2023 (10) TMI 400X X X X Extracts X X X X X X X X Extracts X X X X ..... ntity s book results as well as turnover have been found to be genuine in this tribunal s learned coordinate bench s order. The necessary corollary that flows therefrom is that once M/s. Blue Bird India Ltd., has been held to be a genuine entity which was seriously doubted so as to give rise to all these sec. 148/147 proceedings, we must necessarily hold that all the corresponding sale/purchase book results of these assessees must also deserve to be accepted in toto since not based on any other independent finding. That being the case, we must also hold that the learned lower authorities action, more particularly, that of the AO rejecting books as well as disallowing sec. 40A(3) cash purchases deserve to be upheld qua the latter issue only as these twin assessee s had themselves recorded the same in their returns submitted but also there is no justification of their part in justifying the respective cash purchases as per Rule 6DD. The very factual position continues before us as well as these twin assessee s identical endeavor is only to reduce the gross profit estimation than explaining the mitigating circumstances/business exigencies in making cash purchases. Faced with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. 4. The assessee s endeavor in this factual backdrop is that the CIT(A)'s identical action herein is not sustainable in law and on facts as he has assessed the impugned gross profit @ 2% which is highly exorbitant in case of accommodation entries whereas the department stand before us in it s corresponding three appeals is that the Assessing Officer had rightly made the respective disallowances hereinabove (supra) which deserve to be upheld in entirety. 5. We have given our thoughtful consideration to the foregoing vehement rival stands. The Revenue has placed this tribunal s learned coordinate bench s order in M/s. Blue Bird India Ltd. s case (supra) for the very twin assessment years 2005-06 and 2006-07 settling the issue at rest that the said latter entity had not engaged itself in any kind of accommodation entries. Shri Keyur Patel and Shri Ramnath P. Murkunde took us to the learned coordinate bench s order in Revenue s appeals ITA.Nos.674 964/PUN./2009 as well as assessee s cross-appeals ITA.No.900/PUN./2009 and C.O.No. 33/PUN./2010 in M/s. Blue Bird s case, decided on 06.09.2012 as under : ITA No. 674/PN/2009 (A.Y. 2005-06) ( By Revenue ) : 2. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... modus operandi adopted by the assessee and asked the assessee to explain why its books of accounts should not be treated as incorrect and incomplete. It was explained by the assessee that it had made purchases from various other parties also including the 4 parties named by the AO. The confirmation certificates from various creditors, various sundry debtors, Xerox copies of the purchase invoices duly verified by the bank authority before discounting the LCs in favour of the 4 parties were filed before the AO. The assessee has also made detailed submissions before the AO to the proposition that the entire purchases done by it is genuine and the books of accounts should not be rejected. 4. However, the AO was not satisfied with the explanation given by the assessee and rejected the books results. He enhanced the sales to Rs. 360 Crores and after adopting the GP rate of 15% made addition of Rs. 8,98,57,000/- being the difference between GP determined by him and the GP shown by the assessee by holding as under : 3.2 The above plea is not acceptable because : (i) The purchases in bulk have been made from four parties as mentioned above. These purchases are not fully veri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y are extracted below : (a) Turnover of our company is 330.79 Crores as against the turnover of Sundaram Multi Pap. Ltd. is 55.60 Crores. (b) Our company deals in various type of products such as note books, office stationery, print publication whereas Sundaram Multi Pap. Ltd. Co. deals in the note books and school paper stationery product. (c) Employee cost in case of our company is 1.79 Crore whereas in case of Sundaram Multi Pap Ltd. it is only 0.72 Crore. (d) Other manufacturing expenses in case of our company is 4.71 crore whereas in case of Sundaram Multi Pap Ltd. it is 3.10 crore. (e) Selling and administration expenses in case of our company is 8.83 Crore whereas in case of Sundaram Multi Pap. Ltd. it is 5.87 Crore. (f) Interest and finance charges in case of our company are at Rs. 6.28 Crores whereas in case of Sundaram Multi Pap. Ltd. it is 1.58 Crore. (g) The depreciation in case of our company is 1.08 crore wheras in case of Sundaram Multi Pap. Ltd. it is 0.42 Crore. (h) Net profit before tax in case of our company is 27.53 Crore whereas in the case of Sundaram Multi Pap. Ltd. it is 2.02 Crore in terms of percentage it works out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Swapnil Distributors Pvt. Ltd., be questioned in assessment proceedings of Blue Bird (India) Ltd? It is clear that the Assessing Officer s approach in this regard is contrary to the facts on records. Since the position of purchases from other three parties, namely Nairs Disttributors Pvt. Ltd., M/s. Dhansshree Enterprises and M/s. Laukik Paper Industries Pvt. Ltd. is the same as that in case of purchases from Swapnil Distributors, what is said about the purchases from Swapnil Distributors Pvt. Ltd. applies to purchases from these parties also. For reasons given in the appellate order dated 18-03-2008 passed by this office in the case of M/s.Swapnil Distributors Pvt. Ltd. in appeal No. PN/CIT(A)-/I/ ACIT, Rg-1/31/08-09, the Assessing Officer s conclusions regarding the genuineness of purchases made by Swapnil Distributors Pvt. Ltd. have been held to be unacceptable and additions made by the Assessing Officer in this regard have been deleted. Since the position is similar in respect of purchases from other three parties by the appellant, it is held that conclusions of this office in respect of purchase from Swapnil Distributors Pvt. Ltd., apply to those purchases also and Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sales to customers from various branches Any dealers network throughout the country Thus, the payments on account of export sales and sales from outside Maharastra parties have been received through cheque. Similarly, payment on account of sale to Govt. parties have been received through cheque. The sale which is unverifiable because of lack of address is the sale which has been made on credit in respect of which realization of sale proceeds is received in cash. In respect of such sales no material is adduced by the Assessing Officer to the effect that such sales has been understated, no instances of suppression of sale has been brought on record either by the learned Assessing Officer or by the special auditor. As mentioned hereinbefore, as per the report of the Special Auditor, the rate at which the assessee company has purchased the goods and sold them in the market are comparable and in line with the existing rates of similar commodities in the market. (v) As mentioned hereinbefore, the purchases in the case of Swapnil Distributors have been held to be genuine for the reasons given in the appellate order passed by this office on 18-03-2009 in case of Swapnil Dist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en from the financial websites rediffmoneywiz and moneycontrol.com . 4.3.3 During the course of appellant proceedings it was submitted that the business of the appellant is quite different from that of Sundaram Multi Pap Ltd. In view of this and in view of the fact that the assessee has made sales at comparable rate and market rate as is clearly mentioned by the Special Auditor in the Special Audit Report and the fact that the learned Assessing Officer failed to adduce any instances of unverifiable expenditure debited to the Profit Loss account and any instances of understatement or suppression of sales, there is no justification whatsoever for increasing the G.P. of the appellant from 12.97% to 15%. It is held that the Assessing Officer s action in this regard has no basis. 4.3.4 In view of the foregoing discussion, comments of the Special Auditor in the special audit report regarding manufacturing and trading account, purchases and sales of appellant being verifiable, quantitative details maintained by the appellant in respect of principal items of raw material and finished goods, submission of the appellant hereinbefore and material on record, there is no justificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... defective. He submitted that the assessee has maintained quantitative details of opening and closing stock of purchases, consumption of raw materials (Principal) and sale of finished goods both in terms of quality and value. No discrepancy in this regard has been detected during the course of special audit. Further the assessee sells the goods to Government agencies, Private Distributors and various Limited Companies. No action in the hands of any of the party has been taken by the AO. Most of the payments have been received through account payee cheques. Referring to the decisions reported in 129 ITD 1 (Third Member), 59 TTJ 698 and 30 TTJ 130 he submitted that sales cannot be enhanced unless the AO has corroborative evidence. He accordingly submitted that the order of the CIT(A) rejecting the enhancement of the sales by the AO is justified. 9. So far as the adoption of GP rate @15% he submitted that the case compared by the AO in the case of Sundaram Multi Pap Ltd. is not comparable with that of the assessee. Referring to Para 3.4 of the Assessment Order the learned counsel for the assessee drew the attention of the Bench to the distinctions between the assessee and Sundara ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (d) since sales have been made therefore purchases have been done but not from the parties whose name appear in the books and the purchases might have been done from some third parties in cash. 13. In view of the above, the AO came to the conclusion that the payments for the purchases made from some other parties other than the two parties shown by the assessee have been done out of unexplained/unaccounted sources to that parties prior to the date shown in the books of accounts. Thereafter the assessee has regularised such expenditure by showing the purchases. In view of the above, the AO made addition on account of investment in unexplained expenses and freight and handling charges and made addition of Rs. 1,01,50,000/- as per Para 7 of this order. 14. We find the learned CIT(A) after considering the statement of Sri Arun P. Madania, authorised person of Selection Mercantile Company Pvt. Ltd., Sri Ashok Pande, partner of Sahil Transport Company and Ramesh Padmanabhan, Chief Manager of Federal bank of India which was providing credit facilitates to Blue Bird India Pvt. Ltd. to whom the assessee has made sales accepted the purchases made by the assessee company as genui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss account are either unverifiable or bogus or there is under statement or suppression of sales or enhancement of purchases. Further the comparable case given by the AO in the case of Sundaram Multi Pap Ltd. is distinguishable in view of wide variation in turnover, employee cost, manufacturing expenses, selling and administrative expenses, interest and finance charges, depreciation on fixed assets, investment in inventories and share capital etc. which have been incorporated at Para 3.4 of the Assessment Order. Under these circumstances, we are of the considered opinion that the AO was not justified in enhancing the sales to Rs. 360 crores and adopting GP rate at 15% on the same. In this view of the matter and in view of the detailed order passed by the CIT(A) deleting the addition made by the AO, we find no infirmity in the order of the learned CIT(A) on this issue. Accordingly, the order of the CIT(A) is upheld and the grounds raised by the revenue are dismissed. 6. The Revenue further sought to buttress the point that the so far as the issue of sec. 40A(3) disallowance of cash purchases in all these cases is concerned, these twin assessee s had themselves declared the same ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective cash purchases as per Rule 6DD of the I.T. Rules, 1962. The very factual position continues before us as well as these twin assessee s identical endeavor is only to reduce the gross profit estimation than explaining the mitigating circumstances/business exigencies in making cash purchases. Faced with the situation, we conclude that these twin assessee s respective book results ought to be treated as genuine, which inturn, forms sufficient material for us to revive the Ld. Assessing Officer(s) identical action to the extent he had made sec. 40A(3) disallowance, involving varying sums, in all these cases. The Revenue s stand is partly accepted to this limited extent in all of it s instant three appeals ITA.Nos.72, 73 66/PUN./2021. 9. Learned counsel s again placed reliance on this tribunal s order in M/s. Laukik Paper Industries (P) Ltd., (supra) that only gross profit deserves to be estimated in case of accommodation entries. We don t deem it as a fit case for rejecting these twin assessee s book results for the purpose of holding that they are mere entry providers since all the relevant evidence(s) already form part of record. These twin assessee s as many cross app ..... X X X X Extracts X X X X X X X X Extracts X X X X
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