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TMI Blog2012 (8) TMI 1232X X X X Extracts X X X X X X X X Extracts X X X X ..... in Paper. The assessee filed its return of income declaring total income at Rs.72,300/- on 15-09-2005. A survey action u/s. 133A was carried out in the case of the assessee on 13-03-2007 and subsequently proceedings u/s. 147 were initiated. The company was also directed to get its accounts audited u/s. 142(2A) of the Income Tax Act and the auditors furnished their report to the AO on 11-04-2008. 3. During the assessment proceedings the AO noted that the assessee has made purchases of 288 Metric Tons of Paper costing Rs.99,89,840/- from the following two persons : 1. Komal Enterprises, 76, Keshavji Naik Road, Ist Floor, Masjid Bunder Road, Mumbai 400 009. Rs. 2,85,41,447/- 2. Pritam Enterprises, 30, Kaji Sayyed Street, Mumbai -400 009. Rs.1,04,40,94,343/- 4. The assessee claimed to have transported these goods by M/s. Sahil Transport Company. He further noted that all these purchases have been shown to have done only on two days, i.e. on 21-03-05 and 26-03-05. The payments have been done in cash thereafter on 29-03-05 and 30-03-05. The AO had certain doubts as to how the above mentioned two parties sold the goods and handed over its possession to the assessee without taking the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct as well as Central Sales Tax Act. (iv) Expenditure on account of transportation has been duly supported by bills and vouchers, which have been duly debited in the books of accounts. (v) Day to day qualitative stock is maintained. (vi) The sale consideration has been received through the letter of the credit (LC) issued by the BBIL. (vii) The bank that has cleared the LC has physically verified the stock before releasing payments against the LC, which is evident from the sale invoices bearing signature of the bank authority with a stamp of the bank. (viii) Following judicial pronouncements have been cited in favour of the assessee : J.R. Solvent Industries Pvt. Ltd., 68 ITD 65 (Chd) (TM) Balaji Textile Industries Industries Pvt. Ltd., Vs. ITO 49 ITD 177 (Bom) Satlej Cotton Mills Ltd. Vs. ACIT 96 Taxmann 22 (Del) Bansal Steel Rolling Mills Vs. ITO 96 Taxmann 29 (Del) CIT Vs. M.K. Brothers 163 ITR 249 (Guj) (ix) In view of above facts the assessee has requested that the purchases are genuine. 7. However, the AO was not satisfied with the explanation given by the assessee and made addition of Rs.1,01,50,000/- as unexplained investment/unaccounted purchases by holding as under : 3.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee s plea is accepted for the sake of discussion that it has LC before purchasing goods. In case the BBIL has mentioned the value, it means that it is deciding the sales and purchases of the assessee and the assessee is a front company of BBIL. It is surprising to note that the cash has never been withdrawn from the bank by the assessee. It has been withdrawn by one of the employee of BBIL as evident from the photocopy of the self-drawn cheques encashed from the bank. During the course of survey and post survey proceedings, Shri Ramakant Javalgekar has stated that it has given the duly signed self dawn cheques to the Shri Nitin Sontake, MD of the BBIL or Kishore Pilankar, an employee of the BBIL. Initially, it has been stated that these persons have never returned the cash after encashment of cheques but later this fact has been denied in the statements recorded in March 2007 in post survey proceedings. Thus it can be inferred that the so-called suppliers have not sold goods after perusing the LCs. Thus it can be inferred that the payments if required to be made, therefore, have been made at the time of purchases, in case sale has taken place from the parties shown in the boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, the purchases have been done but not from the parties whose name appears in the books. The purchases have been done from some third parties in cash. The payment thereof has been done out of unexplained/unaccounted sources to that parties prior to the date shown in the books of the accounts. Thereafter, the assessee has regularised such expenditure by showing the purchases in the name of the above suppliers as mentioned in Para 03 above. Thus the investment in the unexplained expenses and handling charges is being worked out. Since the quality and quantum of paper sold to the BBIL has been confirmed by the BBIL, therefore, these qualitative and quantitative details are being taken for working of the unexplained/unaccounted purchase price. The average market rate of the above mentioned quality paper and freight charges as shown in the bills of M/s. Tamilnadu Newsprint and paper Ltd and M/s. Anil Cargo Carriers respectively are being taken (These rate have been obtained from the BBIL) for working out the investment in the unexplained purchases. The investment in unexplained/unaccounted purchases of Offset while paper 166 Tons and Maplitha white paper 122 Tons @ prevailing market p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sonable opportunities for producing any material in support of its claim relating to genuineness of purchases. The learned Assessing Officer has also provided sufficient opportunity to the appellant for placing its contentions before him. Taking into account all these aspects of the matter and material on record, it is held that the appellant s case does not come within the purview of sub-clause (c) and or (d) of clause (1) of Rule 46A of the Income Tax Rules , 1962. Accordingly, it is held that the additional evidence submitted by the appellant is not admissible within the meaning of sub-clause(c) and (d) of rule clause (1) of rule 46A of the I.T. Rules, 1962 and accordingly, rejected. 4.5 As regards the issue of addition on account unaccounted/unexplained purchases, from the perusal of material on record, following aspects emerge: (i) It is claim of the appellant that it has made the purchases from the following two parties for which payments have been made in cash and are duly recorded in books of accounts : (a) Selection mercantile Co. Pvt. Ltd. : Rs.74,90,840/- (b) Takshil Trading Pvt. Ltd. : Rs.24,99,000/- These purchases are duly supported by purchases invoices containing de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -07-2007. 2. I had been carrying out my business as transporter carrier from the place at the premises of Associated Trader Engineering at 4th Floor, Shammik Chambers, Baroch Street, Bombay 400 009. The copy of telephone bill 9MTNL) of the year 1999 is enclosed. 3. The copy of purchase order of Lloyds Steel Industries Ltd. Mumbai dated 25th May 1999 in my name (Sahil Transporter Company) on the address mentioned in Para 2 above is enclosed. 4. Copy of PAN Card is enclosed. 5. My business is being run from new address where name board of Sahil Transport is already in existence. Photograph of the same has already been produced before you today. From the foregoing, I feel that I have sufficiently proved before you by presenting the various documents as evidence, my genuineness as an individual as well as a transporter. iv) During the course of assessment proceedings, Shri Ramesh Padmanabhan, Chief Manager of Federal Bank of India which was providing credit facilities to Blue Bird (I) Ltd. to whom appellant has made sales of goods purchased from the aforesaid two parties was examined by the learned Assessing Officer u/s .131 of the Income Tax Act, 1961 and his statement was recorded. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i. The case of the appellant was subjected to special audit u/s.142(2A) and the issue relating to genuineness of purchases of the appellant has been examined by the special auditor. According to the special auditor, the purchases effected by the appellant company and its corresponding sale are genuine and duly supported by evidences. The extracts from the report of the Special Auditor have been reproduced herein before. vii. It is clear from Para 3.1 of the assessment order that all these purchases have been made within a period of five days and payments have been made thereafter. Now, the credit of a few days cannot be said to be extra ordinary and is in normal of business. In view of this, the AO s comments regarding sale of goods on credit of a few days are held as unjustified. 4.5.1 The learned Assessing Officer has pointed out some inconsistencies and has derived adverse inference from these inconsistencies for coming to the conclusion that the purchases have been made in cash from parties other than Selection Mercantile Co. Ltd. and Takshil Trading Pvt. Ltd. In this regard, it may be mentioned that the fact of purchase of goods from the two companies is clearly recorded in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies prior to the date shown in the books of accounts. 3. The order of the CIT(A) may be vacated and that of the AO restored. 4. The appellant craves leave to add, amend, alter any of the above grounds of appeal. 10. The learned DR heavily relied on the order of the AO. He submitted that the AO had conclusively proved that the assessee had not purchased goods from the so called two concerns but might have purchased from some other parties in cash and supplied the goods to an associate concern. The whole exercise is a colourable one and the learned CIT(A) was not justified in deleting the addition made by the AO on account of investment in unaccounted purchases. 11. The learned counsel for the assessee on the other hand heavily relied on the order of the CIT(A). He submitted that the assessee is a trader in papers and this is the very first year of its operation. The assessee has conclusively proved the genuineness of the purchases by producing the persons from whom purchases have been made, by producing the transporter through whom goods have been transported, by producing the Manager of the Bank who has cleared the LC and who has physically verified the goods before releasing the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2(2A) who have mentioned that the purchases effected by the assessee company as well as the corresponding sales are genuine and are duly supported by evidences. Under these circumstances and in view of the detailed order passed by the learned CIT(A) which has already extracted at para 8 of this order we find no infirmity in the same. Accordingly, we uphold the same and the grounds raised by the assessee are dismissed. CO No. 30/PN/2010 (By assessee A.Y. 2005-06 ) : 15. Grounds raised by the assessee in the CO are as under : 1. The learned CIT(A) erred in confirming the addition made u/s. 40A(3) of Rs.19,97,986/- without appreciating that the addition was not warranted on the facts of the case. 2. The learned CIT(A) erred in confirming the addition of Rs. 96,000/- made u/s .69C of the Act. 3. The learned CIT(A) erred in confirming the addition of Rs. 20,000/- being salary paid to Mrs. Anjali Javalgekar. 4. The learned CIT(A) erred in confirming of Rs. 5,000/- u/s. 69C of the Act. 16. The learned counsel for the assessee at the time of hearing was not very serious about the CO filed by the assessee. We, therefore, do not find any infirmity in the order of the CIT(A) confirming the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) submitted that he has no objection if the matter is restored to the file of the AO for deciding the issue afresh and in accordance with law. 22. We have considered the rival arguments made by both the sides. In this case additions have been made on account of non-deduction of tax from the freight payment. It is the submission of the learned counsel for the assessee that all the payments have been made before the close of the accounting year for which no disallowance u/s. 40(a)(ia) can be made in view of the decision of the Visakhapatnam Special Bench of the Tribunal in the case of Merilyn Shipping and Transport (Supra) and this fact can be verified by the AO if the matter is restored to his file. Under these circumstances, we are of the considered opinion that the matter requires verification at the level of the AO. We, therefore, deem it proper to restore the issue to the file of the AO with the direction to verify the dates of payment and decide the issue afresh in the light of the Visakhapatnam Special Bench of the Tribunal in the case of Merilyn Shipping and Transport (Supra) and in accordance with law after giving due opportunity of being heard to the assessee. We h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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