TMI Blog2010 (12) TMI 1108X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of purchases held by the AO as non-genuine. The AO, during the assessment proceedings, noted that the assessee had declared gross profit of ₹ 4,56,44,561/- on a total turnover of ₹ 28,28,88,493/- which gave a gross profit rate of 16.13% against gross profit rate of 10.81 on total turnover of ₹ 26,44,25,962/- in the immediately preceding year. The AO asked the assessee to submit details of purchases exceeding ₹ 2,00,000/- in each case with names and addresses, which were given by the assessee vide letter dated 19-10-2005. The AO, thereafter, issued notices u/s.133(6) of the I.T. Act to the said parties with a view to verify the genuineness of the purchases but the same were returned by the postal authorities with the remark not known or left . The AO, therefore, asked the assessee vide letter dated 25-01-2006 to produce the parties for verification. As per the AO, the assessee sought adjournment to 10-02-2006 vide letter dated 03-02-2006, which was allowed. But, there was no compliance by the assessee and the parties were not produced for verification. The AO, therefore, listed 10 parties in which cases there were discrepancies or the assessee ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 13.12.2005 was returned unserved with the remark left . A letter dated 25.01.2006 was issued to the assessee highlighting the list of parties to whom the notices could not be served and requesting them to produce the said parties for verification. But the assessee failed to produce and/or to provide the present address of many of these parties including M/s. Komal Enterprise. A summons was issued to the party s banker HDFC Bank who by their letter dated 13.03.2006 replied enclosing copy of the account opening form. The proprietor of M/s. Komal Enterprise was shown as Shri Pradeep S. Sharma of 50/56, Sutar Chawl, 2 nd floor, Zaveri Bazar, Mumbai-2 and the introducer was Shri P.S. Sharma (i.e. the same party) who is also proprietor of M/s.Venus Enterprises and the accounting opening form shows that cheque of ₹ 40,000/- was drawn on Venus Enterprises and deposited to open this account. 6 Amar Corporation Rs.5,00,500/- Notice u/s.133(6) issued on 13.12.2005 was returned unserved with the remark not known . A letter dated 25.01.200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned unserved with the remark not known . A letter dated 25.01.2006 was issued to the assessee highlighting the list of parties to whom the notices could not be served and requesting them to produce the said parties for verification. But the assessee failed to produce and/or to provide the present address of many of these parties including M/s. Veena Mercantile (P) Ltd. Shri N.D. Vyas (proprietor of Poonam Enterprises) is a Director of this company along with Mr. R.K. Shah. This office requested the bank to supply copy of the bank account and the same was verified with certain transactions of this party with the assessee. It is seen that in most of the cases, the money is withdrawn immediately after deposit . Also some of the transactions of the assessee are not reflected in the bank account which means that bearer cheques were issued and encashed. 10 M/s.Dimple Metal Corporation Rs.19,07,595/- Despite issuing notice as per the new address furnished by the assessee, none appeared . As per the opening form obtained from the banker of the party it is seen that th sole proprietor of the firm is Shri P.C. Jain. But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons of the assessee such as those in the case of M/s. Veera Mercantile P.Ltd. were not reflected in the bank account of supplier, the assessee explained that the account payee cheques need not necessarily be deposited in the same account and might have been deposited in some other account for unauthorisedly encashing the account payee cheques. This, therefore, did not prove that the assessee had not made any purchases. The CIT(A) also observed that in case the AO thought that the cheques were not account payee, he could make direct enquiries from the bank, and in case some adverse things were noticed, the AO could always take action u/s.147/148 of the I.T. Act. But, there was no case made out against the assessee on the basis of the enquiries made. The CIT(A), therefore, held that no addition could be made on account of non-genuine purchases and deleted the addition made by the assessee, aggrieved by which the Revenue is in appeal before the Tribunal. 3.4. Before us, the ld. D.R. appearing for the Revenue assailed the order of CIT(A). It was argued that the burden was on the assessee to prove the genuineness of the purchases which had not been discharged by the assessee. The pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the immediate preceding year. There was thus no justification for making any addition in the case of the assessee. The learned A.R. placed reliance on the following decisions in support of his case : (i) 297 ITR 441 (SC) in the case of Anis Ahmed Sons vs. CIT. (ii) 163 ITR 249 (Guj.) in the case of M.K. Brokers. (iii) 49 ITD 177 (Bom.) in the case of Balaji Textile Industries P.Ltd. v. ITO. 3.6 We have perused the records and considered the rival contentions carefully. The dispute is regarding the addition made by the AO on account of certain purchases held as non-genuine. The parties in respect of which the purchases were held as non-genuine are listed at serial nos. 3 to 10 in para 3 earlier. The reason given by the AO for the disallowance of purchases as non-genuine was that the letters issued to the parties had returned unserved and the assessee could not provide the current addresses nor produce the parties. In the cases of serial nos.9 and 10, the AO also noted that the amounts deposited in the bank account of the sellers had been immediately withdrawn in cash and that some of the transactions with the assessee were not reflected in the bank account of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s that it was a commission agent and not a trader. To verify the matter, the AO had issued summons to 10 parties, 5 of which confirmed that the assessee was a commission agent. The remaining 5 parties did not appear as the summons could not be served on them. The AO, therefore, treated the transactions in respect of these 5 parties as traders. But, this was not upheld by the Hon ble Supreme Court on the ground that no adverse inference can be drawn against the assessee due to non-appearance of 5 parties as summons had not been served on them. 3.8 The ld. D.R. has relied on certain judgments which, in our view, are distinguishable. The judgment of Hon ble Supreme Court in the case of Sumati Dayal (214 ITR 801) and the judgment ot Hon ble Bombay High Court in the case of Smt.Vasantibai N. Shah (213 ITR 805) were in a different context and related to cash credits. The said assessees had declared jackpot winnings in races which, considering the facts and circumstances and applying the test of human probabilities, were not found genuine. In the case of Traders Traders vs. CIT (236 ITR 269), the creditors had denied the cash credits and no convincing explanation had been given by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to export incentives while computing deduction u/s. 80HHC. Under the provisions of sec. 80HHC(3)(b), the profit derived from export of goods/merchandise in respect of trading goods is the export turnover in respect of such goods as reduced by direct cost and indirect cost. Since the profit loss account also included export incentives, the issue was whether part of the indirect cost could be attributed to the export incentives and should be deducted from the indirect cost while computing the profits. The assessee had reduced the indirect cost by 10% of export incentives. The issue is now settled by the judgment of the Hon ble Supreme Court in the case of Hiro Exports (295 ITR 454) in which attribution of 10% of export incentives towards indirect cost has been upheld. We, therefore, find no infirmity in the order of CIT(A) and the same is, therefore, confirmed. C.O.No.29/Mum/09 (By assessee): 5. In the cross objection, the main dispute raised by the assessee is in respect of allowability of deduction u/s.80HHC in respect of DEPB income. The assessee has also mentioned that it had raised certain grounds being ground nos.2.3 to 2.10 (7 grounds) before CIT(A) which were not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t satisfied. The CIT(A) has, however, not given any clear finding on this aspect. The ld. A.R. for the assessee also pointed out that one of the conditions mentioned in the third proviso to sec. 80HHC was that the assessee should have an option to choose either the duty drawback or the DEPB scheme but the goods exported by the assessee were not eligible for duty draw back credit and, therefore, those conditions were not relevant in the case of the assessee and the third proviso would apply. In our view, the matter is required to be examined by the CIT(A) who has given no finding on this aspect. We, therefore, set aside the order of CIT(A) and restore the matter back to him for passing a fresh order after necessary examination in the light of the judgment of Hon ble Bombay High Court in the case of Kalpataru Colours Chemicals (supra) and after allowing an opportunity of being heard to the assessee. 8. As regards the grounds being ground nos.2.3 to 2.10 before the CIT(A), which were not adjudicated by the latter, the ld. A.R. submitted that the effective grounds were only ground nos. 2.3, 2.7, 2.9 and 2.10 which related to entitlement of deduction u/s.80HHC even when there was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9. The AO, therefore, issued notice u/s.154 of the I.T. Act to the assessee for rectifying the order for making addition on account of purchases from M/s. Dimple Metal Corporation amounting to ₹ 19,07,595/-. After hearing the assessee, the AO held that there was apparent mistake in the assessment order as the purchases on account of M/s. Dimple Metal Corporation were omitted to be added. He, therefore, amended the order by making addition of ₹ 19,07,595/-. In appeal, the CIT(A) held that since he had already deleted the entire addition on account of purchases while dealing with the appeal of the assessee in the quantum order, the addition made u/s.154 could not be sustained. He, therefore, deleted the addition made by the AO u/s.154 of the I.T. Act, aggrieved by which the department is in appeal. 13. We have heard both the parties, perused the records and considered the material carefully. The dispute is regarding the rectification order passed by the AO u/s. 154. The AO in the assessment gave finding that purchases from 8 parties were not explained but in the computation he made addition only on account of purchases from 7 parties and the addition in respect of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n careful consideration of the various aspects, we see no infirmity in the order of the CIT(A). Since the purchases from the said parties were duly reflected in the sales and quantitative tally had also been given, the purchases could not be considered as bogus because there could not be any sales without purchases. This view is supported by the decision of the Mumbai Bench of Tribunal in the case of Balaji Textile Industries Pvt. Ltd. vs. CIT (49 ITD 177) on which the ld. A.R. has placed reliance. The judgment of Hon ble High Court of Gujarat in the case of M.K. Bros. vs. CIT (163 ITR 249) also supports the case of the assessee. In that case, the sellers had even admitted before the STO that they had issued bogus vouchers. The Tribunal, however, found that there was no evidence to show that the vouchers were bogus and there was also no material to show that the payments made by the assessee by cheque had been returned to it. The Tribunal deleted the addition which was upheld by the Hon ble High Court. The case of the assessee stands on a better footing as in this case none of the sellers had stated that the sales to the assessee were bogus. Merely because the parties were not foun ..... X X X X Extracts X X X X X X X X Extracts X X X X
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