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2011 (6) TMI 802 - AT - Income TaxUnaccounted investment in purchase from unaccounted income - Assessee has made purchases from M/s M.D.R Jewellers which were in turn purchased by M/s M.D.R Jewellers from M/s Amit Agency - The AO considered purchases from M/s Amit Agency as bogus - Therefore, made the addition. HELD THAT:- We observe that all the purchases made by assessee are verifiable. Most of the purchases are made from Jewellers. Partner of M/s M.D.R Jewellers who appeared confirmed having made sales to the assessee. It is further seen that purchases made from M/s M.D.R Jewellers were made through made from known sources. Thus, we are of the considered view that the AO decision was not justified. The Hon'ble Supreme Court in the case of SREELEKHA BANERJEE VERSUS COMMISSIONER OF INCOME-TAX [1963 (3) TMI 47 - SUPREME COURT] has held that the suspicion howsoever strong cannot take the place of evidence. We order accordingly. Rejection of Books of Accounts - Reduction in Trading Addition - CIT(A) confirmed the rejection of books of accounts on the account that sales made to two concerns have been established as bogus, therefore sales are not fully verifiable - Also, it reduced the trading addition made by AO - HELD THAT:- Complete books of account were produced before learned CIT(A) which were audited. In our considered view, observations of ld. CIT (A) regarding bogus sales are not correct as assessee has made sales from its stock which has not been disturbed, sales made by assessee have been accepted. If other parties are bogus then it cannot be said that the genuine party who made sales to these parties are also bogus. Written submissions filed on behalf of the assessee are self-explanatory. In some of the branches the GP rate shown is higher and only in one branch the GP rate declared by assessee is lower, reason for the same has been explained. No defects in the books of account were found. All the purchases and sales are vouched. Therefore, we are of the considered view that there was no justification in making trading addition and sustaining partly at the end of the learned CIT(A). We hold that learned CIT(A) was not justified in restricting the trading addition - Accordingly, same is deleted Unexplained Cash Credits u/s 68 - AO treated an amount so transferred through journal entry as unexplained cash credit - whether journal entry passed or odd can be added as unexplained cash credit - HELD THAT:- CIT(A) held that AO has not understood the accounting sequence of the adjustment entry in question and wrongly considered the same as unexplained credit which was factually incorrect. Findings of CIT(A) find support from the decision of Hon'ble jurisdictional High Court in the case of COMMISSIONER OF INCOME-TAX VERSUS HAZARIMAL MILAPCHAND SURANA. [2002 (9) TMI 29 - RAJASTHAN HIGH COURT] wherein the Hon'ble Court has held that mere book entry does not create income. In view of the reasoning given by learned CIT (A) we confirm his order on this issue.
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