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2022 (3) TMI 337 - AT - Income TaxAddition of bogus purchase of rice husk - AO treated the said purchases as bogus on the basis of statement of one Shri Ajay Malik who claimed to have given the bills only to the said parties - HELD THAT:- No opportunity to cross examine the said persons was given to the assessee the similar purchase made from the said parties in the preceding years had been accepted. The assessee furnished sworn affidavit of the proprietors of the said parties from whom rice husk was purchased and also furnished documentary evidence in the form of purchase bills, Sales Tax Return, Income Tax Returns of the said parties, the payments were made through banking channel and it is not the case of the A.O. that the consumption of rice husk was excessive in comparison to the earlier years. CIT(A) after appreciating the documentary evidences furnished by the assessee, deleted the addition. We do not see any valid ground to interfere with the findings of the Ld. CIT(A) while deleting the addition. Addition made by the A.O. for the reasons that the assessee failed to produce any person from M/s Sarthi Commission Agent, from whom the rice husk was purchased by the assessee to prove the genuineness of the purchase made from the said party - Assessee furnished VAT number issued by the Punjab VAT Department to prove the existence of the said party and all the payments were made through banking channel. The assessee also furnished Sales Tax Record which confirmed that the sales were made to the assessee by M/s Sarthi Commission Agent therefore the Ld. CIT(A) rightly held that the mere fact that during the F.Y. 2014-15 it was found that the said party M/s Sarthi Commission Agent closed its business at that time was not enough to draw any adverse inference for the F.Y. 2010-11 relevant to the A.Y.2011-12 under consideration. In the present case, when the identity of the party was established purchases / sales were vouched and payments were made through banking channel by the account payee cheque, we are of the view that the impugned addition made by the A.O. was rightly deleted by the Ld. CIT(A). Bogus rice husk purchased from M/s Abhishek Enterprises - A.O. made the said addition only on this basis that notice issued under section 131 of the Act to the supplier was received back unserved with remarks “Incomplete Address and Not known”. It appears that the A.O. without verifying the complete address of the said party assumed that the party was not available at the said address. On the contrary the assessee furnished documentary evidence, like copy of account, VAT number of the party, Sales Tax Return etc and the payments were made through banking channel to prove the genuineness and identity of the said party. Moreover the books of the assessee were not rejected, therefore, the said addition was rightly deleted by the Ld. CIT(A). Addition @5% of the remaining purchases - A.O. himself accepted that 95% of the purchase were genuine but considered only 5% as bogus that too on adhoc basis and even without rejecting the books of account. It is well settled that no adhoc addition can be made without rejecting the books of accounts. Moreover the A.O. did not point out any specific defect or discrepancy in the books of account maintained by the assessee in regular course of business and even consumption of the rice husk purchased by the assessee for its business purposes was not doubted. We therefore do not see valid ground to interfere with the findings of the Ld. CIT(A) on this issue. Addition on account of undervaluation of closing stock - difference in the stock statement as on 31/03/2011 given by the assessee to State Bank of India and as recorded in the books of accounts - HELD THAT:- In the present case, it is an admitted fact that there was no difference in the quantitative details of the stock furnished to the bank and maintained in the books of account, the difference in the valuation was explained by the assessee which was due to the valuation in stock statement furnished to the bank on estimate basis while in the books of account the assessee valued the raw material & consumables on the cost price basis while the semi finished & finished goods were valued on the cost of production basis. The A.O. did not point out any defect in the said valuation. It is also not the case of the A.O. that the valuation in the books of account was not in accordance with the provisions contained in section 145A of the Act. the stock hypothecated to the bank was valued on estimate basis while stock was valued in accordance with the provisions of Section 145A of the Act in the books of account i.e; raw material and consumables on the basis of cost price, furnished goods and semi finished goods on the basis of cost of production. It is also not the case of the A.O. that there was any variation in the method of valuation of stock in the books of account from the earlier years. Therefore the addition made by the A.O. only on this basis that valuation of stock in the statement given to bank was different from the stock mentioned in the books of account was rightly deleted by the Ld. CIT(A). We, do not see any valid ground to interfere with the findings of the Ld. CIT(A) on this issue.- Decided against revenue.
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