TMI Blog2015 (6) TMI 763X X X X Extracts X X X X X X X X Extracts X X X X ..... oks of accounts of the assessee and categorically stated that the purchases as well as the sales were through banking channel and there was no cash deposit in the bank account of the assessee. In the present case, the AO has not pointed out any defects in the books of accounts, therefore, the ld. CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. As regards to the additions sustained by the ld. CIT(A) by applying the net profit rate of 5% of the alleged unverifiable purchase. We are of the view that when the ld. CIT(A) himself accepted the trading results of the assessee and also held that the payment for purchases of material had been made through banking channel, GP rate declared by the assessee was progressive then there was no occasion to make the addition by applying the net profit rate of 5% by considering the purchases of ₹ 1,39,70,618/- as unverifiable. We, therefore, by considering the totality of the facts as discussed herein above delete the addition sustained by the ld. CIT(A). - Decided against revenue. - ITA No ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dify/amend or add any one or more grounds of appeal. 3. The grounds raised in assessee s Cross Objection are as follows: 1. That assessee filed the return showing income ₹ 9,65,460/- while the ld. Assessing Officer made the addition of ₹ 1,39,70,618/- without any proper verification which was wrong, illegal and against facts of the case. 2. That assessee filed the appeal before CIT(A) Ghaziabad who after hearing the case partly allowed the appeal and addition was reduced from ₹ 1,39,70,618/- to ₹ 6,98,530/- which was also wrong and ought to be deleted. 3. That Ld. Assessing Officer relied upon the false statement of party, M/s Riddhi Siddhi Enterprises which was later on reverted back by the same party by filing an Affidavit with Ld. Assessing Officer but Ld. Assessing Officer denied the Affidavit and did not accepted the same. 4. From the above grounds it would be clear that the grievance of the department and the assessee relates to the deletion/sustenance of the additions made by the AO on account of purchases. 5. Facts of the case in brief are that the assessee was engaged in the wholesale of iron steel business and file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Siddhi Enterprises was cancelled on 15.05.2008 while on the same date Trade Tax department has issued a certificate of registration and allotment of TIN 09688807641 effective with 15.05.2008 which is the same date hence, it is not clear that which certificate is correct. Copy of certificate UPVAT-XI is enclosed herewith. (b) That as per statement taken on oath from Sh. Surendra Sharma, he had accepted that he was running the firm M/s Riddhi Siddhi Enterprises through his agent Mr. Ravi and he has filed return with Trade Tax dept. showing sales during 2009-10 amounting ₹ 28,18,51,946.00 even though he has never mentioned that he does not know the firm M/s Bankey Lal Jagdish Prasad nor he denied the connection with Mr. Ravi who was looking after his business (As per his statement recorded). (c) That our assessee purchased the goods from him simultaneously sold the same to various parties during the period from August 2008 to February 2009 according to the assessee and as per records there was no bogus purchase or sales which has been confirmed by the assessee after filing his affidavit dated 22.12.2011. (d) That assessee has also filed copies of all purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Shri Surendra Kumar Sharma true and correct without any proper evidence moreover you have not given to us any chance to cross examine him. 6. However, the AO was not satisfied from the submissions of the assessee and considered the amount of ₹ 1,39,70,618/- (which was the purchases made by the assessee from M/s Riddhi Siddhi Enterprises) as income of the assessee. The reliance was placed on the following case laws: Mc Dowell and Co. Vs Commercial Tax Officer 154 ITR 148 (SC) Nanak Chand Laaxman Das Vs CIT (1983) 140 ITR 151 (All.) Anraj Narain Das Vs CIT (1951) 20 ITR 562 (Punj) A.D. Jayveerapandia Nadar Vs CIT (1964) 54 ITR 401 (Mad.) CIT Vs V.K. Mahim (1995) 213 ITR 820 (Ker) CIT Vs Precision Finance Pvt. Ltd. 208 ITR 465 (Cal) CIT Vs Durga Prasad More 82 ITR 540 (SC) 7. Being aggrieved the assessee carried the matter to the ld. CIT(A) and submitted as under: The appellant was not provided any opportunity to cross examine Sh. Surendra Kumar Sharma. The assessing officer also referred to certain judgments which are absolutely distinguishable in as much as these judgments pertain to the question of confirmation of the credito ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nowhere expressed any doubt over the sale of the material as reflected in the books of account and stock register. In such circumstances, going by the observation of the assessing officer, purchases made from Riddhi Siddhi Enterprises can at best be treated as unverifiable purchase. In such circumstances, the entire purchase value cannot be added to the income especially when no doubt is expressed on the sales and the stock register produced before the assessing officer, a reasonable rate can be applied. The assessing officer has on the other hand added Rs./ 1,39,70,618/- being the entire amount of purchase value of the material to the income of the appellant. It is not legally correct to make addition of the entire purchase value to the income of the appellant when the same is unverifiable and books are rejected the only judicious method to frame assessment is to be apply a reasonable rate of profit on the total turnover. It is further stated that the assessing officer has not brought any material on record to prove that the money withdrawn by Sh. Surendra Kumar Sharma of M/s Riddhi Siddhi Enterprises found its way back to the coffers of the appellant namely Sh. Vijay Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... engaged itself in the actual purchase/sale of material and that the appellant had purchased actual material from M/s Riddhi Siddhi Enterprises. That from the statementof Sh. Surendra Kumar Sharma recorded under oath by the assessing offier, Ward- 2(3), Ghaziabad it is not proved that Sh. Surendra Kumar Sharma is engaged in providing accommodation bills. Sh. Surendra Kumar Sharma has equally nowhere alleged in his statement under oath that material was not supplied to appellant. To every answer given by him in response to the questions of the assessing officer, he has simply stated that the so called Mr. Ravi was handling his business, got the bill/cheques signed from him. The assessing officer has not examined the said Mr. Ravi and thus there is no material on record to conclude that Sh. Surendra Kumar Sharma proprietor M/s Riddhi Siddhi Enterprises has admitted to have issued accommodation bills to the appellant especially in the background of the fact that the name of the appellant namely Sh. Vijay Kumar Goel and his proprietorship concern apparently by the name of M/s Bankey Lal Jagdish Prasad is no where mentioned by the said Sh. Surendra Kumar Sharma in his stateme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be deleted. Appropriate relief may kindly be granted. 12. The ld. CIT(A) also asked the remand report from the AO who furnished the same vide letter date 24.09.2012 which has been reproduced by the ld. CIT(A) in para 6 of the impugned order, the assessee also furnished a rejoinder vide letter dated 25.10.2012 which has been reproduced by the ld. CIT(A) in para 7 of the impugned order for the cost of repetition, the same are not reproduced herein. The ld. CIT(A) after considering the submissions of the assessee and the remand report of the AO observed that no independent enquiry had been made by the AO to form an opinion that M/s Riddhi Siddhi Enterprises had provided accommodation bills to the assessee in respect of the material purchased by it and his remand report was silent on this issue. The ld. CIT(A) pointed out that Sh. Surendra Kumar Sharma had given evasive replies to the questions and had nowhere stated that he was into business of providing accommodation bills or that he had provided accommodation bills to the assessee in the material purchased from him. The ld. CIT(A) observed that the AO had not pointed out any defects in the sales records and in the books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee that would result into unimaginable profit in the business particularly when the sales had been accepted purchases also have to be accepted. The ld. CIT(A) observed that the AO had not disturbed the trading results as disclosed by the assessee and the payment for the purchase of material had been made through banking channel, similarly, the payment for the sale of the material had been received through proper banking channel and there was no material on record that the assessee paid his money in cash for issuing cheque in his name and that there was no effective cash deposit in the bank account of the assessee. He accordingly deleted the addition of ₹ 1,39,70,618/- made by the AO and in view of the inference that the assessee might have made impugned purchases from some other parties at a lower cost, and thus earned much better profit on the sale of the impugned purchases, he directed the AO to apply net profit rate of 5% on the said unverifiable purchases of ₹ 1,39,70,618/- which was worked out at ₹ 6,98,530/-. Accordingly the addition to that extent was sustained. 13. Now the department is in appeal against the deletion of addition of ₹ 1,39,70,6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e any opportunity to the assessee to cross examine Sh. Surendra Kumar Sharma. In the present case, it is also noticed that the turnover of the assessee was accepted by the Trade Tax Department and it is not the case of the AO that proper books of accounts were not maintained by the assessee in regular course of business or the same method of accounting was not followed consistently. The ld. CIT(A) examined the bank accounts as well as books of accounts of the assessee and categorically stated that the purchases as well as the sales were through banking channel and there was no cash deposit in the bank account of the assessee. In the present case, the AO has not pointed out any defects in the books of accounts, therefore, the ld. CIT(A) was fully justified in deleting the addition made by the AO on account of alleged bogus purchases particularly when the GP rate declared by the assessee was progressive and was accepted by the AO. As regards to the additions sustained by the ld. CIT(A) by applying the net profit rate of 5% of the alleged unverifiable purchase. We are of the view that when the ld. CIT(A) himself accepted the trading results of the assessee and also held that the payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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