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2015 (9) TMI 1302 - ITAT DELHI

2015 (9) TMI 1302 - ITAT DELHI - TMI - Disallowance of difference in the account of sundry creditor - assessee’s pleaded that though credit notes had been issued by ITC aggregating to ₹ 21,99,867/-, but in its books of a/c it did not account for the same because assessee had lodged the claim for ₹ 26,32,303/-, which the assessee continued to show in its stock register as a separate item - Held that:- The assessee, admittedly, was distributor of M/s ITC Ltd., and, therefore, had regul .....

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ad to account for the credit notes because it is not that only ITC was required to confirm the balance, but even assessee could also be called upon by the AO to confirm the balance relating to ITC Ltd. in assessment proceedings of ITC. Therefore, it cannot be concluded that assessee was deliberately not accounting for the credit notes. Under such circumstances, normal commercial practice assumes significance and that has to be given due credence. In the stock register, maintained by assessee, th .....

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f assessee’s claim with reference to the bank account, which has been filed in the paper book before us. Ground is allowed for statistical purposes. - ITA no. 5419/Del/2010 - Dated:- 4-9-2015 - SHRI S.V. MEHROTRA : ACCOUNTANT MEMBER AND SHRI I.C. SUDHIR : JUDICIAL MEMBER For The Appellant : Shri Salil Aggarwal Adv., and Shri Shailesh Gupta CA For The Respondent : Shri Sameer Sharma DR ORDER PER S.V. MEHROTRA, A.M.: This appeal has been preferred by the assessee against the order dated 25-8-2010 .....

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e details as well as documentary evidence filed during the course of assessment proceeding. 1.3 The learned Commissioner of Income Tax (Appeal) has failed to appreciate the fact that the sundry creditors as well as amount of purchase is supported with the documentary evidence and there is no single instances of bogus transaction as such amount of purchase shown in the books of account cannot be disallowed. 1.4 The learned Commissioner of Income Tax (Appeal) has. also ignored the fact that the di .....

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nd any of the foregoing grounds of appeal. 2. Brief facts of the case are that the assessee, in the relevant assessment year, was carrying on wholesale & retail business of greeting cards of all types under proprietary concerns M/s Prabjyoti Marketing and Jyoti Traders. The assessee had field return of income declaring total income of ₹ 1,65,210/-. The AO noticed that in the case of M/s Prabjyoti Marketing, gross turnover had been shown at ₹ 88,93,854/- with gross profit of ͅ .....

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eet of M/s Prabjyoti Marketing, it was noticed that the assessee had shown sundry creditor of ₹ 91,44,472/- in the name of M/s ITC Ltd. The AO issued notice u/s 143(6) to ITC Ltd. for confirmation of the account of the assessee in their books of a/c. ITC Ltd. confirmed a balance of ₹ 65,52,852/- as against the balance of ₹ 91,44,472/- in assessee s books of a/c. Thus, there was excess credit of ₹ 25,91,620/- in the books of assessee in the account of creditor M/s ITC Ltd. .....

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552852.00 2.1. The AO, after considering the credit notes issued by ITC Ltd., for which purchases were not credited by assessee in its books of a/c, observed that assessee could not explain the reason for not passing the necessary entries in its books of a/c. Thus, he concluded that assessee had shown excess purchases by ₹ 21,99,867/-. As regards other differences, he further observed as under: 2. The assessee has further explained the remaining difference in her accounts and that of ITC L .....

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in the name of M/s ITC Ltd. to the tune of ₹ 4,63,596/- is not tenable. As' stated above, the assessee could not further reconcile the account with ITC Limited as required vide this office letter dated 15.12.-2009 and also could not explain the difference with the help of the books of account. Therefore, the accounts submitted above are not reliable and not acceptable. Considering all the facts of the case, it is clear that the assessee has further inflated her: purchases to the extent .....

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is also assessable as the income of the assessee on account of inflated purchases and excess credit shown as stated above. I, therefore, make an addition of ₹ 3,91 ,753/- to the declared income for the facts stated above on account of inflated purchases and excess credit in the account of ITC Ltd. in the balance sheet. 2.2. The AO further made disallowance of 1/5th of the expenses incurred on account on petrol, car expenses and depreciation in the books of M/s Prabjyoti Marketing. 2.3. In .....

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Out of telephone expenses 657 ₹ 743 ₹ 27,78,373 Rounded off: ₹ 27,78,370/- 2.4. Ld. CIT(A) dismissed the assessee s appeal. Being aggrieved, the assessee is in appeal before us. 3. Ld. counsel for the assessee referred to page 25 of the paper book, wherein the notice u/s 142(1) is contained in which AO had required the assessee to explain the following difference on the basis of letter dated 1- 12-2009 received from M/s ITC Ltd.: 1. Amount debited by ITC not credited by you (d .....

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added the same, which should have been deducted. As regards the difference in opening balance of both the parties as on 1-4-2006 amounting to ₹ 1,24,282/-, ld. counsel pointed out that this cannot be added, in any view of the matter, in this year. Ld. counsel referred to page 31 of the paper book, wherein the submissions made before ld. CIT(A) are contained and pointed out that as regards the addition of ₹ 21,99,867/- it was explained that the entry of the amounts credited by ITC in .....

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had sent the goods amounting to ₹ 26,32,303/- as goods returned to ITC Ltd. against which the assessee got credit of ₹ 21,99,867/-. The assessee pointed out that since the credit for ₹ 21,99,867/- only had been granted as against the return of ₹ 26,32,303/-, the assessee had not accepted the same and, therefore, the said goods returnedhad been shown as stock in hand, lying with the ITC. In support of its contention, the assessee had submitted the stock statement. The asse .....

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69,84,359/- includes the stock lying with ITC of ₹ 26,32,303/-. 3.3. As regards the addition of ₹ 3,03,393/-, ld. counsel pointed out that it is the normal practice of the trade to provide the blank cheques to the company. The company, as and when require, can fill the amount and inform its distributor about the same. The ITC Ltd. had taken into its account the cheques, but as the same had not been informed to the assessee nor presented to the bank, hence not accounted for the bank. .....

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eement with ld. counsel for the assessee that addition of ₹ 1,24,282/- could not be made in this year because the difference pertained to earlier year. As regards the addition of ₹ 35,921/-, the same had to be reduced by AO and not added. The AO will verify this aspect. 5.1. The main issue is regarding addition of ₹ 21,99,867/-. The assessee s plea is that though credit notes had been issued by ITC aggregating to ₹ 21,99,867/-, but in its books of a/c it did not account f .....

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be faulted, because the greeting cards are always year specific and the old stock become obsolete and cannot be used. This practice, therefore, is commercially prevalent in this line of business. 5.2. Further, as regards the credit entries being not accounted for in assessee s books of account, keeping in view the commercial practice, it cannot be denied that the assessee had to account for the credit notes because it is not that only ITC was required to confirm the balance, but even assessee c .....

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