TMI Blog2015 (12) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... ld not offer proper explanations as to why the amount due against purchases was shown as outstanding as at the year end. We notice that the assessee had purchased the goods in the months of May and June, 2008. However, the payments have been made from September, 2009 onwards, i.e., after expiry of about one and half years. It is also not shown that the assessee could avail credit period of one and half years under normal trade practice. Hence, we are of the view that the assessee has failed to establish the genuineness of purchases claimed to have been made from M/s Chirag Corporation. Since the assessee has claimed to have sold the goods and since the amount due to M/s Chirag Corporation was shown as outstanding as at the year end, we a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y business with the assessee. In support of the letter, a copy of sales tax registration cancellation order was also filed by Geeta Jaykant Mehta. The assessee claimed that the payments against purchases were made by way of Account payee cheques and accordingly contended that the reply given by M/s Chirag Corporation was not correct. The AO made enquiries with various banks and found that the cheques issued by the assessee have been encashed by various other concerns, who are not connected with the assessee. The assessee further submitted that the materials purchased made from M/s Chirag Corporation was sold to M/s Murli Industries Ltd, i.e., without effecting purchases, the assessee could not have sold the goods. However, the AO was not co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had claimed to have purchased goods worth ₹ 95,19,775/- from M/s Chirag Corporation, the Ld CIT(A) enhanced the addition to the above said amount and held that the same is assessable as unexplained investment. 4. The Ld Counsel submitted that the assessee had purchased from a person named Shri Chirag Vora, who claimed to be representing the concern M/s Chirag Corporation. He submitted that the assessee did not check the antecedents of the above said person and believed him at his face value. He further submitted that the assessee has earned Gross profit @ 5.21% from the impugned transactions as against the average G.P. rate of 2.16%. He further submitted that the assessee could not have sold goods to M/s Murali Industries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed by its proprietor with supporting evidences. Before the AO, the assessee has contended that the payments have been made by account payee cheques. However, the said claim has been established to be wrong by the assessing officer. Hence both the claims put forth by the assessee have been proved to be false by the assessing officer. Hence the Ld CIT(A) has expressed the view that the assessee has violated the provisions of sec. 40A(3) of the Act and further expressed the view that the assessee would have purchased goods from some other party. Since the payment due to M/s Chirag Corporation was shown as outstanding as at the year end, the Ld CIT(A) has held that the assessee would have purchased the goods by paying cash from third parties ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hased the goods in the months of May and June, 2008. However, the payments have been made from September, 2009 onwards, i.e., after expiry of about one and half years. It is also not shown that the assessee could avail credit period of one and half years under normal trade practice. 8. Hence, we are of the view that the assessee has failed to establish the genuineness of purchases claimed to have been made from M/s Chirag Corporation. Since the assessee has claimed to have sold the goods and since the amount due to M/s Chirag Corporation was shown as outstanding as at the year end, we are of the view that the Ld CIT(A) was justified in drawing inference that the assessee could have purchased goods from third parties by making payment. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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