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ITO, Ward 2 (2) , Ghaziabad Versus Ray Steels

2016 (2) TMI 498 - ITAT DELHI

Bogus purchases - Held that:- 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. The observations made by the assessing officer when analyzed, it can be safely concluded that it is certainly not the case of assessing officer that what is stated by Sh. Surendra Kumar .....

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And Smt. Beena A Pillai, JM For The Assessee : Smt. Rasmita Jha, Sr. DR For The Revenue : Sh. Ajay Wadhwa, Adv. ORDER PER BEENA A PILLAI, JM: The present appeal has been filed by the Revenue against the order of the ld. CIT(A)-Ghaziabad vide his order dated 23/11/2012 for A.Y. 2009-10 on the following grounds: 1. That ld. CIT(A) has erred in deleting the addition of ₹ 2,38,86,670/- on the ground that the material in the possession of the Assessing Off icer was neither supplied to the asse .....

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hen he himself has accepted that the possibil ity of appellant buying material from the parties other than M/s Riddhi Siddhi Enterprises cannot be ruled out. 4. That the ld. CIT(A) has erred in holding that Assessing Off icer has not disturbed the trading results as disclosed by the assessee, ignoring the fact that the defects exposed and addition made do constitute disturbing the trading results. 5. Therefore, the order of the ld. CIT(A) be cancelled or set aside and the order of the Assessing .....

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able in this case as, violation of section 40A(3) was made in payment to M/s Kumar Agencies, while the extra prof it earned from sham transaction wi th M/s Riddhi Siddhi Enterprises is a separate issue these are two separate persons and issues are also different from each other, therefore, telescopy should not be allowed. 8. The appellant craves leave to modify/amend or add any one or more grounds of appeals. 2. Facts of the case in brief are that the assessee was engaged in the business of trad .....

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3), the proprietor of this concern Mr. Surendra Kumar Sharma has given statement that he has not made any sales/purchase. The AO pointed out that information was obtained from the office of Assistant Commissioner Commercial Tax, Ghaziabad who had informed that registration of M/s Riddhi Siddhi Enterprises has been cancelled, the purchases of M/s Riddhi Siddhi Enterprises were from non-existent/bogus firms and that the sales made by this concern should also be considered as bogus. 2.1. However, t .....

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stinguishable in as much as these judgments pertain to the question of confirmation of the creditors and/or as the case may be though in the case of the assessee, the assessing officer has simply relied on the self serving statement of the third party namely Sh. Surendra Kumar Sharma. 3.1. It was submitted that the observations made in the order by assessing officer are totally based on the hear say. The Income Tax Officer, Ward-2(3), Ghaziabad has made an assessment on Sh. Surendra Kumar Sharma .....

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e on record to establish that what is stated by Sh. Surendra Kumar Sharma is in fact not wrong. There is every possibility that in order to save his own skin, the said Sh. Surendra Kumar Sharma has given wrong statement. 3.2. It was further submitted that the finding and/or the observation made in the case of Sh. Surendra Kumar Sharma proprietor M/s Riddhi Siddhi Enterprises cannot be made basis to reject the accounted version of the assessee till an opportunity to cross examine Shri Surendra Ku .....

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he statement of Sh. Surendra Kumar Sharma recorded under oath at the time of the hearing of the case. It was submitted that if the reply given by Sh. Surendra Kumar Sharma to the questions asked by the assessing officer is carefully examined, it would be seen that Sh. Surendra Kumar Sharma has no where admitted that he is involved in providing accommodation bills to the parties and/or specifically to the assessee firm so to term the purchases made by the assessee as bogus. 4.The assessee also su .....

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sing off ier, 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 assessee. To every answer given by him in response to the questions of the assessing off icer, he has simply stated that the so called Mr. Ravi was handling his business, got the bill/cheques signed from him. The assessing off icer has not examined the sai .....

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s than a self serving statement that appears to have been given just to avoid the tax liabil ity in his own cases. That Sh. Surendra Kumar Sharma has given an af f idavit in which he has alleged that the assessing off icer Ward-2(3), Ghaziabad forced him to sign the pre-prepared statement under threat and undue pressure. It is further stated that even wi thout considering the content of affidavit, the assessing off icer had no material at all to treat the purchases made by the assessee from M/s .....

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m Sh. Surendra Kumar Sharma proprietor M/s Riddhi Siddhi Enterprises cannot be termed as bogus and consequently, addition of ₹ 2,38,86,670/- being the total purchase price of the material is illegal and bad in the eyes of the law. The addition made by the assessing of f icer is unjustif ied and wi thout proper material on record. The purchase rate and sale rate of iron and steel purchased from Riddhi Siddhi Enterprises and also from other parties. It would be seen that the purchases from a .....

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ve that there are no cash deposits in the bank of the appellant and thus it is wrong to alleged that the cash withdrawn by M/s Riddhi Siddhi Enterprises found its way back to the coffers of the appellant. In view of the submissions made above the addition has been made without suff icient material on record and thus the same deserves to be deleted. Appropriate relief may kindly be granted. 4.1. The ld. CIT(A) called for the remand report from the AO, who furnished the same vide letter date 12.09 .....

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ses had provided accommodation bills to the assessee in respect of the material purchased by it and his remand report was silent on this issue. 4.2. The ld. CIT(A) pointed out that Sh. Surendra Kumar Sharma 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 accounts. .....

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th by Income Tax Officer, Ward 2(3), which was attached by the AO with the remand report, had nowhere stated that he issued accommodation bills to the parties including the assessee and that the AO had not conducted any independent enquiry to conclude that the actual material was not purchased by the assessee. The ld. CIT(A) observed that the information in possession of the AO, if any, was never confronted to the assessee except that a query was raised on 21.12.2011 but copies of the material w .....

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s of the case the possibility of buying the said material from the parties other than M/s Riddhi Siddhi Enterprises could not be completely ruled out specially in the background of the fact that no doubt was expressed by the assessee on the quantum of the material sold. The ld. CIT(A) was of the view that the material might have been purchased by the assessee from the parties other than Riddhi Siddhi Enterprises probably to save some local taxes etc. and at best could be treated as unverifiable .....

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king 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. 4.6. The ld.CIT(A) accordingly deleted the addition of ₹ 2,38,86,670/- made by the AO and in view of the inference that the assessee might have made impugned purchases from some other parti .....

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ion made by the AO. 4.1. The ld. AR in his rival submissions reiterated that the AO made the addition only on the basis of statement of Sh. Surendra Kumar Sharma which was retracted later on by stating that no bogus entries were provided either to the assessee or any other person. It was further submitted that the sales shown by the assessee were accepted by the Trading Tax Department as well as by the AO and when the sales and the gross profit rate were accepted there was no reason to doubt the .....

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e the impugned addition. He accordingly prayed to delete the addition sustained by the ld. CIT(A). 6. We have considered the submissions of both the parties and carefully gone through the material available on the record. The ld.AR has placed his reliance on the order dated 17.06.2015 of this Tribunal in the case of ACIT vs. Vijay Kumar Goel in ITA no. 670/D/2013, for assessment year 2009-10 which has been placed on record before us. The Ld.AR further submits that the decision of this Tribunal i .....

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e observation of the assessing officer is considered to be correct, where from the stock is received by the assessee for onward sales, as recorded in the books of account. The assessing officer has not rejected the sales. The assessing officer has 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 tr .....

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income of the assessee 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 assessee namely Sh. Vijay Kumar Goel. On the other hand it is fact on record that all th .....

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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 sa .....

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