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2016 (5) TMI 704 - ITAT MUMBAI

2016 (5) TMI 704 - ITAT MUMBAI - TMI - Disallowance u/s. 40A(3) on account of unaccounted cash purchases - making an addition of outstanding liability u/s. 41(1) - Held that:- We find from the facts of the case that the assessee has entered into cash transactions as per seized registers seized from the premises of the assessee which clearly revealed that there is cash transaction of the purchases and the A.O. has made estimation from these seized materials for all these seven years. We further f .....

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see on 13.3.2008. Further, the CIT(A) also confirmed the outstanding liabilities and provision for the reason that no confirmation for such creditors was furnished by the assessee and genuineness of such liabilities was not proved to the satisfaction of the A.O. In view of these facts and circumstances we find no infirmity in the orders of the lower authorities and hence, the order of CIT(A) is confirmed. Similar are the facts in other years and additions are also on identical grounds, hence tak .....

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med by ACIT, Central Circle-11, Mumbai u/s. 144 r.w.s. 153A of the Income-tax Act, 1961 (hereinafter referred to as the Act ) for Assessment Years 2002-03 to 2008-09 vide his separate orders all dated 15.12.2009. 2. At the outset, it is noticed from the order sheet entries, in these seven appeals of assessee, that the assessee has filed these appeals on 24.1.2011 and these appeals came up for hearing first on 25.2.2013, when the Bench did not function. Subsequently, the hearings were fixed on va .....

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arte in the absence of assessee after perusing the case records including the assessment order, order of CIT(A) and arguments of ld. Sr. DR. Hence, we proceeded to hear this matter and decide the same. 3. We find from these seven appeals that the grounds raised in all the seven appeals are identically worded, except the amounts. On merits there are two issues in all the seven appeals against the order of CIT(A) confirming the order of A.O. in making the disallowance u/s. 40A(3) on account of una .....

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dering the adjournment sought by Shri Sushil S. Jhunjhunwala on 18-11-2010, when he personally attended before the ld. Commissioner of Income Tax (Appeals). 3. The ld. Commissioner of Income Tax (Appeals) further erred in confirming the action of the Assessing Officer in passing the ex-parte assessment order under Section 144 of the I. T. Act, 1961. 4. The ld. Commissioner of Income Tax (Appeals) further erred in not appreciating the facts of the case as to why the appellant company had not comp .....

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action of the Assessing Officer in not supplying the photocopies of the seized materials and documents and data in the computer, CDs, CPU, etc. on the one hand and passing the assessment order ex-parte under Sec. 144 of the Income Tax Act on the other hand by adopting the time-barring limit of 31-12-2009 when the actual time barring limit for completing the assessment u/s. 153A of the I. T. Act was 31-12-2010. 7. The ld. Commissioner of Income Tax (Appeals) further erred in confirming the actio .....

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ion of the Assessing Officer in making addition of ₹ 51,12,565/- being outstanding liability under the head Current Liabilities and Provisions in the Balance Sheet by treating the same as income under Section 41 of the Income Tax Act. 4. We have gone through the assessment order and seen that the assessment was framed ex parte u/s. 144/153A of the Act in all these seven assessment years. The facts of the case are that the search and seizure action u/s. 132 of the Act was conducted on the b .....

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ct on account of cash purchases and current liabilities u/s. 41(1) of the Act. Aggrieved, the assessee preferred appeals before the CIT(A). 5. The CIT(A) allowed various opportunities to the assessee by issuing notices for appearance but none represented and the facts as recorded by the ld. CIT(A) for passing ex parte order reads as under: 2.3.1 I have carefully and dispassionately considered the facts and circumstances of the case. Ground Nos. 1, 2, 3, 4 & 5 are general in nature and no spe .....

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seized Annexure A-1 and A-4 found and seized by the Investigation Wing from the office premises of the appellant u/s. 132(1) of the Act on 14-03-2008. The cash sales as recorded in the aforesaid seized material constitute primary evidence. The appellant has not been able to rebut the aforesaid primary evidences as recorded in the seized material. The AO has made a reasonable addition @ 10% only of the unaccounted sales made by the appellant during the time period 01- 04-2001 to 13-03-2008 releva .....

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& gains derived from unaccounted cash sales are liable to be taxed in accordance with the provisions including sec. 40A(3) of the Act, the fact that it is not practicable to comply with the provisions of sec. 40A(3) by making payments by crossed cheque or bank draft in respect of grey market transactions, would not prevent operation of the said sec. 40A(3) of the Act. The fact that it was not possible to establish the identity of the parties from whom purchases were made would not exempt the .....

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stablished, only then the question as to whether the payment in cash was made in exceptional or unavoidable circumstances can be examined. 2.3.3. In the appeals under consideration before the undersigned, the appellant has not even furnished the returns of income with reference to notices u/s.153A of the Act. No written submissions have been furnished, no arguments have been made although sufficient opportunities were granted to the appellant as discussed in para No. 2.2.1 & 2.2.2 above. Hav .....

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s and circumstances of the case. The AO has given a finding of the fact that the appellant has not furnished return of income with reference to notices u/s. 153A of the Act. It seems that till date, returns of income have not been furnished with reference to notices issued u/s. 153A of the Act for the relevant Assessment Years under appeal. The AO has added outstanding current liabilities and provisions as ferreted out from the old returns of income. The AO has added the aforesaid outstanding li .....

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of availing sufficient opportunities. Having regard to the facts and circumstances of the case, bogus liabilities have been rightly charged to tax by the AO. Such addition made by the AO with reference to outstanding liabilities are hereby confirmed for AYs.2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09. Ground of Appeal No. 7 is dismissed for AYs. 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08 & 2008-09. Aggrieved against the action of the CIT(A), the assessee is .....

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und from the premises of the assessee in respect of cash sales and estimation of the same on the basis of statement of one of the employees of director recorded u/s. 131 of the Act during the course of post search proceedings on 29.5.2008. He recorded the following facts in para 5.1 and finally made disallowance u/s. 40A(3) in respect of cash payments for purchases vide para 5.1 as under: 5.1. Cash Transactions as per seized registers: During the course of search proceedings, Annexure A-1 (70 Pa .....

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s is 30/06/04 to 02/08/04. The cash amount can be easily distinguished by the separate column titled as "Cash amt". There is a separate column which shows the person who has made the collection. Names such as "Direct", "Tiwari", "Nitin", "Pandey" etc. find place. Annexure A4 (15 pages)- Jhunjhunwala Distributors P. Ltd Collection book The register total is ₹ 411750 for cheque transactions and ₹ 1216617 for cash transactions. The recor .....

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deal over telephone. I used to send other people like Shriram Tiwari, Akshaylal Pandey, Jagdish to collect cash. This was done from cloth merchants and parties with whom Mr. Sudhir Jhun;hunwala had done cash sales. But on few occasions, I have also gone and collected cash. The amount of cash cannot be said with certainty. It ranges from few thousand rupees to even few lakhs of rupees. Q.9. Have you collected even ₹ 1 lakh to 2 lakh in cash for garment business? Ans. Yes, I have done so. I .....

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can be seen that about 39.37% of the receipts are in cash. It is well known that in view of the provisions of s.40A(3), no party will make the payments in cash in excess of ₹ 20,000/-. Similarly, the A.O. also made disallowance of outstanding liabilities vide para 5.2 as under: 5.2 Current Liabilities and Provisions: From the balance sheet filed as per the old return, it is found that an amount of ₹ 51,12,565/- is outstanding under the head current liabilities and provisions. In abs .....

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e find that the assessee before the A.O. has not complied with the notice issued for filing of the return u/s. 153A of the Act and also not complied with the notice issued u/s. 142(1) of the Act for filing of the details. Even during the course of assessment proceedings none attended the proceedings and the A.O. has framed best judgment assessment u/s. 144 of the Act. Now before us, the assessee has never attended the hearing to explain his case that how the best judgment assessment is bad in la .....

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