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TMI Blog2015 (11) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... in law the Ld. CIT(A) was not justified in confirming the addition of Rs. 74,73,020/- by not accepting the submission of the assessee that on the basis of 'Matching Principle' and since the sales turned out from such purchases have been accepted by the A.O. no addition on account of gross value of purchases was possible. The addition of Rs. 74,73,020/- is warranted. It be deleted. 3) On the facts and circumstances of the case and in law and considering the settled position of law the assessee was not obliged to produce the parties before A.O. The Ld. CIT(A) was not justified to confirm the action made by the A.O. of gross purchases of Rs. 74,73,020/- The addition be deleted. 4) On the facts and circumstances of the case and in law the judicial precedents quoted before CIT(A) were not properly appreciated by CIT(A). The Hon'ble Gujrat High Court in Smita P. Sheth (2013) 38 Taxmann.com 386 (Guj), had held that not the entire purchases but only the profit element can be added. The Ld.CIT(A) was not justified in not accepting the ratio decidendi of Hon'ble Gujrat High Court judgment and decision of other judicial forums. The addition be deleted. 5) On the facts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to be located in Mumbai. The Sales Tax Department had detected that all those parties were merely providing accommodation entries and that though there was a TIN number, they had not paid any VAT alleged to have been collected. Further, the said parties were not available on the given address. Accordingly, the Sale Tax Department treated the above parties along with other such entities as hawala dealers. The Assessing Officer asked the Authorized Representative for the assessee to produce above parties for verification along with supporting bills and other related details, such as delivery challans for the goods, receipts from Octroi paid in respect of goods alleged to have been purchased from the above parties. However, the Authorized Representative for the assessee expressed his inability to produce the parties. The Authorized Representative for the assessee also stated that he was not in a position to produce any Octroi receipts or any other corroborative evidence in support of purchases alleged to have been made from the said parties. In the absence of any supporting details, the Assessing Officer was of the view that purchases from the said parties have to be treated as bo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may be added to the total income of the appellant. This position has been clearly highlighted by the Assessing Officer on page 3 of the assessment order. This fact clearly shows that at no point of time, the appellant took the stand of matching principles which is based on tallying of entire purchases and sales and also closing stock. Therefore, attempt of the appellant to cling to the concept of matching principles is like trying to board the Bus even though the appellant has missed the same at the level of Assessing Officer. The CIT(A) further noted that Even at this stage, the appellant is not in position to discharge the onus cast upon him by producing the parties, their confirmations, transport details, weigh bridge and octroi receipts, etc. to support his case so that remand order u/s.250(4) of Income-tax Act can be passed. Consequently, the stand of the assessee regarding matching concept was found to be mis-placed by the CIT(A). In the alternate, the CIT(A) observed that if it is accepted that corresponding purchases entered into books of account are from alternate sources made by the assessee, the purchases from alternate sources was nothing, but unexplained expenditure wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orized Representative for the assessee pointed out that the findings of CESTAT in this case were that these were Hawala dealers, wherein the seller had collected the tax, but had not paid to the Sales Tax Department. The VAT tax was collected from the assessee and once the assessee has paid VAT, then as per t he learned Authorized Representative for the assessee, the purchases were regularized. The learned Authorized Representative for the assessee further pointed out that in case the said purchases are added in the hands of the assessee, then the GP rate would be abnormal i.e. as against 14.50%, the same would be assessed at 52%. It was stressed by the learned Authorized Representative for the assessee that where sales are not doubted, purchases cannot be added. The learned Authorized Representative for the assessee referred to the details furnished in Paper Book - II, wherein the purchases and sales have been matched. Reliance was placed on series of decisions and in conclusion, the learned Authorized Representative for the assessee stated that only percentage in purchases could be added in the hands of assessee and not the entire purchases. The learned Authorized Representative ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 28,95,578/- in the trading account, in turn declaring GP rate at 14.58%. There was information with the Assessing Officer that some of the parties from whom the assessee had made the purchases were named in the list of hawala dealers published by the Sales Tax Department. The to tal purchases from the said parties worked out to Rs. 74,73,020/- as per the list at page 2 of the assessment order. All the above said parties from whom purchases were made were located in Mumbai i.e. outside the area of operation of the assessee in Bhosari, Pune. The case of the Sales Tax Department against the said parties was that they were providing accommodation entries and though there was a TIN number allotted to each of them, but they had not paid any VAT alleged to have been collected from the re spective persons to whom sales had been made. The assessee was one such person to whom the sales were made by the said parties who were enlisted by the Sales Tax Department. The Sales Tax Department also found that the said parties were not available at the given addresses and hence, these were treated as hawala dealers. The Assessing Officer during the course of assessment proceedings after noting that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it had made the purchases from the said parties. The parties were based in Mumbai and the assessee was based in Pune, had made purchases from Mumbai parties and the assessee was asked to produce any corroborative evidence of movement of goods from Mumbai to Pune. The assessee was asked to produce octroi receipts and / or any other corroborative evidence in support to the movement of goods. However, the assessee categorically before the Assessing Officer admitted that he was not in a position to produce any of the above. 12. Before the CIT(A), the assessee though had first admitted that the purchases should be added as its income, changed its stand that the entire purchases could not be disallowed as bogus, once it was held that the sales were genuinely effected. The case of the assessee before the CIT(A) and even before us is that the said purchases could not be disallowed on the basis of matching principles. Another plea raised by the assessee in this regard was that one of the parties i.e. M/s. Sidhivinayak Enterprises, Mumbai from whom purchases of Rs. 12,73,892/- had been made were not found in the list of hawala dealers. The assessee in this regard submitted that if most of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee to produce the confirmation of purchases by way of transport receipts, weigh bridge receipts, octroi receipts, etc., the assessee has not produced any evidence. On the other hand, when all these facts were confronted to the learned Authorized Representative for the assessee by the Assessing Officer and show caused by way of an order sheet notice, also issued to the learned Authorized Representative for the assessee, he admitted that the alleged purchases made from the hawala dealers should be treated as income. At no point of time during the course of assessment proceedings, the assessee raised the plea of matching principles, under which it claimed that there was tally between the purchases and sales and also the closing stock shown by it. Only before the CIT(A), the concept of matching principles was raised, but in the absence of any details whatsoever, the CIT(A) vide para 10 has given a finding that Even at this stage, the appellant is not in position to discharge the onus cast upon him by producing the parties, their confirmations, transport details, weigh bridge and octroi receipts, etc. to support his case so that remand order u/s.250(4) of Income-tax Act can be passe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and purchase bills. The onus is upon the assessee that the items which it claims to have purchased should have reached him and thereafter, the same should have been transported to the respective parties to whom the sales have been made. However, the assessee has not produced any evidence in this regard and in the absence of the same and also in the absence of any stock details being maintained by the assessee, the alleged re-conciliation exercise has no basis and cannot be relied on to establish the case of the assessee on matching principles. Another aspect to be kept in mind is that the Assessing Officer had further confronted the assessee with the valuation of closing stock at the end of the year. During the course of assessment proceedings, the Assessing Officer found the assessee had not maintained any day-to-day stock register and was of the view that the valuation of stock could not be verified. When confronted on the said issue, the learned Authorized Representative for the assessee submitted that due to large number of items involved, it was not practical to maintain the stock register. As against the same, now the case of the assessee before us is that it is in a position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ms purchased from the hawala dealers are the only purchases made of the said items. Where the assessee has not maintained the stock register, which could establish datewise inflow of goods from different parties, which in turn, were sold by him to different parties on datewise, the assessee claims that he has reconciled the purchases and sales. In the absence of the said details being maintained by the assessee, the exercise of picking up of one item and matching with the another item of sales, around the same date, the data of purchases cannot be verified by any of the authorities as the assessee is a trader in the goods. He was not a manufacturer of items, wherein some kind of exercise would be established that certain items were utilized to give the desired manufactured results. In case of trading, where no quantity-wise or amount-wise or date-wise purchases have been maintained by the assessee to reconcile that a particular item purchased on a particular date, had been sold by the assessee to a particular person on a particular date, it is not only difficult, but impossible to match the purchases and sales. Even in accounting principles, it is recognized that where the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce made merely, the parties were not produced, cannot be upheld. However, in the facts of the present case as pointed out by us, the assessee has not maintained any stock details i.e. the details of opening stock, purchases, sales and closing stock, nor has he produced any evidence of the goods being delivered to him. Further, when he was confronted at the first stage by the Assessing Officer of the non-genuineness of the parties and the same being declared as bogus by the Sales Tax Department, the learned Authorized Representative for the assessee admitted before the Assessing Officer that the same may be treated as bogus and amount may be added in his hands. The onus is upon the assessee to establish that it had made the said purchases from the said parties. However, where the assessee has failed to discharge his onus and has made a statement before the Assessing Officer, then the retraction of such statement is possible only if the assessee files the relevant corroborative evidence to establish the transaction. In the absence of the assessee having established this transaction by way of corroborative evidence, mere exercise of matching some purchases with some sales, in the abs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had prevented the Assessing Officer from carrying on any exercise of any kind of verification, then on a later date, the assessee cannot take the stand that no such addition is warranted in the absence of any verification exercise carried out by the Assessing Officer. The assessee has failed to furnish the confirmation from the parties and the Sales Tax Dep artment has not been able to trace the said parties. In the absence of any confirmation being filed by the said parties or the evidence of the bank statement of the said parties having been placed on record by the assessee to prove its case, merely because such view has been taken in any other decision, the same cannot be applied where the assessee has not discharged its onus. Even before us, the assessee has not furnished any evidence of payment except for making the statement that the amounts were paid by way of cheques. In view thereof, we find no merit in the said stand of the assessee. Upholding the order of CIT(A), we dismiss the ground of appeal Nos.1 to 4. 21. The issue in ground of appeal No.5 raised by the assessee is against the addition of Rs. 15,65,000/- under section 68 of the Act. 22. The Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee is dismissed. 25. The issue in ground of appeal No.6 is against the addition of Rs. 2,00,000/- made on account of stock valuation. 26. During the course of assessment proceedings, the Assessing Officer found that the assessee had not maintained day-to-day stock register, due to which correctness of the value of stock could not be verified. When confronted on the issue, the learned Authorized Representative for the assessee submitted that due to large number of items involved, it was not practical to maintain day-to-day stock register. Though the assessee claims that the stock register was prepared on the basis of physical verification, but no proof of physical verification was filed before the Assessing Officer, hence, the Assessing Officer made lump sum addition of Rs. 2,00,000/-. Before the CIT(A), the claim of the assessee was that no such addition could be made since the books of account were audited under section 44AB of the Act. The CIT(A) upheld the addition holding that though the books of account were audited under section 44AB of the Act, but considering the fact of bogus purchases, unexplained creditors, which were the subject matter of earlier grounds of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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