TMI Blog2015 (11) TMI 1526X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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. - Decided against assessee. Addition under section 68 - Held that:- Both the lower authorities had time and again asked the assessee to furnish the complete details in respect of loan creditors, but the assessee failed to furnish the details and before the Assessing Officer, he admitted that the same may be added as his income. In the absence of the assessee having filed the necessary bank details and the income-tax acknowledgements of filing the return of income, the creditworthiness of the creditors as well as the genuineness of the transaction could not be proved and hence, we uphold the order of CIT(A) in confirming the aforesaid addition - Decided against assessee. Addition made on account of stock valuation - Held that:- 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 pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies before A.O. The Ld. CIT(A) was not justified to confirm the action made by the A.O. of gross purchases of ₹ 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 and circumstances of the case and in law the Ld.CIT(A) erred in confirming the addition made by A.O. of ₹ 15,65,000/- invoking S. 68 of the Act even though the confirmation letters, Incometax details of the creditors were filed before A.O. If at all advances made by the parties were doubtful according to A.O. the addition should have been made in the hands of the said creditors. As far as assessee is concerned in this appeal the provisions of S. 68 were not invokable as all the ingredients of the provision were satisfied. The a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce 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 bogus purchases, especially in view of the fact that the parties were blacklisted by the Sales Tax Department as hawala dealers. The Authorized Representative for the assessee was confronted with the said fact and was asked to show cause vide order sheet entry dated 04.03.2013 as to why the alleged purchases from the above parties amounting to ₹ 74,73,020/- should not be disallowed and added to the total income of the assessee. In response to the said opportunity, the Authorized Rep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lant 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 which was required to be considered for addition under section 69C of the Act. Reliance in this regard was placed on the decisions of Hon ble Delhi High Court in CIT Vs. LAMEDICA reported in 250 ITR 575 (Del) and the Hon ble Madhya Pradesh High Court in System India Castings Vs. CIT reported in 229 ITR 181 (MP). The Hon ble High Courts had upheld the addition on account of entire bogus purchases. The CIT(A) thus, held that the disallowance of ₹ 74,73,020/- was to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 for the assessee relied on the following decisions:- 1. CIT Vs. Sunrise Tooling Systems Pvt. Ltd. (2014) 361 ITR 206 (Delhi) 2. Eland International (P) Ltd. Vs. DCIT (2009) 124 TTJ 554 3. CIT Vs. M.K. Brothers (1987) 163 ITR 249 (Guj) 4. CIT Vs. Bholanath Poly Fab Pvt. Ltd. (2013) 355 ITR 290 (Guj) 5. Ganpatlal A. Sanghavi Vs. ACIT, ITA No.2826/Mum/2013 8. The learned Departmental Representative for the Revenue in reply, pointed out that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om 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 the assessee had made the purchases from the said hawala dealers, had asked the assessee to produce the said parties for verification. In addition, the Assessing Officer also requisitioned the assessee to produce the supporting bills along with related details i.e. delivery challans for the goods, receipts from octroi paid in respect of goods alleged to have been purchased from the above said parties. In reply, the assessee expr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ically 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 ₹ 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 the purchases are unverifiable, at best reasonable GP rate could be applied to make the addition in the hands of assessee and the entire purchase could not be disallowed. 13. The onus is upon the assessee to establish the entries passed in the books of account by first proving that the transaction entered into is genuine, incurred for the purpose of business and also by establishing its case by way of corrobor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee, 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 passed, and in view of thereof, the plea of the assessee regarding matching principles was dismissed by the CIT(A). 14. The learned Authorized Representative for the assessee filed before us a voluminous compilation of data, which was headed as the charts showing details of purchases effected from so called Hawala Parties and corresponding sales turned out from such purchases also quantity wise (Party wise), as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined 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 to reconcile the purchases made from hawala dealers with the sales made by it to different parties. However, in the absence of any day-to-day stock register being maintained by the assessee, we find no merit in the said plea of the assessee. The CIT(A) while deciding the case of the assessee has further gone on the issue that without prejudice even where it has accepted that the correspon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... intained 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 is a trader, then at best FIFO method or LIFO method may be applied i.e. First In First Out and Last In First Out to match the movement of goods. The accounting principles provided that the assessee can maintain the quantity-wise or bill-wise and date-wise details of the items purchased by it. But in the absence of any such details being maintained by the assessee and in view of the var ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssing 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 absence of any stock details being maintained by him from date to date, we find no merit in the stand of the assessee and the same is rejected. The exercise of matching principles has no basis and is futile exercise. 19. The learned Authorized Representative for the assessee placing reliance on various decisions as referred above, pointed out that in the absence of the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 ₹ 15,65,000/- under section 68 of the Act. 22. The Assessing Officer noted that during the year under consideration, the assessee had accepted unsecured loans from various parties to the extent of ₹ 50,05,000/-. The said loans were taken from six creditors and the assessee was asked to provide the confirmation, income-tax acknowledgements, bank account extracts in respect of loan creditors. Though the assessee furnished the confir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 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 appeal, the books of account could not be held to be reliable and where the assessee was not maintaining stock register, to make tally of stock was impossible. Therefore, the disallowance made by the Assessing Officer was held to be justified. 27. The learned Authorized Representative for the assessee before us has raised the plea that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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