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2016 (5) TMI 761 - ITAT AHMEDABAD

2016 (5) TMI 761 - ITAT AHMEDABAD - TMI - Addition on bogus purchases and non-business expenditures - Held that:- In the audited financial statements at Annexure-I to Form No.3CD dated 21.09.2009 wherein consolidated financial figures are to be mentioned by the Tax Auditor. In this Annexure- I, there is a specific column at Sr. No.10 which asks about the commission received by the assessee during the year and to our surprise, the amount shown in the current year as well as preceding year is NIL. .....

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nt of ₹ 54,13,176.52 is payable to farmers which is approximately 30% of the sales and in the balance-sheet under “advance and deposits” a sum of ₹ 39,15,975/- is shown as advance to M/s. Thakorbhai & Co., Amalsad, Navsari. These types of financial transactions raise a question as to whether the assessee has entered into these transactions as a trader of agricultural goods or as a commission agent. We are, therefore, of the view that there are series of questions which remained unans .....

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heard to the assessee and while framing fresh assessment order, he should be clear to assess as to whether the assessee is a commission agent or a trader and then proceed further to deal with the related issues. - Decided in favour of Revenue for statistical purposes. - ITA No. 917/Ahd/2012, ITA No. 918/Ahd/2012 - Dated:- 7-4-2016 - SHRI SHAILENDRA K. YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER For The Revenue : Shri Dinesh Singh, Sr. DR. For The Assessee : Shri K.N. Bhatt, A .....

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es involved are similar, we are taking these appeals together for the sake of convenience. 2. We will take up ITA No.918/Ahd/2012 as the lead case and the decision taken in this appeal will be applied to ITA No.917/Ahd/2012 also. ITA No.918/Ahd/2012 - in the case of assessee M/s. Yogeshkumar & Co. 3. In this appeal, Revenue has raised following grounds:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 53,74,494/- made .....

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the business of Commission Agent for sale and purchase of fruits (Chickoo). During the course of assessment proceedings, on verification of books of accounts, it was noted that the assessee has made maximum purchases in cash through self purchase memos, wherein names and addresses of the parties are not written. The ld. Assessing Officer also observed that the assessee was showing purchase and sale of fruits in its audited financial statements and no specific income from commission was appearing .....

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ickoo to verify details of goods i.e. quantity & quality of goods & total value. But, you have not given identity proof of the parties. Purchase bills for verification of quantity, quality and value of the goods have also not produced. 3. As per written submission dated 25.11.2011 during the FY 2008-09 for AY 2009-10 you have dealt in chickoo, an agriculture product. Details of cash purchases are as under: Cash purchase as per letter dt. 25.11.2011 Rs.98,62,028/- Credit purchase Rs.68,15 .....

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6,961/- 4. On verification of the above, it is found during the FY 2008-09, for AY 2009-10, you have made total cash purchase as follows Total cash purchase as per letter dt. 25.11.2011 Rs.98,62,028/- Total cash payment made against credit purchase ₹ 8,86,961/- Total cash purchase Rs.1,07,48,989/- 5. Therefore, you are asked to show cause as to why 50% i.e. ₹ 53,74,494/- of total cash purchase of ₹ 1,07,48,989/- should not be disallowed as bogus and non verifiable purchase and .....

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re shown at equal figures which too proves that the assessee is a commission agent and as far as the transactions in cash are concerned, the same being entered into with the farmers in regard to agricultural produce purchased. However, the ld. Assessing Officer was not convinced with the reply of the assessee and he, relying on the decision of Vijay Proteins Ltd vs. ACIT, 55 TTJ (Ahd) 76, framed assessment by adding 50% of total cash purchase of ₹ 1,07,48,989/- which arrives at a figure of .....

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us purchases of ₹ 53,74,494/-:- I have considered the observation of the AO in the assessment order as well as the contention raised by the AR of the appellant in the written submission. The AO while farming the issue seems to have diverted himself and routed through a path whereby he himself has contradicted his findings. He has ignored the very fact that the appellant is dealing with the business of perishable agriculture produce (Chikoo) and simply disregarded the details, quantitative .....

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probe into the matter find out the defects and then to ask the appellant to prove the genuineness of his findings. In case of M/s Vijay Proteins Ltd the AO has thoroughly probed the matter and drawn a conclusion. Since in this case as the AO didn t attempt to discharge his onus and relied upon the decision which is not relevant to the case of the appellant ignoring the Circular of the CBDT, I feel that he is not justified and therefore the addition is deleted. 7. Further, the ld. CIT(A), while a .....

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ical observation in respect of the applicability of provisions of section 145(2) of the Act. I found AO to be not justified in making an addition without rejecting the book results. The appellant is succeeded in the second ground of appeal. 8. Aggrieved the Revenue is now in appeal. The solitary grievance in all the four grounds of appeal are relating to the action of the ld. CIT(A) in deleting the addition of ₹ 53,74,494/- made by the ld. Assessing Officer in respect of bogus purchases an .....

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part to put forth in material evidence proving that the assessee-firm is not a trader but a commission agent. 9. On the other hand ld. Authorized Representative submitted that the assessee is basically a commission agent, dealing with fruits which are highly perishable in nature and they are supposed to be disposed off daily basis to avoid risk of total loss. The ld. Authorized Representative also submitted that all the audited books of accounts were furnished before the ld. Assessing Officer du .....

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ultural produce and no disallowance under sub-section (3) of section 40A of the Act is called for such payment, even if payment exceeding ₹ 20,000/- are made otherwise than by an payee cheque or draft. The ld. Authorized Representative further submitted that the decision of M/s. Vijay Proteins Ltd (supra), as relied upon by the ld. Assessing Officer while making addition, is simply not applicable to the case of the appellant, because in the case of Vijay Proteins Ltd (supra), the assessee .....

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of them were produced; and also the bank account through which the payments to the suppliers were rotated was an accommodative bank account for carrying out fictitious transactions. Whereas, in the instant case of the appellant, the ld. Assessing Officer simply ignored the details, evidences, books of accounts, quantitative details, daily inward/outward quantity of perishable fruits (chickoo), the sample copy of purchases and sales bills and all the purchase books produced before him during the .....

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agent. 10. We have heard the rival contentions and perused the material on record. The solitary grievance of the Revenue is against the action of the ld. CIT(A) in deleting the addition of ₹ 53,74,494/- made by the ld. Assessing Officer in respect of bogus purchases and non-business expenditures. On going through the record and submissions made before us, we are able to understand that the assessee is dealing in agricultural product, specifically fruits (chickoo) and provisions of Rule 6DD .....

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nancial statements and stock records furnished by the assessee during the course of assessment proceedings and the books of accounts have not been rejected u/s 145(3) of the Act. Further, the decision of M/s. Vijay Proteins Limited (supra) is also not applicable to the case of assessee as the facts and circumstances in M/s. Vijay Proteins Limited (supra) are different from the facts discussed in the case of the assessee. The only reason for making the addition was that the assessee was unable to .....

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percentage to sales will arrive at 37.42%, which is certainly impossible for the type of business carried on by the assessee. 11. From going through above discussion and also going through the orders of the lower authorities, we are able to understand that ld. Assessing Officer while framing the assessment order was having two parallel views. Taking first view, he treated the assessee as a trader of fruits and went ahead to verify the purchases and sales, and framed the assessment order by way o .....

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ommission agent; but nevertheless he never trust upon the income shown by the assessee under the head administrative charges at ₹ 13,63,768/- even when the assessee has submitted that this actually is the income from commission and only the nomenclature has been changed. 12. We further observe that in the audited financial statements at Annexure-I to Form No.3CD dated 21.09.2009 wherein consolidated financial figures are to be mentioned by the Tax Auditor. In this Annexure- I, there is a s .....

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ntory about, because if it is an inventory, then the assessee is having regular purchase and sale transactions and he may be treated as trader. Further, at the year end, there is an amount of ₹ 54,13,176.52 is payable to farmers which is approximately 30% of the sales and in the balance-sheet under advance and deposits a sum of ₹ 39,15,975/- is shown as advance to M/s. Thakorbhai & Co., Amalsad, Navsari. These types of financial transactions raise a question as to whether the ass .....

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