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2016 (5) TMI 1257 - ITAT MUMBAI

2016 (5) TMI 1257 - ITAT MUMBAI - TMI - Estimation of profit on the sales @ 0.5% - Held that:- As per information received in pursuance to enquiry made under section 133(6) with the parties to whom the assessee claimed to have sold goods, all of them are not only existing entities but are having PAN and all of them confirmed of having transacted with the assessee. It is also found that one of the parties is a listed company. The learned Commissioner (Appeals) also found that the assessee is of a .....

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, hence, calls for no interference. - Decided against revenue

Addition on account of unexplained outstanding balance of creditors - CIT(A) delted the addition - Held that:- Commissioner (Appeals) felt it necessary to conduct enquiry himself and obtain information for enabling him to dispose off the appeal, in our view, no fault can be found with such procedure adopted by the learned Commissioner (Appeals). A reading of the statutory provisions referred to above makes it clear that not .....

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having found that the creditors appearing in assessee’s books are genuine there was no logic in again remanding the matter to the Assessing Officer. In the aforesaid facts and circumstances, we do not see any reason to interfere with the order of the learned Commissioner (Appeals) in deleting the addition made under section 68 - Decided against revenue - ITA No. 192/Mum./2012, ITA No. 4949/Mum./2012, Cross Objection no.78/Mum./2016 - Dated:- 27-5-2016 - Shri Saktijit Dey, Judicial Member And Shr .....

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nd was not originally listed for hearing. However, since it arises out of the order passed by the learned Commissioner (Appeals) under challenge in the cross appeals and further the grounds raised in the cross objection are materially identical to the grounds raised in the appeal of the assessee, the cross objection was taken up for hearing on the consent of both the parties. 3. At the very outset, the learned Authorised Representative submitted a letter dated 19th May 2016, seeking permission t .....

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has no objection for withdrawal of the appeal and the cross objection by the assessee. 5. In view of the aforesaid, we dismiss the cross objection (C.O. no.78/Mum./2015) and appeal by the assessee (ITA no.92/Mum./ 2013) as withdrawn. 6. As far as Revenue s appeal being ITA no.4949/Mum./2012, is concerned, the effective grounds raised are as under:- 1. On the facts and in the circumstances of the case and in law, the learned Commissioner (Appeals) erred in restricting the addition on account of .....

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ner (Appeals) failed to appreciate that the details collected by him in respect to sundry creditors should have been remanded to the A.O. for verification as such details were not available to the A.O. during the assessment proceedings. 7. In ground no.1, the Department has challenged the decision of the learned Commissioner (Appeals) in estimating the profit on the sales @ 0.5%. 8. Brief facts are, assessee an individual claimed to be engaged in the business of polished diamonds, rough diamond, .....

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d summons to the assessee requiring his appearance to explain. In response to the summons issued, the assessee appeared and a statement was recorded from him. From the statement of the assessee, the Assessing Officer found that at the instance of another person Shri Ashok Jain, assessee was carrying out the transaction as namelender. As stated by the Assessing Officer, even the Chartered Accountant appearing for the assessee also confirmed the facts stated by the assessee in the statement record .....

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of the assessee cannot be accepted and have to be rejected in terms of section 145(3) and income has to be estimated. The Assessing Officer observed, as per the Profit & Loss account forming part of the tax audit report, the total sales effected by the assessee during the year was ₹ 76,01,11,881. He observed, in spite of such huge volume of turnover, neither there was any opening stock nor closing stock which according to the Assessing Officer indicates that the assessee was used by an .....

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terial on record found that as per the enquiry conducted by the Assessing Officer himself, assessee was found to be a mere nomenclature of Shri Ashok Jain. That being the case, logically, no addition could have been made at the hands of the assessee. He observed, though, the Assessing Officer inferred that the assessee was actually issuing accommodation bills at the instance of Shri Ashok Jain, but no enquiry was made with Shri Ashok Jain. He observed, if it was found by the Assessing Officer th .....

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e details of purchase along with their address b. Partywise details of sales along with their address c. Quantitative details of traded goods d. Sample copies of purchase bills e. Comparitative chart of gross profit and net profit f. Audited Balance sheet as on 31/03/2009 10. He noted, the Assessing Officer after verifying the details submitted by the assessee, did not point out any specific discrepancy or defect in these information. Therefore, in his view, the net profit rate of 5% adopted by .....

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verify the current liability of the concerned parties it was found from the information supplied by those parties that they are existing entity with regular PAN and were having huge turnover. All those parties have also certified transactions with the assessee and the balance tallied with the ledger produced by the assessee which, to certain extent, proves that the entries are accommodation bills. He also took note of the fact that in the earlier year also, assessee had disclosed similar sales a .....

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ive submitted, when the assessee was found to be involved in unscrupulous/dishonest activities of providing accommodation bills as a benamidar, the learned Commissioner (Appeals) was not justified in reducing the net profit rate to 0.5% thereby giving a premium to the dishonesty of the assessee. He submitted, though, there is no basis shown by the Assessing Officer while adopting net profit rate of 5% similarly learned Commissioner (Appeals) has also not shown the basis for reducing it to 0.5%. .....

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in any case of the matter, in the preceding assessment years also, assessee s income from business was estimated at a considerably lower rate of 0.03%. In this context, he drew the attention of the Bench to the assessment order passed under section 143(3) for the assessment year 2008-09. He, therefore, submitted there is no reason to interfere with the order of the learned Commissioner (Appeals). 13. We have considered the submissions of the parties and perused the material available on record. .....

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unt by the person behind the entire activity for lending his name. Moreover, as found by the learned Commissioner (Appeals) as per information received in pursuance to enquiry made under section 133(6) with the parties to whom the assessee claimed to have sold goods, all of them are not only existing entities but are having PAN and all of them confirmed of having transacted with the assessee. It is also found that one of the parties is a listed company. The learned Commissioner (Appeals) also fo .....

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ioner (Appeals) is reasonable, hence, calls for no interference. Accordingly, upholding the order of the learned Commissioner (Appeals) on the issue, we dismiss ground no.1, raised by the Department. 14. Grounds no.2 and 3, raised by the Department are on common issue of deletion of addition of ₹ 8,95,22,222, made on account of unexplained outstanding balance of creditors. 15. Brief facts are, during the assessment proceedings, the Assessing Officer on verifying the balance sheet found tha .....

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reason that identity and creditworthiness of creditors and genuineness of transaction could not be proved by the assessee by producing the creditors. Accordingly, he added back the amount to ₹ 8,95,22,222. Being aggrieved of such addition, assessee challenged the same in an appeal preferred before the learned Commissioner (Appeals). 16. In the course of hearing, the learned Commissioner (Appeals) on verification of material on record, found that though the assessee had produced confirmatio .....

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alance in the books of Ravindra B. Upalekar is pending before the undersigned for adjudication. In the balance sheet of Shri Ravindra B. Upalekar as on 31/03/2009. The nature of transaction done for the period 01/04/2008 to 31/03/2009; (ii) Copy of your ledger account to the mentioned appellant for the same period. (iii) The details of payment received by you in relation to credit amount outstanding; (iv) Your PAN and designation of Assessing Officer (v) Copy of I.T. Acknowledgement / Balance sh .....

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der section 143(3) by the jurisdictional Assessing Officers. He found all the creditors are not only having PAN but are regular income tax assessees and filing their return of income. They also confirmed their account with the assessee and furnished bank statement reflecting cheque received and paid entries. Thus, after verification of the information submitted, learned Commissioner (Appeals) having found that the concerned parties are not only existing entities but have also confirmed their tra .....

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ted, learned Commissioner (Appeals) though independently conducted enquiry by issuing notices under section 133(6) and obtained information from the creditors, on the basis of which he deleted the addition, he did not thought it fit to send these evidences on remand to the Assessing Officer for verification and his comment. Therefore, without allowing an opportunity to the Assessing Officer to verify evidences brought on record which were not before the Assessing Officer, the deletion of additio .....

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reason that the assessee was not able to produce the creditors before him the Assessing Officer had made addition under section 68. Learned Authorised Representative submitted, in the course of proceeding before the learned Commissioner (Appeals), the assessee had not produced even a single piece of fresh evidence. The learned Commissioner (Appeals) after verifying the materials already available on record before the Assessing Officer having felt that further information is required before comi .....

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part of the learned Commissioner (Appeals) to call for a remand report from the Assessing Officer. Learned Authorised Representative drawing our attention to provisions contained under section 251 of the Act and rule 46A of I.T. Rules submitted, the learned Commissioner (Appeals) is empowered under the aforesaid provisions to conduct enquiry and obtain information if it is necessary for the purpose of disposal of the appeal. He submitted, the information obtained having clearly revealed / proved .....

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f the credit appearing on 31st March 2009. It is also evident from the conclusion drawn by the Assessing Officer in Para-4 of the assessment order, the balance appearing in the name of creditors amounting to ₹ 8,95,22,222 was treated as unexplained cash credit under section 68 only for the reason that the creditors were not produced before the Assessing Officer. The Assessing Officer has not pointed out any specific deficiency either in the confirmation letter or any other documents submit .....

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ance appearing in the books of the assessee. In fact, as per the information obtained by the learned Commissioner (Appeals) in pursuance to notice issued under section 133(6), all of them are income tax assessee with regular PAN and are filing their income tax returns regularly. Apart from confirming their account in assessee s books of account, the individual bank statement of the concerned creditors also reflected payment received through cheque. Therefore, upon consideration of the evidence b .....

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arned Commissioner (Appeals). The assessee made its submissions before the learned Commissioner (Appeals) only on the basis of documentary evidence already furnished before the Assessing Officer. The learned Commissioner (Appeals) after perusing the evidences brought on record felt it necessary to conduct enquiry himself to ascertain the genuineness of the creditors and accordingly issued notices under section 133(6) of the Act seeking further information on the credit from the concerned credito .....

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e learned Commissioner (Appeals) while disposing of an appeal against an order of assessment has the power to confirm, reduce, enhance, or annul the assessment. Therefore, while in session of the appeal the entire assessment order is open for scrutiny before the learned Commissioner (Appeals). He has the power not only to examine the issue which are subject matter of grounds of appeal raised by the assessee but also can look into the issues which were overlooked by the Assessing Officer and whic .....

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ellate authority is concerned. It puts a condition that no additional evidence can be admitted without fulfilling the condition of sub-rule (1) and (2). Similarly, sub-rule (3), provides for an opportunity to be granted to the Assessing Officer to examine the additional evidence and offer his comments. However, sub-rule (4) of Rule 46A, makes it clear that the conditions imposed under sub-rule (1)(2)and (3) in respect of furnishing of additional evidence by the assessee would not apply or affect .....

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