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2016 (7) TMI 93 - ITAT CHENNAI

2016 (7) TMI 93 - ITAT CHENNAI - TMI - Addition of unexplained cash credit under section 68 - Held that:- Commissioner of Income Tax (Appeals) has simply brushed aside the arguments advanced before him by the assessee and his learned Authorized Representative but only relied upon the audit report furnished under section 44AB of the Act and thereby came to a conclusion that the accounts drawn by the assessee is genuine with respect to the stock, however held certain sundry creditors to be bogus w .....

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further of the view that no purpose will be solved by remanding the case back to the file of the Assessing Officer because of the long lapse of time. Considering the facts and circumstances of the case and in the interest of justice, we are of the considered view that sustaining the addition by 50% of ₹ 19,39,677/- will suffice to meet the ends of justice. - Decided partly in favour of assessee - Penalty under section 271(1)(c) - Held that:- Since the entire addition has not been conc .....

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rtment. Therefore, we hereby delete the penalty levied by the learned Assessing Officer which is further confirmed by the learned Commissioner of Income Tax (Appeals). - Decided in favour of assessee - I.T.A. Nos. 601/Mds/2013 & 2831/Mds/2014 - Dated:- 12-5-2016 - Shri N. R. S. Ganesan, Judicial Member And Shri A. Mohan Alankamony, Accountant Member For the Appellant : Mr. S.Sridhar, Advocate For the Respondent : Mr. A.B.Koli, JCIT ORDER Per A. Mohan Alankamony, AM Both these appeals are filed b .....

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ommon order for the sake of convenience. ITA No.601/Mds/2013: 2. The assessee has raised several grounds in his appeal, however, the crux of the issue is as follows:- The learned Commissioner of Income Tax (Appeals) has erred in confirming the addition of ₹ 19,39,677/- made by the learned Assessing Officer on account of unexplained cash credit under section 68 of the Act. 3. Brief facts of the case are that the assessee is an individual engaged in the business of buying & selling of au .....

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assessee had shown sundry creditors amounting to ₹ 26,06,589.21 in his balance sheet. On verification the learned Assessing Officer opined that certain sundry creditors were not genuine because there was discrepancy in the confirmation statements submitted by those sundry creditors and the amount disclosed by the assessee in his balance sheet. On query, the assessee could not prove the genuineness of the creditors amounting to ₹ 19,39,677/-. Therefore, the learned Assessing Officer .....

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parties have denied having supplied the goods to the appellant and consequently, no amount is due from the appellant. However, contrary to the result of the enquiry, the purchases and sales admitted in the accounts have not been disturbed by the Ld. AO. The facts of the transactions are as under: - The appellant has been negotiating for loan for the purpose of the business from the so called "market financiers" who will advance monies SANS security. The principle with interest is colle .....

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be defeated, as, in such a situation, cash balance will come down. Theses unreal purchases are entered in the stock register and simultaneously shown as cash sales adding the gross profit margin from time to time over and above the real day to day cash sales. Thus the unreal stock will vanish-from the accounts within a reasonable time. This practice is prevalent in the line of trade to enjoy credit facilities from the market financiers. At the time of introducing bogus bills and resorting to bog .....

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Police complaint will not be of any avail. 4. It would be noticed from the trading results submitted that the entire bogus purchases and bogus sales are fully accounted for, In respect of such imaginary sales, the normal gross profit is added and billed as otherwise the trading result will be lower than the prevailing gross profit rate and may not be accepted by the Sales tax and Income Tax Department. The fact that normal trading result is admitted in the accounts itself is enough proof that th .....

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ppellant is 15% to 16%. 5. Considering the fact that the unreal purchases as per the bills and sales Including gross profit is already admitted and taxes paid on these onreal transaction, the entire addition made may be deleted. It is painted out that [he Ld AO verified the ten items of purchases and found that these are not real, as the verification confirmed that the outstanding shown in sundry creditors are also not real. 6. Yes, it is admitted that the appellant has resorted to a practice pr .....

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ral justice and against the principles of double jeopardy. Article 20 of the Indian Constitution protects a person from suffering more than once for any default. I have come before your Honour being the judicial authority with an appeal hoping to get flat justice. 7. It is submitted that the appellant is unable to pay the additional burden of tax as a result of the scrutiny assessment and may thus be deleted. 5. However, the learned Commissioner of Income Tax (Appeals) confirmed the order of the .....

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s contentions were to be accepted the appellant would not get any benefit as per the decision of the Hon'ble Allahabad High Court in the case of Kaveri Rice Mills reported in 157 Taxman 376 that when purchases are bogus, all purchases are to be added and not the Gross Profit (GP) irrespective of the fact that GP will go up dramatically. 6.2 In view of the above discussion, the action of the AO is correct in treating unproved Sundry Creditors to the extent of ₹ 19,39,677/- as unexplaine .....

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essee s business and therefore further addition of ₹ 19,39,677/- on the presumption of bogus sundry creditors will jeopardize the business of the assessee. The learned Authorized Representative further submitted that the assessee had window dressed his balance sheet in order to obtain loan from the bank by superficiously increasing the stock and correspondingly increasing the sundry creditors. Therefore, there was no actual increase of stock or sundry creditors. It was therefore humbly sub .....

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ee and his learned Authorized Representative but only relied upon the audit report furnished under section 44AB of the Act and thereby came to a conclusion that the accounts drawn by the assessee is genuine with respect to the stock, however held certain sundry creditors to be bogus without further verification. It would have been proper on the part of the learned Commissioner of Income Tax (Appeals) to obtain a remand report from the learned Assessing Officer on the explanation advanced by the .....

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