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ACIT-25 (2) , Mumbai Versus M/s. Parshva Enterprises And Vice-Versa

2016 (8) TMI 59 - ITAT MUMBAI

Addition u/s 69C - source of the expenditure - purchase of goods - accommodation entries - Held that:- Section 69C of the Act stipulates that the deemed income(where the source of the expenditure is not explained)cannot be allowed as a deduction under any head of income. In other words, even if the assessee can justify the expenditure, but cannot explain its source, the section disentitles him from claiming a deduction on the deemed income under any head of income. In short, what is postulated i .....

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nowhere held that as to how the explanation offered by the assessee about the source of the expenditure was unsatisfactory. Therefore, in our opinion, the AO had wrongly invoked the provisions of the section 69C of the Act. Considering the above, effective GOA, raised by the AO is decided against him. - Decided in favour of assessee - I.T.A. 5288/Mum/2013, I.T.A. 5436/Mum/2013 - Dated:- 22-7-2016 - Sh. Rajendra, Accountant Member & Pawan Singh, Judicial Member For the Revenue : Ms. Radha Kat .....

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e at ₹ 1. 22Crores. 2. During the assessment proceedings, the AO found that the assessee had debited purchase of 25. 25 Croresores. He directed it to file details of purchases, TIN and names and addressed of the parties from whom purchases were made. In reply to notice it filed details. Meanwhile, the AO received information received from Sales Tax Department which was also available on the official website of Sales tax Department regarding suspicious parties who were providing accommodati .....

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ndependent enquiries in each of the hawala parties and had conclusively proved that those parties were engaged in activity of providing accommodation entries only. The AO received affidavit cum declaration dated 05. 08. 2011 of Ketan Shah, Proprietor of SMTC, statement DTD. 11. 08. 2008 of R. B. Shah of NIPL, affidavit of N. K. Shah of TTPL, dt. 05. 08. 2011. He provided the copies of above documents to the assessee. He issued summons to u/s. 131 of the Act on 14. 12. 2012 and deputed an Inspect .....

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from the above mentioned three parties aggregating to ₹ 80. 09 lakhs should not be treated as unexplained expenditure and added back to its returned income. The assessee , vide its letter dt. 31. 03. 2013, submitted copies of bills and delivery challans along with bank statement of the three parties. After considering the submissions of the assessee, the AO observed that submission made by the assessee were not acceptable, that Ketan Shah of SMTC had accepted in his affidavit on declaratio .....

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ed purchases totaling to ₹ 80. 09 lakhs was treated as unexplained expenditure as per the provisions of section 69C of the Act. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appeallate Authority(FAA). Before him, it argued that the AO had passed the order without considering the submissions made by it and had violated the principles of natural justice, that the assessee had made a request from Cross examination of parties whose statements and affida .....

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by the assessee, that there was no dispute in the amount or genuineness of the sales made by the assessee, that it had produced copies of stock statement confirming the inward movement of goods and copies of inward movement of the transport, that sales as well as the stock statements had not been rejected by the AO, that there could not be any sale without corresponding purchases. The assessee referred to cases of Balaji textile Industries P. Ltd. (49ITD177), Nikunj Exim Enterprises Pvt. Ltd. ( .....

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rvation on the sales tax department could not be sustained, that the GP ratio over the years had remained more or less same, that in case the addition to the extent of ₹ 80. 09 lakhs was made the GP ratio would go up to 7. 38% as against GP range of 4. 29% to 5. 5%. 3. 1. After considering the submission of the assessee and the assessment order, the FAA held that the purchases made by the assessee were supported by third party evidences such as transport bills and unloading bills, that the .....

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es. He also referred to the case of Fortune Steel Industries(supra). He further held that the affidavit / statements given by the supplier before the ST Authorities provided the addresses of those parties, that if the summons/notices issued by the AO were returned with the remark left/ unknown no adverse inference could be drawn against the assessee, that the assessee was denied an opportunity to cross examine the suppliers, that the affidavit had no evidential value. Finally , he held that the .....

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ratio had fallen because of inCroresease in turnover. After considering the submission of the assessee , the FAA held that assessee was a trader in the business of Iron and Steel, that in the case of Fortune steel Industries (supra) the assessee had shown GP @ 16. 13% in the AY 03-04 and 10. 81% in the immediate preceeding year, that the Tribunal did not confirm any addition on the GP ratio, that still it was an indication that GP margin in the trading business of Iron & Steel would be highe .....

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42 Crores and the GP shown by the assessee at 1. 11 Crores was added to the income of the assessee. As a result the addition made the AO was restricted to ₹ 39. 19 lakhs and the balance addition of ₹ 48. 90 lakhs was deleted . 4. Before us, the Authorised Representative(AR)argued that the FAA could not make an enhancement to income of the assessee by introducing a new source of income, that where quantitative details were furnished books of account could not be rejected, that mere re .....

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com 514); (67 SOT 52)(Mum Trib. ); Ramesh Kumar & Co. (ITA No. 2959/Mum/2014 dated 28. 11. 2014 A. Y. 2010-11). 4. 1. The Departmental Representative(DR) supported the order of the FAA to the extent of the addition sustained by the FAA. With regard to the addition deleted by him, the DR argued that assessee had not filed confirmation from the sellers, in purchase bills details of the goods were not available, that the expenditure made by the assessee was not explained during the assessment p .....

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llow him to Cross examine the parties. 5. We have heard the rival submissions and perused the material before us. We find that the FAA had given partial relief to the assessee, that he had applied the provision of section 145(3) of the Act, that applying the GP of the earlier year, partial addition was upheld, that the AO had not disturbed the GP shown by the assessee, that he had not issued notice as envisaged by provisions of section 251(2) of the Act, that for applying the earlier years GP th .....

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the FAA does not suffer from any legal infirmity, that the AO had accepted sales made by the assessee, that without purchases there could not be any sales, that the assessee had produced delivery challans, bank statement, stock register during the assessment proceedings. All these documents along with the undoubted sales cannot be brushed aside. The only basis for making the addition was the information available on the website of the sales tax department. In our opinion it was a good lead to st .....

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