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TMI Blog2016 (9) TMI 261X X X X Extracts X X X X X X X X Extracts X X X X ..... bills & vouchers and other information called for. The A.O. after considering the information furnished by the assessee completed the assessment and determined total income of Rs. 8,53,22,530/- by making following disallowances. 1) Additions towards inflation of purchases Rs. 72,26,330/- 2) Additions towards suppression of sales turnover on account of low yield Rs. 4,24,61,798/-. 3) Additions towards unexplained credits u/s 68 of the Act Rs. 2,97,62,203/- 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee has made elaborate written submissions and contended each and every item of additions made by the A.O. The CIT(A), after considering the submissions of the assessee deleted the additions made by the A.O. towards inflated purchases, suppressed sales turnover on account of low yield and unexplained credits u/s 68 of the Act. Aggrieved by the CIT(A) order, the revenue is in appeal before us. 4. The first issue that came up for our consideration is additions towards inflation of purchases. During the course of assessment proceedings, the A.O. noticed that in 7 cases, there is a difference between purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the observations of the A.O. regarding genuineness of final invoices. The D.R. further submitted that the A.O. has brought out clear instances of difference between amounts shown in the books of accounts and purchase invoices in case of 7 parties which was not explained with any evidences. Though, it has filed final invoices showing the correct value recorded in the books of accounts, the invoices are dated prior to the provisional invoices and hence cannot be considered as evidence. 6. On the other hand, the Ld. A.R. for the assessee strongly supported the CIT(A) order. The A.R. further submitted that it is the usual practice in this line of business that the rice millers will supply goods on provisional invoices because of peculiar facts of the business. The A.R. further submitted that assessee has purchased goods from Orissa and West Bengal through middlemen without knowing the suppliers. The goods have been supplied on provisional invoices for movement of goods and once the quality of the goods has been accepted by the assessee, the final price has been determined and accordingly, the suppliers have issued final sale bills. The value recorded in the books of accounts is as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ards low yield of rice bran oil. The A.O. made additions of Rs. 4,24,61,798/- towards suppressed turnover on account of low yield of rice bran oil. The A.O. observed that on analysis of the details of yield from rice bran, it was noticed that there is a decline in the rice bran oil yield when compared to the assessment year 2008-09 & 2009-10 and also to assessment year 2011-12 and 2012-13. According to the A.O., the yield of rice bran oil for the assessment year 2008-09 & 2009-10 is 20.83%, whereas for the year under consideration, the yield is at 14.7%. The A.O. further observed that there is a decline in yield of rice bran oil at 3.1% when compared to average yield for the previous period, therefore, issued a show cause notice and asked to explain the reasons for low yield of rice bran oil. In response to show cause notice, the assessee submitted that during the year under consideration, because of rise in price of raw materials it has purchased more rough bran oil which is having 6% yield. The assessee further submitted that there are 3 varieties of rice bran oil in the market. The price of the rice bran is fixed on the basis of percentage of yield of rice bran oil. Accordingly, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cturing or stock registers. The A.O. did not find any mistakes in the books of accounts or there is a suppression of sales turnover on account of low yield of rice bran oil, without pointing out any errors in the books of accounts, simply made addition based on estimation of yield taking average yield of previous financial years which is not correct. The A.R. further submitted that the A.O. made additions on the basis of comparison of total cost of purchase, but the fact is that during the year under consideration the raw material cost has been increased, therefore, though assessee matches the total purchases cost there is a difference in quality of raw materials purchased because of which there is a variation in the final yield. Therefore, the A.O. was not correct in making addition based on estimation of yield and the addition should be deleted. 11. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. made additions towards low yield of rice bran oil. The A.O. was of the opinion that the assessee has suppressed sales turnover of rice bran oil because of variation in price. According to the A.O., ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that purchase of rough rice bran has been doubled when compared to the last financial year because of which there is a reduction in yield of rice bran oil. But, the other final products of rice bran oil extraction is increased because of low yield of rice bran oil. Therefore, the A.O. was not correct in holding that the assessee has suppressed sales turnover by manipulating yield of rice bran oil and rice bran extraction. The CIT(A) after considering the relevant information rightly deleted the additions made by the A.O. There is no error or infirmity in the order passed by the Ld. CIT(A). Hence, we inclined to uphold the order of CIT(A) and reject the ground raised by the revenue. 13. The next issue that came up for our consideration is addition towards unexplained credits u/s 68 of the Act. The A.O. made additions of Rs. 2,97,62,203/- towards trade creditors u/s 68 of the Act. The A.O. was of the opinion that the assessee has failed to prove the genuineness of the creditors. The A.O. further observed that out of 771 trade creditors, none of the creditors have confirmed the transaction with the assessee. All the letters issued to the creditors have been returned unserved or no s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that the creditors are not genuine. We do not see any merits in the findings of the A.O., for the reason that when purchases are accepted as genuine, he cannot doubt trade creditors which are aroused out of credit purchases. We further observed that A.O. has accepted the financial statement filed by the assessee and on the basis of such financial statement, the net profit has been taxed. This impliedly proves that the A.O. has not doubted the financial results declared by the assessee. Therefore, we are of the opinion that when the purchases having been accepted as genuine, balance remaining outstanding at the end of the year against such purchases cannot be treated as bogus and additions made on that basis cannot be sustained. 16. The A.R. furnished a paper book containing financial statements and also confirmation letters obtained from few trade creditors along with bank statements. On verification of the financial statements filed by the assessee, we find that balance sheet of assessee does not contain any asset or liability other than business asset, stock in trade & sundry debtors corresponding with sundry debtors. On perusal of the financial figures declared by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentatives has relied upon the decision of this bench in the case of Sai Concrete Pavers Pvt. Ltd., referred (supra). In that case, the outstanding creditors for expenses were disallowed by the Assessing Officer. The Learned CIT(A) deleted the addition by placing reliance upon the decision of Hon'ble Allahabad High Court in the case of CIT V Panchamdas Jain (205 CTR 444), wherein it was held that the provisions of section 68 are not attracted to the amounts representing purchases made on credit, when the assessing officer has accepted the purchases as genuine. The bench also noticed that the outstanding amount had been paid in the subsequent period. Hence the bench did not find any infirmity in the decision of the Learned CIT(A)." 19. The assessee relied upon the decision of ITAT, Allahabad in the case of JCIT Vs. Mathura Das Ashok Kumar (2006) 101 TTJ 810. The coordinate bench of this Tribunal, under similar circumstances held that additions cannot be made u/s 68 of the Act towards trade creditors. The relevant portion of the order is extracted as under: All the purchases made by the assessee wherever the same have been made from the Karigars are supported by the 'Purjas& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... spect has been given. Naturally, in the records of the assessee, only such names and addresses would be found recorded, as told to it by the Karigar themselves. Beyond this, the assessee is not concerned to ascertain correct or full addresses of the Karigars as the purchases have been made on credit. It is for the Karigars concerned or his nominee and/or transferee of the 'Purja' to collect his payment from the office of the saree dealer. Not that the same dealer itself has to approach the Karigars for making payments to them. It has, therefore, to be held that even if the address is incomplete or even in an extreme situation, where the Karigar is not found at the address available with the assessee (as written in the Purja), no adverse inference can be drawn in the assessment of the same dealer or any of the aspects of the purchases. This is more so in a case like this where the purchases and sales have been duly accepted. This leads to a conclusion that Purjas themselves as also contents thereof have got great evidentiary value. If payment against the 'Purja' is recorded in the books of account, then the liability in relation to such 'Purja' has to be trea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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