TMI Blog2017 (7) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... ditors. - Decided against revenue Addition being bogus purchases - Held that:- CIT appeal deleted the addition on the expression that all the such purchases were fully supported by purchase vouchers and the payments made substantially through account payee cheques. With respect to the 22 parties he has examined the details as furnished by the assessee wide Annexure 3 of the submission dated 12/09/2013 which was also put for the examination of the Ld. assessing officer also. He further obtained the conformation out of those 22 parties whereas the purchases from them were in excess of ₹ 10 Lacs and same was also forwarded to the Ld. assessing officer for his comments. In absence of specific comments from the AO he deleted the addition. Ld. departmental representative could not submit that when the full purchases, which were objected to by the Ld. assessing officer, were confirmed and also put for remand report by the assessee what infirmity in the order of the Ld. CIT appeal contained. This question could not be replied except relying upon the order of Ld. assessing officer. In view of this we confirm the finding of the Ld. CIT appeal in deleting the above addition - Decide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g cases :- ( i ) CIT Vs . La Medica ( 2001 ) 250 ITR - 575 ( Delhi ) ( ii ) Sri Ganesh Rice Mills Vs . CIT ( 2007 ) 294 ITR 316 ( Alld .) ( iii ) CIT Vs . United Commercial and Industrial Co .( 199 ) 187 ITR 596 Cal . ( iv ) CIT Vs Precision Finance Pvt . Ltd . ( Cal ) 208 ITR 465 ( v ) CIT v / s Korlay Trading Co . Ltd . ( Cal .) 232 ITR 820 . ( vi ) Krishan Kumar Jhanb v / s ITO and Anr ( Punjab Haryana ) 17 DTR 249 ( vii ) M / s Sejai International Ltd v / s CIT Meerut ( All .) Appeal No . 306 of 2010 . ( viii ) CIT Vs Durga Prasad More, 82 ITR 540 ( SC ) ( ix ) CIT Vs P . Mohnakala, 291 ITR 278 ( SC ) ( x ) CIT Vs Sumati Dayal, 214, ITR 801 ( SC ) ( xi ) ITO Vs Diza Holdings Pvt . Ltd . 255 ITR 573 ( Kerla ) ( xii ) CIT Vs Nova Promoters and Finlease Pvt . Ltd . 18 Taxmann 217 . 2 . Whether in the facts and circumstances of the case, the Commissioner of Income tax ( Appeals ) has erred in law in deleting the addition of Rs . 4,94,31,314 /- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal before the ld CIT(A), who in turn deleted the addition of ₹ 1807239/- u/s 68, ₹ 49431314/- on account of bogus purchase, ₹ 197850/- on account of pending reconciliation and a sum of ₹ 4149068/- of expenses disallowed. Against the order of the ld CIT(A), the revenue is in appeal before us on all the deletion of disallowances. 4. For all the grounds ld DR relied upon the order of the ld Assessing Officer vehemently stated that ld CIT(A) has erred in deleting the additions and disallowances. 5. The ld AR relied upon the order of the ld CIT(A) wherein he has stated that he has obtained four remand reports dated 01.07.2013, 13.09.2013, 30.09.2013 and 22.10.2013. He further submitted that addition made u/s 68 of the Act with respect to purchase of jewellers is erroneous. With respect to alleged bogus purchase he submitted that required confirmation of the parties were furnished and they appeared before the ld AO. With respect to non confirmation of the purchase he also asserted same thing. With respect to disallowance of the expenditure he submitted that books of accounts were audited. He therefore, vehemently supported the order of the ld CIT(A). 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceiving the difference in cash . The AO has made the addition adopting - the aggregate value of purchase in the case of two parties and the net credit outstanding as at the end of the year in two cases . It has been, stated that all the transactions with the parties are duly reflected in the Ledger account and are supported by bills of purchase and sale . The Addl . CIT, Range 1, Meerut has given his comments on the submissions made by the - assessee ip the letter dated 12 . 09 . 2013 . The comments have been given in the report dated 30 . 09 . 2013 . The submissions of the assessee have not been controverted in the said report . As a measure of abundant precaution, the assessee was asked to obtain confirmation from Shri Zahiruddin, the only party from whom purchases was in excess of ₹ 10 lakhs . The same was obtained and was forwarded to the AO for comments, if any . The AO required, the assessee to produce this individual, who appeared and confirmed the transaction . A report in this regard has been furnished by the AO in his / letter dated 22 . 10 . 2013 . 3 . 3 The facts and in considered . It is noted that du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellate authority. The Ld. CIT (A) deleted the addition wide para No. 4.2 and 4.3 of his order holding as under:- 4 . 2 As mentioned above, the AO had issued enquiry letters to several parties . From the assessment order, the addition appears to have been made in respect of parties at serial number 1 to 22 listed on page 3 and 4 of the assessment order ( the purchase made for an aggregate of ₹ 1,61,30,657 ) and 5 parties listed on page 5 ( the - purchase made for an aggregate of ₹ 3,33,00,657 ). The additions have been made on the - ground that the purchases could not be verified since the notices issued to such parties had been returned back / remained uncomplied . During the appellate proceedings, it was explained that all such purchases were fully supported by purchase vouchers . The purchases made were of two types namely purchases of old jewellery and other purchases . Insofar as the 22 parties were concerned, these relate to purchase of old jewellery and the amount payable for such purchases were either settled by the sale of new jewellery amounting to ₹ 1,00,90,438 ( which includes net additional amounts being the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ner without examining the nature of the transaction and / or the evidence is on record . Obviously, the assessee has also not beei? confronted before making the disallowances . It is also noted that the fact that assessee had made payment through account payee cheques in respect of 5 of the parties, from whom the bulk of the purchases have been made, has been completely overlooked by the AO . It is further noted that while the onus does lie on the assessee to prove the genuineness of the . purchases, the mere availability or lack of confirmation of the transaction from the counterparty is not determinant of the genuineness of the transaction . The genuineness of the transaction has to be analysed with reference to the nature of the business carried on by an assessee, the accepted trade practices, other evidences in the form of purchase vouchers as also payments made through banking channels for such purchases . It is noted that payments through banking channels have been made not only for the purchases made from the 5 parties but also substantial amount through banking channels have been paid in respect of purchase of old jewellery . It cannot be denied t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eleted the addition. In view of this we do not find any infirmity in the order of the Ld. CIT (A) in deleting the above addition of ₹ 1 97850/ on account of alleged non-reconciliation of the purchases. In the result ground No. 3 of the appeal of the revenue is dismissed. 11. Ground No. 4 of the revenue was with respect to deletion of the disallowance on account of expenditure of ₹ 4149068/- under the various head maintained by the assessee. The Ld. CIT appeal has dealt with this issue as under:- 6 . 1 Ground No 5 is that the total disallowance of ₹ 41,49,068 in the various heads maintained was wrong, illegal, unwarranted and deserves to be deleted . 6 . 2 In the assessment order, the AO has recorded that the books of the assessee along with the bills and vouchers were produced and were examined; The AO has recorded that it was submitted on behalf of the assessee that bills for the heads of business promotion, printing and stationery, travelling and conveyance and manufacturing expenses were not available . According to the AO, 'such 'expenses were supported only by self made vouchers and the authenticity of such vouchers could not b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bill books and do not issue any bill to the assessee . At the time of the hearing of this case on 14 / 08 . 2013, when the . Addl . CIT, Range 1, Merrut was also present, the assessee was required to produce before the AO karigar wise amount of labour charges paid during the year and the AO was required to make such statement with the karigars identified / specified by him and such persons were to be produced for the examination . A report in this regard has been incorporated in the letter of the AO dated 13 . 09 . 2013 . It has been stated that the perusal of the books of account reveals that the karigars do not issue any receipt . The assessee . company issues a set of two computer - generated vouchers when the item is issued to the person . When goods are received, another voucher is generated . Payment is made to the person on net weight basis . Signatures are obtained from the karigars on both the vouchers . All payments are in cash . It has also been stated that five karigars were asked to be produced by the AO out of which four had been produced . Apparently they have confirmed the transactions because there is no contrary ..... X X X X Extracts X X X X X X X X Extracts X X X X
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