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TMI Blog2017 (7) TMI 805X X X X Extracts X X X X X X X X Extracts X X X X ..... 75 (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/- being bogus purchases ignoring the fact that since the letters of enquiry u/s 133(6) of the IT Act, 1961 sent to the parties by the AO remained uncomplied with and purchases remained unproved. Despite being given opportunity to establish the veracity of the transaction, the assessee failed to prove the identity of seller and genuineness of trans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. We have carefully considered the rival contentions. Now coming to ground No. 1 of the appeal of the revenue wherein ld CIT(A) deleting the addition u/s 68 of Rs. 1807239/-has held as under:- "3.1 Ground No 2 contests the addition of Rs. 18,07,239 under section 68 to the total income of the assessee in respect of sundry creditors. 3.2 The assessee company is engaged in the manufacture and trading of silver, gold and diamond jewellery. In the assessment order, the AO has recorded that notices under section 133 (6) of the Act were issued to 42 parties, from whom raw mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... obtain confirmation from Shri Zahiruddin, the only party from whom purchases was in excess of Rs. 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 due diligence has not been exercised by the AO while making the addition as evident from the fact that two cases, the addition has been made for the entire purchases made from the parties concerned, whereas in two other cases, only the credit balances at the end of the year have been added. Moreover, the AO was apparently not examined the nature of such purchases, which related to old jewellery against which sales have been made. The AO is not at all considered what treatment is to be accorded to the sales to these parties if the purchases are held to be bogus. Moreover, as a test case, verification was carried out in the case of one of the parties and no adverse comments have been given by the AO. If indeed both purchases and sales were to be bogus, the books of acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Rs. 1,00,90,438 (which includes net additional amounts being the difference between the purchase and sale value of the jewellery received/paid amounting to Rs. 2,24,754) or by payment by account payee cheques amounting to Rs. 62,64,973. These details have been given in Annexure 3 of the submissions dated 12. 09. 2013. Insofar as the 5 parties are concerned, all payments have been made by account payee cheques. It was also explained that confirmation of 4 of the parties (Smt Varsha Jain,Prem Impex,Smt Mamta Gupta & Smt Prakashwati)had been received by the AO and had been found to be available on records during the inspection taken at the tirrie of appellate proceedings. The balance 1 party was Jayanti Prasad Jeevan Lal Jwellers Pvt Ltd, a sister concern of the assessee company which was assessed to tax in the same circle where the assessee was assessed to tax i.e. ACIT, Circle 1, Meerut. These facts have been recorded on page 2 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rties but also substantial amount through banking channels have been paid in respect of purchase of old jewellery. It cannot be denied that in the business of retail jewellery sale, the purchase of old jewellery and the remaking of such jewellery/sale of jewellery against such purchases, is a normal activity. If indeed the version of the AO is accepted, he ought to have specified how does he propose to deal -with the sales shown in the books of accounts, to have been made to the same parties from whom the old jewellery was purchased." 9. The Ld. 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 Rs. 10 Lacs and same was also forwarded to the Ld. assessing officer for his comments. In absence of specific comments from the Ld. asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y self made vouchers and the authenticity of such vouchers could not be verified. Thereafter, the AO has proceeded to make a sweeping remark that inflating expenses by booking not verifiable bogus expenses appears to be a strategy to simply suppress the profit of the assessee concern. The AO has thereafter remarked while only a random check of the bills and vouchers can be made and has stated that bills for a few expenses were, called for from the assessee concern but majority of these have not been verified by the production of bills. The AO has proceeded to disallow the entire expenses booked under these heads. In the submissions made under cover of letter dated 27.05.2013. it was explained that business promotion expenses are in the nature of refreshments and beverages served to customers as is usual in the business carried on by the assessee. The total expenses under this head is meagre amount of Rs. 88,367. Expenses under the head printing and stationery of Rs. 24,648 are towards purchase of paper, photocopy expenses which are debited to the books in the usual course of business. Travelling and conveyance expenses of Rs. 1,88,258 are towards expenses incurred by employees fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . With regard to the disallowance made of expenses booked under other heads, the AO has not quantified the amount which are not covered by any voucher. It cannot be denied that there are certain expenses for which vouchers are not issued and obviously, in such cases, only self made vouchers can be maintained. Under the circumstances, the addition made cannot be sustained."
12. The Ld. departmental representative could not point out any infirmity in the order of the Ld. CIT (A) in deleting the above addition. He also could not point out any instances reported by the Ld. assessing officer where the expense was not supported by proper vouchers. In view of this we confirm the finding of the Ld. CIT (A) in deleting the addition of Rs. 414 9068/- of various shades. In the result we confirm the finding of the ld. CIT appeal in deleting the above disallowance. Hence, ground No. 4 of the appeal of the revenue is dismissed.
13. Ground No. 5 and 6 of the appeal of the revenue are general in nature and therefore they are not a dedicated and dismissed.
14. In the result appeal of the revenue is dismissed.
Order pronounced in the open court on 06/02/2017. X X X X Extracts X X X X X X X X Extracts X X X X
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