TMI Blog2016 (6) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... rs of confirmation of suppliers, copies of bank statement showing entries of payment through account payee cheques to suppliers and stock reconciliation statements, sale of purchased goods was not doubted, the transactions were supported with evidences and confirmations, in such an event merely because the suppliers have not appeared before the AO or the Ld. CIT(A), one can not conclude that the purchases were not genuine. We do not find justification for the addition made by the lower authorities in this respect. Hence, the additions made by the lower authorities on account of bogus purchases under section 69C of the Act are therefore ordered to be deleted. Additions made on account of excess stock - Held that:- CIT(A) observed from the quantitative details of sales and purchases of the two items, that the entire quantity of the said two items was sold/exported during the relevant year under consideration and no closing stock of these items was left with the assessee at the end of the relevant accounting year. That the assessee had duly explained the mistake resulting in showing the excess stock and the said mistake was duly rectified by filing a revised return within the limit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade genuinely, because all the notices issued by AO have been duly served. d. Applying the ratio of Delhi High Court judgement in the case of CIT vs. LA Medica (2001) 250 ITR 575 (Delhi) although the facts are different and not applicable in the Appellant's case. e. By treating the purchases of ₹ 25,68,750/-, unsubstantiating, unverified, unproved on account of failure of the appellant to discharge the necessary burden of proof and ignoring the submissions made by Appellant from time to time. 3. By disallowing out of legal and professional charges ₹ 18,300/- paid to Register of firm for filling certain documents, which was incurred wholly and exclusively for the purpose of business. 4. The Appellant craves, leave to add, to alter, to amend the above Grounds of Appeal at the time of hearing. 3. The Ld. A.R. of the assessee, at the outset, has stated that he does not press ground No.3 of the appeal. Ground No.3 of the appeal is therefore dismissed as not pressed. 4. We find that ground No.4 is general in nature and does not require any adjudication. 5. Now we are left with ground Nos.1 2 of the appeal which require adjudication. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sabhai Sons Pvt. Ltd., Mumbai, the certificate submitted by the assessee be considered and relief may be allowed. The Ld. CIT(A), therefore, directed the AO not to make any disallowance under section 40(a)(ia) of the Act in respect of the payments made to M/s. Velji Dossabhai Sons Pvt. Ltd. Regarding the remaining three parties he confirmed the disallowance. Aggrieved by the said order, the assessee has come in appeal before us. 10. The Ld. A.R. of the assessee has stated at bar that he does not press disallowance made by the lower authorities in respect of two parties namely M/s. M. Liladhar amounting to ₹ 2,57,827/- and M/s. Lincs Cargo Pvt. Ltd. amounting to ₹ 2,39,340/-. He, however, has strongly contested the disallowance made by the AO in respect of payments made to M/s. J.N. Freight Forwarders Pvt. Ltd. amounting to ₹ 17,18,198/-. He has invited our attention to page 95 of the paper book which is a confirmation by M/s. J.N. Freight Forwarders Pvt. Ltd. stating that they had deducted TDS on behalf of assessee in respect of transportation charges, fumigation charges and stuffing charges. Further that the expenses like port dues, Tele wages were exempte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the parties name on which signatures were scribbled. In view of this, the AO held the purchases in respect of 5 parties as bogus purchases amounting to ₹ 10,27,21,404/- and added the said amount into the income of the assessee under section 69C of the Act. Being aggrieved, the assessee filed appeal before the Ld. CIT(A). 12. The Ld. CIT(A), after going through the evidences on the file, observed that from the quantitative details of purchase and sales shown by the assessee in its books of account, which even were not disputed by the AO, it could not be said that the assessee had not purchased the products to the extent of quantity shown. However, the assessee could not produce the respective farmers and nor any confirmations for the same. The payments were not made by the assessee directly to the farmers but to certain agents and all these circumstances showed that the assessee had made purchases from grey market by paying cash. He observed that the assessee had wrongly shown those in the accounts as credit purchases. He, thereafter, observed that source of the cash purchases was not explained. He observed from the accounts produced by the assessee that the maximum cre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... chases in cash. However, the Ld. CIT(A) has held that the assessee might have made the purchases in cash. He also rejected the contention of the assessee that the payments were made by the assessee through banking channels to the agents and they further passed on the same to the farmers. Considering the overall facts and circumstances of the case and also the fact that the quantitative purchase and sales were shown by the assessee in the books of account, the commodities were actually exported and the sales were accepted by the lower authorities and payments were made through banking channel to the agents who further made the payments to the farmers and most of the farmers have confirmed the sales made to the assessee; in our view, the purchases in respect of 5 parties who have not responded to the notices sent by the AO cannot be held to be bogus. Moreover, the cash theory propounded by the Ld. CIT(A) has no legs to stand as there is no corresponding or corroborating evidence in this respect. The additions in respect of 5 parties have been made only on assumption basis. Even when the purchases are not doubted which actually had been shown to be made by the assessee and correspondi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO to accept the revised return and deleting the addition made on account of excess stock, ignoring the fact that the revised return was rejected due to failure of the assessee to substantiate downward revision of the closing stock in the revised return and not the validity of return. II) The learned CIT(A) on facts and circumstances of the case has failed to appreciate that the AO in his assessment order has clearly brought out factual errors and inconsistencies and self contradictory statements in respect of the so called mistakes and revision in the stocks. Therefore, the same cannot be relied upon. III) The learned ClT(A) has erred on facts and in the circumstances of the case in directing the AO to restricting addition u/s 69C to . Rs.25,68,750/- only being peak credit balance instead of A0 treating the entire purchase as bogus. IV) The earned CIT(A) has erred on facts and in the circumstances of the case in ignoring the fact that the AO has made addition relying on the decision of Delhi High Court in the case of CIT Vs La Medica 250 ITR 575 which based on similar facts. V) The appellant prays that the order of the CIT (Appeals) on the above grounds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e at the end of the relevant accounting year. That the assessee had duly explained the mistake resulting in showing the excess stock and the said mistake was duly rectified by filing a revised return within the limitation period prescribed. On account of these facts and evidences, the Ld. CIT(A) held that the AO was not justified in rejecting the revised return filed by the assessee. He held that the mistake of wrongly showing the closing stock at the enhanced value of ₹ 80,98,900/- was fully verified and the same being inadvertent mistake apparent from record and the revised return being filed in time, the rejection of the said revised return by the AO was wrong. He directed the AO to accept the revised return and to delete the addition on account of excess stock of two items as stated above. 21. After hearing the Ld. Representatives of both parties, we do not find any infirmity in the above order of the Ld. CIT(A) relating to the issue under consideration and the same is accordingly upheld. Ground Nos.3 4 22. Vide ground Nos.3 4, the Revenue has agitated the action of the Ld. CIT(A) in restricting the addition only to the book credit balance instead of trad ..... X X X X Extracts X X X X X X X X Extracts X X X X
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