TMI Blog2018 (5) TMI 1319X X X X Extracts X X X X X X X X Extracts X X X X ..... Kumar, Accountant Member: The present appeal by the Revenue and the cross objection by the assessee have been preferred against the order dated 29.04.2015 of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment year 2011-12. 2. The only issue challenged by the Revenue in its appeal is against the deletion of addition of ₹ 1,14,16,135/- by Ld. CIT(A) as made by the AO on account of unexplained expenditure in respect of which the sundry creditors to whom the notices under section 133(6) of the Act were not responded. The issue raised in ground No.2 is against the violation of rule 46A of IT rules as the Ld. CIT(A) has accepted the confirmations from the creditors at the appellate stage without confronting the same to the AO. The issue raised in the cross objection filed by the assessee is against the confirmation of ₹ 66,09,022/- by Ld. CIT(A) as made by the AO on account of disallowance made by the AO under section 69C of the Act. 3. We shall adjudicate the issue raised by the Revenue as well as the issue raised by the assessee in CO in the following paras. 4. The facts in brief are that AO during the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that Notices were issued to parties. Most of parties replied to notice and confirm the transactions to some extents. But these parties on those notices were duly served but failed to reply. It is not the case where parties are not found or whether transaction were doubted. Addition was made just because parties were failed to reply. These are purchases; therefore, appellant was not required to prove creditworthiness of parties. Appellant has to prove the identity of person. Which is proved by the AU itself by the serving the Notice u/s 133(6). Just because parties not reply cannot be basis for addition. IF AO has any doubt than he has to made further enquiry which he failed to do. Therefore, addition made by the AO is not justified. 2.8 For the above proposition I put my reliance on the decision of Shri Ganpatraj A Sanghavi V/s ACIT I.T.A. No.2826/Mum/2013. In this case the jurisdictional tribunal where held that bank payment is proof of identity - 7. A perusal of the orders passed by the tax authorities would show that they have suspected the genuineness of the purchases only for the reason that the above said five parties were not available in the given addresses. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) on this issue and direct the AO to delete the disallowance of purchases. 2.9 Further, it is well settled law that addition cannot be made on mere ground that parties failed to reply in response to notice u/s 133(6). On above proposition I relied on following decisions:- a) ACITV/S M/s Swastik Roadlines Pvt. Ltd. ITA No. 41/Agra/ 2012 The appellant has submitted required details showing that it had regular business dealings in respect of transactions involved. Simply because no reply has been received in response to information sought u/s 133(6), A.0. cannot jump to the conclusions that these are bogus creditors and treat the same as unexplained credits in absence of any adverse material. The instant cases are not found to be of cash credits simpliciter, but all amounts are payable to parties against the services rendered by them and which have also been paid in due time during next year. On perusal of records, it is seen that the appellant has claimed freight and route expenses and sundry creditors against them regularly in earlier years as per its audited balance sheet which have also been accepted by the A. 0. vide orders passed u/s 143(3). b) Continental Carb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Co. v. CIT [1985] 154 ITR (1985] 154 ITR 591/21 Taxman 238 10. CIT vs. Sahibqanj Electric Cables (P) Ltd. 11978115 ITR 4087 Thus, in view of the above discussion and respectfully following the judicial pronouncement, the addition made by AO on account of mere non reply by parties in response to notice u/s 133(6) is in my opinion not justified. However, the same time the facts emerge from the replied received from the parties cannot be denied. Therefore, appellant was directed to file the confirmation from the parties. Appellant vide letter dated 27.04.2015 filed the confirmation of the parties. And perusal of the ledger account no discrepancy was found. Therefore, this grounds of appeal No.1b) is allowed. 6. The Ld. D.R. vehemently submitted before us that Ld. CIT(A) has grossly erred in deleting the addition of ₹ 1,14,16,135/- in respect of six parties out of which the four did not file any replies despite having served the notices under section 133(6) of the Act and in respect of 2 parties the notices were not served. The Ld. D.R. submitted that the Ld. CIT(A) has deleted the addition by accepting the additional evidences in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e same can not be added as unexplained expenditure under section 69C of the Act. In this case, the AO has found that the assessee has recorded excess purchases to the tune of ₹ 66,09,022/- and treated the same as unexplained expenditure. We also find merit in the contention of the assessee that these creditors might not have shown the respective sales in their books of account and therefore the addition confirmed by the Ld. CIT(A) was wrong and can not be confirmed. The alternative plea of the Ld. A.R. was also put forward before the Bench that in case these are treated as bogus purchases, if the assessee fails in the main prayer the only percentage is required to be added and not the entire amount of ₹ 66,09,022/-. We are not in agreement with the findings of the Ld. CIT(A) on this issue as the AO has made the addition only on the basis of replies received under section 133(6) of the Act. Even if we consider these purchases as bogus/inflated purchases as has been observed by the authorities below even then the entire disallowance is unwarranted and uncalled for. In our opinion, a reasonable disallowance based upon the GP should be made to bring these purchases to tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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