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TMI Blog2021 (3) TMI 1387X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) erred in deleting the addition of Rs.1,23,00,000/- made on account of unexplained unsecured loans and addition of Rs.2,76,499/- made on account of disallowance of interest thereon despite the fact of non-traceability of depositors at the time of assessment. [3] It is, therefore, prayed that the order of the CIT (A) may be set aside and that of Assessing officer may be restored." 3. Now, we shall take ground no.1 raised the Revenue which relates to addition of Rs.1,14,71,603/- made on account of bogus purchase. 4. Brief facts qua the issue are that during the assessment year under consideration, the assessee has shown total purchases of Rs.8,27,50,188/- in respect of Finished Sarees, Grey and Border. It was noticed by Assessing officer that the assessee has shown sundry creditors for purchase of Rs.1,71,24,590/-. In order to verify the genuineness of purchases and creditors shown by the assessee, notices u/s 133(6) of the Act were issued to some of the purchase parties. Notice u/s 133(6) was issued to Shri Chandresh Dalal and Smt. Damini Dalal. On perusal of the compliance received from Shri Chandresh Dalal and Smt. Damini C Dalal, it was noticed by Assessing officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examination wide our letter dated 03/03/2014 and you had given the copies of the statements on 04.03.2014, so we request you to grant us a time of at least 10 more days for our reply in relation to para no. 3 & 4 related to these three parties i.e. Shri Chandresh D. Dalal, Smt. Damini Chandresh Dalal & Shri Pritesh J Gajjar." 6. During the assessment proceedings, the assessee also submitted that purchases were made through account payee cheque and they were genuine. Assessing officer had gone through the submission of assessee and noted to be devoid of any merit. In the instant case, a show cause notice, was issued to the assessee to explain as to why the purchases claimed to have been made from Shri Chandresh D. Dalal of Rs.56,48,508/- and Smt. Damini Chandresh Dalal of Rs.58,23,095/- should not be treated as bogus purchases and added to her total income. The assessee was given repeated opportunities to cross examine the above parties. Assessee for obvious reasons avoided the same. The Assessing officer thus noted that no such conditions exist in the assessee's case as far as the amounts under consideration are considered. The Assessing officer noted that it is a clear case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as a part time accountant for certain parties including the assessee and admitted that he and his wife Smt. Damini Dalal have never done any business of textile items or cloth with any party of the assessee. The statement on oath of Smt Damini Dalal was also recorded who stated that she is a housewife and has never done any business activity and all her affairs are managed by her husband Shri Chandres Dalal. The assessing officer as per the order sheet entry dated 21.02.2014, provided an opportunity to the AR and the husband of the assessee who had attended the proceedings on the same day. Shri Anilkumar Agarwal, husband of the assessee, requested to postpone the proceedings of cross examination on 24.02.2014 but this opportunity was not availed by the assessee on subsequent dates i.e. on 28.02.2014 and 03.03.2014. Therefore, the assessing officer held that the expenses incurred for purchases of Rs.56,48,508/- by Shri Chandresh B Dalal and Rs.58,23,095/-by Smt. Damini C Dalal amounting to Rs.1,14,71,603/- ( Rs.56,48,508 + Rs.58,23,095) are bogus and added to the income of the assessee. 10. Learned Counsel submitted before us that without providing the copy of the statement on oa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , Shri Chandres S Dalal submitted that he worked as a part time accountant for certain parties including the assessee and admitted that he and his wife Smt. Damini Dalal have never done any business of textile items or cloth with any party of the assessee. The statement on oath of Smt. Damini Dalal was also recorded who stated that she is a housewife and has never done any business activity and all her affairs are managed by her husband Shri Chandres Dalal. The assessee contention that the summons u/s 131 were issued to these 2 persons on 19.02.2014 and the time of only 2 days was given for compliance and in the summons it was not mentioned that they have been called as witnesses in the case of 'Ruchi Sarees' was found to be correct as in the summons it was mentioned as 'in your case'. The opportunity to cross examine was not provided though the assessee had made a request for opportunity to cross examine on 11.03.2014 and 26.03.2014 after the statement on oath of the two parties was provided to the assessee on 04.03.2014. 12. The ld CIT(A) noticed that in the assessment order, the Assessing officer has not mentioned any details about the affidavit filed by the two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nst the alleged purchases on various dates. The copy of the ledger account is enclosed. The examination of the bank accounts shows that the next date on which the payment is credited several cheqeus are issued for clearing and this pattern can be seen during the whole year. The details of the payment made by the assessee are as per the ledger account enclosed. 3. You are directed u/s 250(4) of the Act to conduct inquiries regarding the clearing of the cheques on various dates from these two accounts. The name and the address of the persons in whose name the cheques had been cleared is to be ascertained to verify whether the payments are being withdrawn through clearing back to the assessee as claimed by the two persons namely Shri Chandresh D. Dalal and Smt. Damini C Dalal. The copy of the ledger account and the bank statement is enclosed. The report may be submitted by 24.11.2015." 13. The Assessing officer, vide his remand report dated 09.03.2016 submitted the following before ld CIT(A), by way of remand report, which is reproduced below: "As per your directions photo copies of the cheques are collected on test check basis from the OBC Bank Surat by which purchaser shri Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96808/- Shri Shantinath Textile 23. 435141 28.12.2010 95402/- Shri Shantinath Textile 24. 435143 28.12.2010 80790/- Yogesh A Mogokar 25. 436871 03.02.2011 83855/- Balrangbali Agency 26. 436873 05.02.2011 104258/- Poonam Dyeing & printing mills Pvt Ltd 27. 436876 05.02.2011 106988/- Poonam Dyeing and printing mills Pvt Ltd 28. 436874 05.02.2011 106587/- Poonam Dyeing and printing mills Pvt Ltd 29. 436878 05.02.2011 103458/- Poonam Dyeing and printing mills Pvt Ltd 30. 436877 05.02.2011 108426/- Poonam Dyeing and printing mills Pvt Ltd 31. 436875 07.02.2011 179147/- Poonam Dyeing and printing mills Pvt Ltd Photo copies of the cheques collected from the bank are enclosed as under: Shri Chnadresh D Dalal (Annxure A) Smt Damini C Dalal (Annexure B) In this connection it is submitted that photo copies of above mentioned cheques are enclosed for your kind perusal and appropriate action." 14. The copy of the remand report was provided to the assessee. In response to that, the assessee vide, his letter dated 17.03.2016 submitted as follows: "Please refer to your letter dated 14.03.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by these two parties and the payments have been made by Chandresh D. Dalal and Damini D. Dalal to various parties through account payee cheques only. These facts proved that the business transactions are genuine and nowhere it was found that the cheques were deposited in the account of the Chandresh D Dalal and Damini D Dalal and money was withdrawn through bearer cheques etc., and routed back to the assessee. Taking into consideration that the bank statement shows normal business transactions, and which does not prove the fact that the blank cheques were used by the assessee to withdraw the amount from the bank account of the two persons. Hence, ld CIT(A) deleted the addition made by the assessing officer on account of bogus purchases of Rs.1,14,71,603/-. 16. We note that Hon`ble High Court of Gujarat in the case of Nangalia Fabrics (P) Ltd, [2013] 40 Taxmann.com 206 (Guj) held that where purchases were supported by bills, entries were made in books of account and payment was made by cheques, said purchases could not be held as bogus purchases. The findings of the Hon`ble Court is reproduced below: "3. The question pertains to the purchases made by the assessee-respo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rchases as also specially considering the payments made through the cheques, was of the opinion that such addition could not be sustained. Issue, essentially and pre-dominantly based on facts, requires no consideration as no question of law arises." 17. Reference in this regard can also be usefully made to the judgment of Hon'ble Gujarat High Court in the case of M.K.Brothers, 163 ITR 249, wherein it was held assessee was given credit facilities for a short duration and the payments were given by cheques, it can not be said that the entries for purchases of the goods made in the books of accounts were bogus entries. Thus, we have observed that purchases are supported by bills, there is entries in the books of account, payment was made by account payee cheques and assessee maintains quantitative details, and we also noted that Assessing officer did not find any inflation in purchase price. Besides, Assessing officer has failed to prove that payment made by assessee for these purchases came back to assessee in cash. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... report as required in column no. 17(M) of the Form No. 3CD. The assessing officer issued summons u/s 131 to fourteen (14) parties but the summons could be served only on 4 parties whose statement on oath was recorded. The assessee provided the details of the 10 parties to whom summons could not be served on 05.03.2014 and 24.03.2014 alongwith ledger account, contra confirmation, capital account, bank statement, ITR-V acknowledgement, computation of income, PAN card, etc. The new addresses of these parties was also provided on 26.03.2014. It was submitted that all these parties are filing their return regularly and the loans have been given through banking channels and have also been repaid in Financial Year 2011-12. It was submitted that the 4 parties namely, Pritesh Gajjar, Kokila Patel, Mahesh Patel etc had filed an affidavit retracting their earlier statement recorded before the assessing officer on 20.03.2014. The ld Counsel contended that assessee had filed the confirmation to all the parties and the payment have been received through account payee cheque and therefore the had discharged the onus of proof regarding the identity, capacity and genuineness of the transaction. 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the present case, in fact, in the subsequent year also i.e. A.Y 2012-13, there was scrutiny assessment and bank statements were filed before the Assessing officer and the repayment of loan were also reflected in the Tax Audit Report. 25. Therefore, after going through the order of ld CIT(A), we note that assessing officer had issued summons u/s 131 of the Act to ten (10) parties to whom the summons could not be served. The assessee provided the assessing officer, the new addresses of these parties during the assessment proceedings alongwith the confirmations, ledger account, capital account, bank statement, ITR return and computation of income. All these persons are assessed to tax and the balance sheet filed by them reflect the unsecured loans given to the assessee. These persons have in filing return of income for the past many years as per the ITD Data Base which was got verified. The transactions have been duly reflected in their financial statements. The transactions have been made through account payee cheques and the bank accounts have not been credited with any cash deposits. The loan amount has also been repaid during the subsequent assessment year. Therefore, the identit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ax Appeal. Hence, the present Tax Appeal deserves to be dismissed and is accordingly dismissed." 27. On similar facts, our view is fortified by the judgment of Hon`ble High Court of Gujarat in the case of Ranchhod Jivabhai nakhava, 21taxmann.com 159 (Guj), wherein it was held as follows: "14. After hearing Mrs. Bhatt, the learned advocate appearing on behalf of the assessee and after going through the materials on record, we are unable to accept her contention that in this case the Revenue has discharged its onus and it was for the assessee to further prove the genuineness and creditworthiness of the creditors. 15. In our view, once the assessee has established that he has taken money by way of accounts payee cheques from the lenders who are all income tax assessees, whose PAN have been disclosed, the initial burden under Section 68 of the Act was discharged. It further appears that the assessee had also produced confirmation letters given by those lenders. 16. Once the Assessing officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing officer of those lenders, whether in their respective return they had shown existence of such amount o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion of law is, thus, involved. We find no merit in this Appeal and the same is dismissed." 28. At the cost of repetition, based on the assessee`s facts narrated above, we state that once the Assessing officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amount of money had been lent to the assessee. In the assessee`s case department had accepted repayment of loan in subsequent year. The assessee provided the assessing officer, the new addresses of these parties during the assessment proceedings along with the confirmations, ledger account, capital account, bank statement, Income Tax Return and computation of income. All these persons are assessed to tax and the balance sheet filed by them reflect the unsecured loans given to the assessee. The transactions have been made through account payee cheques and the bank accounts have not been credited with any cash deposits. The loan amount has also been repaid during the subsequent assessment year. In view of the above facts, we note that assessee has di ..... X X X X Extracts X X X X X X X X Extracts X X X X
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