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TMI Blog2023 (5) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... n 13.12.2019 for A.Y.2015-19 by CIT(A)-5, Ahmedabad upholding the additions/disallowances aggregating to Rs.1,25,76,805/- made by AO is wholly illegal, unlawful and against natural justice. 1.2 The LD CIT(A) has grievously erred in law and on facts in not appreciating the contentions and evidences submitted during the proceedings. 2.1 The ld.CIT(A) has grievously erred in upholding the additions/ disallowances aggregating to Rs.1,25,76,805/- as under: a) Loss on sale of grey cloth : Rs.23,27,617/- b) Difference in contract confirmation : Rs.71,68,534/- c) Cession of liability u/s.41(1) : Rs.15,85,477/- d) Bogus sundry creditors : Rs.33,29,467/- 2.2 That in the facts and circumstances of the case as well as in law, the ld.CIT (A) has grievously erred in upholding the above said additions/disallowances. 2.3 The observations made and conclusions reached by the both the lower authorities in so far as they were contrary to the evidence on record are not admitted by the appellant so that the entire conclusion is vitiated. 2.4 The ld.CIT(A) has erred in confirming the action of AO in making ex parte assessment u/s.144. 3.1 Without prejudice to above ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us. The assessee had challenged the ex parte assessment order passed by the AO before the ld.CIT(A) also, who dismissed this contention of the assessee finding that the AO had followed the due procedure of law and passed a speaking order after giving sufficient opportunity of hearing to the assessee. His finding in this regard at para-5 of the order is as under: "5. Ground no. l of appeal is against the action of the AO in passing the assessment 144 of the Act. The appellant has not furnished any details or evidences against the passing of order u/s 144 of the Act. From the assessment order, I find that the AO has followed due procedure while passing a speaking order. The AO had offered opportunities of being heard to the appellant by issuing various statutory notices, as is narrated in the assessment order. In view of these facts, I find no infirmity in the action of the AO and the action of the AO in passing the assessment order u/s 144 of the Act is upheld." 8. Before us, the ld.counsel for the assessee was unable to point out any infirmity in the finding of the ld.CIT(A) to the effect that the AO had not violated due procedure of law and passed a speaking order in the pre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct the inquiry conducted by the AO under section 133(6) of the Act from the party from whom purchases were made i.e. M/s.Pratiksha Textiles confirmed the purchase of grey cloth for the impugned year by the assessee. During the appellate proceedings, the assessee filed complete address and copy of purchase bills and delivery challans along with bank statement reflecting the impugned transactions in respect of M/s.Pratiksha Textiles and Rameshwar Sales Corporation, and we have noted that the AO in his remand report admitted to the fact after appraising all the evidences, as above filed before him that prima facie the transactions appears to be genuine. The relevant portion of the remand report containing the above finding of the AO reproduced at page no.5 of the CIT(A)'s order is as under: "2. Vide letter under reference, directions had been issued to the undersigned to verify the genuineness of the loss incurred on sale of goods on the basis of the evidences submitted by the assessee after providing it an opportunity of being heard 3. The issue wise reply after verification of additional evidences and conducting enquiries are submitted as under :- 3.1 Loss on account of Purcha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... although prima fade the transaction may appear to be genuine, but the pattern and correlated evidence clearly indicate a certain pattern which indicates a modus operand! adopted by the assessee to claim fabricated bogus losses. Thus it is kindly requested that the additional evidence justifying these transactions may not be accepted and the disallowance made by the Assessing Officer may kindly be sustained, if deemed fit." 13. The only comment of the AO and the reasons given by the AO for confirming his action of finding the transactions to be bogus is that since facts before him revealed that grey cloth was purchased at a higher rate and sold at a lower rate on the same day, that the transactions taking place between the same parties appeared to be a modus operandi adopted by the assessee to claim fabricated bogus loss. On the basis of investigation conducted by the AO and all the material and evidences placed before him, this conclusion surely could not have been arrived at by the AO, as admitted by him by stating that it appears to be genuine transactions. His finding of the transactions therefore being bogus is only figment of the imagination and based on surmises and conjectu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee by conducting further inquiries from parties to whom the sales were made, the assessee could not have been asked to justify the loss any further. 17. As per the list of the parties whom the sales were made, the same were also supplied by the assessee to AO, as is evident from the remand report, and as noted above, no infirmity was pointed out by the AO and the information furnished by the assessee regarding the sale transactions with respect to grey-cloth. Therefore, all in all, as noted above by us, except for doubting on account of the fact that goods were purchased and sold on the same day at a loss, the AO had no other material on hand to doubt the genuineness or the veracity of the transactions, which otherwise was suitably established by the assessee with all evidences, which were examined and found to be in order by the AO in his remand report. In view of the above, we hold that there is no basis for disallowing the loss of Rs.23,27,617/- to the assessee and the disallowance so made is therefore directed to be deleted. Thus, ground no.2.1(a) of the assessee is therefore allowed. 18. Taking up the grievance raised by the assessee in Ground No.2.1(b), we have note ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cting payments to Shivbaba Textiles only vide banking channels alone, and other accounts named "Shivababa Textile Cr." reflecting all purchases made by the assessee from the said parties including the opening credit balance. On compiling two accounts together, which showed a balance of Rs.15,29,000/- (Dr.) in the payment account and Rs.15,29,000/- in the credit account; net credit balance outstanding of the said party amounted to Rs.29,000/- which tallied with the balance reflected by Shivababa Textiles in its books resulting to the assessee. 21. With respect to Yug International Pvt. Ltd. copy of account of the assessee in the books of the said party from the year beginning 1.4.2011 right upto 31.3.2015 was filed to the AO, copies of which ere placed before us at PB page no.107 to 112. Similarly, the copy of the account of the said party in the books of the assessee for the said period, 1.4.2011 right upto 31.3.2015 was also filed to the AO. Copies of which were placed before us at Page No.113 to 117. 22. As is evident from the bare perusal of these accounts, the discrepancies could well have been culled out from the entries reflected by the respective parties in their books of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n holding that the differences are unreconciled. The addition, therefore, made on this basis and confirmed by the ld.CIT(A), we hold, is not sustainable as per the facts of the case, and we direct the deletion of the addition amounting to Rs.71,68,534/-. The ground no.2.1(b) is therefore allowed. 23. Grievance raised by the assessee in ground no.2.1(c) is in relation to the addition on account of purported cessation of liability of the following sundry creditors, noting the fact that their opening and closing balances remained the same, since last three years: Sr. No Name of the sundry creditors F.Y. 2012-13(A.Y. 2013- 14) F.Y. 2013-14(A.Y. 2014- 15) F.Y. 2014-15(A.Y. 2015-16) Op.Bal. Clos.Bal Op.Bal. Clos.Bal Op.Bal. Clos.Bal 1 Amit ProcessorsP Ltd 700000 700000 700000 700000 7,00,000 7,00,000 2 Dhruvin Textile 664335 664335 664335 664335 6,64,335 6,64,335 3 Shiv Shakti Textiles 221142 221142 221142 221142 2,21,142 2,21,142 Total 1585477 1585477 1585477 1585477 1585477 1585477 The addition made on account of the same and confirmed by the ld.CIT(A) amounted to Rs,15,85,477/-. 24. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in its books in the accounts of Ambica Textiles, but wrongly accounted for in the account of Amit Processors P.ltd. Thus, it is evident from the above that the assessee had clearly established that outstanding balance of Rs.7.00 lakhs in the case of Amit Processors P.Ltd. had nothing to day with the said party. 27. We have noted that the AO has not gone through all these evidences filed before it, nor the ld.CIT(A), and therefore their finding to the effect that the amount of Rs.7.00 lakhs represented outstanding balance in the account of Amit Processors for the past three years is an incorrect finding. For this reason alone, the assessee had established that the balance of Rs.7.00 lakhs in the account of Amit Processors P.Ltd. did not belong to the said party at all. There is no reason for making any addition of the same under section 41(1) of the Act. 28. As for other two parties viz. Dhruvin Textiles and Shiv Shakti Textiles, the only basis for holding that these liabilities ceased to exit was that there were outstanding for three years and no confirmation forthcoming from the said party regarding the outstanding balance. The above facts by itself did not establish th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; that no transaction of purchase took place with these parties during the impugned year. In the case of Shiv Shakti Traders, we have noted that the AO made addition of the outstanding balance of Rs.2,21,142/- noting to be outstanding for the past two years, and holding that the liability ceased to exit. Therefore, it is clearly beyond doubt that these sundry creditors balance did not pertain to any transaction during the year, but were all outstanding balances of preceding year. Holding these balances to be bogus, can only mean and as has held by the ld.CIT(A) also that there were in fact no transactions entered with these parties, and transaction if any entered were of sham/bogus. Since the transactions were entered into in the preceding year the addition, if any, could have been made holding them to be bogus in he said year only. There cannot be case of treating the outstanding balance as bogus and making the addition of the same. In view, therefore, the addition made by treating the outstanding balance of creditors amounting to Rs.33,29,467/- is held to be not sustainable, and accordingly directed to be deleted. Thus, the ground no.2.1(d) of the appeal is allowed. 32. In effe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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