TMI Blog2024 (2) TMI 272X X X X Extracts X X X X X X X X Extracts X X X X ..... d confirmation from these creditors nor produce such parties even during the remand proceedings - HELD THAT:- From the perusal of the ledger account of these parties in the books of the assessee, we find that the assessee made the purchases during the year and also made the payment. Accordingly, the balance outstanding was shown as sundry creditors in its balance sheet, which was added by the AO. Therefore, it cannot be disputed that the addition of outstanding trade creditors has been made under section 68 of the Act, as these parties did not respond to notices issued under section 133(6) of the Act and the assessee also could not furnish the confirmation from these parties. We find that the issue of whether unpaid trade creditors could be added under section 68 of the Act came up for consideration before a five-member Special Bench of the Tribunal in Manoj Agarwal [ 2008 (7) TMI 446 - ITAT DELHI-A] wherein held there is marked difference between a credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account of the supplier c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rajesh G. Jain v/s ITO, M.A.no.450/Mum./2023 (in ITA no.150/Mum./2022, for the assessment years 2010-11), whereby, the earlier order dated 21/10/2022, passed under section 254(1) of the Act was recalled and the appeal was directed to be re-fixed for hearing. 3. The present appeal is filed after a delay of 525 days. As per the assessee, the impugned order dated 13/03/2020 was received by the assessee on 22/06/2020, and the present appeal was filed by the assessee on 28/01/2022. The learned Authorised Representative ( learned AR ) submitted that due to the pandemic situation and the lockdown implemented in the State of Maharashtra, the assessee could not file the present appeal within 60 days from the date of receipt of the impugned order. We find that vide order dated 10/01/2022, passed by the Hon'ble Supreme Court, in M.A. no.21 of 2022, in M.A. no.665 of 2021, in Suo-Motu Writ Petition (Civil) no.3 of 2020, the limitation period for filing the appeal was extended upto 29/05/2022. In view of the above, since the present appeal has been filed within the extended time granted by the Hon ble Supreme Court during the Covid period, therefore there is no delay in filing the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed Hawala purchases which is in contradiction to the Ld. CIT(A)'s own decision of estimating the profit from alleged Hawala purchases @1 2.50% from similar transactions. 7) On the facts and in circumstances of case and in law, the Ld. CIT(A) erred in by confirming an Ad Hoc addition of Rs. 75,000/- on account of lower household withdrawal considering the status of the appellant and his standard in the society. 8) On the facts and in circumstances of case and in law, the Ld. CIT(A) erred by confirming an Ad Hoc addition of Rs. 50,000/- on account of various expenses which were allegedly not fully verifiable. 9) On the facts and in circumstances of case and in law, the Ld. CIT(A) erred in not following the ratio of jurisdictional ITAT and the High Court, according to which only profit element embedded in the alleged bogus purchases can be taxed and not the whole of the alleged bogus purchases. 10) The Ld. CIT(A) has erred on the facts of the case by not appreciating the effect of the addition in totality on the resulting rate of Gross Profit which, under normal circumstances, is highly unrealistic in any line of business activity. 11) The Ld. CIT(A) has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ricted the addition in respect of bogus purchases to 12.5% of such purchases following the decision of the coordinate bench of the Tribunal in Simit P. Sheth v/s ITO, ITA No. 32383/Ahd/2009. In the case of M/s Abhishek Enterprises, the disallowance of Rs. 6,53,022 made on account of bogus purchases was sustained on the basis of the statement of that party that no transaction was carried out with the assessee. Being aggrieved, the assessee is in appeal before us. 10. We have considered the submissions of both sides and perused the material available on record. In the present case, it was noticed that the assessee had made purchases from the parties whose names appear in the list of Hawala parties declared by the Sales Tax Department. Notices issued under section 133(6) by the AO to said entities were also not complied with by the said parties. The AO made an addition of the entire amount of the alleged bogus purchases made from the said supplier. We find that before the lower authorities, the assessee was unable to produce the parties. The assessee also failed to produce any supporting documents in the form of delivery challan, lorry receipts, or stock register in support of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee has provided the ledger extracts and payment through the bank account along with sample bills of such parties evidencing purchases, however, the assessee has neither furnished confirmation from these creditors nor produce such parties even during the remand proceedings. Being aggrieved, the assessee is in appeal before us. 14. We have considered the submissions of both sides and perused the material available on record. During the year under consideration, an amount of Rs. 66,74,029 was shown as sundry creditors in the balance sheet of the assessee. During the assessment proceedings, notices under section 133(6) of the Act were issued to the sundry creditors, however, there was no compliance from these parties. In support of its submission, the assessee provided the ledger extracts and submitted that the payments have been made through the banking channel. The assessee also furnished the sample bills of such parties evidencing the purchases made. However, in the absence of a response from these parties in compliance to notice issued under section 133(6) of the Act as well as the non-production of such parties by the assessee, the addition was made by treating the balanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to account by making a credit entry in the books of account in favour of the person to whom the money is payable. Thus, there is marked difference between a credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account of the supplier cannot be added under section 68 of the Act, more so when the purchase has been accepted as genuine and a deduction therefor has been allowed. In all other cases including the case of a credit representing the sale proceeds of an asset, the provisions of section 68 are applicable and it is for the assessee to prove satisfactorily the nature and source of the monies. . 16. We find that in Smt. Madhu Solanki v/s ITO, ITA No. 974/Bang/2009, the coordinate bench of the Tribunal, vide order dated 09/08/2021, after considering the aforesaid decision held that the AO cannot make an addition of trade creditors under section 68 of the Act when the purchases made during the year and payments made during the year have been accepted. The relevant findings of the coordinate bench, in the aforesaid decisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing balances, while accepting the purchases made during the year payments made during the year. The AO has made the addition u/s 68 of the Act and did not invoke provisions of sec. 41(1) of the Act. On the contrary, the assessee has shown that the payments have been made in the succeeding year through banking channels. Accordingly, we are of the view that the revenue could not rely upon the decision rendered in the case of Sureshkumar T Jain. Under these set of facts, we are of the view that the AO could not have made addition of trade creditors u/s 68 of the Act. 17. Therefore, respectfully following the aforesaid decisions, since in the present case the purchases made by the assessee and the payment made during the year have not been disputed by the AO in respect of the parties shown as sundry creditors, we are of the view that the addition in respect of the balance sundry creditors is not sustainable. Accordingly, the AO is directed to delete the same. As a result, ground no. 6 raised in assessee s appeal is allowed. 18. Grounds no. 7 and 8, raised in assessee s appeal, pertain to ad hoc addition of Rs. 75,000 on account of lower household withdrawal and addition ..... X X X X Extracts X X X X X X X X Extracts X X X X
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