TMI Blog2024 (2) TMI 1197X X X X Extracts X X X X X X X X Extracts X X X X ..... nterest has been paid to the lenders, and TDS on interest has been paid hence genuineness of the fresh loan cannot be doubted. We also note that some of the Lenders have been fully repaid during the year under consideration. Once, the repayment is made and accepted by the department no addition for such loan is to be made in the hands of the assessee. Decided against revenue. Estimation of income - bogus purchases - HELD THAT:- Under the Income tax proceedings, the disallowance of entire purchases is not justified when the assessee has furnished the details of purchases and payments made through banking channel. It is settled law under the income tax proceedings that only profit element embedded in such transaction, may be disallowed and not the substantial part of transaction. Keeping in view the nature of business activities of the assessee and profit margin in trading activities, 6% of impugned disallowance would be reasonable and justified to avoid the possibility of revenue leakage. Thus, the Assessing Officer is directed to restrict the addition to the extent of 6% of Rs. 1.01 crore. Decided partly in favour of assessee. - Shri Pawan Singh, Judicial Member And Dr. Ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is arrived by the Ld. AO and how the Ld. CIT(A) has arrived the figure of Rs,7,83,00,173/- to confirm the addition. 5. The Ld. CIT(A) has erred in confirming the addition u/s 68 of the Act, which includes the opening balance and not considered the submission of the assessee in this regard. 6. The Ld. CIT(A) and the Ld. AO has erred in mentioning in the order that the assessee has made part submission however failed to mentioned which submission asked in the notice and not submitted by the assessee. 7. The Ld. CIT(A) has erred in confirming the addition of Rs. 1,01,84,012/- being non genuine purchase. 8. The Ld. CIT(A) has erred in confirming the addition of Rs. 1,01,84,012/- as non-genuine whereas the assessee has submitted copy of all bills, payments details, GST returns, stock details and confirmation of accounts from concerned parties and Ld. CIT(A) as well as the Ld. AO has not pointed any mistake in such details. 9. The Ld. CIT(A) has erred in confirming the addition of Rs, 1,01,84,012/-, whereas there is no allegations or findings against all the three parties in income-tax or GST that the parties are not genuine. 10. The appellant reserves the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Valsad Rd. Samroli, Chikli AJSPK9083A 1229191 995500 0 370000 12.00 % 1181329 118133 11877387 4 Hitesh Corporation (H.C. Jain HUF) 303, Kishan Apartment, Desai Vad, Vapi AAEHH1471G 0 100000 0 90000 1200 % 1000000 10000 1000000 5 Lehrulal Jat Junda Railmagra, Rajsamand, Rajasthan ACDPJ0183G 0 250000 0 250000 12.00 % 281096 28110 2502986 6 Babita Vimal Kuruvilla 203,, Abhishek apt., OId Valsad Rd. Samroli, Chikli ANSPK4145R 2806090 322900 0 0 12.00 % 521859 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elers Pvt. Ltd. The Assessing Officer in order to verify the genuineness of purchases, issued notice under Section 133(6) of the Act to all three parties. No response was made in response to such notice by the said parties. The Assessing Officer treated the aggregate of purchases from three parties of Rs. 1.01 crore as non-genuine purchases which was made to inflate the purchase transaction. The Assessing Officer disallowed such purchases under Section 37(1) of the Act. 5. Aggrieved by the additions in the assessment order, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee filed detailed written submissions. The ld. CIT(A) in para 6 of his order recorded that the assessee furnished reply to the notice of hearing on 05/08/2023. However, the contents of submission filed by assessee is not recorded/discussed in the impugned order. The assessee has filed copy of such submission on record. In the written submission, the assessee apart from giving the details of submission filed in response to the show cause notice before the Assessing Officer also submitted that it was not clear from the contents of assessment order and from the show cause notice, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0000 70000 120000 Total 17654037 3838044 21629000 955821 379424 41785836 6. For lender namely Johnson P K, the Assessing Officer has wrongly mentioned the figure of loan as Rs. 23.45 lacs, though the assessee has received loan of Rs. 24.35 lacs. Further, there was a difference in opening balance, otherwise the total amount of Rs. 7,99,660/- is tallied. Copy of show cause notice was also furnished. The assessee explained that certain part of loan except from lender No. 4 and 5 was shown as opening balance as it was received in earlier years, the assessee paid interest thereon, the assessee has received only Rs. 2.16 crores of loan during the currency of this year. The assessee further submitted that confirmation of amounts were furnished before the Assessing Officer in respect of 11 parties. The assessee by reiterating the tabulated details prepared by Assessing Officer, contended that the loan amount of Rs. 1.12 crore was received during the year a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs. 3.00 lacs only. The loan was received through banking channel, bank statement was furnished. The assessee prayed that the party s creditworthiness and addition against the loan is unjustified. For lender/creditor No. 3 Vimal P K Kuruvilla, the assessee received loan of Rs. 19.00 lacs. The assessee filed confirmation, bank statement, financial statement and confirmation of T John and Johnson P K to prove the source of source. The Assessing Officer made a general remark without verifying the creditworthiness of the parties. The said party has paid tax of Rs. 1.73 lacs during the year. He has also shown rental income of Rs. 2.88 lacs and Rs. 11.91 lacs as income from other sources. The assessee has proved the creditworthiness of such creditors. Out of total loan, the assessee has paid Rs. 3.70 lacs during the year itself on various dates, confirmation was filed by the party. The assessee has received loan in various transactions. The assessee has not only proved the source but source of source and the addition made by the Assessing Officer is unjustified. For lender/creditor No.4 Hitesh Corporation (HC Jain HUF) from whom the assessee has received Rs. 10.00 lacs, the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00 lacs on 17/12/2019, the source of source from loan from husband, third loan of Rs. 1.50 lacs on 18/12/2019 and source of source was loan from mother-in-law T. John, fourth deposit/loan of Rs. 1.19 lacs on 26/12/2019 which was received from husband and fifth loan/deposit of Rs. 50,000/- on 01/01/2020, source of source was mother-in-law, sixth and seventh entry of loan/deposit of Rs. 5.00 lacs and Rs. 4.84 lacs on24/01/2020 and 27/01/2020 given out of gold loan from IDBI bank of Rs. 9.84 lacs on 24/01/2020. Copy of gold loan reimbursement was furnished. The assessee submitted that the assessee proved the source of source and creditworthiness of such deposits and submitted that addition was unjustified. From lender No.7 Jagdishchandra M Jat from whom, the assessee received Rs. 2.60 lacs. The assessee filed confirmation, copy of bank accounts and financial statement. The Assessing Officer drawn inference on the basis of his view that he has shown total income of Rs. 3.43 lacs only and doubted the creditworthiness. The assessee further stated that loan of Rs. 2.60 lacs was taken on three different occasions. The lender was having sufficient cash balance in his account as on 08/03/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has received Rs. 75,000/- from his mother. His source of source is genuine and no addition could be made being unjustified. 7. On the addition of disallowance of purchases under Section 37(1) of the Act of Rs. 1.01 crore, the assessee submitted that the Assessing Officer disallowed the expenses of purchases under Section 37(1) of the Act by taking a view that the seller party has not filed return of income and/or no response was received in respect of notice under Section 133(6) of the Act. The assessee submitted that filing of return of income and response of notice of Assessing Officer is not under the control of assessee, which cannot be a basis for making disallowance. The assessee purchased the material for selling in market and confirmation of account was already furnished. The assessee accounted the purchases in his books of account. Purchases were shown in the stock register. The assessee included all sales in GST return for the relevant period. Account of assessee was subject to tax audit. Audit reports were filed in due course. The assessee is in trading activities, stock moment was also certified in tax audit report. Payment to all parties were made by RTGS. Though t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r.CIT Vs. Meerut Roller Flour Mills (P) Ltd. in Income Tax Appeal No. 284 of 2017. The ld. CIT(A) also held that the assessee failed to substantiate the claim, mere payment is made through banking channel is not sufficient. Further aggrieved, the assessee filed present appeal before this Tribunal. 10. We have heard the submissions of learned Authorised Representative (ld. AR) of the assessee and the learned Commissioner of Income Tax- Departmental Representative (ld. CIT-DR) for the revenue and have also perused the orders of the lower authorities carefully. Ground No. 1 to 6 of the appeal relates to the additions of unsecured loan. The ld AR for the assessee submits that the assessing officer made addition of Rs. 7.83 crores on the basis of his summary as recorded on page No. 4 and 5 of assessment order. The Assessing Officer added the entire figure which includes the opening balance of loan from eleven parties as well as new loans received from eleven parties and interest paid to them. There is no basis of making addition without segregating the figure. The assessee explained before Assessing Officer that outstanding balance at the year-end of eleven parties only Rs. 4.17 cror ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission, the ld. AR of the assessee relied upon the following decisions: CIT Vs Ranchhod Jivabhai Nakhwa 21 taxmann.com 159 (Guj) DCIT Vs. Rohini Builder (2002) 256 ITR 360 (Guj) Aravali Trading Company Vs ITO (2008) 220 CTR 622 (Raj) Orient Trading Company Vs CIT (1963) 49 ITR 723 (Bom) Hindden Forge P Ltd. Vs DCIT ITA No. 3800/Del dated 03/12/2020 Tota Ram Daga Vs CIT 59 ITR 632 (Assam) Nemi Chand Kothari Vs CIT 264 ITR 254 (Gau) Jalan Timber Vs CIT 223 ITR 11 (Gau) Sona Electric Co. Vs CIT 152 ITR 507 (Delhi) Kale Khan Md. Hanif Vs CIT (1963) 50 ITR 1 (SC) and ITO Vs. Suresh Kalmadi (1988) 32 TTJ (Pune) TM 300 12. With regard to ground No. 7 to 9 of the appeal, the ld. AR of the assessee submits that the Assessing Officer as well as ld. CIT(A) disallowed the entire / 100% purchases shown from three parties, on the ground that they have not filed return of income or not responded in response to notice under Section 133(6) of the Act. The ld. AR of the assessee submits that neither the sale of assessee was disputed nor books of account was rejected. The sale is not possible in absence of purchase. 100% of disallowance of pur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rovision of Section 115BBE of the Act. Before the ld. CIT(A), the assessee tried to explain about the creditworthiness of all the lenders. The details of submissions are recorded in para 6 of this order. The ld. CIT(A) on considering the submission with regard to identity, creditworthiness and genuineness of transactions held that creditworthiness of lenders and genuineness of transaction cannot be said to have been proved merely on filing bank statement or identity of creditor. ITR of lender and confirmation of lenders were not filed. Purported confirmation is only copy of unsigned account. Source of fund has not been explained. The case laws relied by assessee is distinguishable on facts and circumstances. Once the creditworthiness and genuineness of transaction is not proved so the onus was not shifted on the revenue. The credit reflected in the bank account of Jasmin Kochar Kapoor is not explained so her creditworthiness is not proved. The ld. CIT(A) also relied on various case laws. 15. We find that the Assessing Officer while preparing summary of loan of various lenders accepted that there was opening balance of loan and fresh loan was availed by assessee. The Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns were through banking channel. On such fresh loan interest has been paid to the lenders, and TDS on interest has been paid hence genuineness of the fresh loan cannot be doubted. We also note that some of the Lenders have been fully repaid during the year under consideration. Once, the repayment is made and accepted by the department no addition for such loan is to be made in the hands of the assessee. For that reliance can be placed on the following judgments of Jurisdictional High Court of Gujarat: (i) Murlidhar Lahorimal Vs CIT (280 ITR 512 Guj), (ii) CIT Vs Ayachi Chandrashekhar 42 taxmann.com 251 Guj. Based on the above facts and circumstances, we allow Ground Nos.1 to 6 raised by the assessee. 17. In the result, Grounds Nos. 1 and 6 of appeal are allowed statistical purposes. 18. So far as grounds Nos. 7 to 9 of the appeal are concerned, we find that the Assessing Officer made the addition of entire/aggregate of purchases shown from three parties by treating as inflated purchases. The ld.CIT(A) upheld the action of Assessing Officer with similar observation. We find that the assessee has furnished copy of purchase bill with detail of GST, stock register, confi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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