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TMI Blog2025 (5) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case are that the assessee is engaged in the business of trading of mustard oil cake and groundnut oil cake in its proprietary concern M/s Shiv Enterprises. He filed his return of income on 11.03.2022 declaring total income of Rs. 15,34,520/- (PB 40-43). The AO observed that assessee has made substantial purchases from three suppliers i.e. Sh. Parshottam Agarwal (M/s Jagdamba Traders), Jagdamba Enterprises and Smt. Parwati Agarwal (M/s ParwatiCottex and Oil Industries)who have not filed ITR for the relevant year under consideration and have made large sales transaction with the assessee. In response to notice issued notice u/s 133(6) on 09.11.2022 no reply has been received from these parties. Accordingly, AO vide show cause notice required the assessee to explain why the total purchases of Rs. 9,60,01,182/- should not be considered as unexplained expenditure and added back to the income of assessee. In response to the same, assessee vide letter dated 14.12.2022 filed audit report, balance sheet, bank account statements, GST returns, purchase invoice along with e-way bills, ledgers, and transportation bills by various transporters to prove the purchases and also filed j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : "1. The assessee is maintaining day to day books of accounts. The books of account is duly audited u/s 44AB. The same is also supported by the stock item register (PB 51-62) maintained on day to day basis. The purchase and sales made by the assessee are duly supported by the bills and vouchers. The AO accepted the books of accounts except purchases made from the three parties namely Jagdamba Enterprises, Jagdamba Traders and ParwatiCottex& Oil Industries. The corresponding sales made out of these purchases have been accepted by the AO. 2. In assessment proceeding, in respect of the purchases made from all the three parties, the assessee has filed the following evidences:- (i) Copy of purchase bills along with transport builty and E-way bills of goods purchased(PB 63-243) (ii) Copy of GST returns (GSTR-2A and GSTR3B) (iii) Ledger account and confirmation of the party along with the bank statement indicating payment by cheque(PB 244-306) (iv) Stock register indicating the receipt of goods and thereafter sold All these documents clearly proves that the assessee has made the purchases, goods has been received through transport and the same are either uploaded at the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 72.5 2371 18.03.2021 Falak Enterprises 258.7 582333.7 2251 From the above table, it is clear that the rate of most of the purchase transactions from these three parties is comparable to the rate of purchases made from other parties. Thus the purchases made by the assessee from all these parties are fully verifiable. For this purpose reliance is placed on the decision of Hon'ble Supreme Court in case of PCIT Vs. TejuaRohitkumar Kapadia (2018) 256 Taxman 213 wherein SC upheld the order of Gujarat High Court and dismissed the special leave petition filed by the department. In this case, Hon'ble High Court of Gujarat dismissed the appeal filed by the revenue by holding that purchases cannot be treated as bogus if (a) they are duly supported by bills, (b) all payments are made by account payee cheques, (c) the supplier has confirmed the transactions, (d) there is no evidence to show that the purchase consideration has come back to the assessee in cash, (e) the sales out of purchases have been accepted & (f) the supplier has accounted for the purchases made by the assessee and paid taxes thereon. The assessee has also relied on various cases as referred at PB 4-7 where also simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re family members of the supplier ParwatiCottex and Oil Industries Proprietary concern Proprietor is Parwati Agarwal - wife of Purshottam Agarwal Jagdamba Traders Proprietary concern Proprietor is Purshottam Agarwal The accountant of all the three firms was same. It is a general practice in the market that transport builty is made by the person of the supplier and therefore the hand writing in all the builty is similar. Hence for this reason the purchases made from these parties can't be treated as non-verifiable. (iv) The assessee has been regularly making purchases from these suppliers in the past. Copy of ledger account of these suppliers for AY 2020-21 along with copy of relevant page of bank account indicating payments for purchases made through banking channel is at PB 244-306. These suppliers are registered under the GST Act and filed returns till the year under consideration. Copy of GST details of three suppliers is at PB 307-315. Because of the losses and the cases filed against these parties u/s 138 of the Negotiable Instrumentation Act, they have absconded. Copy of one of such notice is at PB 316-317 and therefore only because they have not responded to the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... genuine by holding as under:- "6. It is observed from the ledger extracts and tax invoices there is a bulk purchases periodically and supported by periodical payments through banking channels which suffered GST. 7. It is observed that the assessee firm has admitted a gross profit on mustard trade at 1.47% which is in excess of industry average of 1.25%. 9. Since, the CASS reason for selection of scrutiny was verified with respect to purchases regarding purchases from four suppliers who have not filed their returns of income and subject to the above, assessment is completed u/s 143(3) of the Income Tax Act, 1961 accepting income returned." Thus when the department itself is accepting the purchase in assessee's sister concern as genuine, the action taken in the hands of the assessee by treating the same as non- genuine is unjustified. 8. The assessee has filed a detailed affidavit explaining the facts about purchases made from these three parties (PB 360-366). These parties were purchasing the goods from local mills and selling it to assessee. Due to heavy losses in the business, these parties closed their business and left Bharatpur. Cheques issued by them to various mill ow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Oil Industries(Prop. Smt. Parwati Agarwal). The Ld. CIT(A) deleted the addition by giving following findings at para 8.1 to 8.4 of the order. "8.1 I find that the appellant is maintaining day-to-day books of accounts along with stock register. The appellant during the course of assessment proceeding as well as in appellate proceedings in respect of purchases made from all the three parties has filed the following documents:- (i) Purchase bill, (ii)Transport bilty, (iii) E-way bills, (iv) GST returns (GSTR-2A and GSTR3B). (v) ledger account (vi) Confirmation of the party, (vii) bank statement indicating payment by cheque (viii) Stock register indicating the receipt of the goods and thereafter sold. The AO has not found any defect therein. Further, it is noted that the payments made by the appellant to these suppliers are in cheque. In appellate proceedings the appellant has also filed an affidavit affirming the fact that the purchases from these parties are genuine. The appellant has submitted these parties (Sh. Parshottam Agarwal, Jagdamba Enterprises and Smt. Parwati Agarwal) have run into heavy losses and to avoid the payments to the creditors, they have l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee firm are genuine. Assessee firm has furnished all the documentary evidences i.e., ledger account of suppliers, purchase invoices, E-way bills, bilities, stock records, bank statement showing payment to suppliers, GST returns. The assessee contended that the suppliers were not filling returns of income does not mean that business transactions made by the assessee firm with the parties are suspicious and non-genuine. The AO, however after considering the various evidences accepted the purchase made by these parties as genuine by holding as under:- "6. It is observed from the ledger extracts and tax invoices there is a bulk purchase periodically and supported by periodical payments through banking channels which suffered GST. 7. It is observed that the assessee firm has admitted a gross profit on mustard trade at 1.47%, which is in excess of industry average of 1.25%. 9. Since, the CASS reason for selection of scrutiny was verified with respect to purchases regarding purchases from four suppliers who have not filed their returns of income and subject to the above, assessment is completed u/s 143(3) of the Income Tax Act, 1961 accepting income returned." 8.3 On perusal of al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n that assessee failed to prove genuineness of the purchases, the case was reopened on the ground that purchases made by the assessee are from hawala operator, the assessee choose not to attend the reassessment proceedings, the assessee having consciously and intentionally decided not to join the investigation, he cannot now contend that revenue should have given them all the details before making the addition and the decisions relied on by the Ld. Counsel of the respondent assessee are distinguishable on the facts. However, the facts of the present case is entirely different in as much as the revenue has not brought any evidence on record that purchase made from these parties are bogus or hawala transactions or accommodation entries. Assessee has brought on record the fact that these concerns run into heavy losses and to avoid the payment to the creditors, they have left their premises and are absconding for which copy of the case filed by these parties against these suppliers for dishonoring the cheques against the supply of goods to them was filed. The assessee has also linked the purchases made from these parties with the corresponding sales and the GP rate and NP rate declared ..... X X X X Extracts X X X X X X X X Extracts X X X X
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