TMI Blog2004 (3) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... eting the addition of Rs. 21,54,303 made under s. 69C on account of unexplained investment made in the purchases. The AO was of the opinion that the purchases made from M/s Shanti Corpn. amounting to Rs. 20,70,582, M/s Rohitchandra Co., to the extent of Rs. 80,070 and from M/s Automech Engg. (P) Ltd., of Rs. 3,651 should be treated as unexplained purchases because the identities of the parties from whom the purchases were made had not been established. The AO observed that against these purchases the assessee had not made any payments as noted from the respective party's ledger account. The AO also detected that the parties to whom the sales have been shown did not confirm the said transactions and the contention that these entries reflected adjustment entries had also not been established as the assessee was unable to provide confirmations. The AO was of the opinion that since the assessee has not been able to prove as to whether he was maintaining any godown wherein the items could be stored, the genuineness of the purchases became doubtful. Accordingly, an amount of Rs. 21,54,303 was treated as unexplained investment of the assessee. Being aggrieved, assessee carried the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in a position to provide the whereabouts of the parties from whom the purchases were reflected he felt that the transactions did not take place and accordingly disallowed the entire payment made towards purchases on this account. The AO, it would thus transpire, had considered that the sales were effected by the appellant. If that be a case, there has to be a corresponding purchase. The appellant's books or the bank account do not reflect any payment made to M/s Shanti Corpn. and Other. The AO has added back the amount only on the surmise that the parties from whom purchases were made are not available. While this might lead to some doubt about the genuineness of the purchase price so reflected, the entire purchases cannot be added back by treating the same as bogus as because corresponding sales have been taken into account while tabulating the profit of the appellant. The AO has added the amount by stating that the investments in purchases are from undisclosed sources. This has not been ascertained on the basis of any entries in the books nor has the AO been able to provide any clue that payments were made. Unless the source of the said amount is pinpointed and that the AO is abl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rtmental Representative read over the relevant portions of CIT(A)'s order at pp. 9 and 10. The learned Departmental Representative also objected to the CIT(A)'s observation given on p. 11 of his order that the AO had made the impugned addition on the basis of surmises. The learned Departmental Representative contended that addition was not made on surmises but in fact was based upon the enquiries made by the AO. The learned Departmental Representative further stated that the learned CIT(A) did not call for any remand report from the AO and confirmed sales estimated by the AO. The learned Departmental Representative contended that GP as shown by the assessee was confirmed by the CIT(A). The learned Departmental Representative further contended that the onus is on the assessee to prove the purchases. The learned Departmental Representative further contended that alleged cash movement made by the assessee is not required to be established by the AO. The learned Departmental Representative vehemently contended that the CIT(A)'s order is based upon irrelevant facts and the correct facts have not been appreciated by the learned CIT(A). Reliance was placed by the learned Departmental Repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO's order, the learned counsel pointed out that GP was estimated by the AO at 5 per cent as against 3.4 per cent shown by the assessee. Referring to the relevant portions of AO's and CIT(A)'s orders, the learned counsel pointed out that only adjustment entries were passed by the assessee in respect of purchases and sales transactions and the assessee more or less acted as a commission agent for which no addition could be made for unexplained expenditure in purchases. The learned counsel contended that the decisions relied upon by the learned Departmental Representative are not applicable due to the peculiar facts of the instant case. It was stated that in those cases books of account were not rejected by the Department and in the case of La Medica, there was a specific finding regarding introduction of on-money which is not the fact in the instant case. The learned counsel relied upon the decisions quoted by the learned CIT(A) in his order. In addition the learned counsel relied upon the following decisions: (i) Indwell Constructions vs. CIT (1999) 151 CTR (AP) 207 : (1998) 232 ITR 776 (AP) (ii) Dy. CIT vs. Adinath Industries (2001) 170 CTR (Guj) 262 : (2001) 252 ITR 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied Motors (P) Ltd. (1997) 139 CTR (SC) 364 : (1997) 224 ITR 677 (SC) was followed. The learned counsel of the assessee interrupted to say that the decision in the case of Star Chemicals was with regard to s. 43B and hence it is distinguishable in facts. The learned Departmental Representative then contended that the decisions relied upon by the learned counsel of the assessee are distinguishable in facts. It was stated that (1999) 151 CTR (AP) 207 : (1998) 232 ITR 776 (AP) pertains to s. 40 which starts with the wording "notwithstanding anything to the contrary in ss. 30 to 38.....". It was stated that s. 69C does not fall between ss. 30 to 38 and hence the facts are distinguishable. Referring to the decision in (2001) 170 CTR (Guj) 262 : (2001) 252 ITR 476 (Guj), the learned Departmental Representative contended that in that case only the purchases made by the assessee were found to be bogus. The learned Departmental Representative contended that in the instant case the sales are also doubted and hence the judgement of Gujarat High Court is not applicable on the facts of the case. Referring to the Tribunal's decision reported in (1994) 49 ITD 177 (Bom), the learned Departmental R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unsel of the assessee is accepted and the relief allowed by the learned CIT(A) is further strengthened on the basis of this alternative contention. We are in agreement with the finding of the learned CIT(A) that the AO having estimated sales at Rs. 1,25,00,000 as against Rs. 1,01,21,800 shown by the assessee, the benefit of this addition has to be given to the assessee as it has to be considered that sale proceeds to the above extent were available in the hands of the assessee. The learned counsel of the assessee has argued that decisions relied upon by the learned Departmental Representative are distinguishable in facts and the learned Departmental Representative has argued that most decisions relied upon by the learned counsel of the assessee are distinguishable in facts. We are of the opinion that the matter has to be decided on the peculiar facts of the instant case rather than following the precedents which are not on all fours with the facts of the instant case. However, the decision of the Tribunal in the case of H.R. Builders with regard to the prospective operation of proviso to s. 69C is applicable to the facts of the instant case. The learned counsel of the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of appeal of the assessee. We are inclined to agree with the finding of the learned Departmental Representative and we hold that the learned CIT(A) rightly confirmed rejection of books of account of the assessee by the AO by invoking the provisions of s. 145(2). The appeal of the assessee fails on this ground. 12. Ground of appeal No. 2 is raised as under: "On the facts and in the circumstances of the case, the learned CIT(A) erred in confirming the addition of Rs. 2,96,603 made by the AO to the income of your appellant on account of alleged cash credits invoking the provisions of s. 68 of the IT Act, 1961." 13. The AO found that the assessee had introduced cash loans from 17 parties aggregating to Rs. 2,96,603 and the amount from each party was less than Rs. 20,000. The AO further noted that "It is surprising to note that though the assessee has made entries in the cash book in respect of alleged cash loans received by him yet he has not made any corresponding entry in the ledger account". The assessee stated that these were squared up loans and hence no ledger entry was made. The AO rejected the assessee's contention by observing that "the assessee's books are audite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to prove the identity and creditworthiness of the creditors. 16. Having considered the rival submissions in the light of the material placed before us, we are of the opinion that assessee had failed to prove the identity and creditworthiness of the creditors. Therefore, we hold that the addition was rightly sustained by the CIT(A). We, therefore, find no merit in this ground of appeal of the assessee. This ground of appeal is, therefore, rejected. 17. Ground of appeal No. 3 is raised as under: "On the facts and in the circumstances of the case, the lower authorities erred in treating the agricultural income of Rs. 25,510 as income from undisclosed sources and thereby erred in making the addition to the income of your appellant." 18. The assessee has shown agricultural income of Rs. 25,510 which was treated by the AO as assessee's income from undisclosed source in the absence of corroborative evidence. The AO pointed out in his order that the assessee had only stated that the agricultural land is situated in Haryana State and the crops produced are grain and wheat, and sale proceeds are received in cash. The AO observed that there was no corroborative evidence to suppor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e sheet as the balance sheet pertained to the proprietary concern of the assessee, viz., M/s Silver Star. It was stated that the balance sheet was of the proprietary concern and, therefore, agricultural land being not the asset of the proprietary concern was not reflected in the balance sheet. The learned counsel further referred to the Jamabandi documents available at pp. 57 to 60 of the paper book, which were produced before the CIT(A). On the other hand, the learned Departmental Representative relied upon the order of the AO as well as of the CIT(A). In reply, the learned counsel adverted our attention to p. 86 of the paper book which contains the submissions made before the CIT(A) in connection with the agricultural income. It was pointed out that these submissions show that copies of Jamabandi issued by Patwari were filed before the CIT(A). It was stated that the assessee owns the agricultural land along with his father. 21. Having considered the rival submissions in the light of the material placed before us, we are of the opinion that agricultural income shown by the assessee has to be accepted in view of the facts of the case. Agricultural income was accepted by the Depa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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