IN THE INCOME TAX APPELLATE TRIBUNAL
"C" Bench, Mumbai
Before Shri Vijay Pal Rao, Judicial Member and
Shri D. Karunakara Rao, Accountant Member
ITA No.2809/Mum/2013
(Assessment year: 2009-10)
Income tax Officer-23(3)(1) Pravin Damji Shah
Room No.401, 4th Flo0r M/s. Harshil Textiles
C-10 Pratyakshakar Bhavan 107, Suparshwa Sarvodaya
Vs.
Bandra Kurla Complex Nagar, Nahur Road, Mulund (W)
Bandra (E) Mumbai-80.
Mumbai-51.
(Appellant) (Respondent)
Permanent Account No. : AAGPS 8197 L
Assessee by Shri Vijay Mehta and
: Shri Anuj Kishnadwala
Revenue by : Smt. Parminder
Date of hearing : 15/07/2014
Date of Pronouncement : 25/07/2014
ORDER
Per Vijay Pal Rao, Judicial Member:
This appeal by the revenue is directed against the order dated
11/2/ 2013 of CIT(A) for the assessment year 2009-10. The revenue has
raised the following grounds in this appeal :-
"1. Whether on the facts and in the circumstances of the
case and in law, the learned CIT(A) erred in deleting the
addition of Rs. 52,51,714/- made by the A.O. u/s. 68 of the
Income-Tax Act, on account of unexplained
investment/unexplained cash, without appreciating the fact
that the assessee did not submit any documents/ evidences
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in support of his claim for the said purchases, nor the
whereabouts of the purchase parties were traceable.
2. Whether on the facts and in the circumstances of the
case and in law, the learned CIT(A) was right in deleting the
addition stating that no benefit has accrued to the assessee
by purchases from these nine parties.
3. Whether on the facts and in the circumstances of the
case and in law, the learned CIT(A) was right in deleting the
addition after going through the additional evidences in
support of goods returned to nine creditors during appellate
proceedings, without remanding the matter to the AO."
2. Ground No.1 & 2 is regarding deletion of addition of
Rs.52,51,714/- made by AO under section 68 of the Income tax Act,
1961.
3. The assessee is a wholesale cloth merchant dealing in suiting &
shirting. During the course of assessment proceedings the assessee was
asked to provide details of sundry creditors exceeding Rs.5.00 lacs along
with proof of payment. The assessee submitted a list of 15 sundry
creditors exceeding Rs.5.00 lacs out of which in 9 cases it was stated
that goods valuing to the outstanding balance were returned and hence
no payment was made. The total of such purchases returned comes to
Rs.52,51,714/-. The AO issued notice under section 133(6) to the parties
which were returned by the postal authorities with a remark not known.
The assessee was also requested to prove the genuineness of its claim of
such purchases with delivery challan, details of octroi receipts etc. Since
the assessee did not produce requisite record in support of claim of
return of goods, the AO made an addition of Rs.52,51,714/- as
unexplained investment by the assessee and added the same to the total
income of the assessee . Alternatively the AO has also held that the
assets to the tune of Rs.52,51,714/- remained unexplained without
explaining the genuine source of investment against the same. Therefore
the said amount is treated as unexplained cash credit under section 68.
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The assessee challenged the action of AO before CIT(A). The CIT(A) noted
that the assessee filed stock statement and copies of ledger account of
these 9 parties before the AO. The assessee has also filed copies of P&L
Account and Balance Sheet with Annex for Financial Year ended on
31/03/2009. After taking into account the fact that the purchase from
these 9 parties are duly reflected in the closing stock as on 31/03/2009,
the CIT(A) was of the view that no benefit has accrued to the assessee by
taking purchases from these 9 parties in purchase account and
subsequently showing them in closing stock. CIT(A) has also noted the
fact that the closing stock includes purchases made from these parties
were sent on approval basis to the prospective buyer and accounted for
in the books of account. Accordingly the CIT(A) deleted the addition made
by the AO.
3. Before us the ld. DR has relied upon the order of AO and
submitted that when the assessee failed to prove the genuineness of
purchases and return of purchases then the AO is justified in making the
addition. On the other hand the ld. AR has supported the impugned
order of CIT(A) and submitted that there is no financial effect of these
transactions of purchases and return of the goods because neither there
was any payment by the assessee nor any refund.
4. We have considered the rival submissions as well as relevant
material on record. Though the assessee could not produce the delivery
challan, transport details and details of octroi payment in respect of
returning the goods to these 9 parties however, there is no dispute on the
fact that these transactions of purchase of goods and subsequently
return to the parties does not involve any payment or refund of amount.
We further note that the CIT(A) has given a categorical finding that the
purchases made by the assessee from these parties amounting to
Rs.52,51,714/- which was claimed to have been returned was duly
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forming part of the closing stock as on 31/03/2009. The assessee has
claimed that these purchases were returned as it was not approved by
the prospective buyer of goods from the assessee therefore the credit
transactions in the books of account of the assessee were neutralized by
the return of the goods purchased. The assessee has also corroborated
this fact of rejection of these goods by the buyers and accordingly these
purchases were returned to these 9 parties by producing the copies of
sales as well as sales returns. The sales during the year has been
reflected by the assessee as net of sales return and consequently the
goods in question were shown as part of the closing stock. The CIT(A) has
discussed all the facts in detail in para 3.5 to 3.9 of the impugned order.
The concluding part of the order of CIT(A) in 3.8 to 3.9 is as under :-
"3.8 After going through the submissions and facts which are
supported by audited books of accounts for A.Y. 2009-10 and
2010-11, and having found that the closing stock included
purchases made from these parties were sent on approval basis to
the prospective buyers was rejected; and consequently the goods
were returned and accounted for so in the books of accounts,
despite of the fact that parties were found not in existence as
notices served to the addresses given in these bills under section
133 (6), I am of the opinion that having reflected the rejected lot of
purchases in closing stock, before returning it to appellant's
sellers and then also not having not paid to these parties, credits
shown in the names cannot be treated as bogus liability as these
purchases were made during the year and by no logic the
appellant could have imagined as on 31.3.2009 that he is not
going to pay them and hence liabilities shown in these names
cannot be taken as bogus liabilities for the purpose of addition
made under section 68 of the act.
3.9 In view of this fact that purchases were debited for the full
volume, sales reflected net of return and closing stock included
the sales return at cost, I am convinced that the liabilities shown
as on 31.03.2009 could not have been treated as bogus liabilities
by the A.O and hence addition made by disallowing outstanding
liabilities in the name of these 9 sundry creditors amounting to
Rs.52,51,714/- is deleted herewith. The ground no.2 is allowed."
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5. We do concur with the view of the CIT(A) on this issue that the
rejected lot of purchases is part of closing stock before it was returned to
these parties which does not involve any payments to these parties and
therefore the creditors shown in the name cannot be treated as bogus
liability. Accordingly we do not find any error or illegality on the order of
CIT(A).
6. Ground No.3 is regarding the additional evidence considered by the
CIT(A) without giving opportunity to the AO. We have heard the ld. DR as
well as the ld. AR and carefully perused the impugned order. At the
outset we note that though the assessee produced additional evidence in
the shape of purchase bill, transport challan and ledger account showing
return of goods pertaining to these 9 parties however, the CIT(A) did not
admit these additional evidences and held in para 3.3 of the impugned
order as under :-
"3.3. I have gone through copies of purchase bills in respect of
purchases made - from nine parties during the period relevant to
assessment year 2009 - 10. The appellant has filed copies of
transport challans in support of goods returned to 9 ccreditors as
additional evidences. I have gone through the same and it is noted
that these bills apparently raised by these nine parties, only
mention pieces, their length in meters and amount thereof,
however they do not mention any details of transport, order
number as the spaces against the same are found blank in case of
these bills. Coming to transport challans furnished by appellant
saying that these are supporting documents for goods were
returned, it is again noted from the same that there is no mention
of any transport i.e. vehicle number and then there is no
acknowledgment for the receipt of these goods claim to have been
returned. It is also noted that these transport challans are under
the letterhead of those nine parties only to whom the appellant is
claiming as having returned the goods and they are not bills of
transporter. For example, in case of Pooja Synthetics the delivery
chance vide number 414, 496, 5 to 0, 567 , 572 and 712 all are
between November 2008 to February 2009. Then, in case of
Urvashi Fabrics again, it is noted that the delivery challans
furnished by appellant bearing number 738 and 765 are dated 7
December 2008 and 24th December 2008, respectively same is the
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case for other parties named Simon fabrics, M/ s Ambica Fabs et
cetera except in the case of one party named 'Herschel textile' in
whose case appellant has provided transport done through
transporter and bill is dated 26th of May 2009. In view of this fact
that these transport challans are found pertaining to the period
2008 - 09 so are supporting purchases made from those parties as
is evident from the date of bill and data of challans are same,
however-they are no proof of return of goods as claimed by the
appellant. In view of this, additional evidences being not transport
challans for goods returned to these nine creditors, though
claimed so by the appellant are rejected here with."
6.1 It is clear from the order of the CIT(A) that the additional evidence
sought to be filed by the assessee was rejected by the CIT(A) and
therefore, the ground No.3 raised by the revenue is not emanating from
the impugned order of the CIT(A). It is manifest from the grounds raised
by the revenue that the concerned officers are taking the matters so
casual without even going through the impugned order and
understanding the same properly. This is a case of gross negligent
approach on the part of AO as well as the approving Commissioner to
file the appeal against the impugned order and authorizing of the
grounds of appeal. Accordingly the ground No.3 of the revenue is
dismissed.
7. In the result appeal of the revenue is dismissed.
Order pronounced in the open court on 25th July, 2014.
Sd/- Sd/-
(D. KARUNAKARA RAO) (VIJAY PAL RAO )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai, Dated: 25/07/2014.
Jv.
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Copy to: The Appellant
The Respondent
The CIT, Concerned, Mumbai
The CIT(A) Concerned, Mumbai
The DR " " Bench
True Copy
By Order
Dy/Asstt. Registrar, ITAT, Mumbai.
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