SHRI PRADEEP KUMAR AGARWAL, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 33/JPR/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1975 (ITAT-JAIPUR)
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-11-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 10-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI JCIT A
• Assessee Lawyers: N S VYAS
• Keywords: Business income; Onus to prove
• Section: 234B; 133(6); 68

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S A, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA-@ ITA. NO. 33/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2014-15 SHRI PRADEEP KUMAR AGARWAL 1466, KHEJARON KA RASTA, 4 TH CROSSING, CHANDPOLE BAZAR, JAIPUR. CUKE VS. THE ITO, WARD-1(5), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AIAPG 0302 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI N.S VYAS (C.A.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J.C. KULHARI (JCIT) A LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 08/08/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT : 06/11/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF LD. CIT(A), JAIPUR DATED 17.11.2017 FOR ASSESSMENT YEAR 2014-15 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING GROUNDS OF APP EAL:- 1. THAT THE AUTHORITIES BELOW ERRED IN CONFIRMING THE ADDITION U/S 68 OF THE IT ACT, 1961 AMOUNTING TO RS. 1,91,14,250 /-. 2. THAT THE AUTHORITIES BELOW HAVE FURTHER ERRED IN ENHANCING THE INCOME U/S 68 OF THE IT ACT, 1961 BY RS. 7,64,57,00 1/-. ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 2 3. THAT THE ENHANCEMENT SO MADE BY THE AUTHORITIES BELOW IS BAD IN LAW. 4. THAT THE AUTHORITIES BELOW HAVE FURTHER ERRED I N CONFIRMING THE ADDITION OF INTEREST EXPENSES U/S 40(A)(IA) OF THE IT ACT, 1961 AMOUNTING TO RS. 30,756/-. 2. IN RESPECT OF GROUNDS NO. 1-3, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRADING OF G LASS CHATON/ BEAD THROUGH HIS PROPRIETORSHIP CONCERN M/S MALVIKA INTE RNATIONAL. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, ON PERUSAL OF THE ASSESSEES BALANCE SHEET, NOTICED THAT THERE IS OUTSTANDING BALANCE OF RS. 7,67,76,315/- IN RESPECT OF VARIOUS SUNDRY CREDITORS WHICH HAVE BEEN RAISED DURING THE YEAR AND DETAILS OF WHICH ARE AS UNDER:- S.NO. NAME OF THE PARTY OUTSTANDING BALANCE AS ON 31.03.2014 1. ASHOKA GEMS ARTS RS. 22,67,000 2. BALAJI ENTERPRISES RS. 1,01,26,000 3. BHAWANI IMPEX RS. 22,33,000 4. M.L. ENTERPRISES RS. 58,37,000 5. ORIENTAL ENTERPRISES RS. 1,11,32,000 6. P.G. IMPEX RS. 15,00,000 7. RAJESH GEMS & JEWELS RS. 27,90,000 8. RED ROSE ENTERPRISES RS. 50,000 9. R.R. GEMS RS. 86,34,000 10. S.D. GEMS RS. 19,14,000 ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 3 11. SHRI NARAYAN JEWELLERS RS. 3,60,000 12. S.R. GEMS ARTS RS. 30,00,000 13. SUMAN TRADERS RS. 13,12,000 14. V. KHANDELWAL & CO. RS. 38,02,000 15. ADARSH CO-OPERATIVE RS. 37,50,000 16. MANGAL DEEP MULTY STATE URBAN RS. 1,10,00,000 17. NANDI INTERNATIONAL RS. 3,19,315 18. SANGAM GEMS & JEWELLERS RS. 4,45,000 19. SEVEN HILLS COOPERATIVE URBAN RS. 63,00,000 TOTAL RS. 7,67,76,315 2.1 IN ORDER TO PROVE THE GENUINENESS OF THE SUNDRY CREDITORS, THE ASSESSEE WAS ASKED TO FURNISH THE CONFIRMATION OF T HESE PARTIES AND IN RESPONSE, THE ASSESSEE FILED CONFIRMATION BEFORE TH E ASSESSING OFFICER. FURTHER, THE ASSESSING OFFICER ALSO ISSUED NOTICES U/S 133(6) OF THE ACT TO THESE CREDITORS ON 18.02.2016 AND THESE WERE RET URNED BACK UN- SERVED. THEREAFTER, THE ASSESSEE WAS ASKED TO PRODU CE THE PARTIES/CREDITORS ALONG WITH THEIR BOOKS OF ACCOUNT , BANK ACCOUNT, RETURN OF INCOME ALONG WITH BILLS AND VOUCHERS FOR VERIFICATION, HOWEVER THE ASSESSEE HAD SHOWN HIS INABILITY TO PRODUCE THE SE PARTIES. THEREAFTER, THE ASSESSING OFFICER MADE ONE MORE ATT EMPT TO SERVE THE NOTICES U/S 133(6) OF THE TO THESE PARTIES WHICH WE RE RETURN BACK UN- SERVED. THEREAFTER, THE ASSESSING OFFICER DEPUTED H IS INSPECTOR TO SERVE THE NOTICES U/S 133(6) OF THE ACT UPON THE SUPPLIER S/SUNDRY CREDITORS AND IT WAS REPORTED BY THE INSPECTOR THAT NO SUCH C ONCERNS EXIST EVER ON THE GIVEN ADDRESSES/NO ADDRESSES EXIST EXCEPT TH AT OF NANDI ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 4 INTERNATIONAL. THE LD. AR OF THE ASSESSEE FURTHER S UBMITTED THE RETURN OF INCOME AND CONFIRMATION OF V. KHANDELWAL & CO., SUM AN TRADERS, BHAWANI IMPEX BUT THE SAME WERE NOT FOUND ACCEPTAB LE TO THE ASSESSING OFFICER AS THE ASSESSEE HAS NOT PRODUCED THESE PARTIES ALONG WITH THEIR BALANCE SHEET AND OTHER DETAILS CALLED F OR BY THE ASSESSING OFFICER. THEREAFTER, THE ASSESSING OFFICER HELD THA T THE CREDITWORTHINESS OF THESE PARTIES CANNOT BE PROVED EXPECT THAT OF NA NDI INTERNATIONAL WHICH WAS CONSIDERED GENUINE. THEREAFTER, THE ASSES SING OFFICER MADE AN OBSERVATION THAT IN SPITE OF THE FACT THAT NOTIC ES ISSUED U/S 133(6) OF THE ACT BY POST WERE RETURNED BACK UN-SERVED AND EVEN INSPECTOR HAS GIVEN HIS REPORT THAT NO SUCH CONCERNS EXIST ON THE GIVEN ADDRESSES, HOWEVER, CONFIRMATIONS WERE RECEIVED BY POST AUTOMA TICALLY IN THE MONTH OF NOVEMBER, 2016 WHICH RAISES THE DOUBT IN THE MIND OF THE ASSESSING OFFICER AS TO WHY THE CREDITORS ARE RESPO NDING TO HIS LETTERS. 2.2 FINALLY, A SHOW CAUSE WAS ISSUED TO THE ASSESSE E ON 28.11.2016 ASKING THE ASSESSEE TO SHOW CAUSE THAT IN LIGHT OF THE INVESTIGATION SO CARRIED OUT, WHY THE SUNDRY CREDITORS SHOWN IN THE BOOKS OF ACCOUNT SHOULD NOT BE TREATED AS UNVERIFIABLE AND ADDED TO HIS TOTAL INCOME. IN RESPONSE, THE ASSESSEE SUBMITTED THAT HE HAS ALREAD Y SUBMITTED THE CONFIRMATION OF THE CREDITORS IN THE NATURE OF ADVA NCES TAKEN FOR ORDER ALONG WITH CONFIRMATION OF UNSECURED LOAN AND ADVAN CES. IN MOST OF THE CASES, ADVANCE AGAINST THE SUPPLY ORDER HAS BEEN TA KEN AND THE SAME HAS BEEN REMITTED TO OVERSEAS SUPPLIERS THROUGH BAN K. SINCE, ALL THE CREDITORS IN THE NATURE OF ADVANCES IS RIGHT AND TH E SAME HAS BEEN CLOSED DURING THE FINANCIAL YEAR 2014-15 AFTER SALE OF GOODS TO THOSE ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 5 PARTIES. THE SUBMISSION SO FILED BY THE ASSESSEE W AS HOWEVER NOT FOUND ACCEPTABLE TO THE ASSESSING OFFICER. 2.3 AS PER THE ASSESSING OFFICER, THE ASSESSEE NEIT HER PRODUCED THE SAID CREDITORS NOR THESE CREDITORS WERE FOUND IN EX ISTENCE AT THE ADDRESS PROVIDED BY THE ASSESSEE. FURTHER, MOST OF THE ADDR ESSES WERE NOT IN EXISTENCE, THEREFORE, THE CREDITORS WERE HELD AS BO GUS AND NON GENUINE BY THE ASSESSING OFFICER. THE ASSESSING OFFICER FUR THER HELD THAT HAVING TIN & PAN NO. AND PAYMENT BY CHEQUE DOES NOT MAKE T HE TRANSACTION GENUINE. IT WAS HELD BY THE ASSESSING OFFICER THAT INSPITE OF BEING GIVEN SEVERAL OPPORTUNITIES, THE ASSESSEE HAS FAILE D TO PRODUCE THE ALLEGED SUNDRY CREDITORS. FURTHER, BASIS VARIOU S INQUIRIES WHICH HAVE BEEN DISCUSSED EARLIER, THE PARTIES ARE NOT EXISTING AT THE GIVEN ADDRESSES OR ADDRESS WERE NOT IN EXISTENC E. THE ASSESSEE WAS CONFRONTED WITH ALL THIS INFORMATION, BUT HE HAD NO SATISFACTORY EXPLANATION. IN THE LIGHT OF THESE FAC TS, THE EVIDENCES HAVE TO BE WEIGHTED WHETHER THE ASSESSEE HAS DISCHA RGED ITS ONUS OF PROVING THE SUNDRY CREDITORS WHOM PURCHASES HAVE BEEN MADE, TO BE GENUINE OR THE DEPARTMENT HAS ENOUGH EV IDENCES TO ESTABLISH THAT THE SUNDRY CREDITORS WERE NON GENUIN E. THE ASSESSEE OTHER THAN PROVIDING COPIES OF BILLS WHICH CAN EASI LY BEEN PREPARED AND GIVING DETAILS OF PAYMENT BY CHEQUES WHICH HAVE BEEN IMMEDIATELY WITHDRAWN IN CASH, COULD NOT LEAD ANY F URTHER EVIDENCE TO PROVE THE GENUINENESS. THE CONTENTION O F THE ASSESSEE THAT NOTHING FURTHER COULD BE DONE BY HIM AND THE ALLEGED SELLERS WERE NOT IN HIS CONTROL TO BE ABLE TO PRODUCE THEM BEFORE THE ASSESSING OFFICER IS NOT CORRECT. A S PER BOOKS ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 6 OF ACCOUNTS, HE HAS REGULAR DEALING WITH THE SAID C ONCERNS AND THEREFORE, THE ASSESSEE SHOULD HAVE KNOWLEDGE ABOUT THE BUSINESS PREMISES OF THE SELLERS. THE PRIMARY FACTS ARE IN HIS KNOWLEDGE AND IT IS HIS DUTY TO INFORM THE DEPARTME NT ABOUT THEIR CORRECT ADDRESSES WHICH HAS NOT BEEN DONE. IT IS ALSO INTERESTING TO NOTE THAT UNDER NORMAL CIRCUMSTANCES ONE OR TWO PARTIES COULD HAVE CLOSED BUSINESS OR SHIFTED THEIR PREMISES WITHOUT THE ASSESSEES KNOWLEDGE, BUT PARTIES FROM WHOM ASSESSEE CLAIMS PURCHASES/RECEIVED ADVANCES FOR ORD ER AND SHOWN AS SUNDRY CREDITORS SUBSTANTIAL OF RS. 7,64,5 7,001/- (OUT OF TOTAL SUNDRY CREDITORS SHOWN OF RS. 7,67,76,316/ -) ARE NOT AVAILABLE AT THEIR GIVEN ADDRESSES. TO THE CONTRARY , THE DEPARTMENT HAS DONE EVERY INVESTIGATION POSSIBLE AT ITS END TO VERIFY THE ALLEGED SUNDRY CREDITORS. INQUIRIES WERE CONDUCTED AT ALL THE ADDRESSES GIVEN BY THE ASSESSEE AND THE PAR TIES WERE NOT FOUND AT THOSE ADDRESSES. THE INSPECTORS REPOR T WAS BASED ON LOCAL INQUIRIES THAT NO SUCH CONCERN EVER EXISTE D AT THOSE PREMISES. THEREFORE, IT IS CRYSTAL CLEAR THAT THE A LLEGED SUNDRY CREDITORS AS DETAILED IN EARLIER PARAS, SHOWN BY TH E ASSESSEE IN HIS BALANCE SHEET FOR AMOUNTING TO RS. 7,64,57,000/ - ARE NOT GENUINE AND HAVE BEEN INTRODUCED IN THE BOOKS OF AC COUNTS TO REDUCE ITS GROSS PROFITS. THEREAFTER RELYING ON THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF M/S S ANJAY OILCAKE INDUSTRIES VS CIT (2008) 10 DTR 153, M/S VI JAY PROTEINS LTD. VS. ACIT 58 ITD 428 (ABD) AND M/S NANDKISHORE MEGHRAJ JEWELLERS IN ITA NO. 433/JP/2009 HAS HELD THAT THE TOTAL SUNDRY CREDITORS OF RS. 7,64,57,001/- ARE UNVERIFIABLE AND THE AO ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 7 DISALLOWED 25% OF THE UNVERIFIABLE SUNDRY CREDITORS AND MADE TRADING ADDITION OF RS. 1,91,14,250/- TO THE DECLAR ED GROSS PROFIT OF THE ASSESSEE U/S 68 OF THE ACT. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTE R IN APPEAL BEFORE THE LD. CIT(A) WHO OBSERVED THAT IN RESPECT OF THE ADVANCES RECEIVED BY THE ASSESSEE DURING THE YEAR UNDER CONS IDERATION, THERE ARE NO PURCHASES WHICH HAVE BEEN MADE BY THE ASSESSEE F ROM THESE PARTIES AND THEREFORE, THERE CANNOT BE ANY QUESTION OF DISALLOWING 25% OF THE SUNDRY CREDITORS AND ENHANCEMENT NOTICE U/S 251(2) OF THE ACT WAS ISSUED TO THE ASSESSEE AS TO WHY THE DISALLOWAN CE TO THE EXTENT OF 100% SHOULD NOT BE MADE IN THE CASE OF UNVERIFIABLE CREDITORS U/S 68 OF THE ACT. 3.1 IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE GO ODS WERE PURCHASED, THE FREIGHT CHARGES WERE DULY PAID AND T HE PAYMENT WAS MADE BY CHEQUE OR NEFT. THE GOODS WERE SOLD BY THE PARTY AGAINST WHICH THE PAYMENT WAS RECEIVED BY ACCOUNT PAYEE CHE QUE AND THE PROFIT WERE DULY SHOWN WHILE COMPUTING THE INCOME. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED THE BILLS SHO WING THEREIN THE ADDRESS, PAN ETC. AND THE PURCHASES DULY RECORDED I N THE BOOKS OF ACCOUNT AND SOLD TO VARIOUS PARTIES AND DULY ACCOUN TED AND THE BOOKS OF ACCOUNTS ARE DULY AUDITED. 3.2 THE SUBMISSIONS OF THE ASSESSEE WERE DULY CONSI DERED BY THE LD CIT(A) BUT NOT FOUND ACCEPTABLE. THE RELEVANT FINDI NGS OF THE LD. CIT(A) ARE CONTAINED AT PARAS 7, 8, 9 AND 16 WHICH ARE REP RODUCED AS UNDER:- ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 8 (VII) IT IS TO BE NOTED THAT FURNISHING OF PAN/TIN DOES NOT PROVE THE CREDIT WORTHINESS OF THESE PARTIES. FURTHER, IT HAS BEEN HELD IN A NUMBER OF JUDICIAL PRONOUNCEMENTS THAT PAYMENT THRO UGH BANKING CHANNELS ARE NOT SACROSANCT. IT MAY BE NOTED THAT I T WAS STATED BY THE APPELLANT THAT THE ENTIRE AMOUNT WAS PAID TO TH E OVERSEAS SUPPLIERS DURING THE F.Y. 2013-14 FOR IMPORT OF GLA SS CHATTONS. HOWEVER, IT IS NOTED FROM THE AUDITED PROFIT AND LO SS ACCOUNT OF THE APPELLANT FOR THE SUBSEQUENT YEAR I.E. 2014-15 RELE VANT TO THE AY 2015-16 THAT GLASS CHATTON AMOUNTING TO RS. 65,91,0 29/- WERE IMPORTED AND THE LOCAL PURCHASES WERE TO THE TUNE O F RS. 6,23,01,669/-. THUS, THERE IS INCONSISTENCY BETWEEN THE CONTENTIONS OF THE APPELLANT AND ITS FINANCIAL STATEMENTS. IT W AS FURTHER NOTED FROM THE DETAILS SUBMITTED BY THE APPELLANTS THAT IN THE FY 2014-15, IT HAS IMPORTED GOODS WORTH RS. 56,05,416/- FROM M/S SHINI NG LIFE COMPANY LTD. DURING THE F.Y. 2014-15, WHEREAS A SUM OF RS. 7,12,58,410/- APPEARS TO BE ADVANCED TO THE SAID COMPANY DURING T HE F.Y. 2013-- 14 FOR THE PURPORTED PURPOSE OF PURCHASE OF GOODS. IT IS ALSO NOTED THAT DURING THE F.Y. 2014-15, IT HAS IMPORTED GOODS AMOUNTING TO RS. 9,85,612/- FROM M/S DEAN TRADING-CHINA AND NO A DVANCE PAYMENT APPEARS TO BE MADE TO IT IN THE F.Y. 2013-1 4. I FAIL TO UNDERSTAND THAT WHY SUCH A HUGE AMOUNT WAS PAID TO M/S SHINING LIFES COMPANY' LTD. DURING THE F.Y. 2013-14 WHEREAS, THE SALES BY M/S SHINING LIFES COMPANY LTD. DURING THE FY. 2014-15 WAS ONLY AROUND 8% OF SUCH / ADVANCES. IT IS PERTINENT TO MENTION HERE THAT THE ALLEGED ADVANCES WERE GIVE N BY THESE 18 PARTIES FOR PURCHASE OF IMPORTED GLASS CHATTONS, WHEREAS TOTAL SALES DURING THE FY 2014-15 WAS TO THE TUNE O F RS. ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 9 7,32,12,651/-, MEANING THEREBY, THAT THE SALES WERE MAINLY MADE FROM INDIGENOUS PURCHASES ONLY AND NOT FROM IM PORTED ONE. IT IS FURTHER MENTIONED THAT THE OPENING STOCK AS WELL AS CLOSING STOCK FOR THE FY 2014-15, AS APPEARING FROM THE PROFIT AND LOSS ACCOUNT OF THE APPELLANT WAS NIL. (VIII) IT WAS CLAIMED BY THE APPELLANT THAT IN THE SUBSEQUENT YEAR, I.E. F.Y. 2014-15, THE SALES WERE MADE BY THE APPELLANT TO THE 18 PARTIES, HOWEVER, IT IS PERTINENT TO MENTION HERE THAT NEITH ER ANY EVIDENCE NOR ANY CONFIRMATION FROM THESE PARTIES WERE FILED FOR THE F.Y. 2014-15, WHICH MAY ESTABLISH THAT THE GOODS WERE SUPPLIED BY THE APPELLANT AGAINST THE SO CALLED ADVANCES RECEIVED FROM SUCH P ERSONS DURING THE F.Y. 2013-14. THE APPELLANT HAS ONLY FURNISHED DOCU MENTS RELATING TO IMPORTS OF GOODS DURING THE F.Y. 2014-15 AND NO DET AILS WERE SUBMITTED RELATING TO PURCHASE OF GOOD FROM LOCAL V ENDORS. IT IS PERTINENT TO MENTION THAT APPELLANT HAS FILED COPIE S OF ACCOUNTS OF THESE PARTIES AS APPEARING IN ITS BOOKS OF ACCOUNTS FOR THE F.Y. 2014- 15 BUT THE SAME WERE NOT SIGNED BY THESE PARTIES I. E. THE ACCOUNTS WERE NOT CONFIRMED BY THESE 18 PARTIES. THEREFORE, THESE ARE NOTHING BUT SELF SERVING DOCUMENTS AND ARE OF NO HELP TO TH E APPELLANT. IT MAY BE MENTIONED THAT BURDEN IS UPON THE APPELLANT TO P LACE ON RECORD EVIDENCES WHICH MAY ESTABLISH THAT THE GOODS WERE SOLD BY THE APPELLANT TO THESE PARTIES IN THE SUBSEQUENT YEARS, AS CLAIMED BY IT. FURTHER, THESE ALLEGED ADVANCES ARE TO BE TREATED AS CASH CREDITS ONLY AS NO SALES WERE MADE BY THE A PPELLANT TO THESE PARTIES DURING THE YEAR UNDER CONSIDERATION. ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 10 (IX) THUS, A SUM OF RS. 7,64,57,001/- WAS CREDITED IN THE BOOKS OF ACCOUNTS AS ADVANCE FROM 18 PARTIES AND THE ONUS TO PROVE SUCH CASH CREDITS IS ON THE APPELLANT AS REQUIRED UNDER THE PROVISIONS OF SECTION 68 OF THE ACT. THE APPELLANT IS REQUIRED TO PROVE THE IDENTITY AND CREDIT WORTHINESS OF SUCH CASH CREDITO RS AND TO PROVE THE GENUINENESS OF THE TRANSACTIONS. IT HAS ALREADY BEEN MENTIONED EARLIER THAT DETAILED ENQUIRIES WERE MADE BY THE AO BUT NEITHER ANY COMPLIANCE WAS MADE BY THESE 18 PARTIES NOR THESE WERE FOUND AVAILABLE AT THE ADDRESSES PROVIDED BY T HE APPELLANT. THE APPELLANT HAS NOT PRODUCED THESE 18 PARTIES ALO NG WITH THEIR BOOKS OF ACCOUNTS, BANK STATEMENTS AND ITR FOR VERI FICATION OF THE TRANSACTION UNDER CONSIDERATION, THOUGH SPECIFICALL Y REQUIRED BY THE AO. THUS, NEITHER THE IDENTITY NOR CREDITWORTHI NESS OF THESE 18 PARTIES WERE PROVED BY THE APPELLANT. EVEN THE GENU INENESS OF THE TRANSACTIONS COULD NOT BE PROVED AS THE APPELLANT D ID NOT FILE THE COPIES OF THE RELEVANT BANK STATEMENTS OF THESE 18 PARTIES. THUS, THE APPELLANT FAILED TO PROVE CASH CREDITS FROM 18 PARTIES WHICH ARE UNDER CONSIDERATION. THE CONTENTION OF THE APPELLAN T THAT GOODS WERE SUPPLIED TO THESE 18 PARTIES IN THE SUBSEQUENT YEAR COULD NOT BE ESTABLISHED BY THE APPELLANT. THOUGH NOT ADMITTE D, IF IT IS ASSUMED FROM THE TIME BEING THAT THE APPELLANT HAS SOLD GOODS TO THESE PARTIES IN SUBSEQUENT YEAR, IT DOES NOT ABSOL VE THE APPELLANT TO PROVE THE CASH CREDITS RECEIVED DURING THE YEAR UNDER CONSIDERATION. (XVI) THEREFORE, IN VIEW OF THE ABOVE DISCUSSION AN D LOOKING TO THE TOTALITY OF FACTS AND CIRCUMSTANCES CASE, THE ADDIT ION OF RS. 1,91,14,250/-, BEING 25% OF RS. 7,64,57,001/- MADE BY AO TO THE ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 11 INCOME OF THE APPELLANT U/S 68 OF THE ACT IS BEING ENHANCED TO RS. 7,64,57,001/- AS THE APPELLANT HAS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND IDENTITY AND CREDITWORTHINE SS OF THESE CASH CREDITORS. IT MAY BE MENTIONED THAT AS PER PROVISIO NS OF SECTION 68 OF THE ACT, THE ONUS IS UPON THE APPELLANT TO PROVE THE CASH CREDITS, WHICH IT FAILED MISERABLY IN THE INSTANT C ASE UNDER CONSIDERATION. THE AO IS HEREBY DIRECTED TO CHARGE INTEREST U/S 234A, 234B AND 234C OF THE ACT AND TO ISSUE NECESSA RY FORMS INCLUDING NOTICE OF DEMAND AND CHALLAN TO THE APPEL LANT. 4. DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE TOTAL SALE OF THE PETITIONER IS RS. 6,66,10,014/- AND THE GROSS G.P. RATE WAS SHOWN AT 32.61%. IT WAS FUR THER SUBMITTED THAT THE BOOKS OF THE PETITIONER IS SUBJECT TO TAX AUDIT , UNDER THE CIRCUMSTANCES, THE AO WAS NOT CORRECT IN ESTIMATING THE GROSS PROFIT U/S 68 OF THE IT ACT, 1961 AMOUNTING TO RS. 1,91,14,250 /- @ 25% ON THE ALLEGED UNVERIFIABLE SUNDRY CREDITORS WHEREAS THE P ETITIONER HIMSELF DECLARED THE GP RATE OF 32.61%. THAT THE NOTICES U/ S 133(6) OF THE IT ACT, 1961 WERE ISSUED TO THE CREDITORS BUT WAS NOT SERVED AND IF THE NOTICES U/S 133(6) OF THE IT ACT, 1961 ARE NOT SERV ED, THE ITO SHOULD HAVE IMPOSED THE PENALTY U/S 133(6) OF THE IT ACT, 1961 FOR NON- COMPLIANCE OF NOTICES BUT SHE HAS NOT DONE SO. MERE LY ISSUE OF NOTICES U/S 133(6) OF THE IT ACT, 1961, THE CREDITO RS CANNOT BE TREATED AS BOGUS, IF THE SAME IS NOT ATTENDED BY TH EM. THAT AGAINST THE SAID ORDER, THE PETITIONER WAS IN APPEAL BEFORE THE HON'BLE CIT(APPEALS-I), JAIPUR WHO HAS ENHANCED THE INCOME U/S 68 OF THE IT ACT, 1961 BY RS. 7,64,57,001/- AND NOT ALLOWING THE ADDITION WHICH WAS ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 12 MADE BY THE LD. ITO AMOUNTING TO RS. 1,91,14,250/-. IN THIS RESPECT, IT IS SUBMITTED THAT THE COPY OF ACCOUNTS OF 11 PARTIE S HAVE BEEN FILED THEREIN SHOWING THE CONFIRMATION AND PAN VIDE LETTE R DT. 08.03.2016 OF M/S M TAILOR & COMPANY, CHARTERED ACCOUNTANTS WHICH IS AVAILABLE AS PART OF THE PAPER BOOK. 4.1 IT WAS FURTHER SUBMITTED BY THE LD AR THAT THE ADDITION MADE BY THE AO AND INCOME ENHANCED BY THE HON'BLE CIT(APPEA LS-I), JAIPUR IS BAD IN LAW AS WELL AS ON FACTS IN VIEW OF GUJARAT H IGH COURT DECISION IN CASE OF YUNUSH HAJI IBRAHIM FAZALWALA VS INCOME TAX OFFICER IN ITA NO. 701 OF 2015 REPORTED IN 255 DTR (GUJ) 311 WHERE IN IT WAS HELD (HEAD NOTES) CIT(A) FOUND THAT THERE WERE NO DEF ECTS IN THE BOOKS OF ACCOUNT INCLUDING THE DAY TO DAY STOCK REGISTER MAINTAINED BY THE ASSESSEE, WHICH MEANS WHERE THE CHEQUES AND SALES A RE GENUINE-AO HAS NOT FOUND ANY INSTANCES WHERE THE CHEQUES ISSUE D BY THE ASSESSEE HAVE BEEN ENCASHED ON BEHALF OF THE ASSESSEE-AO HAS ACCEPTED THE SALES MADE BY THE ASSESSEE AND IF THAT BE SO, IT WO ULD INDICATE THAT THE ASSESSEE MUST HAVE MADE PURCHASES, OTHERWISE IT WOU LD NOT BE POSSIBLE FOR THE ASSESSEE TO MAKE THE SALES- THUS E VEN AS REGARDS THE BASIS FACTS, TRIBUNAL HAS PROCEEDED ON AN ERRONEOUS FOOTING-ORDER OF TRIBUNAL REVERSING THE ORDER OF CIT(A) BEING CONTRA RY TO ITS OWN DIRECTIONS MADE IN THE FIRST ROUND OF APPEAL AND BE ING CONTRARY TO THE RECORDS, IS PERVERSE AND NOT SUSTAINABLE -TRIBUNAL WAS NOT THEREFORE RIGHT IN HOLDING THAT PURCHASES OF RS. 73,29,278/- OUT OF THE TOTAL PURCHASES OF RS. 1,01,83,331/- WERE BOGUS AND THERE FORE, 25% THEREOF WAS REQUIRED TO BE DISALLOWED AND ADDED AS INCOME O F THE ASSESSEE'. ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 13 4.2 IT WAS FURTHER SUBMITTED THAT SINCE THE REGULAR BOOKS OF ACCOUNTS ARE MAINTAINED, PAYMENT AND PURCHASES WERE MADE BY ACCOUNT PAYEE CHEQUES AND SALE ARE EFFECTED TO THE GENUINE PARTIE S AGAINST CHEQUE PAYMENT, THE ADDITION MADE BY THE AO AS WELL AS ENH ANCED BY THE CIT(APPEALS-I), JAIPUR IS BAD IN LAW AND THE SAME M AY KINDLY BE DELETED IN VIEW OF THE DECISION AS ABOVE. IT IS NOT OUT OF PLACE TO MENTION THAT THE PETITIONER PAID THE FREIGHT CHARGES FOR THE GOO DS IMPORTED AND THE SAID FACTS HAVE ALREADY BEEN SHOWN BEFORE THE AO. T HAT WE ALSO RELY ON THE DECISION BY THIS BENCH IN CASE OF DY. CIT CIRCL E-2, JAIPUR VS M/S GEM PARADISE (C.O. NO. 65/JP/2012 ARISING FROM ITA NO. 747/JP/2012). 5. THE LD. DR IS HEARD WHO HAS VEHEMENTLY ARGUED TH E MATTER AND HAS TAKEN US THROUGH THE FINDINGS OF THE LD CIT(A) AND THE AO WHICH WE HAVE ALREADY NOTED ABOVE. 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE UNDER CONSIDERATION RELATES TO ADDITION MADE BY THE AO AND ENHANCED BY THE LD CIT(A) UNDER SECTION 68 OF THE ACT. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF TRA DING OF GLASS CHATON/ BEADS THROUGH HIS PROPRIETORSHIP CONCERN M/ S MALVIKA INTERNATIONAL. THE ASSESSEE IMPORTS THE GOODS FROM OVERSEAS SUPPLIERS AGAINST THE ORDERS PLACED BY THE LOCAL BUYERS AND T HEN, SUPPLY THE SAME TO THE LOCAL BUYERS. DURING THE YEAR UNDER CONSIDE RATION, CERTAIN ADVANCES AGAINST THE SUPPLY ORDERS HAVE BEEN RECEIV ED AND THE SAME WERE REFLECTED IN THE BALANCE SHEET UNDER THE HEAD SUNDRY CREDITORS. IT HAS FURTHER BEEN CONTENDED BY THE ASSESSEE THAT PURCHASES AND SALES AGAINST THE SAID ADVANCES HAVE BEEN EFFECTED IN THE SUBSEQUENT ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 14 FINANCIAL YEAR AND THE SAME HAVE BEEN DULY REFLECTE D IN THEIR REGULAR BOOKS OF ACCOUNTS WHICH ARE DULY AUDITED. THEREFOR E, TO TEST THE SAID FACTUAL POSITION AND EXPLANATION OF THE ASSESSEE, N O DOUBT THE IDENTITY, CREDITWORTHINESS OF THE CREDITORS HAVE TO BE EXAMIN ED BUT AT THE SAME TIME, THE GENUINENESS OF THE TRANSACTION NEEDS TO B E EXAMINED. IN THE PRESENT CASE, GOING BY THE FACTUAL NARRATIVE AS STA TED ABOVE, GENERALLY SPEAKING, THE SEQUENCE OF TRANSACTIONS START WITH A SSESSEE RECEVING AN ORDER FROM THE LOCAL BUYERS FOR PURCHASE OF GOODS F ROM OVERSEAS, THEREAFTER, THE ASSESSEE RECEIVES AN ADVANCE FROM T HE LOCAL BUYERS, SUBSEQUENTLY, THE ORDER IS PLACED BY THE ASSESSEE O N THE OVERSEAS BUYERS, THE ADVANCE IS PAID TO THEM OUT OF EARLIER ADVANCE SO RECEIVED, THE GOODS ARE SUPPLIED BY OVERSEAS SUPPLIERS, FREIG HT PAID AND SHIPMENT CLEARED FROM INDIAN PORTS AND THEN ONCE THE SHIPMEN T HAS LANDED IN INDIAN SHORES, THE SAME ARE SUPPLIED TO THE LOCAL B UYERS AND THE TRANSACTION IS FINALLY SETTLED WITH DELIVERY AND RE CEIVING THE BALANCE CONSIDERATION. IN THE INSTANT CASE, NO DOUBTS SOME INVESTIGATION HAS BEEN CARRIED OUT BY THE ASSESSING OFFICER AND APPRE HENSION HAS BEEN RAISED REGARDING THE NON-AVAILABILITY OF THE BUYERS /NON-EXISTENCE OF BUYERS AT THE GIVEN ADDRESSEES, HOWEVER, TO CONCLUD E FINALLY THAT THE CREDITORS ARE BOGUS AND THE WHOLE TRANSACTION IS NO N-GENUINE, THE MATTER NEED TO BE INVESTIGATED FURTHER AND RELATES DOCUMENTATION NEED TO BE EXAMINED. IN THIS REGARD, WE FIND THAT THERE IS NO MATERIAL AVAILABLE ON RECORD FOR US TO VIEW A FIRM VIEW IN T HE MATTER. FURTHER, WE FIND THAT IN THE LIST OF CREDITORS, THERE ARE NA MES APPEARING SUCH AS ADARSH CO-OPERATIVE, MANGAL DEEP MULTY STATE URBAN AND SEVEN HILLS COOPERATIVE URBAN WHICH APPEARS TO BE BANKS/CO-OPER ATIVE BANK AND NOT TRADE CREDITORS, THE SAME ALSO NEED PROPER INVE STIGATION. IN LIGHT OF ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 15 ABOVE, WE DEEM IT APPROPRIATE TO REMAND THE MATTER TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH AFTER PROVIDING REASO NABLE OPPORTUNITY TO THE ASSESSEE. IN THE RESULT, THE GROUND IS ALLO WED FOR STATISTICAL PURPOSES. 7. IN RESPECT OF GROUND NO. 2, BRIEFLY THE FACTS O F THE CASE ARE THAT THE AO HAS DISALLOWED A SUM OF RS. 30,756/- U/S 40( A)(IA) OF THE ACT AS THE APPELLANT HAS NOT DEDUCTED TAX AT SOURCE WHILE MAKING INTEREST PAYMENT TO M/S TATA FINANCE COMPANY LTD. DURING THE APPELLATE PROCEEDINGS BEFORE THE LD CIT(A), IT WAS SUBMITTED BY THE APPELLANT THAT SINCE THE INTEREST PAYMENT WAS MADE TO A NBFC, IT W AS NOT OBLIGATORY TO MAKE TDS. IN SUPPORT OF ITS CLAIM, THE APPELLANT HAS RELIED ON THE DECISION OF THE COORDINATE BENCH IN THE CASE OF HER BICIDES INDIA LTD. VS ITO. IT WAS NOTED BY THE LD CIT(A) THAT THE SAID DE CISION IS DISTINGUISHABLE ON FACTS AS THE ISSUE IN THAT CASE WAS WHETHER THE PROVISION OF SECTION 40(A)(IA) OF THE ACT COULD BE INVOKED IN A CASE WHERE THE AMOUNT WAS PAYABLE AT THE YEAR END OR NOT . IT WAS FURTHER NOTED BY THE LD CIT(A) THAT THE APPELLANT HAS NOT F ILED ANY CERTIFICATE FROM THE CHARTERED ACCOUNTANT IN FORM NO. 26A AS RE QUIRED AS PER THE PROVISION 201 R.W.S 40(A)(IA) OF THE ACT. THEREFORE , THE DISALLOWANCE OF RS. 30,756/- MADE BY THE AO WAS SUSTAINED. 8. DURING THE COURSE OF HEARING, THE LD. AR OF THE ASSESSEE SUBMITTED THAT M/S TATA FINANCE COMPANY IS A COMPAN Y REGISTERED UNDER COMPANIES ACT AND REGULARLY ASSESSED TO INCOM E TAX WHERE SUCH PAYMENTS ARE OUGHT TO HAVE BEEN DISCLOSED AND AS SU CH INTEREST CANNOT BE DISALLOWED MERELY ON THE GROUND THAT FORM NO. 26A AS REQUIRED UNDER PROVISION OF SECTION 201 READ WITH S ECTION 40(A)(IA) OF ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 16 THE IT ACT, 1961 WAS NOT SUBMITTED BY THE PETITIONE R. IN SUPPORT, RELIANCE WAS PLACED ON THE DECISION OF M/S HERBICID ES (INDIA) LTD. VS. ITO. 9. THE LD. DR IS HEARD WHO HAS RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 10. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. AS WE HAVE SET-ASIDE THE MATTE R RELATING TO ADDITIONS UNDER SECTION 68, THIS ISSUE IS ALSO SET- ASIDE TO THE FILE OF THE AO TO EXAMINE THE CLAIM OF THE ASSESSEE THAT THE PA YEE ENTITY HAS FURNISHED ITS RETURN OF INCOME AND HAS DISCLOSED TH E PAYMENT IN ITS RETURN OF INCOME. IN THE RESULT, THE GROUND IS ALL OWED FOR STATISTICAL PURPOSES. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06/11/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 06/11/2018. *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI PRADEEP KUMAR AGARWAL, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO. WARD- 1(5), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. ITA NO. 33/JP/2018 SHRI PRADEEP KUMAR AGARWAL VS. ITO 17 6. XKMZ QKBZY@ GUARD FILE { ITA NO. 33/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR