Vikas Jain, Ambala City V. ITO, Ambala

ITA 411/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5089 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 05-01-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 21-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Bogus purchase; Business income; Question of law; Onus to prove
• Section: 69C; 133(6); 131; 68; 145; 144

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACOCUNTANT MEMBER ITA NO. 411/CHD/2016 ASSESSMENT YEAR: 2012-13 SH. VIKAS JAIN, V THE ITO, WARD NO.1 PROP M/S VEER STORES, AMBALA AMBALA CITY PAN NO. ADMPJ2095H (APPELLANT) (RESPONDENT) APPELLANT BY : SH. ROHIT GOYAL RESPONDENT BY : SH. MANJIT SINGH DATE OF HEARING : 22.03.2017 DATE OF PRONOUNCEMENT : 19.06.2017 ORDER PER ANNAPURNA GUPTA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), PANCHKULA DATED 16.3.2016 PERTAINING TO ASSESSMENT YEAR 2012-13. THE ASSESSEE HAS RAISED THE FOLLOWING TWO EFFECTIVE GROUNDS:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION U/S 68 AMOUNTING TO RS. 37,27,929/- ON ACCOUNT OF PURCHASE MADE FROM M/S TIRUPATI MARKETING SALES. 2 2. THE LD. CIT(A) HAS ERRED IN LAW AND FACTS IN CONFIRMING AN ADDITION U/S 68 OF RS. 39,05,000/- BEING CASH RECEIVED ON ACCOUNT OF SALES MADE TO M/S INFINITY CORPORATION AMOUNTING TO RS. 87,00,478/-. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IN THE PRESE NT APPEAL IS AGAINST ADDITION MADE U/S 68 OF THE INCOME-TAX ACT, 1961 (I N SHORT 'THE ACT') ON ACCOUNT OF PURCHASE AND / OR CASH RECEIVED FROM TWO PARTIES I.E. M/S TIRUPATI MARKETING SALES AND M/S INFINITY CORPORATION AMOUNTING TO RS. 37,27,929/- AND RS. 39,05,000/- RESPECTIVELY. THE ENTIRE EXERCISE AND I NVESTIGATION CARRIED OUT BY THE ASSESSING OFFICER LEADING TO THE AFORESAID ADD ITIONS AND THE ARGUMENTS OF THE ASSESSEE AGAINST THE SAID ADDITIONS WERE COMMON , THEREFORE, WE SHALL DEAL WITH BOTH THE GROUNDS SIMULTANEOUSLY. 3. THE BRIEF FACTS LEADING TO THE ADDITION MADE ARE THAT DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE ENQUIRES A BOUT TWO CREDITORS AS MENTIONED ABOVE I.E, M/S TIRUPATI MARKETING SALES A ND M/S INFINITY CORPORATION, SHOWING CREDIT BALANCE IN THE BOOKS OF ACCOUNT OF THE ASSESSEE OF RS. 37,27,929/- AND RS. 55,72,463/- RESPECTIVELY. L ETTERS U/S 133(6) OF THE ACT FOR CONFIRMING THE TRANSACTIONS WERE ISSUED BY THE ASSESSING OFFICER WHICH WERE RECEIVED BACK UNDELIVERED WITH THE POSTAL REMARKS T HAT THE PARTIES ARE NOT TRACEABLE AT THE GIVEN ADDRESS. FURTHER, ENQUIRES W ERE MADE THROUGH THE INSPECTOR WHO REPORTED THAT NO SUCH PARTIES WERE FO UND TO EXIST AT THE GIVEN ADDRESS OR IN THE VICINITY. THE LOCAL TRADER IN THE SAME LINE OF BUSINESS ALSO COULD NOT GIVE ANY CLUE ABOUT THE EXISTENCE OF THOS E CONCERNS. FURTHER, EVEN THE ASSESSEE DENIED HAVING ANY KNOWLEDGE OF THE PARTIES AND WAS ALSO UNABLE TO PRODUCE ANY RECEIPTS, SLIPS OR OTHER PROOFS FOR MA KING PAYMENTS OR DOCUMENTS PROVING THE DELIVERY OF GOODS AT HIS PREMISES FOR P URCHASES. THE ASSESSEE ALSO COULD NOT PRODUCE THE STOCK REGISTER OR ANY OTHER P ROOF SHOWING THE RECEIPT OF 3 GOODS CORRESPONDING TO THE PURCHASE BILLS. BASED ON THESE FACTS, THE ASSESSING OFFICER ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE AN D AFTER CONSIDERING THE REPLY REACHED TO THE CONCLUSION THAT NONE OF THESE PARTIE S NEVER EXISTED. HE, THEREFORE, HELD THAT ASSESSEE HAD MADE FALSE CREDIT ENTRIES IN ITS BOOKS OF ACCOUNT VIS-A-VIS THE PURCHASE AND CASH PAYMENTS REFLECTED IN THE ACC OUNTS AND HELD THEM TO BE UNEXPLAINED CASH ENTRIES. HE, THEREFORE, MADE ADDIT ION OF THE SAME BEING RS. 37,27,929/- IN THE CASE OF M/S TIRUPATI MARKETING SALES AND RS.39,05,000/- IN THE CASE OF M/S INFINITY CORPORATION, TO THE TOTAL INCOME OF THE ASSESSEE. THE MATTER WAS CARRIED IN APPEAL BEFORE THE CIT(A) WHER E DETAILED SUBMISSIONS WERE MADE BY THE ASSESSEE WHICH HAVE BEEN NOTED BY THE L D. CIT(A) AT PARAS 5.1 TO 5.4 OF THE ORDER. THE ASSESSEE EXPLAINED THE NATURE OF THE SAID CREDIT ENTRIES AS BEING ON ACCOUNT OF PURCHASES MADE IN THE IMPUGNE D YEAR WHICH WAS SETTLED BY WAY OF SALES MADE IN THE SUBSEQUENT YEAR IN THE CAS E OF M/S TIRUPATI MARKETING SALES AND AS BEING ADVANCES RECEIVED WHICH WERE SET OFF AGAINST SALES MADE DURING THE YEAR AND REFUND OF THE SAID ADVANCES IN SUBSEQUENT YEARS BY WAY OF CHEQUES IN THE CASE OF M/S INFINITY CORPORATION. T HE CONFIRMATIONS FROM THE SAID PARTIES WERE ALSO FILED. THE ASSESSEE ALSO SUB MITTED THAT THE PARTIES WERE REGISTERED WITH SALES TAX AUTHORITIES AND SUBJECTED TO VAT AND CST AND THEIR ASSESSMENTS HAD BEEN COMPLETED BY THE AUTHORTIES. IT WAS ALSO SUBMITTED THAT SAID PARTIES WERE INCOME TAX ASSESSES, THEIR PAN NU MBERS WERE FURNISHED AND IT WAS REQUESTED THAT COMMISSION BE ISSUED TO THE ASSE SSING OFFICER HAVING JURISDICTION OVER THESE PARTIES TO VERIFY THE GENUI NENESS OF THE SAID PARTIES. THE ASSESSEE ALSO CONTENDED THAT SINCE THE SALES MADE T O THE OTHER PERSONS ON ACCOUNT OF GOODS PURCHASED FROM THESE PARTIES HAVE NOT BEEN DOUBTED, THE PURCHASES COULD NOT BE HELD TO BE BOGUS. THE LD. CI T(A) REJECTED ALL THE CONTENTIONS RAISED BY THE ASSESSEE AND UPHELD THE A DDITIONS MADE BY HOLDING AS UNDER:- 4 7.1 AFTER CONSIDERING THE FACTS AND SUBMISSION AND ON PERUSAL OF THE COPY OF ACCOUNT OF TIRUPATI MARKETIN G SALES, IT IS NOTICED THAT CASH RECEIVED ARE SHOWN I N THE MONTH OF APRIL. JUNE & NOVEMBER, 2011 OF RS.2,50,00 0/-, RS.2,75,000/- AND RS.8,85,500/- RESPECTIVELY. THE PURCHASES WORTH RS.L1,64,735/- AND RS.L1,52,744/-HA VE BEEN SHOWN ON 16.09.2011 AND 19.09.2011, THUS THERE WAS A TOTAL CREDIT BALANCE IN THE APPELLANT'S BOOK OF RS.37,27,9797-. IT IS PERTINENT TO NOTE THAT CASH R ECEIPTS AS WELL AS PURCHASES, BOTH HAS BEEN SHOWN DURING TH E YEAR AND NO PAYMENT ON ACCOUNT OF PURCHASES ARE REFLECTED IN THE ACCOUNT. THE APPELLANT DURING THE APPELLATE PROCEEDINGS SUBMITTED COPY OF ACCOUNT FOR THE SUBSEQUENT YEARS AND ON PERUSAL OF THE SAME, IT IS FOUND THAT INSTEAD OF MAKING PAYMENTS AGAINST PURCHASES A ND REPAYMENT OF CASH RECEIPTS, THE APPELLANT HAS REDUC ED BALANCE BY SHOWING SALES IN SUBSEQUENT YEARS. THE APPELLANT IS A WHOLE SALE TRADER AND IF ANY PURCHAS ES ARE MADE FOR ITS WHOLE SALE TRADING BUSINESS, THEN LOGI CALLY THE PAYMENTS WOULD ARISE AGAINST SUCH PURCHASES RAT HER THAN SHOWING SALES TO THE SAME PARTY IN THE SUBSEQU ENT YEARS. FURTHER, THE CASH RECEIPTS ENTRIES ARE ALSO NOT BACKED BY ANY EVIDENCE IN SUPPORT OF APPELLANT'S CONTENTION THAT THE SAME WERE IN THE NATURE OF ADVA NCE. HAD THERE BEEN ADVANCE FOR ANY SALE, THE SAME WOULD HAVE MATERIALIZED IN THE SAME YEAR SUBSEQUENT TO RE CEIPT OF CASH RATHER THAN AGAINST CASH RECEIPTS THERE WER E SUBSEQUENT FURTHER PURCHASES SHOWN FROM THE SAME PA RTY. AFTER PURCHASES IN THE MONTH OF SEPTEMBER, 2011, FU RTHER CASH RECEIPTS HAVE BEEN SHOWN IN THE MONTH OF NOVEM BER, 2011. THE FACTS GATHERED BY THE AO DURING ASSESSMEN T PROCEEDINGS CLEARLY ESTABLISHES THAT SUCH PARTY WAS NOT EXISTING AND EVEN DINING REMAND PROCEEDINGS NO EXIS TENCE OF SUCH PARTY WAS EVER ESTABLISH. THE APPELLANT'S R ELIANCE OF DOCUMENTS HAVING PAN, SALES TAX NUMBER AND INVOI CE 5 DOES NOT CONCLUSIVELY PROVE THE NATURE OF TRANSACTI ON IN THE ABSENCE OF NON EXISTENCE OF PARTY. DURING THE ASSESSMENT PROCEEDINGS, THE AO HAS RECORDED THE STATEMENT OF APPELLANT AND SPECIFICALLY ASKED TO SUBSTANTIATE THE PURCHASE AND CASH TRANSACTION WITH SUPPORT OF DOCUMENTARY EVIDENCES WHICH THE APPELLAN T FAILED TO DO SO. MOREOVER, THE APPELLANT STATED THA T HE DOES NOT KNOW THE CONCERNED PARTY. THESE FACTS CLEA RLY ESTABLISHES THAT APPELLANT HAS CREATED BOGUS PURCHA SE IN ITS BOOKS OF ACCOUNT OF RS.23,17,479/- AND UNEXPLAI NED CASH RECEIPTS OF RS.14,10,500/- IN THE NAME OF TIRU PATI MARKETING SALES. 7.2 FURTHER, ON PERUSAL OF THE COPY OF ACCOUNT OF M/S INFINITY CORPORATION, IT IS NOTED THAT DURING THE YEAR THE TOTAL TRANSACTIONS SHOWN IS RS. 1,57.20,000/-. IN T HE MONTH OF APRIL, MAY & JUNE, 2011, THE APPELLANT HAS SHOWN CASH RECEIPTS ON VARIOUS DATES AMOUNTING TO RS.39,05,000/-. SUBSEQUENTLY, THERE ARE CREDITS THR OUGH BANK AND SALES HAVE BEEN SHOWN IN THE MONTH OF JULY TO SEPTEMBER, 2011. THE TOTAL SALES SHOWN IS RS.87,00, 476/- RESULTING INTO A CLOSING CREDIT BALANCE OF RS.55,72 ,463/-. IN SUBSEQUENT YEAR 2012-13, THERE IS A SOLITARY TRANSACTION OF RS. 50,000/- SHOWN AS PAYMENT THROUG H BANK AND IN SECOND SUBSEQUENT YEAR 2013-14, THERE A RE PAYMENTS THROUGH BANK OF. INDIA OF RS.2,00,000/- EA CH ON VARIOUS DATES AND THERE IS NO SALES TRANSACTION. TH E ACCOUNTS REFLECT UNUSUAL TRANSACTIONS WHERE THE CAS H HAS BEEN CREDITED IN THE BEGINNING MONTHS OF YEAR AND S ALE SHOWN IN SUBSEQUENT MONTHS AFTER FURTHER RECEIPTS O F AMOUNTS THROUGH BANK, WHICH IS NOT COMMENSURATE TO THE RECEIPTS IN CASH AS WELL AS THROUGH BANK. THUS, RES ULTING INTO A HUGE CREDIT OF RS.55,72,463-. INITIALLY AS P ER BILL, THE ADDRESS WAS SHOWN AT SHIMLA WHICH WAS SUBSEQUE NTLY SHOWN AT NEW DELHI. ON INQUIRIES, THE SUMMONS WERE 6 RECEIVED BACK AND THE PARTY WAS NOT FOUND TO BE GEN UINE. SINCE, THE APPELLANT HAS SHOWN CASH CREDITS OF RS. 39,05,000/- IN THE ACCOUNT FOR WHICH NO SATISFACTOR Y EXPLANATION WAS PROVIDED, THE AO PROCEEDED WITH THE ADDITION OF RS. 39.05.000/- AS UNEXPLAINED CASH CRE DIT. 7.3 REGARDING THE APPELLANT'S CONTENTION THAT THE B OOKS OF ACCOUNTS WERE PRODUCED AND THE AO HAS NOT REJECT ED THE BOOKS OF ACCOUNT, IT IS FOUND THAT IN CASE OF F INDING OF NON EXISTING SELLER TO CREATE BOGUS PURCHASES, THE AO WAS NOT BOUND TO INVOKE THE PROVISIONS OF SECTION 145 F OR REJECTION OF BOOKS OF ACCOUNT. THE TRANSACTION NEED NOT BE ACCEPTED ONLY ON THE BASIS OF BOOKS OF ACCOUNT A ND THE DOCUMENTS. IN THIS REGARD, I TAKE SUPPORT FROM THE JUDGMENT OF HON'BLE HIGH COURT OF PUNJAB & HARYANA IN THE CASE OF I.R. SOLVENT INDUSTRIES PVT. LTD. VS. C IT [2012] 22 TAXMANN.COM 115 WHEREIN THE HON'BLE COURT HELD THAT WHERE PURCHASES WERE MADE FROM A NON EXIS TING SELLER, SAME WOULD HE HELD TO BE BOGUS EVEN IF COMP LETE QUANTITATIVE DETAILS OF PURCHASE WAS AVAILABLE IN T HE ASSESSEE'S BOOKS OF ACCOUNT AND PROVISIONS OF SECTI ON 145(2) WOULD NOT HE ATTRACTED IN SUCH A CASE SO AS TO MAKE BEST JUDGMENT ASSESSMENT U/S 144 OF THE ACT. 7.4 A REGARDING THE APPELLANT'S CONTENTION THAT AO HAS NOT MADE SUFFICIENT INQUIRY NOR ISSUED COMMISSION T O ASCERTAIN THE EXISTENCE OF SELLER, IT IS FOUND THAT THE ONUS TO PROVE THE TRANSACTION OF PURCHASE AND CASH RECEI VED WAS ON THE APPELLANT WHICH HE HAS FAILED TO DISCHAR GE. IN THIS REGARD, THE SUPPORT IS DRAWN FROM THE DECISION OF HON'BLE ITAT AHMEDABAD BENCH IN THE CASE OF VIJAY PROTEINS LTD. VS. ACIT [1996] 58 ITD 428 WHEREIN TH E HON'BLE TRIBUNAL HELD THAT IT IS SETTLED LAW THAT O NUS LIES ON THE ASSESSEE TO PROVE THE GENUINENESS OF ANY EXPENDITURE WHICH IS CLAIMED AS DEDUCTION IN COMPIL ING 7 ITS TAXABLE INCOME. THEREFORE, THE ONUS IN THE THAT CASE, SQUARELY LAY ON THE ASSESSEE TO PROVE THE GENUINENE SS OF PURCHASE OF OIL CAKES SAID TO HAVE BEEN MADE FROM T HE 33 PARTIES WHICH HAD BEEN HELD TO BE BOGUS PARTIES BY THE DEPARTMENTAL AUTHORITIES. IT WAS INCUMBENT ON THE ASSESSEE TO PROVE THAT THE SUPPLIERS WERE GENUINE SUPPLIERS OF OIL CAKES AND THEY REALLY SUPPLIED SUC H OIL CAKES TO THE ASSESSEE AND THE ASSESSEE REALLY MADE PAYMENTS BY CHEQUES, TO THESE VERY PARTIES AND NONE ELSE. SUCH A BURDEN HAD TO BE DISCHARGED BY THE ASSESSEE WITH VERY STRONG AND CLINCHING EVIDENCE IN VIEW OF THE BLATANT DENIAL BY SOME PARTIES TO AN INVESTIGATION BY THE A O. NO SERIOUS EFFORTS WERE MADE BY THE ASSESSEE TO DISCHA RGE SUCH BURDEN OF PROVING THE GENUINENESS OF THE TRANSACTIONS WITH THESE PARTIES. 7.5 REGARDING THE APPELLANT'S CONTENTION ON GENUINENESS OF PARTIES BY PRODUCING COPIES OF ACCOU NTS WITH THESE PARTIES HAVING TRANSACTIONS TRAVERSED IN SUBSEQUENT YEARS, IT IS FOUND THAT THE ENTRIES EXAM INED DURING THE YEAR AS PER ACCOUNTS WITH THESE PARTIES WERE FOUND TO BE UNEXPLAINED. FOR THE TAXABILITY OF INCO ME, EACH YEAR BEING SELF CONTAINED UNIT, TAXES OF A PAR TICULAR YEAR IS PAYABLE WITH THE REFERENCE TO THE INCOME OF THAT YEAR AS COMPUTED IN TERMS OF THE ACT. HERE, THE SUP PORT IS DRAWN FROM THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF CIT VS. BRITISH PAINT INDIA LTD. 188 IT R 44. 7.6 REGARDING THE CASH DEPOSITS IN APPELLANT'S ACCO UNT, I PLACE RELIANCE ON THE DECISION GIVEN BY HON'BLE SUPREME COURT IN THE CASE OF KALE KHAN MOHAMMAD HANIF VS. CIT (1963)50 ITR 1 (SC). THE HON'BLE SUPREME COURT IN THAT CASE GAVE THE FOLLOWING FINDI NGS:- 8 IT IS WELL ESTABLISHED THAT THE ONUS OF PROVIDING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY THE ASSESSEE IS ON HIM. IF HE DISPUTES LIABILITY FOR TAX, IT IS FOR HIM TO SHOW EITHER THA T THE RECEIPT WAS NOT INCOME OR THAT IF IT WAS EXEMPT FRO M TAXATION UNDER THE PROVISIONS OF THE ACT. IN THE ABSENCE OF SUCH PROOF THE ITO IS ENTITLED TO TREAT IT AS TAXABLE INCOME. ' 7.7 FURTHER IN THE CASE OF ROSHAN DI HAITI VS. CTT 107 ITR 938, THE HON'BLE SUPREME COURT HELD AS UNDER :- NOW THE LAW IS WELL SETTLED THAT THE ONUS OF PROVING THE SOURCE OF A SUM OF MONEY FOUND TO HAVE BEEN RECEIVED BY AN ASSESSEE IN ON HIM. IF HE DISPUTES THE LIABILITY FOR TAX, IT IS FOR HIM TO SH OW EITHER THAT THE RECEIPT WAS NOT INCOME OR THAT IF I T WAS, IT WAS EXEMPT FROM TAXATION UNDER THE PROVISIONS OF THE ACT. IN THE ABSENCE OF SUCH PROOF , THE REVENUE IS ENTITLED TO TREAT IT AS TAXABLE INCO ME. TO PUT IT DIFFERENTLY, WHERE THE NATURE AND SOURCE OF A RECEIPT WHETHER IT BE OF MONEY OR OF OTHER PROPERTY, CANNOT BE SATISFACTORILY EXPLAINED BY THE ASSESSEE, IT IS OPEN TO THE REVENUE TO HOLD THAT I T IS THE INCOME OF THE ASSESSEE AND NO FURTHER BURDEN LIES ON THE REVENUE TO SHOW THAT THE INCOME IS FROM ANY PARTICULAR SOURCE.' 7.8 REGARDING THE APPELLANT'S CITATION OF VARIOUS JUDGMENTS IN ITS WRITTEN SUBMISSIONS, I GONE THROUG H THE JUDGMENTS AND NOTICED THAT THE JUDGMENTS OF VARIOUS COURTS ARE BASED ON SPECIFIC FACTS RELEVANT IN THOS E CASES WHICH SQUARELY DOES NOT APPLY ON THE FACTS OF THE I NSTANT CASE. THUS, THE JUDGMENTS ARE DISTINGUISHABLE ON TH E FACTS OF THE INSTANT CASE. 9 7.9 THEREFORE, IN VIEW OF THE ABOVE FACTS AND DISCUSSION. I FIND THAT THE PURCHASE SHOWN IN THE N AME OF M/S TIRUPATI MARKETING SALES IS UNEXPLAINED AS PER DEEMING PROVISIONS OF SECTION 69C OF THE ACT. THE APPELLANT CREATED BOGUS PURCHASES IN THE NAME OF NO N EXISTING SUPPLIER AND THEREFORE, *HE AO WAS JUSTIFI ED IN ADDITION OF SUCH UNEXPLAINED PURCHASE OF RS. 23,17, 479/-. FURTHER, THE APPELLANT HAS SHOWN CASH RECEIPT OF RS . 14,10,500/- AND RS, 39,05,000/- IN THE NAMES OF M/S TIRUPATI MARKETING SALES AND M/S INFINITY CORPORATI ON, THE SOURCES OF WHICH WERE UNEXPLAINED. AS PER PROVI SIONS OF SECTION 68 OF THE ACT, THE EXPLANATION GIVEN BY THE APPELLANT WAS NOT FOUND TO BE HE SATISFACTORY AND THEREFORE, THE AO WAS JUSTIFIED IN ADDITION OF THE CASH CREDIT OF RS. 14,10,500/- AND RS. 39.05,000/- UNDE R THE DEEMING PROVISIONS OF SECTION 68 OF THE ACT. THUS, THE TOTAL ADDITION OF RS. 76,32,929/- IS CONFIRMED. THE GROUNDS OF APPEAL ARE DISMISSED. 4. AGGRIEVED BY THE SAME, THE ASSESSEE HAS NOW COME UP IN APPEAL BEFORE US. DURING THE COURSE OF ARGUMENTS BEFORE US, LD. COUNS EL FOR THE ASSESSEE REITERATED THE CONTENTIONS MADE BEFORE THE LD. CIT( A) WHILE THE LD.DR RELIED ON THE ORDER OF THE CIT(A). WE SHALL BE TAKING UP THE CONTENTIONS PARTY WISE. IN THE CASE OF TIRUPATI MARKETING SALES SHOWING A C REDIT BALANCE OF RS. 37,27,929/- WHICH WAS HELD TO BE UNEXPLAINED , LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE COPY OF ACCOUNT OF THE SA ID PARTY PLACED AT PAPER BOOK PAGE NO.23 AND POINTED OUT FROM THE SAME THAT THE ENTIRE BALANCE WAS ON ACCOUNT OF TWO PURCHASES MADE TOTALLING RS. 23,17,4 79/- (RS. 1164735 + 1152744) AND REST ON ACCOUNT OF CASH RECEIVED ON VA RIOUS DATES. THEREAFTER, LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE COPY OF CONFIRMATION FILED BY THE SAID PARTY PLACED AT PAPER BOOK PAGE NO. 70. LD . COUNSEL FOR THE ASSESSEE 10 THEREAFTER DREW OUR ATTENTION TO THE COPY OF ACCOUN T OF THE SAID PARTY IN THE SUBSEQUENT YEARS I.E. FINANCIAL YEARS 2012-13 AND 2013-14 AND 2014-15 AND THEIR CONFIRMATIONS PLACED AT PAPER BOOK PAGE NOS. 24 TO 28.IT WAS POINTED OUT THEREFROM THAT THE CREDIT BALANCE OF THE IMPUGNED Y EAR RS. 37,27,929/- WAS SQUARED OFF IN THE SUBSEQUENT YEAR ITSELF I.E. FINA NCIAL YEAR 2012-13 BY WAY OF SALES MADE TO THE SAID PARTY AMOUNTING TO RS. 45,08 ,155/-. LD. COUNSEL FOR THE ASSESSEE FURTHER STATED THAT THE PAN NUMBER OF THE SAID PARTY AND ITS SALES TAX REGISTRATION NUMBER WAS ALSO PROVIDED TO THE ASSESS ING OFFICER WHO WAS REQUESTED TO ISSUE COMMISSION TO THE AO HAVING J URISDICTION OVER THE CASE OF THE SAID PARTY TO GET THE DESIRED INFORMATION. BANK ACCOUNT DETAILS WERE ALSO PROVIDED TO THE AO WHO WAS REQUESTED TO CALL FOR TH E BANK ACCOUNT DETAILS WITH ACCOUNT OPENING FORM AND KYC DETAILS OF THE SAID CU STOMER TO MAKE THE POSITION CLEAR. OUR ATTENTION WAS DRAWN TO THE COPY OF THE S AID LETTER GIVING THE ABOVE DETAILS , PLACED AT PAPER BOOK PAGE NO. 129. LD.CO UNSEL FOR THE ASSESSEE STATED THAT IN VIEW OF THE ABOVE, IT WAS CLEAR THAT THE SA ID PARTY WERE GENUINE AND THE CREDIT APPEARING IN ITS ACCOUNT COULD NOT BE TREATE D AS UNEXPLAINED. THE ASSESSEE FURTHER RELIED UPON THE DECISION OF THE HO N'BLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT VS. PANCHAM DASS JAIN (2006) 205 CTR 444 FOR STATING THAT PROVISIONS OF SECTION 68 ARE NOT ATTRACTED TO AMOUN TS REPRESENTING PURCHASES MADE ON CREDIT. THE ASSESSEE FURTHER RELIED UPON TH E DECISION OF THE AHMEDABAD BENCH OF THE ITAT IN THE CASE OF RAJESH P SONI VS. ACIT (2006) 100 TTJ 892, IN SUPPORT OF ITS CONTENTION THAT MERELY BECAUSE TH E SUPPLIERS COULD NOT BE LOCATED THE ADDITION ON ACCOUNT OF UNEXPLAINED INV ESTMENTS IN PURCHASES COULD NOT BE MADE WHEN THE PURCHASES WERE PROPERLY RECORD ED IN THE BOOKS SUPPORTED BY BILLS AND DETAILS OF SUPPLIERS AND THEIR SALES T AX NUMBER AS ALSO PAYMENTS MADE THROUGH BANKING CHANNELS WERE SUPPLIED AND SAL ES AGAINST THE SAID PURCHASES WERE NOT DOUBTED. RELIANCE WAS ALSO PLACE D ON THE DECISION OF THE 11 GUJARAT HIGH COURT IN THE CASE OF CIT VS. M.K. BROT HERS (1987) 163 ITR 249 IN THIS REGARD. 4. THE LD. DR ON THE OTHER HAND, RELIED HEAVILY ON THE ORDERS AND FINDINGS OF THE ASSESSING OFFICER AND CIT(A) AND STATED THA T UNDENIABLY THE SAID PARTY COULD NOT BE TRACED BY THE INVESTIGATION MADE DURIN G ASSESSMENT PROCEEDINGS AND EVEN THE ASSESSEE HAD DENIED ANY KNOWLEDGE OF T HE SAID PARTIES. THE LD. DR ALSO POINTED OUT THAT NO EVIDENCE IN SUPPORT OF THE SAID PURCHASES MADE SHOWING RECEIPT OF THE GOODS BY WAY OF STOCK REGISTER OR OT HERWISE WAS FILED BY THE ASSESSEE. THE LD. DR CONTENDED, THEREFORE, THAT IT IS CLEAR FROM THE ABOVE THAT THE PARTIES WERE BOGUS AND THE CREDIT ENTRY IN THE ACCOUNT OF THE SAID PARTY WAS THUS UNEXPLAINED. LD. DR ALSO POINTED OUT THAT DUR ING THE IMPUGNED YEAR, BOTH PURCHASES WERE MADE AND AMOUNTS RECEIVED FROM THE SAID PARTY WHICH IS STRANGE CONSIDERING THE FACT THAT THE ASSESSEE OUGH T TO HAVE MADE PAYMENTS ON ACCOUNT OF PURCHASES MADE AND NOT RECEIVED PAYMENTS . LD. DR ALSO POINTED OUT THAT EVEN IN SUBSEQUENT YEAR, THE AMOUNT HAD BEEN S ETTLED AND SQUARED OFF, NOT BY WAY OF MAKING PAYMENT, BUT BY MAKING SALES TO TH E SAID PARTY, WHICH AGAIN IS STRANGE. THE LD. DR POINTED OUT THAT IF THE CASH RE CEIVED DURING THE YEAR WAS ON ACCOUNT OF ADVANCE RECEIVED FOR SALES, THE SALES SH OULD HAVE BEEN MADE IN THE SAME YEAR AND NOT IN THE SUBSEQUENT YEAR. AS FOR TH E CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT COMMISSION SHOULD HAV E BEEN ISSUED TO THE ASSESSING OFFICER OF THE CONCERNED PARTY, THE LD. DR SUBMITTED THAT ONUS WAS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE SAI D CREDIT ENTRIES WHICH COULD NOT BE SHIFTED TO THE ASSESSING OFFICER. THE LD. DR FURTHER COUNTERED THE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT T HE TRANSACTIONS WERE SETTLED / SQUARED OFF IN THE SUBSEQUENT YEAR BY STATING THAT THE TAXABILITY OF INCOME HAD TO BE SEEN WITH RESPECT TO A PARTICULAR YEAR ONLY A ND WITH REFERENCE TO THE INCOME OF THAT YEAR. THE LD. DR, THEREFORE, CONTEND ED THAT THE ADDITIONS MADE 12 IN THE CASE OF M/S TIRUPATI MARKETING SALES HAD BEE N RIGHTLY UPHELD BY THE LD. CIT(A). 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE PARTIES. THE FACTS WHICH ARE RELEVANT FOR ADJUDICATING THE ISSUE BEFORE US ARE T HAT THE ACCOUNT OF M/S TIRUPATI MARKETING SALES REFLECTED A CREDIT BALANCE OF RS. 3 7,27,929/- WHICH WAS ON ACCOUNT OF PURCHASES MADE AMOUNTING TO RS. 23,17,47 9/- AND CASH RECEIVED AMOUNTING TO RS. 14,10,500/- DURING THE YEAR. THE A SSESSEE HAS FILED THE FOLLOWING DOCUMENTS / INFORMATION TO PROV E THE GENUINENESS OF THE BALANCE. (I) CONFIRMATION FROM THE SAID PARTY (II) COPIES OF PURCHASE BILLS RAISED BY THE SAID PARTY (III) SALES TAX NUMBER AND PAN NUMBER OF THE SAID PARTY (IV) COPIES OF ACCOUNTS OF THE SUBSEQUENT YEAR REFLECTIN G SETTLEMENT/SQUARING OFF OF THE SAID CREDIT BALANCE BY WAY OF SALES MADE. (V) BANK ACCOUNT NUMBER AS ALSO THE NAME OF THE BANK OF THE SAID PARTY. BESIDES THE ABOVE, THE ASSESSEE HAD EXPRESSED ITS I NABILITY TO TRACE THE SAID PARTIES, BEING NOT IN CONTACT WITH THEM BUT HAD REQ UESTED THE ASSESSING OFFICER TO ISSUE COMMISSION TO THE BANK AND ALSO THE ASSESS ING OFFICER OF THE CONCERNED PARTY TO VERIFY THE NATURE OF THE TRANSACTIONS. NEC ESSARY DETAILS ,AS STATED ABOVE, WERE PROVIDED BY THE ASSESSEE. 6. THE REVENUE, ON THE OTHER HAND WE FIND, RESTS IT S CASE OF HOLDING THE TRANSACTION UNDERTAKEN WITH THE SAID PARTY TO BE B OGUS, SINCE THE PARTY COULD NOT BE TRACED DESPITE REPEATED ATTEMPTS MADE BY ISS UING NOTICE U/S 133(6) AND DEPUTING AN INSPECTOR FOR THE PURPOSE AND FURTHER S INCE NO DOCUMENTARY EVIDENCE 13 WAS FILED TO SUPPORT THE TRANSACTIONS REFLECTED IN THE ACCOUNT OF THE SAID PARTY. FURTHER, WE FIND THAT THE REVENUE HAS EXPRESSED DOU BTS AND SUSPICION ON THE MANNER IN WHICH TRANSACTIONS WERE UNDERTAKEN WITH THE SAID PARTY BY REFLECTING ONLY PURCHASE AND PAYMENTS RECEIVED FROM THE SAID PARTY WHEN, AS PER THE REVENUE, PAYMENTS SHOULD HAVE BEEN MADE TO THE PART Y FOR THE PURCHASES MADE. THE REVENUE HAS ALSO DOUBTED THE NATURE OF CASH REC EIVED AS BEING ADVANCE AGAINST SALE STATING THAT IF IT WERE IN THE NATURE OF ADVANCE FOR SALE ,THE SALE SHOULD HAVE MATERIALIZED IN THE SAME YEAR . ON CONSIDERING THE EVIDENCES AND CONTENTIONS OF BOT H THE PARTIES, WE FIND THAT THE ASSESSEE HAS ADEQUATELY DISCHARGED ITS ONUS TO PROVE THE GENUINENESS OF THE TRANSACTION. UNDISPUTEDLY THE SAID CREDIT BALANCE H AS BEEN SETTLED IN THE SUBSEQUENT YEAR BY WAY OF MAKING SALE TO THE SAID P ARTY.THE SALE SO MADE HAS NEITHER BEEN DISPUTED BY THE REVENUE NOR IS IT THE CASE OF THE REVENUE THAT THE SALE TRANSACTION WAS SHAM. FURTHER, THE ASSESSEE BE ING A TRADER, THE PURCHASES MADE COULD NOT HAVE BEEN DOUBTED PARTICULARLY WHEN THE SALES MADE AGAINST THE SAME HAVE BEEN ACCEPTED THE CREDIT BALANCE PERTAINI NG TO THE SAID PARTY THEREFORE CANNOT BE SAID TO BE UNEXPLAINED. IT IS T RUE THAT THE ASSESSEE HAS FAILED TO PRODUCE DOCUMENTARY EVIDENCES SHOWING THE MOVEME NT OF GOODS ON ACCOUNT OF PURCHASE MADE FROM THE SAID PARTY AND THE SAID P ARTY WAS NEITHER PRODUCED BY THE ASSESSEE NOR COULD BE TRACED BY THE REVENUE, BU T THAT IN ITSELF CANNOT BE THE REASON FOR HOLDING THE TRANSACTIONS UNDERTAKEN WITH THE SAID PARTY AS NOT GENUINE. WE FIND THAT ALL BILLS PERTAINING TO THE S AID PURCHASES WERE FILED BY THE ASSESSEE. THE ASSESSEE HAD FAIRLY ADMITTED THAT IT WAS NOT IN TOUCH WITH THE SAID PARTY SINCE IT CONDUCTED BUSINESS THROUGH ITS STAFF ,BUT AT THE SAME TIME HAD PROVIDED ALL NECESSARY INFORMATION ABOUT THE PARTY I.E ITS PAN NUMBER, BANK ACCOUNT DETAILS & SALES TAX NUMBER AND REPEATEDLY A SKED THE AO TO UTILIZE ITS POWERS AND CONFIRM THE EXISTENCE OF THE PARTY ON TH E BASIS OF SUCH DETAILS. THE AO COULD VERY WELL HAVE INVESTIGATED FURTHER AND CA RRIED THE MATTER TO ITS 14 LOGICAL CONCLUSION .HAVING NOT DONE SO THE REVENUE IS NOT CORRECT IN STATING THAT THE ONUS RESTED WITH THE ASSESSEE. THE ASSESSEE HAV ING GIVEN A PLAUSIBLE EXPLANATION FOR NOT BEING AWARE OF THE WHEREABOUTS OF THE PARTY AND PROVIDING ALL INFORMATION IN ITS POSSESSION PROVING ITS EXIS TENCE AND WHICH COULD ENABLE THE AO TO DETERMINE SO, THE ONUS SHIFTS TO THE REV ENUE. AND ON FAILING TO DISCHARGE THE SAME, LIABILITY COULD NOT BE FASTENE D ON THE ASSESSEE BY HOLDING THAT THE CREDIT ENTRIES REMAINED UNEXPLAINED. THE APEX COURT IN THE CASE OF CIT VS ORISSA CORPORATION PVT. LTD REPORTED IN 159 ITR 78 HAS CLEARLY LAID DOWN THE SAID PROPOSITION AS UNDER: 13.IN THIS CASE, THE ASSESSEE HAD GIVEN THE NAMES AND ADDRESSES OF THE ALLEGED CREDITORS. IT WAS IN T HE KNOWLEDGE OF THE REVENUE THAT THE SAID CREDITORS WERE INCOME-TAX ASSESSEES. THEIR INDEX NUMBERS WERE IN THE FILE OF THE REVENUE. THE REVENUE, APART FROM ISSUING NOTICES UNDER S. 131 AT THE INSTANCE O F THE ASSESSEE, DID NOT PURSUE THE MATTER FURTHER. TH E REVENUE DID NOT EXAMINE THE SOURCE OF INCOME OF THE SAID ALLEGED CREDITORS TO FIND OUT WHETHER THEY WERE CREDITWORTHY OR WERE SUCH WHO COULD ADVANCE THE ALLEGED LOANS. THERE WAS NO EFFORT MADE TO PURSUE THE SO-CALLED ALLEGED CREDITORS. IN THOSE CIRCUMSTANCES, THE ASSESSEE COULD NOT DO ANYTHING FURTHER. IN THE PREMISES, IF THE TRIBUNAL CAME TO T HE CONCLUSION THAT THE ASSESSEE HAS DISCHARGED THE BURDEN THAT LAY ON HIM, THEN IT COULD NOT BE SAID THAT SUCH A CONCLUSION WAS UNREASONABLE OR PERVERSE OR BASED ON NO EVIDENCE. IF THE CONCLUSION IS BASED ON SOME EVIDENCE ON WHICH A CONCLUSION COULD BE ARRIVED AT, NO QUESTION OF LAW AS SUCH ARISES. 15 WE DO NOT AGREE WITH THE CONTENTION OF THE REVENUE THAT THE TRANSACTION OF SALE IN THE NEXT YEAR CANNOT BE TAKEN NOTE OF FOR THE PU RPOSE OF DETERMINING THE INCOME OF THE IMPUGNED YEAR. BUSINESSES INVOLVE A S ERIES OF TRANSACTIONS TAKING PLACE IN CONTINUITY AND CANNOT BE LOOKED AT IN IS OLATION IN EACH YEAR. MOREOVER THE OBSERVATIONS OF THE CIT(A) TO THE EFFECT THAT T HE ASSESSEE SHOULD HAVE MADE PAYMENTS AGAINST THE PURCHASES MADE IN THE IMPUGNED YEAR OR SHOULD HAVE EFFECTED SALES AGAINST THE ADVANCES RECEIVED IN THE IMPUGNED YEAR ITSELF, ONLY TANTAMOUNT TO TELLING THE ASSESSEE HOW TO CARRY OUT ITS BUSINESS, WHICH DOES NOT FALL WITHIN THE PURVIEW OF ITS POWERS. NO ADVERSE I NFERENCE ALSO CAN BE DRAWN ON ACCOUNT OF THE SAME. THE SAID OBSERVATIONS ARE NOT EVEN STRONG ENOUGH TO CAST EVEN A SHADOW OF DOUBT ON THE TRANSACTIONS UNDERTAK EN BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE DELETE THE DISALLOWANCE M ADE ON ACCOUNT OF CREDIT BALANCE APPEARING IN THE ACCOUNT OF M/S TIRUPATI M ARKEING SALES AMOUNTING TO RS. 37,27,929/-. 7. COMING TO THE NEXT CREDITOR M/S INFINILTY CORPOR ATION, LD. COUNSEL FOR THE ASSESSEE AND THE LD, DR REPEATED THE ARGUMENTS MADE VIS-A-VIS IN THE CASE OF TIRUPATI MARKETING SALES . HAVING HEARD BOTH THE PARTIES, WE FIND THAT THE CAS E OF M/S INFINITY CORPORATION RESTS ON A STRONGER FOOTING AS COMPARED TO M/S TIRU PATI MARKETING SALES. IN THE CASE OF M/S INFINITY CORPORATION, THE CREDIT BALANC E OF RS. 55,72,463/- IS ON ACCOUNT OF SALES MADE DURING THE YEAR TO THE SAID P ARTY AMOUNTING TO RS. 87,00,478/- AND OUTSTANDING OPENING DEBIT BALANCE O F RS.14,47,059/- AGAINST WHICH TOTAL PAYMENT RECEIVED WERE OF RS. 1,57,20,00 0/-. OUT OF THE AFORESAID TOTAL RECEIPTS, RS. 39.05 LACS WAS RECEIVED IN CASH AND THE BALANCE BY WAY OF CHEQUES. IT IS THIS CASH RECEIVED OF RS.39.05 LACS WHICH HAS BEEN TREATED AS UNEXPLAINED AND ADDED BACK TO THE INCOME OF THE ASS ESSEE. WE FIND THAT IN THE 16 SUBSEQUENT YEARS, THE ENTIRE AMOUNT HAS BEEN REFUND ED TO THE SAID PARTY THROUGH CHEQUES. THE REVENUE, WE FIND, HAS NOT DOUBTED THE SALES MADE TO THE SAID PARTY BUT HAS ONLY DOUBTED THE CASH RECEIVED IN THE SAID ACCOUNT. FURTHER, THE ENTIRE BALANCE HAS BEEN REFUNDED BY CHEQUE. IT IS NOT THE CASE OF REVENUE NOR THERE IS ANY FINDING THAT THE CHEQUE PAYMENTS HAVE COME BACK TO THE ASSESSEE IN THE FORM OF CASH, THEREFORE, THE GENUINENESS OF THE TRA NSACTIONS WITH THE SAID PARTY IS ADEQUATELY PROVED. FURTHER, OUR FINDINGS VIS-A-V IS THE REQUEST OF THE ASSESSEE TO ISSUE A COMMISSION TO THE ASSESSING OFFICER OF T HE CONCERNED PARTY AND ALSO TO THE BANKER OF THE PARTY TO OBTAIN INFORMATION A BOUT THE SAID PARTY WHICH WENT UNHEEDED, APPLIES IN THE CASE OF M/S INFINITY CORPO RATION ALSO. WE, THEREFORE, ALSO HOLD THAT THAT THE ADDITIONS MADE ON ACCOUNT O F CREDIT BALANCE IN THE ACCOUNT OF M/S INFINITY CORPORATION AMOUNTING TO RS .39,05,000/- IS TO BE DELETED. ACCORDINGLY, BOTH THE GROUNDS OF APPEAL OF THE ASS ESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19.06.2017 SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 19.06 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR