THE ITO, WARD-1(2), Vijayawada V. Smt Vutukuri Jayanaga Anitha, Vijayawada

ITA 507/VIZ/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1990 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 27-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G GURUSWAMY
• Assessee Lawyers: C SUBRAHMANYAMAR
• Keywords: Unexplained cash credit
• Section: 40A(3); 133(6); 68

Judgement Text

ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NOS.506 TO 510/VIZAG/2013 ( / ASSESSMENT YEAR: 2007-08 TO 2011-12) ITO , WARD - 1(2) , VIJAYAWADA VS. V. JAYANAGA ANITHA VIJAYAWADA [PAN: AGSPJ 0790J ] ( / APPELLANT) ( / RESPONDENT) / APPELLANT BY : SHRI G. GURUSWAMY, DR / RESPONDENT BY : SHRI C. SUB RAHMANYAM,AR / DATE OF HEARING : 25.02.2016 / DATE OF PRONOUNCEMENT : 31.03.2016 / O R D E R PER G. MANJUNATHA, ACCOUNTANT MEMBER: THESE FIVE APPEALS FILED BY THE REVENUE ARE DIRECT ED AGAINST THE SEPARATE, BUT IDENTICAL ORDERS OF THE CIT(A), DATED 18.4.2013 AND IT PERTAINS TO THE ASSESSMENT YEARS 2007-08 TO 2011-12 . SINCE, THE ISSUES INVOLVED IN THESE APPEALS ARE COMMON, THEY ARE CLUB BED, HEARD TOGETHER ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 2 AND DISPOSED OFF, BY WAY OF THIS COMMON ORDER FOR T HE SAKE OF CONVENIENCE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E SMT. VUTUKURI JAYANAGA ANITHA IS A PROPRIETRIX OF M/S. SRI AMBICA READYMADE GARMENTS. SHRI V. MURALI KRISHNA, THE HUSBAND OF AS SESSEE, WHO IS MANAGING THE BUSINESS WAS FOUND IN POSSESSION OF CA SH AMOUNTING TO RS.40,52,660/- AT TADIPATRI, ANANTHAPUR DISTRICT. T HE INCOME TAX DEPARTMENT, UNDER WARRANT OF AUTHORIZATION U/S 132A OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT) ISSUED BY THE DIRECTOR OF INCOME TAX (INV.), HYDERABAD HAS SEIZED CASH ON 20. 10.2010. IN THE SWORN STATEMENT DEPOSED BEFORE THE DY. DIRECTOR OF INCOME TAX (INV.) ON 7.1.2011, THE ASSESSEE SMT. V. JAYA NAGA ANITHA HAS STATED THAT THE CASH SEIZED FROM HER HUSBAND BELONGS TO HER. SHE FU RTHER STATED THAT HER HUSBAND SHRI V. MURALI KRISHNA IS MANAGING THE AFFAIRS OF THE BUSINESS OF M/S. SHRI AMBICA READYMADE GARMENTS IN HER NAME AND HAS COLLECTED THE CASH FROM THE CUSTOMERS LOCATED AT GU NTAKAL, TADIPATRI, ANANTHAPUR, HINDUPUR AND ADJOINING AREAS. THE SAID CASH IS COLLECTED TOWARDS AMOUNT DUE FROM THE CUSTOMERS TOWARDS SALES MADE BY HER PROPRIETRIX CONCERN AND WHICH WAS DULY RECORDED IN THE BOOKS OF ACCOUNTS MAINTAINED BY HER FOR THE RELEVANT ASSESSM ENT YEARS. ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 3 3. IN VIEW OF THE ABOVE STATEMENT GIVEN BY THE ASSE SSEE, PROCEEDINGS U/S 153C OF THE ACT WAS INITIATED BY IS SUING NOTICE ON 14.11.2011, REQUIRING HER TO FILE RETURN OF INCOME FOR THE ASSESSMENT YEARS FROM 2005-06 TO 2011-12. THE ASSESSEE, VIDE L ETTERS FILED ON 19.12.2011 STATED THAT THE RETURN FILED ON 26.11.20 10 MAY BE TREATED AS RETURN FILED IN RESPONSE TO NOTICE U/S 153C OF THE ACT. SUBSEQUENTLY, THE CASE HAS BEEN SELECTED FOR SCRUTINY AND ACCORDINGLY , NOTICE U/S 143(2) OF THE ACT WAS ISSUED. IN RESPONSE TO NOTICE, THE AUT HORIZED REPRESENTATIVE OF THE ASSESSEE PRESENT AND THE CASE WAS DISCUSSED WITH HIM. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE VIDE LETTER DATED 9.5.2012 HAS REQUESTED FOR XEROX COPIES OF THE BOOK S OF ACCOUNTS AND LOOSE SHEETS, WHICH HAVE BEEN IMPOUNDED U/S 131(3) OF THE ACT. AS REQUESTED BY HER, THE A.O. ALLOWED HER TO TAKE PHOT O COPIES OF BOOKS OF ACCOUNTS AND OTHER LOOSE SHEETS IMPOUNDED UNDER SEC . 131(3) OF THE ACT. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO PRODUCE BOOKS OF ACCOUNTS, BANK ACCOUNT AL ONG WITH PURCHASE AND SALE BILLS. IN RESPONSE TO NOTICES, THE ASSESSE E HAS PRODUCED BANK STATEMENT, HOWEVER INSPITE OF REPEATED OPPORTUNITIE S, FAILED TO PRODUCE PURCHASE BILLS/SALE BILLS, ETC. THE ASSESSEE FURTHE R STATED THAT SHE HAD ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 4 PURCHASE AND SALE BILLS PERTAINING TO THE ASSESSMEN T YEAR 2009-10 AND ALSO PART OF THE PURCHASE BILLS FOR THE CURRENT FIN ANCIAL YEAR UP TO 30.11.2010, HOWEVER, REMAINING BILLS ARE WITH THE A CCOUNTANT WHO HAS TAKEN THE BILLS FOR WRITING THE BOOKS OF ACCOUNTS. THEREFORE, SHE IS UNABLE TO PRODUCE THE PURCHASE BILLS/SALE BILLS FOR THE ABOVE PERIOD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A. O. NOTICED THAT THE ASSESSEE HAS SHOWN TRADE CREDITORS OF RS.1,58,52,39 9/-. IN VIEW OF ASSESSEES FAILURE TO PRODUCE PURCHASE AND SALE BIL LS, LETTERS WERE ADDRESSED TO THE TRADE CREDITORS AS PER THE ADDRESS GIVEN BY THE ASSESSEE, CALLING FOR ACCOUNT COPY OF THE ASSESSEE AS APPEARING IN THE BOOKS OF ACCOUNTS OF CREDITORS UNDER THE PROVISIONS OF SECTION 133(6) OF THE ACT. HOWEVER, MOST OF THE LETTERS WERE RETURNE D UN-SERVED AND IT IS FOUND THAT NOT EVEN A SINGLE CASE CONFIRMATION FROM THE TRADE CREDITORS WAS RECEIVED. THEREFORE, THE A.O. HAS ASKED ASSESSE E TO PRODUCE CONFIRMATION FROM ALL TRADE CREDITORS. THE ASSESSEE , VIDE REPLY DATED 11.12.2012 STATED THAT THE CREDITORS WHO SUPPLIED T HE GARMENTS CANNOT BE TRACEABLE NOW BECAUSE THEY CHANGE THEIR PLACE OF BUSINESS FREQUENTLY AND HENCE, CONFIRMATION LETTERS CANNOT BE OBTAINED. THE ASSESSEE FURTHER SUBMITTED THAT IN FACT ALL THE PURCHASES WE RE MADE FROM THE SUPPLIERS LOCATED IN THE CITY OF KOLKATA AND HOWRAH AND THE BILLS WHICH WERE ISSUED BY THE SUPPLIERS DURING THE RELEVANT PE RIOD WERE MISPLACED. ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 5 5. THE A.O. AFTER CONSIDERING THE SUBMISSIONS OF TH E ASSESSEE, ISSUED A SHOW CAUSE LETTER AND ASKED TO EXPLAIN WHY THE TO TAL CREDITS OF RS.1,23,87,919/- SHOULD NOT BE TREATED AS DEEMED IN COME OF THE ASSESSEE, IN THE ABSENCE OF NECESSARY BILLS AND ALS O CONFIRMATION LETTERS FROM THE CREDITORS. THE ASSESSEE, IN RESPONSE TO SH OW CAUSE NOTICE, SUBMITTED THAT THE CREDITORS ARE NOT TRACEABLE, BEC AUSE THEY HAVE CHANGED THEIR ADDRESS, THEREFORE, NOT ABLE TO PRODU CE THE CONFIRMATION LETTERS. THE ASSESSEE FURTHER SUBMITTED THAT SHE HA D PURCHASED THE GOODS FROM KOLKATA AND ALL THE PURCHASES HAVE BEEN ACCOUNTED IN THE BOOKS OF ACCOUNTS AND ALSO REPORTED TO THE SALES TA X AUTHORITIES. THE PURCHASES ARE GENUINE AND ALL THE PURCHASES HAVE BE EN REPORTED TO THE AUTHORITIES. UNDER THESE CIRCUMSTANCES, NO DISALLOW ANCE CAN BE MADE FOR SUNDRY CREDITORS FOR WANT OF CONFIRMATION LETTE RS. THE A.O. AFTER CONSIDERING THE EXPLANATIONS OFFERED BY THE ASSESSE E MADE ADDITIONS U/S 68 OF THE ACT TOWARDS TRADE CREDITORS. WHILE DOING SO, THE A.O. HELD THAT THE ASSESSEE HAS NOT FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR WITHIN THE DUE DATE SPECIFIED U/S 139(1) OF THE ACT , THOUGH SHE HAS GOT TAXABLE INCOME. THE TURNOVER OF THE ASSESSEE EXCEED ED RS.40 LAKHS AND IS SUBJECT TO AUDIT. THE ASSESSEE NEITHER FILED THE RETURN BEFORE THE DUE DATE NOR GOT HER ACCOUNTS AUDITED AS REQUIRED U/S 4 4AB OF THE ACT. THE ASSESSEE FAILED TO FURNISH COPY OF AUDIT REPORT EVE N DURING THE COURSE OF ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 6 SCRUTINY PROCEEDINGS. THE A.O. FURTHER HELD THAT WH EN ASKED TO FURNISH THE BILLS FOR PURCHASES, THE ASSESSEE HAS FAILED TO FURNISH THE PURCHASE BILLS AND ALSO FAILED TO FURNISH CONFIRMATION LETTE RS FROM THE CREDITORS, THEREBY FAILS TO PROVE THE IDENTITY, GENUINENESS OF THE TRANSACTIONS AND CREDITWORTHINESS OF THE CREDITORS. THEREFORE, BY I NVOKING THE PROVISIONS OF SECTION 68 OF THE ACT, THE ENTIRE TRADE CREDITOR S OF RS.1,23,73,373/- HAS BEEN BROUGHT TO TAX. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON VERIFICATION OF THE BOOKS OF ACCOUNTS, THE A.O. NOTICED THAT THE AS SESSEE HAS MADE CASH PAYMENTS TOWARDS PURCHASE OF GOODS. THE A.O. FURTHER NOTICED THAT ON VERIFICATION OF THE BANK STATEMENT FILED BY THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE HAS ISSUED BEARER CHEQUES T OWARDS PURCHASE OF GOODS AND ALSO ISSUED CHEQUES TO THIRD PARTIES WITH OUT ANY MANDATE FROM THE CREDITORS. THEREFORE, ISSUED A SHOW CAUSE NOTICE AND ASKED TO EXPLAIN WHY THE CASH PAYMENTS MADE TOWARDS PURCHASE OF GOODS SHALL NOT BE DISALLOWED U/S 40A(3) OF THE ACT. IN RESPON SE TO SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT SHE HAD ISSUED CHEQUES TOWARDS PURCHASE OF GOODS. THOUGH, IN FEW CASES, BEARER CH EQUES ARE ISSUED, THE CHEQUES ARE ISSUED AS DIRECTED BY THE SUPPLIERS , THEREFORE, THERE EXIST A BUSINESS EXPEDIENCY IN MAKING THE CASH PAYM ENT AND HENCE, NO ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 7 DISALLOWANCE CAN BE MADE U/S 40A(3) OF THE ACT. THE A.O. AFTER CONSIDERING THE EXPLANATIONS FURNISHED BY THE ASSES SEE DISALLOWED THE PAYMENTS BY INVOKING THE PROVISIONS OF SECTION 40A( 3) OF THE ACT. WHILE DOING SO, THE A.O. HELD THAT THE ASSESSEE, WHILE DE POSING THE STATEMENT BEFORE THE INVESTIGATING OFFICER STATED THAT SHE HA D PURCHASED GOODS AND MADE PAYMENTS EITHER BY WAY OF CASH OR BEARER CHEQU ES. THE A.O. FURTHER HELD THAT ON PERUSAL OF THE BANK STATEMENT SUBMITTED BY THE ASSESSEE, IT WAS NOTICED THAT ALL THE CHEQUES FOUND ISSUED BY HER ARE BEARER CHEQUES AND ALSO FEW CHEQUES ARE ISSUED TO T HIRD PARTIES AND FOR WHICH THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE WITH ANY PROOF. WITH THESE OBSERVATIONS, THE A.O. HAS DISALLOWED THE CAS H PAYMENTS U/S 40A(3) OF THE ACT. 7. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A). BEFORE THE CIT(A), THE A SSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE A.O.. THE ASSESSEE FURTHER SUBMITTED THAT AS REGARDS THE DISALLOWANCE OF SUNDRY CREDITOR S U/S 68 OF THE ACT, IT WAS SUBMITTED THAT SHE HAD PURCHASED GARMENTS FROM KOLKATA AND HOWRAH AND THE GARMENT MARKET IN KOLKATA IS AN UNOR GANIZED MARKET. THE DEALERS DO BUSINESS ON A PLATFORM PROVIDED UNDE R A TIN SHED. THEY PURCHASE CLOTH FROM WHOLESALE DEALERS AND STITCH TH E CLOTH AND MAKE ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 8 READYMADE GARMENTS. THE WHOLE BUSINESS IS CONDUCTED ON TRUST AND BELIEF. THEY NEVER DISCLOSE THEIR IDENTITY TO THE C USTOMERS AND WE DO NOT KNOW WHETHER THEY ARE ASSESSED TO SALES TAX OR INCO ME TAX. HOWEVER, THEY ALLOWED US TO PURCHASE THE GOODS ON CREDIT AND MAKE THE PAYMENT SUBSEQUENTLY. THE ASSESSEE FURTHER SUBMITTED THAT T HEY NORMALLY GIVE INSTRUCTIONS TO THE CUSTOMERS TO ISSUE CHEQUES IN T HE NAMES OF THEIR CLOTH SUPPLIERS OR TO ISSUE BEARER CHEQUES TO FACIL ITATE EASY ENCASHMENT OF CASH AT KOLKATA WITHOUT ANY LOSS OF TIME. UNLESS THE CUSTOMERS ACCEPT THEIR CONDITIONS, IT IS IMPOSSIBLE TO CARRY ANY TRA DE WITH THEM. UNDER THESE CIRCUMSTANCES, THE TRADE CREDITORS REMAIN AT THE END OF THE FINANCIAL YEAR, THEREFORE, NO DISALLOWANCE CAN BE M ADE FOR WANT OF CONFIRMATION LETTERS. THE ASSESSEE FURTHER SUBMITTE D THAT THE A.O. HAS NOT DISPUTED THE FINANCIAL YEAR RESULTS DECLARED BY HER. THE A.O. HAS ACCEPTED PURCHASES AND SALES AND ALSO ACCEPTED THE NET PROFIT DECLARED FOR THE YEAR UNDER CONSIDERATION. ONCE THE FINANCI AL YEAR RESULTS HAVE BEEN ACCEPTED, FURTHER ADDITION TOWARDS TRADE CREDI TORS FOR WANT OF CONFIRMATION LETTERS IS UNWARRANTED. THE ASSESSEE F URTHER SUBMITTED THAT ON RECEIPT OF ASSESSMENT ORDER FROM THE ASSESSING O FFICER, HER HUSBAND WENT TO KOLKATA AND REQUESTED TRADE CREDITORS TO IS SUE CONFIRMATION LETTERS AND ABLE TO COLLECT CONFIRMATION LETTER FRO M MANY OF THE TRADE CREDITORS. TO THIS EFFECT FURNISHED PHOTOCOPIES OF CONFIRMATION LETTERS FOR ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 9 VERIFICATION. SIMILARLY, AS REGARDS THE DISALLOWANC E OF CASH PAYMENTS U/S 40A(3) OF THE ACT IS CONCERNED, THE ASSESSEE SUBMIT TED THAT SHE HAS MADE THE CASH PAYMENT AND ALSO BEARER CHEQUES AS PE R THE REQUEST OF THE SELLERS. THE SELLERS BEING UNORGANIZED BUSINESS PEOPLE NEVER ACCEPTED ANY CHEQUE PAYMENTS. SHE HAD PAID CASH AS DIRECTED BY THE SUPPLIERS AND THERE WAS A BUSINESS EXPEDIENCY IN MA KING THE CASH PAYMENTS, THEREFORE, NO DISALLOWANCE CAN BE MADE BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. 8. THE CIT(A) AFTER CONSIDERING THE EXPLANATIONS FU RNISHED BY THE ASSESSEE, DELETED THE ADDITIONS MADE TOWARDS SUNDRY CREDITORS U/S 68 OF THE ACT. THE CIT(A) DELETED THE ADDITIONS BY HOLDI NG THAT IT IS A SETTLED POSITION OF LAW THAT WHEN TRADING RESULTS, I.E. SAL ES AND PURCHASES HAVE BEEN ACCEPTED AS GENUINE, NO ADDITION U/S 68 OF THE ACT CAN BE MADE FOR UNEXPLAINED SUNDRY CREDITORS. THE CIT(A) FURTHE R HELD THAT IT IS IMPORTANT TO NOTE HERE THAT BEFORE MAKING ANY ADDIT ION U/S 68 OF THE ACT OVER ALL FACTS SHOULD BE CONSIDERED. MERELY, BECAUS E THE ASSESSEE IS UNABLE TO FURNISH CONFIRMATION LETTER FROM SUNDRY C REDITORS, ADDITION U/S 68 OF THE ACT CANNOT BE MADE. SIMILARLY, THE CIT(A) DELETED THE ADDITIONS MADE U/S 40A(3) OF THE ACT. THE CIT(A) D ELETED THE ADDITIONS BY HOLDING THAT THE ASSESSEE IS PREVENTED FROM ISSU ING CROSSED CHEQUES. ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 10 THEREFORE, HER CASE IS COMING UNDER THE EXCEPTIONS PROVIDED U/S 40A(3) OF THE ACT READ WITH RULE 6DD OF THE I.T. RULES, 19 62. THE CIT(A) FURTHER HELD THAT ON EXAMINATION OF THE FACTS OF TH E PRESENT CASE, THE GOODS WERE OBTAINED FROM UNORGANIZED MARKETS. THERE FORE, THE ASSESSEE WAS COMPELLED TO MAKE THE CASH PAYMENTS OR BEARER CHEQUES AS REQUESTED BY THE SUPPLIERS. THE A.O. HAS NOT DOU BTED THE GENUINENESS OF THE PAYMENTS. WHEN THE GENUINENESS O F THE PAYMENTS ARE NOT DOUBTED, NO ADDITIONS CAN BE MADE SIMPLY BE CAUSE THERE WAS A CASH PAYMENT BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE IS IN AP PEAL BEFORE US. 9. THE FIRST ISSUE CAME UP FOR OUR CONSIDERATION IS DELETION OF ADDITIONS MADE BY THE A.O. TOWARDS TRADE CREDITORS, U/S 68 OF THE ACT. THE LD. D.R. SUBMITTED THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITIONS MADE BY THE A.O., TOWARDS TRADE CREDITORS BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. THE CIT(A) DEL ETED THE ADDITIONS BY STATING THAT WHEN THE PURCHASES AND SALES ARE ACCEP TABLE TO THE DEPARTMENT, THE TRADE CREDITORS CANNOT BE REJECTED. THIS VIEW OF THE LD. CIT(A) CANNOT BE ACCEPTED ON ACCOUNT OF THE FACT TH AT THE ONUS IS ON THE ASSESSEE TO PROVE THE IDENTITY OF THE CREDITORS, GE NUINENESS OF THE TRANSACTIONS AND ALSO CREDITWORTHINESS OF THE CREDI TORS IN RESPECT OF ANY ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 11 AMOUNT STANDING TO THE CREDIT OF TRADE CREDITORS AS APPEARED IN THE BOOKS OF ACCOUNTS OF THE ASSESEE. IT CANNOT BE SAID THAT SINCE THE PURCHASES AND SALES ARE ACCEPTED, THE CREDITORS HAV E TO BE TREATED AS GENUINE. IN THE PRESENT CASE, THE ASSESSEE COULD N OT EVEN PRODUCE ANY PURCHASE BILLS OR SALE BILLS TO SUBSTANTIATE THE PU RCHASE AND SALES RECORDED IN HER BOOKS OF ACCOUNTS. ALL THESE IMPORT ANT FACTORS ARE COMPLETELY BRUSHED ASIDE AND DELETED THE ADDITIONS, SIMPLY BASED ON OBSERVATION THAT WHEN PURCHASES ARE ACCEPTED AS GEN UINE, NO ADDITION CAN BE MADE TOWARDS TRADE CREDITORS. THE LD. D.R. FURTHER SUBMITTED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE ASSESSEE COULD NOT ABLE TO SUBSTANTIATE ANY TRADING RESULTS INCLUD ING PURCHASES AND SALES BY FILING NECESSARY BILLS. THE ASSESSEE FAIL ED TO FURNISH ANY CONFIRMATION LETTERS FROM THE CREDITORS TO PROVE TH E GENUINENESS OF THE TRANSACTIONS. UNDER THESE CIRCUMSTANCES, THE CIT(A) WAS COMPLETELY ERRED IN DELETING THE ADDITIONS. THEREFORE, THE AS SESSMENT ORDER PASSED BY THE A.O. SHOULD BE UPHELD. 10. ON THE OTHER HAND, THE LD. A.R. SUBMITTED THAT THE ASSESSEE IS A SMALL RETAIL TRADER IN READYMADE GARMENTS PURCHASED GARMENTS FROM THE CITY OF KOLKATA AND HOWRAH. THE A.R. FURTHER SUBMIT TED THAT THE SUPPLIER OF GOODS FACILITATED CREDIT FACILITY TO THE ASSESSE E, BECAUSE OF HER ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 12 REPUTATION IN THE MARKET AND ALSO IN GOOD FAITH. T HE ASSESSEE HAS PURCHASED THE GOODS ON CREDIT AND MADE THE PAYMENTS SUBSEQUENTLY. THE A.O. AT THE TIME OF ASSESSMENT HAS ACCEPTED THE PURCHASES DECLARED BY THE ASSESSEE AND AT THE SAME TIME MADE ADDITIONS TOWARDS TRADE CREDITORS, BY STATING THAT THE ASSESSEE HAS N OT PROVED THE IDENTITY AND GENUINENESS OF THE TRANSACTIONS. ONCE THE PURCH ASES HAVE BEEN ACCEPTED AS GENUINE, NO ADDITIONS CAN BE MADE TOWAR DS TRADE CREDITORS, BECAUSE OF THE REASON THAT THE TRADE CREDITORS ARIS ES BECAUSE OF CREDIT PURCHASES. THE A.R. FURTHER SUBMITTED THAT THE ASS ESSEE HAS STARTED HER BUSINESS IN THE FINANCIAL YEAR 2005-06 WITH A MEAGE R INVESTMENT OF RS.18,000/- AND DEVELOPED HER BUSINESS WITH THE HEL P OF THE SUPPLIERS. THE ASSESSEE USED TO PURCHASE GOODS ON CREDIT AND S OLD THE GOODS IN THE LOCAL MARKET AND MAKE THE PAYMENT TO THE SUPPLI ERS AFTER 2/3 MONTHS, WHEN THIS BEING THE CASE, NATURALLY THE CRE DITORS WILL REMAIN IN THE BOOKS OF ACCOUNTS AT THE END OF THE FINANCIAL Y EAR. IT WAS FURTHER SUBMITTED THAT THESE CREDITORS ARE ARISING FROM OUT OF PURCHASES ACCEPTED BY THE DEPARTMENT. IT GOES WITHOUT SAYING THAT THE DEPARTMENT HAS ACCEPTED THE SALES AND THE SALES ARE ARISING OUT OF THESE PURCHASES ONLY. IT IS A WELL KNOWN FACT THAT THERE CANNOT BE ANY SALES WITHOUT PURCHASES. WHEN ALL THESE FACTS ARE INTERLIN KED, THE ASSESSING OFFICER COULD NOT HAVE DISBELIEVED SUNDRY CREDITORS FOR WANT OF ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 13 CONFIRMATION LETTERS. THE A.R. FURTHER SUBMITTED TH AT THE JUDICIAL FORUMS IN THIS COUNTRY CONSISTENTLY HELD THAT ONCE DEPARTM ENT HAS ACCEPTED THE PURCHASES, THE SALES AND THE BOOK RESULTS AS GENUIN E, COULD NOT HAVE DISBELIEVED THE TRADE CREDITORS AND MAKE ADDITIONS BY INVOKING THE PROVISIONS OF SECTION 68 OF THE ACT. IN SUPPORT OF HIS ARGUMENT RELIED UPON PLETHORA OF JUDGEMENT. THE A.R. FURTHER SUBMIT TED THAT THE ASSESSING OFFICER MADE THE ADDITION U/S 68 OF THE A CT, BUT UNDER THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, ADDITI ONS CANNOT BE MADE U/S 68 OF THE ACT, AS THE AMOUNTS REPRESENTS PURCHA SES MADE ON CREDIT. WHEN THE ASSESSING OFFICER HAS ACCEPTED THE PURCHASE S AS GENUINE, NO ADDITIONS CAN BE MADE TOWARDS TRADE CREDITORS BY HO LDING THAT CREDITORS ARE BOGUS. THE ASSESSEE RELIED UPON THE FOLLOWING J UDGEMENTS: 1) CIT VS. PANCHAM DASS JAIN (2006) 156 TAXMAN 507 (ALL) 2) CIT VS. NIKUNJ EXIMP ENTERPRISES PVT. LTD. (2015 ) 372 ITR 619(BOM) 3) JCIT VS. MATHURA DAS ASHOK KUMAR (2006) 101 TTJ 810 (ALL) 4) HIGH COURT OF DELHI APPEAL NO.325 OF 2008 IN THE CASE OF CIT VS. RITU ANURAG AGGARWAL 5) ITAT VIZAG BENCH ITA NO.316/VIZAG/2009 DATED 25. 10.2010 IN THE CASE OF SURYA EARTH MOVING, RAJAHMUNDRY VS. ITO WAR D-4, RAJAHMUNDRY 6) CIT VS. PRAMESHWAR BOHRA (2008) 301 ITR 404 (RAJ ) 7) CIT VS. USHA STUD AGRICULTURAL FARMS LTD. (2008) 310 ITR 384 8) (2015) 37 ITR (TRIB) 386 (CUTTACK) RADHA SHYAM P ANDA VS. ITO ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 14 11. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE A.O. INVOKED THE PROVISIONS U/S 68 OF THE ACT AND M ADE ADDITIONS TOWARDS TRADE CREDITORS. THE A.O. WAS OF THE OPINIO N THAT THE ASSESSEE HAS FAILED TO FURNISH CONFIRMATION LETTERS FROM TRA DE CREDITORS, THEREFORE, FAILS TO DISCHARGE INITIAL ONUS CAST UPON HER TO PR OVE THE IDENTITY, GENUINENESS AND CREDITWORTHINESS OF THE TRANSACTION S. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAS FAILED TO FURNISH EV EN BILLS FOR PURCHASES CLAIMED IN THE BOOKS OF ACCOUNTS. THE A.O. FURTHER HELD THAT THE LETTER ISSUED TO THE TRADE CREDITORS REPORTED UN-SERVICED. WHEN THESE FACTS WERE CONFRONTED TO THE ASSESSEE, THE ASSESSEE STATE D THAT THE CREDITORS ARE UNORGANIZED SELLERS, THEY DO NOT DISCLOSE THEIR IDENTITY, AND THEREFORE, NOT POSSIBLE TO FURNISH CONFIRMATION LET TERS. THE A.O. FURTHER HELD THAT AS PER THE PROVISIONS OF SECTION 68 OF TH E ACT, THE ONUS IS ON THE ASSESSEE TO PROVE THE GENUINENESS OF THE CREDIT . SECTION 68 OF THE ACT DOES NOT CONFINE ONLY TO CASH CREDITS IN THE BO OKS OF ACCOUNTS, BUT APPLIES TO ANY LIABILITY SHOWN IN THE ACCOUNT, WHIC H IS FOUND TO BE BOGUS AND THERE IS NO PLAUSIBLE AND REASONABLE EXPLANATIO NS FROM THE ASSESSEE, THEN THE AMOUNTS CAN CERTAINLY BE ADDED T OWARDS TRADE CREDITORS. IT WAS THE CONTENTION OF THE ASSESSEE TH AT SHE HAD PURCHASED ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 15 THE GOODS FROM THE UNORGANIZED MARKET OF KOLKATA AN D HOWRAH, WHERE THE SELLERS OF THE GOODS SOMETIMES DO NOT GIVE THEI R IDENTITY BECAUSE OF VARIOUS REASONS. SINCE THE SUPPLIERS FACILITATED H ER TO BUY THE GOODS ON CREDIT, SHE HAS PURCHASED THE GOODS ON CREDIT AND M ADE THE PAYMENT LATER. SHE FURTHER STATED THAT SHE IS A SMALL DEALE R IN READYMADE GARMENTS AND STARTED HER BUSINESS WITH A MEAGER INI TIAL CAPITAL OF RS.18,000/- AND DEVELOPED THE BUSINESS WITH THE HEL P OF SUPPLIERS WHO SUPPLIED THE GOODS ON CREDIT. SHE HAS DEVELOPED TH E BUSINESS OVER A PERIOD OF TIME BY TAKING THE HELP OF THE SUPPLIES A ND SOLD THE GOODS IN THE LOCAL MARKET AND MADE THE PAYMENTS SUBSEQUENTLY AFTER 2/3 MONTHS. WHEN THIS IS BEING THE CASE, NATURALLY THE CREDITORS AT THE END OF THE YEAR IN THE BOOKS OF ACCOUNTS WILL BE QUITE HIGH. THE ASSESSEE FURTHER STATED THAT WHEN THE A.O. HAS NOT DOUBTED T HE GENUINENESS OF THE CREDITORS AND SALES, THERE IS NO REASON FOR HIM TO DOUBT THE TRADE CREDITORS AS THESE CREDITORS ARE AROSE OUT OF CRED IT PURCHASES IN THE BUSINESS. 12. THE A.O. MADE ADDITIONS SOLELY ON THE GROUND TH AT THE TRADE CREDITORS ARE NOT CONFIRMED THE TRANSACTIONS. THE A .O. FURTHER STATED THAT ALL THE LETTERS ISSUED TO THE CREDITORS HAVE B EEN RETURNED UN- SERVICED THEREFORE, HELD THAT THE CREDITORS ARE NOT GENUINE. WE DO NOT ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 16 SEE ANY MERITS IN THE FINDINGS OF THE A.O., FOR THE REASON THAT WHEN PURCHASES AND SALES ARE ACCEPTED AS GENUINE, HE CAN NOT DOUBT TRADE CREDITORS WHICH ARE AROSE OUT OF CREDIT PURCHASES. WE FURTHER NOTICED THAT THE A.O. HAS ACCEPTED THE FINANCIAL STATEMENT FILED BY THE ASSESSEE AND ON THE BASIS OF SUCH FINANCIAL STATEMENT THE NE T PROFIT HAS BEEN DETERMINED. THIS IMPLIEDLY PROVES THAT THE A.O. HAS NOT DOUBTED THE FINANCIAL RESULTS DECLARED BY THE ASSESSEE. BUT, H E HAS DOUBTED THE TRADE CREDITORS ON THE SOLE GROUND THAT CONFIRMATIO N LETTERS HAVE NOT BEEN FILED. THEREFORE, WE ARE OF THE OPINION THAT WHEN THE PURCHASES HAVING BEEN ACCEPTED TO BE GENUINE, BALANCE REMAINI NG OUTSTANDING AT THE END OF THE YEAR AGAINST SUCH PURCHASES CANNOT B E TREATED AS BOGUS LIABILITY AND ADDITIONS MADE ON THAT BASIS CANNOT B E SUSTAINED. 13. THE ASSESSEE CONTENDS THAT SHE HAD PURCHASED GA RMENTS FROM KOLKATA AND KOLKATA GARMENT MARKET IS AN UNORGANIZE D SECTOR. THE SELLERS NEVER DISCLOSED THEIR IDENTITY AND ALSO NOT ISSUED ANY ACCOUNT COPY OR CONFIRMATION LETTERS TO AVOID UNNECESSARY P ROBLEMS. IN CASE THE CUSTOMERS DO NOT ACCEPT THEIR CONDITIONS, THEY DO N OT DO ANY BUSINESS WITH US. WE FIND FORCE IN THE ARGUMENTS OF THE ASSE SSEE FOR THE REASON THAT THE READYMADE GARMENT MARKET IN KOLKATA IN UNO RGANIZED MARKET AND IT IS QUITE POSSIBLE THAT THERE ARE EVERY CHANC E OF NOT ISSUING ANY ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 17 SALES BILLS. THE TOTAL TRANSACTIONS HAPPEN PURELY O N TRUST AND BELIEF. AS CONTENDED BY THE ASSESSEE, THEY FACILITATE CREDIT P URCHASES AND ALLOWED THE CUSTOMERS TO PURCHASE GOODS ON CREDIT AND MAKE THE PAYMENT SUBSEQUENTLY. THIS FACT WAS NOT DISPUTED BY THE REV ENUE. IN FACT THE A.O. HAS ACCEPTED THE PURCHASES AS GENUINE. UNDER T HESE CIRCUMSTANCES, ADDITION U/S 68 OF THE ACT TOWARDS T RADE CREDITORS BY HOLDING THAT THE CONFIRMATION LETTERS HAS NOT BEEN FILED HIS NOT CORRECT. 14. THE A.R. SUBMITTED THAT THE ASSESSEE IS A SMALL RETAIL TRADER AND STARTED HER BUSINESS WITH A MEAGER INITIAL CAPITAL OF RS.18,000/-. THE A.R. FURTHER SUBMITTED THAT THE ASSESSEE BUSINESS I S MANAGED BY HER HUSBAND. BEFORE SHE VENTURED INTO THIS BUSINESS, HE WAS UNEMPLOYED FOR A QUITE PERIOD AND ALSO WORKED AS A SALESMAN IN A R EADYMADE GARMENT SHOP AND WITH THIS MINIMUM EXPERIENCE HE HAS STARTE D THE BUSINESS ON HIS OWN. THE A.R. FURNISHED A PAPER BOOK CONTAINING THE FINANCIAL STATEMENTS FILED BY THE ASSESSEE AND ALSO CONFIRMAT ION LETTERS OBTAINED FROM FEW TRADE CREDITORS ALONG WITH BANK STATEMENTS . ON VERIFICATION OF THE FINANCIAL STATEMENTS FILED BY THE ASSESSEE, WE FIND THAT THE ASSESSEE BALANCE SHEET DOES NOT CONTAIN ANY ASSET OR LIABILI TY, OTHER THAN THE BUSINESS ASSETS SUCH AS STOCK IN TRADE, SUNDRY DEBT ORS AND SUNDRY CREDITORS. ON PERUSAL OF THE FINANCIAL FIGURES DECL ARED BY THE ASSESSEE, ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 18 WE NOTICED THAT THE SUNDRY CREDITOR PAYABLE TO THE SUPPLIERS OF THE GOODS IS ALMOST EQUAL TO THE STOCK IN TRADE HELD BY THE ASSESSEE AND ALSO AMOUNT RECEIVABLE FROM THE CUSTOMERS. IT IS NO T CASE OF A.O. THAT THERE ARE INVESTMENTS IN PERSONAL ASSETS, WHICH WAS EXPLAINED BY TRADE CREDITORS. UNDER THESE CIRCUMSTANCES, THE A.O. WAS NOT CORRECT IN ADDING THE TRADE CREDITORS BY INVOKING THE PROVISIONS OF S ECTION 68 OF THE ACT. 15. THE A.R. HAS FURNISHED A STATEMENT SHOWING WORK INGS OF FINANCIAL RESULTS DECLARED BY THE ASSESSEE AND ALSO THE PROFI T DETERMINED BY THE A.O. ON PERUSAL OF THE FINANCIAL RESULTS DECLARED B Y THE ASSESSEE, WE FOUND THAT FOR THE PERIOD FROM FINANCIAL YEAR 2007- 08 TO 2011-12, THE ASSESSEE DECLARED A GROSS PROFIT OF 5 TO 10% FROM H ER BUSINESS. AFTER MEETING ALL EXPENDITURE, SHE HAS DECLARED A NET PRO FIT OF 2 TO 4%. AS AGAINST THIS, THE ASSESSING OFFICER HAS DETERMINED THE TOTAL INCOME FOR THE ABOVE PERIOD AND THE PERCENTAGE OF PROFIT TO TH E TOTAL TURNOVER AS PER THE ASSESSING OFFICER IS 40% TO 205%. ON PERUSA L OF THE DETAILS SUBMITTED BY THE ASSESSEE, WE NOTICED THAT THE ASSE SSING OFFICER HAS MADE ADDITIONS TOWARDS TRADE CREDITORS, WHICH IS MO RE THAN THE TOTAL PURCHASES MADE BY THE ASSESSEE FOR THE RELEVANT FIN ANCIAL YEAR. IN ADDITION TO THE TRADE CREDITORS, THE ASSESSING OFFI CER ALSO MADE ADDITIONS TOWARDS CASH PAYMENTS BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IN TOTAL, THE NET PROFIT DETERMINED BY TH E ASSESSING OFFICER FOR ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 19 THE ABOVE PERIOD IS QUITE ABNORMAL, WHEN COMPARED T O THE NATURE OF BUSINESS CARRIED OUT BY THE ASSESSEE. ON PERUSAL OF THE NATURE OF BUSINESS OF ASSESSEE, WE ARE OF THE VIEW THAT NO BU SINESSMAN CAN EARN SUCH A HUGE PROFIT IN THIS LINE OF BUSINESS. THEREF ORE, WE ARE OF THE OPINION THAT THE A.O. HAS SIMPLY CREATED HIGH PITCH ED DEMAND WITHOUT ANY VALID REASONS. 16. THE ASSESSEE HAS RELIED ON PLETHORA OF JUDGEMEN TS AND SUBMITTED THAT WHEN PURCHASES AND SALES ARE ACCEPTED AS GENUI NE, NO ADDITIONS CAN BE MADE TOWARDS TRADE CREDITORS AS BOGUS. THER EFORE, IT IS PERTINENT TO DISCUSS THE CASE LAWS IN THE LIGHT OF THE FACTS OF THE PRESENT CASE. THE ASSESSEE HAS RELIED UPON THE HONBLE HIGH COURT OF ALLAHABAD JUDGEMENT, IN THE CASE OF CIT VS. PANCHAM DASS JAIN (2006) 156 TAXMAN 507. THE HONBLE ALLAHABAD HIGH COURT, UNDER SIMILAR CIRCUMSTANCES DELETED THE ADDITIONS MADE TOWARDS TR ADE CREDITORS. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: THE TRIBUNAL HAS RECORDED A CATEGORICAL FINDING O F FACT BASED ON APPRECIATION OF MATERIALS AND EVIDENCE ON RECORD TH AT THE AO HAD ACCEPTED THE PURCHASES, SALES AS ALSO THE TRADING R ESULT DISCLOSED BY THE ASSESSEE. IT HAD RECORDED A FINDING THAT THE TW O AMOUNTS REPRESENTED THE PURCHASES MADE BY THE ASSESSEE ON C REDIT AND, THEREFORE, THE PROVISIONS OF S. 68 COULD NOT BE ATT RACTED IN THE PRESENT CASE. THE VIEW TAKEN BY THE TRIBUNAL ON THIS ISSUE IS SUSTAINABLE INASMUCH AS, ON THE BASIS OF THE FINDINGS RECORDED BY IT THAT THESE TWO AMOUNTS REPRESENTED PURCHASES MADE BY THE ASSESSEE ON CREDIT AND THE PURCHASES AND SALES HAVING BEEN ACCEPTED BY THE DEPARTMENT, THE QUESTION OF ADDITION OF THE SAID TWO AMOUNTS UNDER S. 68 DID NOT ARISE ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 20 INASMUCH AS THE PROVISIONS OF S. 68 WOULD NOT BE AT TRACTED ON THE PURCHASES MADE ON CREDIT. 17. THE ASSESSEE RELIED UPON THE HONBLE HIGH COURT OF BOMBAY, IN THE CASE OF CIT VS. VS. NIKUNJ EXIMP ENTERPRISES PV T. LTD. (2015) 372 ITR 619(BOM). THE HONBLE HIGH COURT OF BOMBAY, HEL D THAT MERELY BECAUSE THE SUPPLIERS HAS NOT APPEARED BEFORE THE A SSESSING OFFICER AND FURNISHED CONFIRMATION LETTERS, NO ADDITIONS CAN BE MADE TOWARDS TRADE CREDITORS. THE RELEVANT PORTION IS REPRODUCED HERE UNDER: TRIBUNAL HAD DELETED THE ADDITIONS ON ACCOUNT OF B OGUS PURCHASES NOT ONLY ON THE BASIS OF STOCK STATEMENT I.E. RECON CILIATION STATEMENT, BUT ALSO IN VIEW OF THE OTHER FACTS. THE TRIBUNAL RECOR DED THAT THE BOOKS OF ACCOUNTS OF THE RESPONDENT-ASSESSEE HAD NOT BEEN RE JECTED. SIMILARLY, THE SALES HAD NOT BEEN DOUBTED AND IT WAS AN ADMITTED P OSITION THAT SUBSTANTIAL AMOUNT OF SALES HAD BEEN MADE TO THE GO VERNMENT DEPARTMENT I.E. DEFENCE RESEARCH AND DEVELOPMENT LA BORATORY, HYDERABAD, FURTHER, THERE WERE CONFIRMATION LETTERS FILED BY THE SUPPLIERS, COPIES OF INVOICES FOR PURCHASES AS WELL AS COPIES OF BANK STATEMENT ALL OF WHICH WOULD INDICATE THAT THE PURCHASES WERE IN FAC T MADE. MERELY BECAUSE THE SUPPLIERS HAD NOT APPEARED BEFOR E THE ASSESSING OFFICER OR THE CIT(A), ONE COULD NOT CONC LUDE THAT THE PURCHASES WERE NOT MADE BY THE RESPONDENT-ASSESSES. THE ASSESSING OFFICER AS WELL AS CIT(A) HAD DISALLOWED THE DEDUCT ION OF RS1.33 CRORES ON ACCOUNT OF PURCHASES MERELY ON THE BASIS OF SUSPICION BECAUSE THE SELLERS AND THE CANVASSING AGENTS HAD N OT BEEN PRODUCED BEFORE THEM. 18. THE ASSESSEE RELIED UPON ITAT, ALLAHABAD BENCH DECISION, IN THE CASE OF JCIT VS. MATHURA DAS ASHOK KUMAR (2006) 101 TTJ 810 (ALL). THE COORDINATE BENCH OF THIS TRIBUNAL, UNDER SIMILAR CI RCUMSTANCES HELD AS FOLLOWS: ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 21 ALL THE PURCHASES MADE BY THE ASSESSEE WHEREVER THE SAME HAVE BEEN MADE FROM THE KARIGARS ARE SUPPORTED BY THE 'P URJAS' ISSUED BY IT. SUCH 'PURJAS' WERE FOUND TO BE DULY ENTERED IN 'JAMA JAKAR BAHI', WHICH IS A PART OF RECORDS KEPT BY THE ASSESSEE REG ULARLY TO RECORD ITS PURCHASES FROM KARIGARS. IN THE FINANCIAL RECORDS A LSO, ENTRIES OF THE PURCHASES OF SAREES HAVE DULY BEEN MADE ON THE BASI S OF PRIMARY RECORDS. THE PURCHASES RECORDED IN THIS MANNER HAVE BEEN ACCEPTED IN TOTO WITHOUT ANY KIND OF CONTROVERSY WHATSOEVER. AF TER THE PURCHASES OF SAREES SUPPORTED BY THE 'PURJAS' HAVE BEEN ACCEP TED, ANY FURTHER VERIFICATION ABOUT THE KARIGARS IN WHOSE FAVOUR SUC H PURJAS' HAVE BEEN ISSUED IS REALLY NOT NECESSARY; THE REASON BEING TH AT IT IS THE KARIGAR WHO COME TO THE SAREE DEALERS AND OFFERS HIS STOCK FOR BEING DEALT WITH BY THE SAME DEALERS. THE DEALERS ALSO HAVE NO OCCASION TO FEEL CONCERNED ABOUT THE NAMES AND ADDRESSES OF SUCH KAR IGARS AS PURCHASES FROM THEM ARE MADE ON 'CREDIT AND THAT TO O AFTER DUE APPROVAL OF THE SAME THROUGH INSPECTION AND OTHERWI SE. IN OTHER WORDS, IT IS ONLY THE VERIFICATION OF SAREES THAT A RE BROUGHT FOR SALE BY THE KARIGARS AT THE SHOP OF THE SAREE DEALERS WHICH IS RELEVANT AND NOT THE KARIGAR THEMSELVES. IT IS FOR THIS REASON THAT EVEN THE CBDT FELT THAT AFTER THE SALES (MADE OUT OF PURCHASES FROM KA RIGARS) ARE FOUND TO BE VERIFIABLE, IT IS NOT NECESSARY THAT THERE SH OULD BE AN INSISTENCE FOR PRODUCING THE KARIGARS. THE INSTRUCTIONS LIKE T HIS, ALTHOUGH MAY NOT BE CAPABLE OF BEING TREATED AS HAVING BINDING E FFECT, NONETHELESS THEY LAY DOWN NECESSARY GUIDELINES FOR COMPLETION O F ASSESSMENT IN A PARTICULAR LINE OF TRADE. THIS LOGIC IS APPLICABLE WITH ALL ITS FORCE IN THE PRESENT CASE. NECESSITY TO HAVE THE ADDRESSES OF TH E KARIGARS MAY ARISE ONLY FOR THE PURPOSES OF MAKING ENQUIRIES FRO M THE KARIGARS, SO FAR AS THE ASSESSMENT OF THE SAME DEALERS IS CONCER NED. IF SUCH A VERIFICATION IS NOT REQUIRED TO BE MADE, IN VIEW OF THE REGULAR SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE AS PER THE P RACTICE PREVALENT IN THIS TRADE, ONE FAILS TO UNDERSTAND AS TO WHY NO N-FURNISHING OF ADDRESSES SHOULD BE MADE AN ISSUE BY THE AO FOR MAK ING ADDITION AND THAT TOO ON SELECTIVE BASIS. FURTHER, 15 PURJAS VAL UE OF WHICH HAS BEEN TREATED AS BOGUS LIABILITY, DO CONTAIN FULL PARTICU LARS OF THE KARIGARS. ANNEX. A ITSELF HAS GOT A COLUMN 'NAMES AND ADDRESS ES OF THE KARIGARS' AND AGAINST ALL THE 15 'PURJAS', NECESSAR Y INFORMATION IN THIS RESPECT HAS BEEN GIVEN. NATURALLY, IN THE RECORDS O F THE ASSESSEE, ONLY SUCH NAMES AND ADDRESSES WOULD BE FOUND RECORDED, A S TOLD TO IT BY THE KARIGAR THEMSELVES. BEYOND THIS, THE ASSESSEE I S NOT CONCERNED TO ASCERTAIN CORRECT OR FULL ADDRESSES OF THE KARIGARS AS THE PURCHASES HAVE BEEN MADE ON CREDIT. IT IS FOR THE KARIGARS CO NCERNED OR HIS NOMINEE AND/OR TRANSFEREE OF THE 'PURJA' TO COLLECT HIS PAYMENT FROM THE OFFICE OF THE SAREE DEALER. NOT THAT THE SAME D EALER ITSELF HAS TO APPROACH THE KARIGARS FOR MAKING PAYMENTS TO THEM. IT HAS, THEREFORE, TO BE HELD THAT EVEN IF THE ADDRESS IS INCOMPLETE O R EVEN IN AN EXTREME SITUATION, WHERE THE KARIGAR IS NOT FOUND A T THE ADDRESS AVAILABLE WITH THE ASSESSEE (AS WRITTEN IN THE PURJ A), NO ADVERSE INFERENCE CAN BE DRAWN IN THE ASSESSMENT OF THE SAM E DEALER OR ANY ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 22 OF THE ASPECTS OF THE PURCHASES. THIS IS MORE SO IN A CASE LIKE THIS WHERE THE PURCHASES AND SALES HAVE BEEN DULY ACCEPT ED. THIS LEADS TO A CONCLUSION THAT PURJAS THEMSELVES AS ALSO CONTENT S THEREOF HAVE GOT GREAT EVIDENTIARY VALUE. IF PAYMENT AGAINST THE 'PU RJA' IS RECORDED IN THE BOOKS OF ACCOUNT, THEN THE LIABILITY IN RELATIO N TO SUCH 'PURJA' HAS TO BE TREATED AS GENUINE UNLESS OF COURSE SOME MATE RIAL IS BROUGHT ON RECORD THAT THE ASSESSEE HAS ACTUALLY MADE PAYMENT AGAINST THE SAME WHICH IS NOT RECORDED. IN THE PRESENT CASE, NO SUCH MATERIAL HAVING BEEN BROUGHT ON RECORD, IT COULD NOT BE SAID THAT T HE LIABILITY IS BOGUS. EVEN AT THE COST OF REPETITION, IT IS STATED THAT B OGUS LIABILITY PRE- SUPPOSES TWO THINGS, FIRSTLY, THERE IS A LIABILITY INCURRED AND SECONDLY SUCH LIABILITY HAS BEEN DISCHARGED WITHOUT BEING RE CORDED IN THE BOOKS OF ACCOUNT. AS NO SUCH MATERIAL IS AVAILABLE ON REC ORD, THE LIABILITY IN QUESTION CANNOT BE SAID TO BE BOGUS SO AS TO ATTRAC T ANY ADDITION ON THIS SCORE. IT ALSO APPEARS THAT THE AO HAS TREATED THE LIABILITY TO BE OF CASH CREDIT' IN NATURE AND THAT IS WHY HE FELT ANX IOUS TO HAVE THE IDENTITIES OF THE CREDITORS ESTABLISHED. IN THIS RE SPECT, FIRST OF ALL, CREDITS 'IN THE SUNDRY CREDITORS (UDHAR KHAREED) KH ATA' ARE REFERABLE TO THE PURCHASES OF SAREES MADE ON CREDIT BASIS. AS THE PURCHASES HAVE BEEN HELD TO BE GENUINE AND ACCEPTED AS SUCH, THE CREDITS THAT REMAINED OUTSTANDING IN SUCH ACCOUNT CANNOT BE TREA TED TO HAVE REMAINED UNEXPLAINED. THE BALANCE APPEARING IN THIS ACCOUNT, WHICH INCLUDED THE DISPUTED ADDITION ALSO IS THE SUM TOTA L OF PURCHASES THAT REMAINED UNPAID AT THE END OF THE YEAR. AS THE GENU INENESS OF SUCH PURCHASES HAS NOT BEEN DISPUTED, RATHER THE SAME HA S BEEN ACCEPTED, THE CREDITS STAND FULLY EXPLAINED AND NO ADVERSE IN FERENCE IS CALLED FOR EITHER ON FACTS OR IN LAW. THUS, ON A CONSIDERATION OF TOTALITY OF FACTS AND CIRCUMSTANCES OF THE CASE, AS HAVE BEEN DISCUSS ED ABOVE, THE LIABILITY AGGREGATING RS. 1,05,800 AS HAS BEEN SHOW N AGAINST 15 PURJAS/KARIGARS COULD NOT BE TREATED AS BOGUS LIABI LITY. THE CIT(A) HAS RIGHTLY DELETED THE ADDITION AND NO INTERFERENCE IN THE SAME IS CALLED FOR. 19. IN YET ANOTHER CASE, THE COORDINATE BENCH OF THIS T RIBUNAL, IN THE CASE OF SURYA EARTH MOVING, RAJAHMUNDRY VS. ITO WAR D-4, RAJAHMUNDRY IN ITA NO.316/VIZAG/2009 DATED 25.10.20 10, HELD THAT AMOUNTS REPRESENTING PURCHASES ON CREDIT, PROVISION S OF SECTION 68 OF THE ACT CANNOT BE APPLIED. THE RELEVANT PORTION IS REPRODUCED HEREUNDER: ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 23 WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULLY P ERUSED THE RECORD. THE MAIN OBJECTION OF THE ASSESSEE IS THAT THE TRADE CREDITS CANNOT BE ADDED AS UNEXPLAINED CREDITS UNDER SECTIO N 68 OF THE ACT. IN THIS REGARD, THE LEARNED AUTHORISED REPRESENTATIVES HAS RELIED UPON THE DECISION OF THIS BENCH IN THE CASE OF SAI CONCRETE PAVERS PVT. LTD., REFERRED (SUPRA). IN THAT CASE, THE OUTSTANDING CR EDITORS FOR EXPENSES WERE DISALLOWED BY THE ASSESSING OFFICER. THE LEAR NED CIT(A) DELETED THE ADDITION BY PLACING RELIANCE UPON THE DECISION OF H ONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT V PANCHAMDAS JAIN (205 CTR 444), WHEREIN IT WAS HELD THAT THE PROVISIONS OF SECTION 68 ARE NOT ATTRACTED TO THE AMOUNTS REPRESENTING PURCHASES MADE ON CREDIT, WHEN THE ASSESSING OFFICER HAS ACCEPTED THE PURCHASES AS GENUINE. THE BENCH ALSO NOTICED THAT THE OUTSTANDING AMOUNT HAD BEEN PAID IN THE SU BSEQUENT PERIOD. HENCE THE BENCH DID NOT FIND ANY INFIRMITY IN THE D ECISION OF THE LEARNED CIT(A). 20. THE LD. D.R. RELIED UPON THE JUDGEMENT OF PUNJA B & HARYANA HIGH COURT, IN THE CASE OF UPLAKSH METAL INDUSTRIES VS. CIT (2009) 177 TAXMAN 298 AND ALSO ITAT, BANGALORE BENCH DECISION, IN THE CASE OF SRI ABDUL GAFFAR VS. ITO 99/BANG/2009. WE HAVE CONSIDERE D THE CASE LAWS RELIED UPON BY THE LD. D.R., IN THE LIGHT OF THE FA CTS OF THE PRESENT CASE AND FIND THAT THE CASE LAW RELIED UPON BY THE LD. D .R. IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE CASE BEFORE T HE HONBLE PUNJAB & HARYANA HIGH COURT IS THAT ONCE THE IMPUGNED ENTRY IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE WAS NOT ACCEPTED, TREATING THE AMOUNT AS INCOME OF THE ASSESSEE WAS CONSEQUENTIAL. SIMILARLY , THE ITAT BANGALORE BENCH, IN THE ABOVE CASE HAS NOT LAID ANY RATIO WIT H REGARD TO THE ADDITIONS TOWARDS TRADE CREDITORS U/S 68 OF THE ACT . THE COORDINATE BENCH, IN THE ABOVE MENTIONED CASE, SIMPLY REJECTED THE MISCELLANEOUS ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 24 PETITION FILED BY THE ASSESSEE WITHOUT ANY FINDINGS WITH REGARD TO THE ADDITIONS MADE U/S 68 OF THE ACT. 21. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT NO ADDITION CAN BE MADE ON TRADE CREDI TORS, WHEN PURCHASE HAS BEEN ACCEPTED AS GENUINE. THE CIT(A) AFTER CON SIDERING THE RELEVANT DETAILS FILED BY THE ASSESSEE HAS RIGHTLY DELETED THE ADDITIONS MADE BY THE ASSESSING OFFICER. WE DO NOT FIND ANY ER ROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A). HENCE, WE INCLINED TO UPHOLD THE ORDER PASSED BY THE CIT(A) AND REJECT THE GROUND RAISED B Y THE REVENUE. 22. THE NEXT ISSUE CAME UP FOR OUR CONSIDERATION IS DISALLOWANCE OF CASH PAYMENTS U/S 40A(3) OF THE ACT. THE LD. D.R. S UBMITTED THAT THE CIT(A) WAS ERRED IN DELETING THE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS CASH PAYMENTS. THE LD. D.R. FURTHER SUBMITT ED THAT THE ASSESSEE HAS ACCEPTED BEFORE INVESTIGATION AND ALSO BEFORE THE ASSESSING OFFICER THAT SHE HAS MADE THE PAYMENT EIT HER BY WAY OF CASH OR BEARER CHEQUES. THEREFORE, THERE IS A CLEAR VIOL ATION OF SECTION 40A(3) OF THE ACT AND ACCORDINGLY, THE DISALLOWANCE MADE B Y THE ASSESSING OFFICER SHOULD BE UPHELD. THE LD. D.R. FURTHER SUB MITTED THAT THOUGH ASSESSEE CLAIMS THAT SHE HAS MADE THE PAYMENTS TO T HE AGENTS OF THE SUPPLIERS, FAILED TO PRODUCE ANY CONFIRMATION FROM THE RESPECTIVE AGENTS, ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 25 TO PROVE THAT SHE HAD BEEN UNDER OBLIGATION TO MAKE THE PAYMENTS EITHER IN CASH OR THROUGH BEARER CHEQUES. THE CIT(A ) FAILED TO CONSIDER THAT IN THE ABSENCE OF ANY EVIDENCE ON RECORD, THE ASSESSEE CASE CANNOT BE TREATED AS COVERED BY THE EXCEPTIONS PROVIDED IN RULE 6DD OF THE IT RULES. THE CIT(A), WITHOUT SPECIFYING THE CLAUSE UN DER WHICH THE CASE OF ASSESSEE IS COVERED BY EXCEPTION PROVIDED TO SEC. 4 0A(3) OF THE ACT, DELETED THE ADDITION WHICH IS NOT CORRECT. 23. ON THE OTHER HAND, THE LD. A.R. OF THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS RIGHTLY DELETED THE ADDITIONS. THE A.R. FURTHER SUBMITTED THAT THE ASSESSING OFFICER IS NOT CORRECT IN ARRIVING AT THE ABOVE AMOUNTS FOR ADDITION BY HOLDING THAT THE PAYMENTS WERE MADE IN CASH. THE PAYMENTS CONSIDERED BY THE ASSESSING OFFICER FOR DI SALLOWANCE U/S 40A(3) OF THE ACT, IN FACT INCLUDES PAYMENT MADE TH ROUGH ACCOUNT PAYEE CHEQUES. THE ASSESSEE HAS ISSUED ACCOUNT PAYEE CHEQ UES IN THE NAMES OF THE AGENTS NOMINATED BY THE SUPPLIER OF THE GOOD S AND ALSO IN FEW CASES SHE HAS MADE THE PAYMENT BY ISSUING BEARER CH EQUES. THE ASSESSEE WAS COMPELLED TO MAKE THE PAYMENTS IN CASH AS REQUESTED BY THE SUPPLIERS OF THE GOODS. UNLESS, SHE OBLIGED TO THE REQUEST OF THE SUPPLIERS, SHE CANNOT DO ANY BUSINESS WITH THE SUPP LIES. THEREFORE, THERE WAS A BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS AND ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 26 HENCE, NO DISALLOWANCE CAN BE MADE U/S 40A(3) OF TH E ACT. THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSING OFFIC ER HAS ACCEPTED THE FACT THAT THE ASSESSEE HAS MADE THE ACCOUNT PAYEE C HEQUES IN FAVOUR OF THE AGENTS NOMINATED BY THE SUPPLIERS. HOWEVER, INV OKED THE PROVISIONS OF SEC. 40A(3) AND DISALLOWED THE AMOUNT FOR THE SI MPLE REASON THAT THE ASSESSEE HAS NOT FILED ANY CONFIRMATION LETTERS FRO M THE AGENTS. THE A.R. FURTHER SUBMITTED THAT WHEN ASSESSING OFFICER HAS N OT DOUBTED THE GENUINENESS OF THE PURCHASES, TRADE CREDITORS CANNO T BE ADDED, BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE AC T. TO THIS PROPOSITION RELIED UPON THE JUDGEMENT OF THE HIGH COURT OF BOMB AY, REPORTED IN (2015) 372 ITR 619 AND ALSO ITAT CUTTACK BENCH, DEC ISION REPORTED IN (2015) 37 ITR (TRIB) 386. 24. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATE RIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) OF THE ACT AND DISALLOWED THE CASH PAYMENTS MADE TOWARDS PURCHASE OF GOODS. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE ASSES SEE HAS ADMITTED IN THE STATEMENT RECORDED DURING THE COURSE OF INVESTI GATION THAT SHE HAD MADE THE PAYMENT EITHER BY WAY OF CASH OR BEARER CH EQUES. THE ASSESSING OFFICER FURTHER WAS OF THE OPINION THAT T HOUGH ASSESSEE CLAIMS ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 27 TO HAVE MADE THE PAYMENT THROUGH THE AGENTS OF THE SUPPLIER, FAILED TO FURNISH ANY EVIDENCES IN SUPPORT OF HER CLAIM, THER EFORE, DISALLOWED THE AMOUNT BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. IT WAS THE CONTENTION OF THE ASSESSEE THAT SHE WAS UNDER T HE OBLIGATION TO MAKE THE CASH PAYMENT, AS THE SUPPLIERS HAVE INSIST ED FOR EITHER CASH OR BEARER CHEQUES. THEREFORE, THERE WAS A BUSINESS EXP EDIENCY IN MAKING THE CASH PAYMENT AND HENCE, NO DISALLOWANCE CAN BE MADE U/S 40A(3) OF THE ACT. 25. THE FACTS OF THE CASE, WHICH ARE UNDER CONSIDER ATION, NEEDS TO BE EXAMINED IN THE LIGHT OF THE FACT THAT WHETHER THER E EXIST ANY BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS. AS STATED I N THE EARLIER PARAGRAPHS, THE ASSESSEE IS IN THE BUSINESS OF TRAD ING IN READYMADE GARMENTS. THE ASSESSEE CONTENDS THAT SHE HAD PURCHA SED THE GOODS FROM THE UNORGANIZED MARKET OF KOLKATA AND AS PER T HE INSTRUCTIONS OF THE SUPPLIERS SHE MADE THE CASH PAYMENTS. UNLESS, S HE OBLIGES THE INSTRUCTIONS OF THE SUPPLIERS, SHE CANNOT DO ANY BU SINESS WITH THEM. THE ASSESSEE FURTHER SUBMITTED THAT SHE WAS A SMALL RETAIL TRADER, STARTED HER BUSINESS WITH INITIAL INVESTMENT OF JUS T RS. 18,000/-. SHE HAD DONE THE BUSINESS BECAUSE OF CREDIT FACILITY EXTEND ED BY THE SUPPLIER OF GOODS, UNLESS THE SUPPLIER EXTENDS THE CREDIT FACIL ITY, SHE CANNOT DO ANY ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 28 BUSINESS. THE SUPPLIERS FACILITATE HER TO PURCHASE THE GOODS ON CREDIT AND MAKE THE PAYMENT AFTER 2/3 MONTHS. UNDER THESE CIRCUMSTANCES, SHE WAS UNDER COMPULSION TO MAKE THE CASH PAYMENT A S REQUESTED BY THE SUPPLIERS. THE ASSESSEE FURTHER STATED THAT IN FEW CASES, SHE HAS ISSUED BEARER CHEQUES AND ALSO ACCOUNT PAYEE CHEQUE S IN THE NAME OF THE AGENTS AS INSTRUCTED BY HER SUPPLIERS. HOWEVER, THE ASSESSING OFFICER HAS IGNORED THE DETAILS FURNISHED BY HER AN D TREATED THE TOTAL PAYMENTS AS CASH PAYMENTS AND INVOKED THE PROVISION S OF SECTION 40A(3) OF THE ACT. 26. SECTION 40A(3) OF THE ACT, PROVIDES FOR DISALLO WANCE OF EXPENDITURE, WHERE THE ASSESSEE INCURS ANY EXPENDIT URE, IN RESPECT OF WHICH ANY PAYMENT IS MADE TO ANY PERSON, IN CASH IN EXCESS OF RS.20,000/-, IN A SINGLE DAY. SIMILARLY, PROVISO PR OVIDED TO SECTION 40A(3) OF THE ACT, PROVIDES FOR NO DISALLOWANCE SHA LL BE MADE AND NO PAYMENTS SHALL BE DEEMED TO BE THE PROFIT & GAINS O F BUSINESS OR PROFESSION UNDER SUB SECTION (3) AND THIS SUB SECTI ON, WHERE PAYMENT OR AGGREGATE OF PAYMENTS MADE TO A PERSON IN A DAY, OT HERWISE THAN BY AN ACCOUNT PAYEE CHEQUE DRAWN ON A BANK OR DRAFT, EXCE EDS RS.20,000/-, IN SUCH CASES AND UNDER SUCH CIRCUMSTANCES AS MAY B E PRESCRIBED, HAVING REGARD TO THE NATURE AND EXTENT OF BANKING F ACILITIES AVAILABLE, ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 29 CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS. RULE 6DD PROVIDES FOR CERTAIN EXCEPTIONS FOR CASH PAYMEN TS AND ACCORDINGLY, PROVIDES EXCEPTIONS IN A PARTICULAR CASE AS PRESCRI BED. THE PROVISO PROVIDED TO SECTION 40A(3) OF THE ACT, EXEMPTS THE PAYMENT IN CASH, WHERE THE ASSESSEE PROVES TO THE SATISFACTION OF TH E ASSESSING OFFICER THAT THERE EXIST A BUSINESS EXPEDIENCY AND ALSO OTH ER RELEVANT FACTORS. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS, WE FIND THAT THE ASSESSEE IS A RETAIL TRADER IN GARMENTS. IT IS A W ELL KNOWN FACT THAT THE GARMENT INDUSTRY IS MOSTLY RUN BY THE UNORGANIZED S ECTORS OF THE SOCIETY. AS CONTENDED BY THE ASSESSEE, SHE HAD PURC HASED THE GOODS FROM READYMADE GARMENTS MARKET FROM KOLKATA. THE RE ADYMADE GARMENT MARKET OF KOLKATA IS UNORGANIZED ONE AND TH E SUPPLIERS DID NOT DISCLOSE THEIR IDENTITY AND ALSO NOT ISSUED ANY BIL LS OR CONFIRMATION LETTERS FOR THE TRANSACTIONS. THE TOTAL TRANSACTION BETWEEN THE SUPPLIERS OF READYMADE GARMENTS AND THE CUSTOMERS IS PURELY DONE ON THE BASIS OF TRUST AND BELIEF. THE SUPPLIERS INSIST FOR CASH PAY MENTS, THEREFORE, SHE WAS OBLIGED TO MAKE THE PAYMENT EITHER IN CASH OR B EARER CHEQUES TO AVAIL THE CREDIT FACILITY. THEREFORE, THERE EXIST A BUSINESS EXPEDIENCY AND ACCORDINGLY, NO DISALLOWANCE CAN BE MADE BY INV OKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT. WE FIND FOR CE IN THE ARGUMENTS OF THE ASSESSEE, FOR THE REASON THAT EACH AND EVERY PAYMENT IN CASH ARE ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 30 NOT AUTOMATICALLY GET DISALLOWED U/S 40A(3) OF THE ACT. IN A PARTICULAR CASE, WHERE THERE EXISTS A BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS, THEN, THE ACT PROVIDES FOR IMMUNITY FROM D ISALLOWANCE OF EXPENDITURE. IF THE ASSESSEE PROVES TO THE SATISFA CTION OF THE ASSESSING OFFICER, THAT THERE EXIST A BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS, SUCH PAYMENTS CANNOT BE DISALLOWED U/S 40 A(3) OF THE ACT. 27. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACTS, WE FIND THAT THE ASSESSING OFFICER HAS ACCEPTED THE PURCHASES DE CLARED BY THE ASSESSEE AS GENUINE. ONCE THE ASSESSING OFFICER HAS ACCEPTED THE PURCHASES AS GENUINE, THERE IS NO REASON FOR HIM TO SUSPECT THE CASH PAYMENTS. IT MAY BE THE CONDITION OF LAW THAT CERT AIN PAYMENTS SHOULD BE MADE EITHER BY WAY OF ACCOUNT PAYEE CHEQUES OR D RAFTS. BUT, AT THE SAME TIME, ALL PAYMENTS MADE IN CASH OR BEARER CHEQ UES CANNOT BE DISALLOWED, UNLESS THE ASSESSING OFFICER PROVED THA T THE PAYMENTS ARE NOT GENUINE. THEREFORE, WE ARE OF THE OPINION THAT WHEN THE ASSESSING OFFICER DID NOT DOUBT THE GENUINENESS OF THE TRANSA CTION OR THE IDENTITY OF THE SELLERS, IF THE PAYMENTS ARE GENUINE AND IF THE BUSINESS EXPEDIENCY SO REQUIRES THE PAYMENTS IN CASH, THEN T HE TECHNICAL REQUIREMENT SHOULD NOT COME IN THE WAY OF CLAIMING IT AS EXPENDITURE IN VIEW OF THE PROVISO TO SECTION 40A(3) OF THE ACT. WE NOTICED FROM THE ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 31 DOCUMENTS AVAILABLE ON RECORD, THE ASSESSEE HAS FUR NISHED A BANK STATEMENT, WHEREIN MOST OF THE PAYMENTS ARE MADE BY EITHER ACCOUNT PAYEE CHEQUE OR BEARER CHEQUES. OUT OF THE TOTAL P AYMENTS DISALLOWED BY THE ASSESSING OFFICER, ONLY FEW PAYMENTS ARE MAD E IN CASH AND REMAINING PAYMENTS ARE MADE IN ACCOUNT PAYEE CHEQUE S. UNDER THESE CIRCUMSTANCES, THE ASSESSING OFFICER WAS NOT CORREC T IN COMING TO THE CONCLUSION THAT THE ASSESSEE HAS MADE THE CASH PAYM ENTS WHICH ATTRACTS THE DISALLOWANCE U/S 40A(3) OF THE ACT. 28. THE PRIMARY OBJECTS OF INSERTION OF SECTION 40A (3) OF THE ACT IN THE STATUTE IS TO CURB THE USE OF BLACK MONEY WITH AN I NTENTION TO AVOID TAX. IN THE PRESENT CASE ON HAND, ON PERUSAL OF THE FACT S, WE FIND THAT THERE IS NO ELEMENT OF AVOIDANCE OF ANY TAX BY PAYING THE CASH, AS ASSESSEE HAS DECLARED THE PURCHASES AND SALES WHICH WAS ACCE PTED BY THE ASSESSING OFFICER AS GENUINE. WHEN THE ASSESSING OF FICER HAS ACCEPTED THE PURCHASES AND SALES AS GENUINE, THERE IS NO REA SON OF WHATSOEVER FOR HIM TO DISALLOW THE CASH PAYMENTS BY INVOKING T HE PROVISIONS OF SECTION 40A(3) OF THE ACT. WE FURTHER NOTICED THAT IF YOU SUSTAIN THE ADDITIONS MADE BY THE ASSESSING OFFICER WITH REGARD TO THE ADDITIONS U/S 68 OF THE ACT AND ADDITIONS MADE U/S 40A(3) OF THE ACT, THE PERCENTAGE OF PROFIT WORKS OUT TO 50% TO 205%. IF YOU CONSIDE R THE NATURE OF ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 32 BUSINESS CARRIED OUT BY THE ASSESSEE, SUCH A HUGE P ROFIT FROM THE RETAIL TRADE OF GARMENTS CANNOT BE EARNED. THEREFORE, WE A RE OF THE OPINION THAT THE ASSESSING OFFICER, WITHOUT ANY VALID REASO N SIMPLY MADE ADDITIONS BY INVOKING THE PROVISIONS OF SECTION 40A (3) OF THE ACT. IF YOU TAKE INTO ACCOUNT THE TOTAL ADDITIONS MADE BY THE A SSESSING OFFICER, IT EXCEEDS THE TOTAL PURCHASES MADE BY THE ASSESSEE IN ALL THE FINANCIAL YEARS, WHICH CANNOT HAPPEN IN ANY CASE. THEREFORE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS NO REASON TO DISALLOW CASH PAYMENTS BY INVOKING THE PROVISIONS OF SECTION 40A( 3) OF THE ACT, WHEN HE HAS NOT DOUBTED THE GENUINENESS OF THE PURCHASES . THE ASSESSEE HAS MADE THE CASH PAYMENT AGAINST PURCHASES. THE ASSESS EE HAS REPORTED THE PURCHASES AND THE ASSESSING OFFICER HAS ACCEPTE D SUCH PURCHASES AND COMPUTED THE PROFIT AS PER THE FINANCIAL STATEM ENT FILED BY ASSESSEE. UNDER THESE CIRCUMSTANCES, WE ARE OF THE OPINION TH AT MAKING ADDITIONS BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE ACT AMOUNTS TO DOUBLE ADDITIONS WHICH IS NOT PERMISSIBLE UNDER THE LAW. 29. THE ASSESSEE RELIED UPON THE JUDGEMENT OF ITAT, CUTTACK BENCH IN THE CASE OF RADHA SHYAM PANDA VS. ITO (2015) 37 ITR (TRIB) 386. THE COORDINATE BENCH OF THIS TRIBUNAL, AFTER CONSIDERIN G THE FACTS OF THE CASE HELD THAT THE PROVISO PROVIDED TO SECTION 40A(3) OF THE ACT, TAKEN INTO ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 33 CONSIDERATION OF NATURE AND EXTENT OF BANKING FACIL ITIES AVAILABLE, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELE VANT FACTORS WHILE ALLOWING OR DISALLOWING DEDUCTIONS. THE RELEVANT PO RTION IS REPRODUCED HEREUNDER: HAVING HEARD BOTH SIDES, WE FIND THAT ASSESSEE'S C LAIM IS NOT COVERED BY ANY OF THE EXCEPTIONS PROVIDED UNDER RUL E 6DD. HOWEVER, THE FIRST PROVISO BELOW SECTION 40,4(3) CLEARLY TAK ES INTO CONSIDERATION THE NATURE OF EXPENSES, BANKING FACIL ITIES, CONSIDERATION OF BUSINESS EXPEDIENCY AND OTHER RELEVANT FACTORS. RULE GOD IN INTENT AND PURPOSE TAKES INTO CONSIDERATION ALL THESE ASPE CTS, FOR PRESCRIBING VARIOUS EXCEPTIONAL CIRCUMSTANCES. THEREFORE, RULE 6DD CANNOT BE MECHANICALLY APPLIED AND WE HAVE TO CONSIDER THE OV ERALL EXPLANATION OF THE ASSESSEE HAVING REGARD TO THE BUSINESS CONSI DERATION. THE ASSESSES'S EXPLANATION IS THAT ASSESSEE HAD NO BANK ACCOUNT AT CUTTACK AND SELLER WAS INSISTING FOR CASH PAYMENTS. THE PAY MENTS HAD BEEN MADE TO THE SELLER BECAUSE OF THAT REASON. THE GENUINENE SS OF PURCHASES HAD NOT BEEN DOUBTED BY THE ASSESSING OFFICER. UNDER SU CH CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE DISALLOWANCE OF THESE E XPENSES BY APPLYING TO SECTION 404(3) WOULD NOT BE JUSTIFIED. WE, ACCORDIN GLY, SET ASIDE THE ORDER OF ID CIT(A) ON THIS COUNT. 30. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THERE EXISTS A BUSINESS EXPEDIENCY IN MAKING THE CASH PAYMENTS TOWARDS PURCHASE OF GOODS. THE ASSESS EE WAS OBLIGED TO MAKE THE CASH PAYMENTS REQUIRED BY THE S UPPLIERS. THEREFORE, NO DISALLOWANCE CAN BE MADE TOWARDS CASH PAYMENTS BY INVOKING THE PROVISIONS OF SECTION 40A(3) OF THE AC T. THE CIT(A) RIGHTLY DELETED THE ADDITIONS. WE DO NOT SEE ANY ER ROR OR INFIRMITY IN THE ORDER PASSED BY THE CIT(A). THEREFORE, WE INCLI NED TO UPHOLD THE ORDER OF THE CIT(A) AND REJECT THE GROUND RAISED BY THE REVENUE. ITA NOS.506 TO 510/VIZAG/2013 V. JAYANAGA ANITHA, VIJAYAWADA 34 31. IN THE RESULT, THE APPEALS FILED BY THE REVENUE IN ITA NOS.506 TO 510/VIZAG/2013 ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 31 ST MAR16. SD/- SD/- ( . ) ( . ) (V. DURGA RAO) (G. MANJUNATHA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER # /VISAKHAPATNAM: ' /DATED : 31.03.2016 VG/SPS )# *# /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ITO WARD-1(2), VIJAYAWADA 2. / THE RESPONDENT SMT. VUTUKURI JAYANAGA ANITHA, P/O M/S. SRI AMBICA READYMADE SHOP NO.19, 1 ST FLOOR, SARDAR COMPLEX, NR SESHAMAHAL TARAPET, VIJAYAWADA. 3. + / THE CIT, VIJAYAWADA 4. + ( ) / THE CIT (A), VIJAYAWADA 5. # . , . , # / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // 12 . (SR.PRIVATE SECRETARY) . , # / ITAT, VISAKHAPATNAM