Shri Gems Vs ITO (ITAT Delhi)
In the present case the amount in question was deposited by the partner as his capital, therefore, even if the Assessing Officer was not satisfied with the explanation of the assessee, it cannot be added in the hands of the assessee firm. At the most it cannot be considered in the hands of the individual partner of the assessee firm.
FULL TEXT OF THE ITAT JUDGMENT
This is an appeal by the assessee against the order dated 12.02.2014 of ld. CIT(A)-28, New Delhi.
2. Following grounds have been raised in this appeal:
“1. On the facts and circumstances of the case, the order passed by the learned Commissioner of Income Tax (Appeals) is bad both in the eye of law and on facts.
2. That the assessment order having been passed in gross violation of the principle of natural justice is illegal and untenable in the eyes of Law.
3. (i) On the facts and circumstances of the case, the learned CIT(A) erred both in eyes of law and facts in confirming the addition of Rs.36,23,600/- on account of purchases made by assessee treating the same as bogus.
(ii) That the above addition has been confirmed by not considering the submissions made by the appellant before the Ld. CIT (A).
(iii) That the above addition is untenable in the eye of law having been confirmed without providing opportunity to cross examine the person on the basis of whose statement the allegations have been made against the appellant and without following the principle of natural justice.
(iv) That the addition made mere on basis of statement of any person without supported by any corroborative evidences is untenable in the eyes of law.
4. (i) On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law in confirming an addition of Rs.54,898/- on account of commission on bogus purchases under section 69C of Act.
(ii) That the above said addition has been confirmed by the Ld. CIT (A) without bringing any material or evidence on record to apply the said rate of commission.
5. (i) On the facts and circumstances of the case, the learned CIT (A) has erred both on facts and in law .in confirming addition of Rs.4,25,000/- on account of capital introduced by Sh. Rishi Sachdeva.
(ii) That the above said addition has been made despite the assessee bringing all material and evidence to prove the same and ignoring the fact that no such addition on account of capital introduced by a partner can be made in the hands of the firm.
6. On the facts and circumstances of the case the Ld. A.O. has erred both on facts and in law in charging interest u/s 234 B and 234 D.
7. That the appellant craves leave to add, amend or alter any of the grounds of appeal.”
3. Ground Nos. 1, 2 & 7 are general in nature, so do not require any comment on our part.
4. Vide Ground No. 3, the grievance of the assessee relates to the confirmation of addition of Rs.36,23,600/- made by the AO by treating the purchases as bogus.
5. Facts of the case in brief are that the AO during the course of assessment proceedings noticed that the assessee firm made total purchases of Rs.70,09,040/- out of which purchases of Rs.36,23,600/-were made from M/s Parshanath Enterprises. The AO asked the assessee to produce ledger account of M/s Parshanath Enterprises which was furnished by the assessee. The AO also asked the assessee to submit the bills of purchases. The assessee furnished copies of the bills vide letter dated 27.10.2009. The AO observed that out of the total purchases from M/s Parshanath Enterprises, Rs.28,47,698/- were of Rudraksh Kawach Chain. However, no such material was there in the closing stock of the assessee. The AO alleged that most of the sales had been made to the assessee by M/s Parshanath Enterprises during the period from 15.01.2007 to 24.01.2007 and there were only two sales bills issued by the assessee between 24.01.2007 to 02.02.2007. He considered the transaction as suspicious and issued summons u/s 131 of the Income Tax Act, 1961 (hereinafter referred to as the Act) to M/s Parshanath Enterprises. In response to the said summons, Sh. Mukesh Mangla attended the proceedings on 17.11.2009 and his statement was recorded under oath. The AO mentioned that Sh. Mukesh Mangla in answer to question No. 17 has stated as under:
“I want to tell you that M/s Parshanath Enterprises does not enter into any sales or purchase in real terms. This firm is on papers only. We have not made any sales to M/s Shri Gems. We had only provided the sale bills to them. We get one and half percent commission from them. Out of this about one percent is our expenses. We had received a commission of Rs.54,898/- from M/s Shri Gems which is 11/2% of Rs.36,59,836/-”
6. On the basis of aforesaid statement, the AO asked the assessee to show cause as to why the purchases made from M/s Parshanath Enterprises amounting to Rs.36,23,600/- be not treated as bogus purchases and disallowed. The AO observed that no explanation was given by the assessee, therefore, by remaining silent, the assessee tacitly admitted the fact that the purchases made by it with M/s Parshanath Enterprises were bogus. He, therefore, made the addition of Rs.36,23,600/-.
7. Being aggrieved the assessee carried the matter to the ld. CIT(A) and moved an application for admission of the additional evidence under Rule 46A of the Income Tax Rules, 1962. The ld. CIT(A) forwarded the evidences to the AO for his report, in response, the AO vide letter dated 05.12.2013, furnished the report which had been reproduced in para 5.1 of the impugned order. The assessee also furnished rejoinder to the remand report which has been reproduced in para 5.2 of the impugned order. Thereafter, the AO also furnished his comments vide letter dated 16.01.2014 and the assessee filed rejoinder to the remand report which have been reproduced by the ld. CIT(A) in paras 5.3 & 5.4 of the impugned order, for the cost of repetition, the same are not reproduced herein.
8. The ld. CIT(A) after considering the submissions of the assessee and the remand report of the AO, sustained the addition by observing in para 5.5 of the impugned order as under:
“During appellate proceedings the appellant claimed
