Case Law Details
Entire Industries Vs ITO (ITAT Ahmedabad)
It is pertinent to note that the disallowance by the Assessing Officer is presumptive basis as the books were not rejected. Merely stating that bills were not produced was incorrect fact. In fact, the assessee through its bills has established that there is a co-relation between the sales and the purchase and merely not producing original bills cannot make the purchase bogus. The seized material by the Excise Department was also confined to the said purchase and therefore, the estimated purchases done by the Assessing Officer is not justifiable. At no point of time books were rejected and hence the genuinity of the purchase and the details given by the Assessing Officer at the assessment proceedings were justifiable. Hence, appeal of the assessee is allowed.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
2. The grounds of appeal raised by the assessee are as under:
” 1. The ld. CIT(A) has erred in confirming the adhoc and estimated addition of Rs 11,31,522/- being 5% of total purchases of Rs.2,26,30,434/- made by the AO on the ground that the original bills are not produced and in view of late disclosure of the fact of search operation carried out by the Central Excise Department in case of the appellant. In view of facts of the case and evidences available and furnished in support thereof, the impugned adhoc and estimated addition of Rs.11,31,522/- requires to be deleted.
2. The ld. CIT(A) has erred in observing that no document or communication/ correspondence has been given to establish that the bills are with the Excise Department and that the cross party confirmations furnished have no evidentiary value. as they are simply unsigned and unstamped printouts without proper appreciation of the fact that the AO has not made any cross enquiry with the Excise Department and the categorical admission by the AO that there is no discrepancy in stock/purchases found by the Excise Department. The confirmation of the addition by the ld. CIT(A) is thus wholly unjustified and bad in law and deserved to be deleted.
3. The ld. CIT(A) has grievously erred in not appreciating the fact that the AO has categorically admitted that the stock physically found during the course of search proceedings by the excise department duly tallied with the stock shown in the books of accounts as categorically confirmed by the Excise Department and hence the question of doubting the genuineness of the purchases and making an adhoc addition does not arise merely because the original bills could not be produced due to circumstances beyond appellant’s control.
4. The ld. CIT(A) has erred in not appreciating the fact that the AO has made the adhoc and estimated addition on account of 5% of total purchases while observing that the said addition is made till finding /final report/ final outcome of the seizure operation based on the seized documents is gathered from the Central Excise Department meaning thereby that the AO has made a provisional addition subject to the outcome of the search carried out by the Central Excise Department, which is wholly unwarranted and unjustified.
The appellant craves leave to add, amend, alter, modify or delete any of the above grounds as well as to submit additional grounds at the time of hearing of the appeal.”
3. The assessee e-filed its original return of income on 09.09.2015 declaring total income of Rs. 4,33,650/-. The return of income was selected for limited scrutiny and notice under Section 143(2) was issued to the assessee informing the assessee that issues related to Contract Receipts / Fees Mismatch, Sales Turnover Mismatch, Sundry Creditors and Tax Credit Mismatch are the issues identified for examination. The assessee filed details through Authorized Representative before the Assessing Officer. The Assessing Officer submitted that the assessee failed to produce appeals for verification and therefore, observed that the search operation carried out at the factory premises by the Central Excise Department on 22.12.2015, the physical stock of goods found at the factory was not tallied with the bills and therefore, made addition at 5% thereby disallowing purchase at 5% which amounted to Rs. 11,31,522/-.
4. Being aggrieved by the assessment order the assessee filed appeal before the CIT(A). The CIT(A) dismiss the appeal of the assessee.
5. The Ld. A.R. submitted that the assessee filed the deeds, documents asked by the Assessing Officer as well as the confirmation from the creditors by cross party ledgers / bills etc. The Ld. A.R. submitted that due to seizure by the Central Excise Department the assessee could not produce the original bills at that time but the duplicate bills are from the same source and when the
purchase and sales were accepted by the Assessing Officer then on estimated basis the Assessing Officer cannot disallowed the purchase.
6. The Ld. D.R. relied upon the assessment order and the order of the CIT(A).
7. Heard both the parties and perused all the relevant material available on record. There is a delay of 21 days in filing the present appeal. The delay has been explained by the assessee and it appears that it is a genuine delay. Hence, the delay is condoned. It is pertinent to note that the disallowance by the Assessing Officer is presumptive basis as the books were not rejected. Merely stating that bills were not produced was incorrect fact. In fact, the assessee through its bills has established that there is a co-relation between the sales and the purchase and merely not producing original bills cannot make the purchase bogus. The seized material by the Excise Department was also confined to the said purchase and therefore, the estimated purchases done by the Assessing Officer is not justifiable. At no point of time books were rejected and hence the genuinity of the purchase and the details given by the Assessing Officer at the assessment proceedings were justifiable. Hence, appeal of the assessee is allowed.
8. In result, the appeal of the assessee is allowed.
This Order pronounced in Open Court on 15/03/2023
