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Judgment
@JUDGMENT-JUDGMENT
R.K. Panda, AM
The appeal filed by the assessee is directed against the order dated 31st March, 2016 of the CIT(A), Meerut, relating to assessment year 2011-12.
This appeal was last fixed for hearing on 29th May, 2009 and at the request of the ld. counsel, the case was adjourned to 28th August, 2019. However, when the name of the assessee was called, none appeared on behalf of the assessee nor any petition seeking adjournment of the case was filed. Therefore, we proceed to decide the appeal on the basis of material available on record and after hearing the ld. DR.
The grounds raised by the assessee are as under:-
"1. The L'D Commissioner Of Income Tax (Appeals) has ,on the facts and circumstances of the case, misdirected sustenance of Addition of Rs.9,91,425/- U/S 40(A)(3).
The L'D Commissioner Of Income Tax (Appeals) has erred in enhancing the initial addition of Rs 16,35,549/- to Rs 1,63,55,491/-. Observations made, inferences drawn and findings recorded for so doing are against the facts, arbitrary, illegal and at any rate highly excessive."
Facts of the case, in brief, are that the assessee is a private limited company engaged in business of processing and trading of buffalo meat. It filed its return of income on 29.09.2011 declaring nil income after set off of brought forward losses. During the course of assessment proceedings, the Assessing Officer noted that the assessee in its balance sheet has shown sundry creditors at Rs.2,18,28,275/-. On the basis of the details of sundry creditors along with name, addresses and balance outstanding filed by the assessee, the Assessing Officer issued notice u/s 133(6) to the suppliers who replied to the said notice. The Assessing Officer, thereafter, asked the assessee to produce the creditors where the credit amount is more than Rs.10 lacs. The Assessing Officer recorded the statements of such suppliers. He observed that at the time of statement, nobody submitted the account and they have not produced any type of proof in this regard. Therefore, in absence of maintenance of any type of account/record as well as the bank account, the Assessing Officer held that the payments made to them are not fully justified.
Since neither the assessee nor the cash creditors furnished satisfactory proof of documents, the Assessing Officer disallowed an amount of Rs.43,65,605/- being 20% of the total cash creditors appearing in the balance sheet. The Assessing Officer further noted that the assessee company has shown total purchases of Rs.2,66,64,300/-. Further, the assessee has made payment of preceding year amounting to Rs.1,15,20,466/- and for the current year of Rs.48,35,025/- and the total comes to Rs.1,63,55,491/-. He noted that the assessee in his case has shown the payments made at less than Rs.20,000/-. To verify the genuineness of the payments, the Assessing Officer issued notice u/s 133(6) to all the suppliers. In response to the notices, only four suppliers of the meat furnished reply wherein it was stated that they have no PAN Nos. and are not income-tax assessees, they deal in purchase and sale of raw buffalo meat and sold them to the assessee company. They have not maintained any books of account of this business and they are doing raw meat business at a very small level. Some suppliers also stated that they do not know the farm or related person before or after 01.04.2009. One Mrs. Mohd. Nasim Qureshi denied to have any business or otherwise with the assessee company. The amount pertaining to him was Rs.9,91,425/- which has been shown as paid to him during the year under consideration. Since the person had denied to have any business transaction with the assessee, the Assessing Officer made addition of Rs.9,91,425/- to the total income of the assessee. In case of the remaining suppliers, the notices were returned back unserved by the Postal Department with the report 'incomplete addresses', 'not traceable', 'left', etc. ITA No.6009/Del/2016 From the various details furnished by the assessee, the Assessing Officer noted that neither the assessee nor the suppliers have furnished satisfactory proof of documents. He, therefore, made an addition of Rs.16,35,549/- being 10% of the payment of Rs.1,63,55,491/- u/s 40A(3) of the IT Act.
In appeal, the ld.CIT(A) deleted the addition of Rs.48,35,025/- made by the Assessing Officer. He, however, sustained the addition of Rs.9,91,425/- made by the Assessing Officer. So far as the amount of Rs.16,35,549/- is concerned, the ld.CIT(A), instead of deleting the same, issued an enhancement notice to the assessee and enhanced the same to Rs.1,63,55,491/-, thereby making an enhancement of Rs.1,47,19,942/-.
Aggrieved with such order of the CIT(A), the assessee is in appeal before the Tribunal.
We have considered the arguments advanced by the ld. DR and perused the orders of the A.O. and CIT(A). We do not find any infirmity in the order of the CIT(A) so far as the addition of Rs.9,91,425/- is concerned. It is an admitted fact that the suppliers Mohd Nasim Qureshi who had supplied the raw meat in the F.Y. 2009-10 has submitted that 'I do not now the above farm or related persons of above farm before or after 01.04.2009.' Nothing has been brought on record that the assessee has purchased the raw material from the said person. The assessee has merely stated before the Assessing Officer that the amount of Rs.9,91,425/- was the opening balance and the total payments had been made less than Rs.20,000/- in a day. Mere statement by the assessee that it has dispute with this person cannot be sufficient to delete the addition. Since the ld.CIT(A) while sustaining the addition has give justifiable reasons, therefore, we uphold the same. The ground raised by the assessee on this issue is accordingly dismissed.
So far as the enhancement of income from Rs.16,35,549/- u/s 40A(3) to Rs.1,63,55,491/- is concerned, here also we do not find any infirmity in the order of the CIT(A). We find the ld.CIT(A) while deciding the issue has gone through the details and has passed a very detailed and elaborate order which is being reproduced hereunder:-
"5.3 Decision and Reasons In this case, cash purchases of Rs. 1,63,55,491/- has been made from various suppliers of raw meat. The AO applied Sec. 40 A(3) and disallowed to the extent of 10% thereof i.e. Rs. 16,35,549/-. During appeal proceedings notice u/s. 251 (2) was given for enhancement of Rs. 1,47,19,942/- u/s. 40 A (3) for making addition for the balance cash purchases out of total cash purchases of Rs. 1,63,55,491/-. The facts of the case as per records and the submissions of the Ld. AR have been carefully considered in respect of addition made by the AO as well as for notice of enhancement issued by this office. It is not in dispute that all these are purchases in cash. The assessee produced few suppliers whose statements have been recorded.
On examining these statements as well as the submissions of the assessee, the undisputed facts that comes out is that there is no sale bill issued by the suppliers to the assessee at the time of making the sales, it has been claimed that on supplying the material, the assessee issues a slip to the supplier for payment to be made against these supplies, the assessee makes cash payments to the supplier from time to time which is noted on the said slip maintained by the supplier, on receipt of full payment, the supplier destroys the slip.
The assessee claims that it records the cash payment in his books of a/c's as and when these payments are made. However, the fact remains that neither so called slips are produced to verify the quantum of payments made by the assessee to suppliers from time to time, nor the assessee maintained any such supporting documents which may prove the dates and the amounts paid on those dates to the Suppliers, the only evidence, the assessee could adduce is his own books of a/c's wherein, the payments are recorded for sums not exceeding Rs. 20,000/- each time. Apart from this, statement of few suppliers also states that the payments were not exceeding Rs. 20,000/-. Thus, only on the basis of entries in his books of a/c's and the statement of few suppliers, the assessee claims that each payment is not exceeding Rs, 20,000/-, hence, not hit by the provisions of Sec. 40 A (3). The Appellant in its letter dated 12.02.2016. has offered to produce the remaining suppliers. However, this would not serve any purpose for the following reasons.
As a matter of fact, when I examine the statement of few suppliers, I find that for instance, in the statement of Wasim recorded on 06.03.2014, in answer to Q. No. 11 he has stated that he received payments from time to time ranging between Rs. 8,000 - Rs. 20,000/-. In statement of Miraj recorded on 07.03.2014, in answer to Q. No. 10, he stated that he received the payments ranging between Rs. 5,250 - Rs. 20,000/-. Similarly, in statement of Sh. Kalim recorded on 07.03.2014, in answer to Q. No. 10, he stated that he received the payments ranging between Rs.5,500 -- Rs. 20,000/-, so on and so forth. The nature tone and tenor of transactions with suppliers has a clear pattern as explained below.
During Asstt., copy of ledger a/c.'s of few suppliers in the books of the assessee were also filed. In the ledger a/c. of Mohd. Islam in the books of assessee, the assessee has shown opening payable to this party as Rs. 11,58,265/- as on 01.04.2010. During this year, no purchases have been made from this party. The payment has been shown to this party by the assessee as under :-
57 times paid @Rs. 20,000/- each time - Rs. 11,40,000/-
1 time paid Rs. 18,265/- - Rs. 18,265/-
TOTAL - Rs. 11,58,265/-
Not only this, the payments have been shown being started from 01.08.2010 onwards and the last payment made on 31.03.2011. The payments have been shown generally on daily basis i.e. Rs. 20,000/- on 01August, then on 2nd August, then on 3rd August and so on and so forth. Copy of this ledger a/c. is attached as "Annexure -- A" to this order. In the ledger a/c. of Abrar Khan in the books of assessee shows opening payable as on 01.04.2010 at Rs. 7,11,880/-. No purchases have been made during this year. This outstanding has been started being paid w.e.f. 20.02.2011 till 27.03.2011 practically on each day in the denominations of Rs. 20,000/- as under:-
35 times paid @Rs. 20,000/- each time Rs. 7,00,000/-
1 time paid Rs. 11,880/- Rs. 11.880/-
TOTAL Rs. 7,11,880/-
Copy of this ledger a/c. is attached as "Annexure -- B" to this order. Another similar example is ledger a/c. of Mehboob Illahi Quareshi. The opg. Payable as on 01.04.2010 was Rs. 11,09,350/-, the payments has been started on day to day basis in the same manner w.e.f. 01.11.2010 @ Rs. 20,000/- each day which ended on 31.12.2010. The total payments has been made as under
55 times paid @Rs. 20,000/- each time Rs. 11,00,000/-
1 time paid Rs. 9,350/- Rs. 9,350/-
TOTAL Rs. 11,09.350/-
Copy of this ledger a/c. is attached as "Annexure -- C" to this order.
There are other similar examples also which are not mentioned in this order for not burdening more this order. From the analysis of above ledger a/c's when considered alongwith the statements recorded of various suppliers, which are more or less similar, very interesting feature emerges. The statement of these suppliers mentions That they are very small persons, carrying on business of meat at a very small scale, do not maintain any books of a/c's and also do not maintain any bank a/c. Now, it is unimaginable, unthinkable and not possible that such small suppliers having such a small business will work on such a huge outstanding payments against their supplies. Not only this, as it comes out from the ledger a/c's, they will accept small payments for Rs. 20,000/- each which they will collect daily from the assessee and not only this, the outstanding payment would had been made by the assessee to these suppliers after a long gap i.e., if quoted from above instances, in the case of Akram Khan it has been started from 20.02.2011, in the case of Mohd. Islam it has been started from 01.08.2010 & in the case of Mehboob Illahi Quareshi it has been started from 01.11.2010.
It is also important to remember that the assessee could not produce any documentary evidence what so ever despite repeated opportunities to show that the payments have been made as they are appearing in the books of a/c's of the Assessee. The books of a/c's maintained by the assessee are without any supporting document of any sort that could vouch the correctness of dates and the amounts of payment to suppliers as shown in the books. Given these state of affairs these details as laid out in the Books cannot be accepted as true and correct. It is a case where the circumstances and the material clearly shows that the entries of Rs.20.000/- each in the books of a/c's have been made simplicitor to avoid the implication of Sec. 40 A (3) of the I.T Act. The fact of the matter is that no such petty uneducated meat supplier who generally resides in a village, will wait for so long to collect the payments against the supplies made. He would either seek payments instantly or in a very short period failing which he may not be in a position to earn his ITA No.6009/Del/2016 livelihood. The book entries without any supporting documents is only a makeup story to avoid the provisions of Sec. 40 A (3). The contention of the assessee that the books are audited is of no support for the assessee. The auditors in tax audit report in Form -- 3 CD, in reply to Q. No. 17 (h) (B) has clearly refrained from certifying that there is no violation of provisions of Sec. 40 A (3)of the I.T Act 1961.
In view of these findings, the addition of Rs. 16,35,549/- u/s. 40 A (3) is enhanced to Rs.1,63,55,491/- thereby making an enhancement of Rs.1,47,19,942/-. In the result this ground fails with enhancement as above. Penalty proceedings U/s. 271 (1) (c) is being initiated separately for furnishing the inaccurate particulars of income to the extent of enhanced income of Rs.1,47,19,942/-. AO to issue demand Notice and challan separately while giving effect to this order."
After going through the same we find the ld.CIT(A) has passed a very detailed and elaborate order while enhancing the income of the assessee u/s 40A(3) of the Act. In the absence of any contrary material available before us, we do not find any infirmity in the order of the CIT(A). Accordingly the same is upheld. The ground raised by the assessee on this issue is also dismissed.
In the result, the appeal filed by the assessee is dismissed.
The decision was pronounced in the open court on 17.10.2019.