ITO vs Nandan Gupta

Further, the AO noted that after due analysis of the relevant information and verification from the Department’s database, it was observed that Nandan Gupta (Proprietor of Jaidev Mal and Company) has taken accommodation entry from Madanlal Madho Prashad and M/s Kalki Trading Company amounting to Rs. 72,40,998/-. It is also observed that since assessee has failed to prove the genuineness of the said transaction of Rs. 72,40,998/- as sales/purchases because the evidences shows that the transaction is recorded in books, however, the allegations itself is that there is no actual business that has taken place, it is only a paper transaction where book entry is made without any corresponding transfer of goods. These transactions are recorded in the books only to claim the non-genuine expenses to reduce taxable income. AO further noted that assessee has failed to discharge the onus, hence, the additions amounting to Rs. 11,13,248/- and Rs. 61,27,750/- were disallowed and added to the total income of the assessee by assessing the same at Rs. 77,38,048/-.

Acknowledgement of return with computation of income of the assessee;

ii) Tax Audit Report, trading and profit and loss account of the appellant as on 31.3.201;

iii) Bank statement with bank book of Jaidev Mal and Company;

Form 26AS;

Stock register of Channa, Arhar, Moong Dal, Peddy etc;

Purchase /sale invoices with summary of items;

Confirmation of parties from purchases and sales were made;

Invoice of purchase and sales made with truck no through which material was sent and ;

GST return for 9 months.

It is noted that the AO except for general comments has not pointed any discrepancy qua the documentary evidence filed by the assessee. It is undisputed fact that assessee against gross sales of Rs. 12,56,58,5781/- has declared profit of Rs. 16,90,472/-. The gross sales were to the tune of Rs.12,56,58,571/-and total purchase were Rs. 11,70,90,542/- out of which purchase from Madanlal Madho Prashad and Kalki Trading Company was only that of Rs. 61,27,750/- i.e. only 5.23% of total purchase. Ld. CIT(A) noted that since the details of stock of Channa, Arhar, Moong Dal, Peddy, Masoor, Rice etc. were filed alongwith detail of parties from whom purchases were made with bill numbers giving quantity purchase as well as rate and similarly, party-wise details of sales, containing quantity and the rate at which the material was sold, therefore, without cogent material or such other investigation, there was no reason for the AO to say that genuineness of purchase and sale of Rs. 72,40,998/- was not proved. The AO has accepted the trading result, hence, the addition of Rs. 61,27,750/- made by disallowing the said purchases from the said two parties, ought not to have been made merely the party has not appeared in response to the notice u/s. 133(6) of the Act, as has been held in ITO vs. Vaman International P. Ltd. (ITA NO. 794/Mum/2015) dated 16.11.2016, CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. (2015) 372 ITR 619 and CIT vs. Nangalia Fabrics (P) Ltd. (2014) 220 Taxman 17 (Guj.), thus, Ld. CIT(A) rightly deleted the addition of Rs. 61,27,750/-made by the AO u/s. 28 of the Act by disallowing the purchases is not sustainable and hence, the same was rightly deleted, which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on this issue and reject the ground raised by the Revenue.

In so far as addition of Rs. 11,13,248/- relating to disallowance of sales made to the same two parties i.e. Madan Lal Madhro Prasad and Kalki Trading Company u/s. 68 of the Act is concerned, it is noted that the AO has made the said disallowance summarily and has not brought on records any such basis or facts or such investigations to show or prove that, the assessee had not made any such sales to the said two parties. Since the AO have accepted the trading results, the addition in dispute ought not to have been made merely because the party has not responded to the notice u/s. 133(6) of the Act. It is noted that the assessee has filed the relevant details to show the existence of parties, their identity, creditworthiness and genuineness of the transaction. As the identity of the person (who has sent the money/credit) has been established as they are having PAN and they are filing returns. The genuineness of the transaction is established from the fact that, both the acceptance and repayment of amount has been made through banking channels and the confirmation of the payer’s also support the factum of credits and creditworthiness of the lenders can be established from the bank statements and relevant records. We find that Ld. CIT(A) relied upon the decision of the Hon’ble Bomba y High Court in the case of CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. 372 ITR 619 (Bom.) and the SLP filed by the Revenue in the said case has been dismissed vide order dated 30.,8.2013 (SLP Civil No. 27890 of 2013). Thus, the assessee has discharged its burden by submitting the information in the assessment proceedings and the AO has failed to conduct the further enquiries and independent investigation of his own and not rely merely on the third party statements or such reports, if any. Thus, Ld. CIT(A) rightly deleted the addition of Rs. 11,13,248/- made by the AO u/s. 68 of the Act by disallowing the purchases is not sustainable and hence, the same was rightly deleted, which does not need any interference on our part, therefore, we uphold the action of the Ld. CIT(A) on this issue and reject the ground raised by the revenue.