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Income Tax Appellate Tribunal, JODHPUR BENCH,
Before: SHRI SANDEEP GOSAIN & SHRI MANOJ KUMAR AGGARWAL
O R D E R PER BENCH The present appeal has been filed by the Revenue against the order of the ld. CIT(A), Ajmer dated 25/03/2019 for A.Y. 2016-17, wherein the Revenue has raised following grounds of appeal:
“1. Deleting the addition of Rs.7,82,95,551/- u/s 69 of the IT Act, 1961 made by the AO on account of unexplained investment by considering the purchase of Rs.7,82,95,551/- shown against the name of not existent six parties was bifurcation of total purchases of Rs.10,00,68,034/- from M/s Maximum Synthetics Pvt. Ltd. but completely ignored the fact that the assessee furnished ledger accounts of these non-existing six parties during the course of assessment proceedings before AO showing date wise quantity in the narration which also supported by the purchase bill of the 2 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. parties M/s Poonam Synthetics and M/s Jain Syntax which were part of the assessment order. 1.1 Not appreciating the fact that company had its own manufacturing still shown purchase of finished goods from unverifiable bogus entities and never produced complete details and books of accounts before the AO while deleting addition of Rs.7,82,95,551/-. 1.2 Accepting the verbal contention of the assessee that purchase of Rs.10,00,68,034/- were bifurcated in the name of seven parties to obtain loan/ limit from the bank as the assessee failed to substantiate its claim before the AO as well as before the Ld. CIT(A) that why this bifurcation was necessary to obtain bank limit and how can it affect the bank limit thereby allowed the perpetuation of the creation of fraudulent documentation before AO and bank which should have been tested instead.
2. Deleting addition of Rs.1,23,87,853/- made on account of profit against sale of unaccounted purchase as the assessee failed to negate the findings of AO that it has made the unaccounted purchases of Rs.7,82,95,551/- during the year under consideration.”
2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic.
The brief facts of the case are that the assessee company is engaged in the business of manufacturing and trading of textile products. It filed its return of income on 15.10.2016 at Nil income. During the year it declared gross profit of Rs.5.22 crore on sales of Rs.36.14 crore giving G.P. rate of 14.47% as against gross profit of Rs.5.37 crore on sales of Rs.3.31 crore giving G.P. rate of 16.19% in last year. In assessment proceedings AO 3 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. required the assessee to furnish details of purchase of finished fabrics of Rs.1 lakhs and above. In response to same assessee filed the details of purchase of finished fabric which is reproduced at page 3 of the assessment order. The assessee also filed the copy of ledger account of these parties. The AO issued summon u/s 131 of the Income Tax Act, 1961 (in short, the Act) to verify the purchase of finished fabric and called for certain details reproduced at page 4 of the order. The AO observed that assessee produced incomplete books. Further assessee did not produce any other details regarding purchase of finished fabrics such as quantitative details or daily stock register of the six parties mentioned at page 4 to 5 of the assessment order. On 15.12.2018 statement of Sh. Azad Sharma (wrongly mentioned as Anand Sharma), accountant of the company was recorded where in reply to Q.No.6 he denied to produce any details of these parties though earlier assessee himself has submitted details of purchases from these six parties and bills of two parties for valuation purpose. Further in reply to Q.No.8, Azad Sharma (wrongly mentioned as Anand Sharma) stated that company did not make purchases from these six parties and mentioned that those bills were prepared for bank loan purpose only. The assessee has purchased finished fabrics of Rs.15,00,44,069/- only from parties mentioned in table no. 3 at page 5 of the assessment order and duly shown in the profit & loss account. The AO, however, held that the assessee is 4 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. maintaining two set of books of accounts. In one set of books, purchases from parties at S.No.1 to 6 of table no.2 were reflecting and in other set of books such purchases are not reflected. The assessee produced ledger and sample bills from which it is evident that purchases have been made from these parties and later on it has been denied. Accordingly, book results of the assessee company can’t be treated as reliable. This shows that assessee is engaged in out of books purchase or sale of goods. Accordingly, he issued show cause notice on 19.12.2018 reproduced at page 6 to 9 of the assessment order requiring to show cause as to why purchases of Rs.7,82,95,551/- may not be considered as unexplained investment u/s 69 of the Act and gross profit of Rs.1,21,11,922/- (7,82,95,551*14.32%) may not be added to the total income. In response to same assessee submitted reply vide letter dated 21.12.2018 explaining that for bank loan/limit purpose, purchase made from M/s Maximum Synthetics Pvt. Ltd. has been split in the name of six parties but in fact there is no purchase from these parties and therefore no addition should be made. The AO, however, did not accept the explanation of assessee and rejected the books of accounts u/s 145(3) of the Act and made addition of Rs.7,82,95,551/- by treating the purchases made from the six parties as unexplained investment u/s 69 of the Act. He further held that these purchases were sold outside books of accounts and thus, made addition of unaccounted profit of Rs.1,23,87,853/- 5 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. by applying average g.p. rate of preceding two years, i.e. 15.86% on Rs.7,82,95,551/- without allowing any further expenditure against such profit.
4. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties and after perusal of the material placed on record, deleted the addition by holding that the purchases of M/s Maximum Synthetics Pvt. Ltd. at Rs.10,00,68,034/- as appearing in the books of accounts of the appellant (though in the party wise list of purchases, the purchases from M/s Maximum Synthetics Pvt. Ltd. were shown at Rs.2,17,72,483/- only) and also treat the purchases of Rs.7,82,95,551/- from above referred six parties as unaccounted purchases of the assessee. When the purchases and payments shown against the name of above referred six parties are same as appearing in the accounts of M/s Maximum Synthetics Pvt. Ltd., then there is no justification for rejecting the explanation of appellant that purchases of Rs.10,00,68,034/- made from M/s Maximum Synthetics Pvt. Ltd. were bifurcated in the name of seven parties only for the purpose of obtaining loan/ limit from the bank. The AO cannot take some figures (purchases of Rs.7,82,95,551/-) from non-existent 6 parties and other figures from list of party wise purchases submitted on 10.11.2018 (purchases of 6 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. Rs.10,00,68,034/- from M/s Maximum Synthetics Pvt. Ltd.) as appearing in the books of accounts of the assessee. The explanation of assessee that purchases of Rs.7,82,95,551/- shown against the name of above referred non-existent six parties in the party wise purchase submitted along with letter dt. 10.11.2018 was in fact bifurcation of the total purchases of Rs.10,00,68,034/- from M/s Maximum Synthetics Pvt. Ltd. only cannot be rejected. Thus, addition of Rs.7,82,95,551/- made by the AO holding that assessee had made purchases of Rs.7,82,95,551/- out of books of accounts from the non-existent 6 parties is deleted. Further the addition of Rs.1,23,87,853/- made by the AO on account of sale of unaccounted purchases of goods of Rs.7,82,95,551/- is also deleted. Against the said order of the ld. CIT(A), the Revenue is in further appeal before the ITAT.
5. Grounds No. 1, 1.1, 1.2 and 2 of the appeal are interrelated and interconnected, therefore, both these grounds are being disposed off by this consolidated order. The ld. DR has relied on the order of the A.O. and has further submitted that the assessee company is involved in the manufacturing and trading of textile products. He also submitted that the assessee purchased huge quantity of finished fabrics despite having its own manufacturing activities. When the assessee asked for give details of those persons from whom it had purchased fabrics of more than Rs. 1.00 lacs but 7 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. the assessee failed to submit such details. The DR has further submitted that ld. CIT(A) had erred in deleting the addition of Rs.7,82,95,551/- u/s 69 of the Act made by the AO on account of unexplained investment by considering the purchase of Rs.7,82,95,551/- shown against the name of not existent six parties was bifurcation of total purchases of Rs.10,00,68,034/- from M/s Maximum Synthetics Pvt. Ltd. but completely ignored the fact that the assessee furnished ledger accounts of these non- existing six parties during the course of assessment proceedings before AO showing date wise quantity in the narration which also supported by the purchase bill of the parties M/s Poonam Synthetics and M/s Jain Syntax which were part of the assessment order. Ld. DR also submitted that the ld. CIT(A) had also erred in not appreciating the fact that company had its own manufacturing still shown purchase of finished goods from unverifiable bogus entities and never produced complete details and books of accounts before the AO while deleting addition of Rs.7,82,95,551/-. Ld. DR also submitted that the ld. CIT(A) had also erred in accepting the verbal contention of the assessee that purchase of Rs.10,00,68,034/- were bifurcated in the name of seven parties to obtain loan/ limit from the bank as the assessee failed to substantiate its claim before the AO as well as before the Ld. CIT(A) that why this bifurcation was necessary to obtain bank limit and how can it affect the bank limit thereby allowed the perpetuation 8 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. of the creation of fraudulent documentation before AO and bank which should have been tested instead. Ld. DR also submitted that the ld. CIT(A) had erred in deleting addition of Rs.1,23,87,853/- made on account of profit against sale of unaccounted purchase as the assessee failed to negate the findings of AO that it has made the unaccounted purchases of Rs.7,82,95,551/- during the year under consideration. The ld DR has vehemently supported the order of the A.O.
On the contrary, the ld AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and has also relied on the written submissions filed before the Bench and the contents of its written submissions are reproduced below:
1. It is submitted that the entire addition made by the AO is on the basis of purchase details of finished fabrics above Rs.1,00,000/- submitted by the assessee vide letter dated 09.11.2018 along with the ledger account and sample bills. In this letter details of 10 parties from whom purchase of finished fabrics was made is given. This list includes name of six parties from whom no purchases were in fact made. Rather the purchases made from M/s Maximum Synthetics Pvt. Ltd. of Rs.10,00,68,034/- was bifurcated in the name of these six parties as explained vide letter dated 21.12.2018 (PB 45-52) as under:-
S. Particulars Qty (Mtr.) Amount (Rs.) S. Particulars Qty (Mtrs.) Amount (Rs.) No. No.
Actual 833554.45 10,00,68,034/- Actual purchases purchases from from M/s 9 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. M/s Maximum Maximum Synthetics Pvt. Synthetics Pvt. Ltd. Bhilwara Ltd. Bhilwara as per profit & bifurcated in the Loss A/c and following parties Balance Sheet only for bank loan/ limit purposes 1. M/s Maximum 190147.60 2,17,72,483/- Synthetics Pvt. Ltd. Bhilwara 2. Harsh Textile Bhl 112859.55 1,36,28,298/- 3. Jain Syntex, 81814.15 9735883/- Bhilwara 4. Kashliwal 114052.10 14598680/- Synthetics, Bhilwara 5. Kaveri Synthetics, 73139.15 89,22,977/- Bhilwara 6. Poonam 80747.25 1,00,12,663/- Synthetics, Bhilwara 7. Shree Govindam 180794.65 2,13,97,050/- Textile, Bhilwara TOTAL 833554.45 10,00,68,034/- TOTAL 833554.45 10,00,68,034/- From the above details it can be noted that quantity and the amount of purchases made from M/s Maximum Synthetics Pvt. Ltd. is duly recorded in the regular books of accounts and the same is also supported by the stock records. Only for the bank purpose, purchase is shown to the banker in seven names including M/s Maximum Synthetics Pvt. Ltd. as the assessee was under the apprehension that if purchase from one party of Rs.10 cr. is shown to the bank it may lead to adverse opinion from the bankers for grant of limit in as much as the banker may take a view that assessee is mainly dependent on purchases from one supplier only and therefore the said bifurcation was provided to the bank which was also submitted to the AO but the fact remains is that no purchase is made from these six parties and therefore, the same is not part of books of accounts.
The fact that assessee has not made purchases from these six parties is also independently verified by the AO by recording the statement of 10 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. accountant Azad Sharma (PB 53-65). In this statement he has stated as under:-
(i) The bills of these six parties are not entered in the books as bills and records of these parties were prepared only for bank limit purpose. No purchases are made from these parties (reply to Q.No.8) (PB 58- 60).
(ii) There is no difference in total purchases. The same are duly supported by finish purchase register and original bills. The same are tallied with the bank statement. The difference of six parties is only due to bank loan/limit purpose (reply to Q.No.9) (PB 60-61).
(iii) The details of these parties are prepared for bank loan purpose. The total purchases tally with the profit & loss account and sales tax return. No cash purchases are made (reply to Q.No.13) (PB 63-65).
This statement has not been controverted by the AO by bringing any adverse material against the assessee. In fact before drawing adverse conclusion against the assessee, AO has not made any enquiry to know about the existence of these parties. Therefore, simply on surmises and conjectures it can’t be presumed that assessee has fabricated the books of accounts and made cash purchases from these six parties which is not recorded in the books of accounts.
3. The fact that assessee has not made purchases from these six parties rather the purchase made from M/s Maximum Synthetics Pvt. Ltd. has been bifurcated in the name of these six parties is evident from the fact that payment for purchases recorded in the ledger account of these six parties (PB 7-16) are in fact made to M/s Maximum Synthetics Pvt. Ltd. as is evident from its ledger account in the books of accounts (PB 17- 22). This fact is also verified by the AO by calling the bank statement of 11 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. the assessee from the banker u/s 133(6) where it is verified that the payment reflected against these six parties are made in the account of M/s Maximum Synthetics Pvt. Ltd. This fact proves that no purchases is made from these six parties but only for bank purpose, the purchase made from M/s Maximum Synthetics Pvt. Ltd. was partly shown in the name of these six parties. However, taken together, both the quantity and value of purchases shown to the bank is duly recorded in the regular books of accounts of the assessee. Hence, there is no basis with the AO to presume that assessee has made cash purchases out of books from these six parties which is also sold out of books.
The AO has made the addition u/s 69. The provisions of section 69 reads as under:- “Where in any financial year an assessee has incurred any expenditure and he offers no explanation about the source of such expenditure or part thereof, or the explanation, if any, offered by him is not, in the opinion of the Assessing Officer, satisfactory, the amount covered by such expenditure or part thereof, as the case may be, may be deemed to be the income of the assessee for such financial year”
From the above provisions it can be noted that addition under this section can be made if the following conditions are satisfied:-
(i) Assessee has incurred the expenditure.
(ii) Offered no explanation about the source or the explanation offered is not satisfactory.
In the present case, assessee has not incurred any expenditure on purchase from these six parties. This fact was cross verified by the AO by taking statement of the accountant. Further the source of payment made 12 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. to them in the ledger account is duly recorded in the books in the ledger account of M/s Maximum Synthetics Pvt. Ltd. as verified by the AO from the bank statement called u/s 133(6). The AO has not brought any evidence on record to prove that assessee has made any cash payment to these six parties. He has also not made any enquiry from these parties to hold that assessee has made cash payment. Hence, without discharging the burden casted u/s 69 on the AO and by simply rejecting the explanation of assessee, addition made by AO u/s 69 is unjustified which has been rightly deleted by Ld. CIT(A).
As there is no out of books purchases, the question of selling the same does not arise. Accordingly, addition made by the AO of Rs.1,23,87,853/- on account of profit on alleged sale of unaccounted purchases has been rightly deleted by Ld. CIT(A). In view of above, order of Ld. CIT(A) be upheld by dismissing the ground of department.
We have heard the ld. Counsels of both the parties and have perused the material placed on record. From perusal of the record, we found that the ld. CIT(A) has deleted the additions so made by the A.O. by observing as under: “4.3 I have gone through the assessment order, statement of facts, grounds of appeal and written submission carefully. It is seen that during the course of assessment proceedings, the AO asked the appellant to furnish details of purchase of finished fabrics above Rs. 1 lac. The appellant vide letter dated 10.11.2018 submitted the partywise details of finished fabric purchased by the appellant as under:
13 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. The total purchase of fabric debited in the Profit & Loss Account is also of Rs. 18,20,58,897/- only. Later on, the appellant submitted that the purchases made from Maximum Synthetics Pvt. Ltd. was of Rs. 10,00,68,034/- and this purchase of Rs. 10,00,68,034/- made from Maximum Synthetics Pvt. Ltd. were shown in the name of seven parties as under:
In other words, according to the appellant, in the books of accounts of the appellant purchases from Maximum Synthetics Pvt. Ltd. were shown at Rs. 10,00,68,034/- but in the detail of partywise purchases above 1 lac submitted by the appellant, the purchases from Maximum Synthetics Pvt. Ltd. were shown only at Rs. 2,17,72,483/- and remaining purchases was shown in the name of six parties mentioned above. The purchases of Rs. 10,00,68,034/-made from 14 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. Maximum Synthetics Pvt. Ltd. were shown in the name of seven different parties only for the purpose of obtaining loan/ limit from the bank. Actual purchases were made from Maximum Synthetics Pvt. Ltd. only and no purchases from other six parties were made by the appellant. However, the AO accepted the contention of appellant that purchases from Maximum Synthetics Pvt. Ltd. were made of Rs. 10,00,68,034/- as appearing in the books of accounts of the appellant (though in the list submitted by the appellant, the purchases from Maximum Synthetics Pvt. Ltd. were shown only at Rs. 2,17,72,483) but he did not accept the contention of the appellant that purchases shown in the name of remaining six parties were only bifurcation of total purchases of Rs. 10,00,68,034/- made from Maximum Synthetics Pvt. Limited.
It is seen that the total purchases of fabric shown in the Profit & Loss Account is of Rs. 18,20,58,897/-. The total purchases shown in the list submitted by the appellant vide letter dated 10.11.2018 was also Rs. 18,20,58,897/-. However, in the books of accounts, the purchases shown from Maximum Synthetics Pvt. Ltd. was of Rs. 10,00,68,034/- but in the partywise list of purchases submitted vide letter dated 10.11.2018, purchases from Maximum Synthetics Pvt. Ltd. was shown at Rs. 2,17,72,483/- only and remaining purchases of Rs. 7,82,95,551/- (Rs. 10,00,68,034 — Rs. 2,17,72,483) was shown in the name of Harsh Textile (Rs.1,36,28,298), Jain Syntex (Rs.97,35,883), Kasliwal Textile (Rs.1,45,98,680), Kaveri Synthetics (Rs.89,22,977), Poonam Synthetics (Rs.1,00,12,663) and Govindam Textile (Rs. 2,13,97,050). The AO during the course of assessment proceedings also recorded the statement of Shri Azad Sharma, accountant of the appellant company on 15.12.2018 u/s 131. The 15 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. relevant portion of the statement of the accountant is reproduced hereunder for ready reference:
16 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. 17 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. 18 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. Thus, Shri Azad Sharma in his statement had also stated that the purchases of Rs. 10,00,68,034/- was made from Maximum Synthetics Pvt. Ltd. and this purchases was bifurcated in seven parties name only for obtaining loan/ limit from bank. The payments against the purchases of Rs. 10,00,68,034/-was also made only to Maximum 19 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. Synthetics Pvt. Limited. The total purchases of Rs. 7,82,92,551/- shown to have been made from the above referred six parties are appearing in the account of M/s Maximum Synthetics Pvt. Ltd. also. In other words, purchases of Rs. 7,82,92,551/- and payment against these purchases from the above referred six parties were appearing in the account of Maximum Synthetics Pvt. Limited.
I am of the considered view that the AO can not take the purchases of Maximum Synthetics Pvt. Ltd. at Rs. 10,00,68,034/- as appearing in the books of accounts of the appellant, (though in the partywise list of purchases, the purchases from Maximum Synthetics Pvt. Ltd. were shown at Rs. 2,17,72,483/- only) and also treat the purchases of Rs. 7,82,95,551/-from above referred six parties as unaccounted purchases of the appellant. When the purchases and payments shown against the name of above referred six parties are the same as appearing in the account of Maximum Synthetics Pvt. Ltd. then 1 am of the view that there is no justification for rejecting the explanation of the appellant that the purchases of Rs. 10,00,68,034/- made from Maximum Synthetics Pvt. Ltd. were bifurcated in the name of seven parties only for the purpose of obtaining loan/ limit from the bank. The AO can not take some figures (purchases of Rs. 7,82,95,551/- from the non-existant six parties referred above) and other figures from list of partywise purchase submitted on 10.11.2018 (purchases of Rs. 10,00,68,034/- from Maximum Synthetics Pvt. Ltd.) as appearing in the books of accounts of the appellant. In view of the facts discussed above, I am of the considered view that the explanation of the appellant that purchases of Rs. 7,82,95,55I/-shown against the name of above referred non- existent six parties in the partywise purchases submitted along with letter dated 10.11.2018 was in fact bifurcation of the total purchases 20 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. of Rs. 10,00,68,034/- from Maximum Synthetics Pvt. Limited only, cannot be rejected. Therefore, the addition of Rs. 7,82,95,551/- made by the AO, holding that the appellant had made purchases of Rs. 7,82,95,551/- out of books of accounts from the above referred non-existent six parties is hereby deleted. As the addition of Rs. 7,82,95,551/- made by the AO in respect of unexplained investment in purchases has already been deleted, therefore, the addition of Rs. 1,23,87,853/- made by the AO on account of sale of the unaccounted purchases of goods of Rs. 7,82,95,551/- is also deleted.”
From perusal of the record, we noticed that the entire addition made by the AO is on the basis of purchase details of finished fabrics above Rs.1,00,000/- submitted by the assessee vide letter dated 09.11.2018 along with the ledger account and sample bills. In this letter details of 10 parties from whom purchase of finished fabrics was made is given. This list includes name of six parties from whom no purchases were in fact made. Rather the purchases made from M/s Maximum Synthetics Pvt. Ltd. of Rs.10,00,68,034/- was bifurcated in the name of these six parties as explained vide letter dated 21.12.2018 and the details of the same are already mentioned in earlier paragraph of this order.
We also observe from the record that quantity and the amount of purchases made from M/s Maximum Synthetics Pvt. Ltd. is duly recorded in the regular books of accounts and the same is also supported by the stock 21 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. records. Only for the bank purpose, purchase is shown to the banker in seven names including M/s Maximum Synthetics Pvt. Ltd. as the assessee was under the apprehension that if purchase from one party of Rs.10 cr. is shown to the bank it may lead to adverse opinion from the bankers for grant of limit inasmuch as the banker may take a view that assessee is mainly dependent on purchases from one supplier only and therefore the said bifurcation was provided to the bank which was also submitted to the AO but the fact remains is that no purchase is made from these six parties and therefore, the same is not part of books of accounts.
We observe that the assessee has not made purchases from these six parties is also independently verified by the AO by recording the statement of accountant Azad Sharma, which is at page No. 53 to 65 of the paper book. In this statement he has stated as under: - (i) The bills of these six parties are not entered in the books as bills and records of these parties were prepared only for bank limit purpose. No purchases are made from these parties (reply to Q.No.8). (ii) There is no difference in total purchases. The same are duly supported by finish purchase register and original bills. The same are tallied with the bank statement. The difference of six parties is only due to bank loan/limit purpose (reply to Q.No.9). (iii) The details of these parties are prepared for bank loan purpose. The total purchases tally with the profit & loss account and 22 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. sales tax return. No cash purchases are made (reply to Q.No.13). The above statement recorded has not been controverted by the AO by bringing any adverse material against the assessee. In fact before drawing adverse conclusion against the assessee, AO has not made any enquiry to know about the existence of these parties. Therefore, simply on surmises and conjectures it can’t be presumed that assessee has fabricated the books of accounts and made cash purchases from these six parties which is not recorded in the books of accounts.
We also observe that the assessee has not made purchases from these six parties rather the purchase made from M/s Maximum Synthetics Pvt. Ltd. has been bifurcated in the name of these six parties is evident from the fact that payment for purchases recorded in the ledger account of these six parties are in fact made to M/s Maximum Synthetics Pvt. Ltd. as is evident from its ledger account in the books of accounts. This fact is also verified by the AO by calling the bank statement of the assessee from the banker u/s 133(6) of the Act where it is verified that the payment reflected against these six parties are made in the account of M/s Maximum Synthetics Pvt. Ltd. This fact proves that no purchases is made from these six parties but only for bank purpose, the purchase made from M/s Maximum Synthetics Pvt. Ltd. was partly shown in the name of these six 23 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. parties. However, taken together, both the quantity and value of purchases shown to the bank is duly recorded in the regular books of accounts of the assessee. Hence, there is no basis with the AO to presume that assessee has made cash purchases out of books from these six parties which is also sold out of books.
We further observe that in the present case, assessee has not incurred any expenditure on purchase from these six parties. This fact was cross verified by the AO by taking statement of the accountant. Further the source of payment made to them in the ledger account is duly recorded in the books in the ledger account of M/s Maximum Synthetics Pvt. Ltd. as verified by the AO from the bank statement called u/s 133(6). The AO has not brought any evidence on record to prove that assessee has made any cash payment to these six parties. He has also not made any enquiry from these parties to hold that assessee has made cash payment. Hence, without discharging the burden casted u/s 69 of the Act on the AO and by simply rejecting the explanation of assessee, addition made by AO u/s 69 is unjustified. Considering the totality of facts and circumstances of the case, we observe that the ld. CIT(A) has passed a reasoned and speaking order in deleting the additions so made by the A.O., therefore, we do not find any 24 ITA 205/Jodh/2019 ACIT Vs M/s Samarpan Synthetics Pvt. Ltd. reason to interfere in the order of the ld. CIT(A) qua this issue. Accordingly, we uphold the same.