ITO 5(2)(1), MUMBAI vs. MOTIWALA AND SONS GOLD AND DIAMONDS PVT. LTD., BYCULLA

Sr. No. Name of the supplier Amount as per Purchase register 1 Bankim Rasiklal Shah 1,97,53,367/- Since, there is no confirmation from the above Supplier to the notice issued u/s.133(6) with sufficient proof, of the above huge transaction appearing in the Trading A/c of the assessee, it is presumed that they are not genuine and hence unsubstantiated. And hence a show cause was Issued to the assessee on 15/03/2024 proposing to bring to tax, the amount appearing in the name of above Supplier, whose genuineness is not substantiated. The assessee vide letter dated 16/03/2024 did not object to the addition, but merely stated that there is an error in filing the GSTR by the supplier.

4.2.4(2) The onus is on the assessee to prove the genuineness of purchases made by it, merely producing a purchaser list cannot be considered as proof. The assessee did not produce any substantive evidence to prove the creditworthiness of the supplier and genuineness of the transaction. Owing to the failure of the assessee in this regard, it became necessary to gather further evidence about the transactions of the the assessee. Accordingly, notice u/s 133(6) of the IT Act was issued to the suppliers, and the above supplier did not comply with the notice issued. Since, there is no direct confirmation from the supplier of the amount appearing in assessee's trading A/c, it is presumed that the supplier is not genuine and the claim of the assessee with regard to the purchase made stands unsubstantiated 4.2.4(3) In view of the above, and in the absence of any confirmation from Shri Bankim Rasiklal Shah, the genuineness of above transactions amounting to Rs. 1,97,53,367/- could not be proved by the assessee or were found to be bogus, the expenses/transactions remain unexplained in his hands and hence, the same is brought to tax as unexplained expenditure in the hands of the assessee u/s.69C r.w.s 115BBE of the Act. Addition: Rs.1,97,53,367/- 4.2.4(4) The assessee have also not proved the genuineness of the claim regarding sundry creditors, called for vide notice issued u/s.142(1). They were required to submit details of Creditors and liabilities recorded in the balance sheet, ledger copies of all items in the liabilities and furnish confirmation letters from such creditors, proving their genuineness and creditworthiness. In connection to this, this Unit had issued notice u/s.133(6) to the most of the Creditors of the assessee requiring them to furnish details of the nature of business done by them with them, copy of the ledger A/c in their books of accounts for the AY 2022-23. But there was no response from the below mentioned Creditor to the notice issued: Sr. No. Name of the supplier Amount appearing in balance sheet 1 Shri virendrakumar S. 3,81,327 Maskara Since, there is no confirmation from the above Creditor to the notice issued u/s.133(6) with sufficient proof, of the amount appearing in assessee's financials, it is presumed that they are not genuine and hence unsubstantiated. And hence a show cause was issued to the assessee on 15/03/2024 proposing to bring to tax the Creditors whose genuineness is not substantiated. The assessee vide letter dated 16/03/2024 submitted a copy of the ledger claiming it as proof. 4.2.4(5) The reply filed by the assessee was considered, but not acceptable. The onus is on the assessee to prove the genuineness of credits appearing in its books of accounts, merely producing a ledger cannot be considered as proof. The assessee did not produce any substantive evidence to prove the creditworthiness of the Creditor and genuineness of the transaction. Owing to the failure of the assessee in this regard, it became necessary to gather further evidence about the transactions of the assessee. Accordingly, notice u/s 133(6) of the IT Act was issued to the Creditors, and the above Creditor did not comply with the notice issued. 4.2.4(6) In view of the above, and in the absence of any confirmation from Shri Virendrakumar S Maskara, to the notice issued u/s. 133(6), it is clear that assessee has no valid proof to offer towards the genuineness of the credits appearing in its books of accounts. And since the genuineness of above Creditor amounting to Rs.3,81,327/-, found credited in the books of the assessee during the financial year 2021-22 could not be be proved by the assessee or were found to be bogus, thus remain unexplained and hence, the same is brought to tax as unexplained cash credits in the hands of the assessee u/s.68 r.w.s 115BBE of the Act.

8.1 These ground of appeal are against the addition made by the AO of Rs. 1,97,53,367/- on account of purchase from Kruti Jewels proprietary of Bankim Rasiklal Shah & Rs. 3,81,327/- on closing of balance of creditor named Rashika Exports proprietary of Shri Virendrakumar S Maskara. The appellant had claimed that the AO made the additions stating that the third parties failed to submit response against the notice issued u/s. 133(6) of the IT Act during the assessment proceeding. 8.2 During the course of the appellate proceeding, the appellant has submitted clarification towards the reasons as to why the third parties failed to submit response and the same is reproduced as under: Clarification regarding addition of Rs. 1,97,53,367/- on account of purchase from Kruti Jewels proprietary of Bankim Rasiklal Shah

8. We would like to submit the affidavit of Sh. Bankim Rasiklal Shah dated 28.03. 2024 in this regard. He has clarified as to why the reply to the notice issued 133(6) of the Act could not be sent to the Id.AO, NAFC and was sent to the JAO on 11.03.2024. Notice was received by him on 08.03.2024(Friday) giving him time up to 11.03.2024. His CA Jogin Raval tried to upload the confirmation on 11.03.2024 but the window for the 133(6) was not open. So, he sent the confirmation to the JAO. The Affidavit of Sh.Bankim Rasiklal Shah and the certified copy of the ledger for the period under consideration.

9. Both these documents undisputedly prove that our transactions with Bankim Rasiklal Shah are genuine.

This office is in receipt of the Appellate Proceeding in the case of Mr. MOTIWALA AND SONS GOLD AND DIAMONDS PRIVATE LIMITED (PAN: AAICM6152A) (AY 2022-23) against the order u/s. 143(3) read with section 144B of the Income tax Act dated 23.03.2024 with the following grounds of appeal:

1. On the facts and circumstances of the case in law the Id AO erred in not considering documents submitted before him.

2. On the facts and circumstances of the case in law the Id AO erred in making addition of Rs. 1,97,53,367/- on account of purchase from Kruti Jewels proprietary of Bankim Rasiklal Shah.

3. On the facts and circumstances of the case in law the Id AO erred in making addition of Rs. 3,81,327/- on closing of balance of creditor named Rashika Exports proprietary of Shri Virendrakumar S Maskara 4 On the facts and circumstances of the case in law the Id AO erred in invoking section 115BBE of the income tax Act.

5. On the facts and circumstances of the case in law the Id. AO erred in initiating penalty proceedings u/s 271AAC(1) of the Income Tax Act. 6. appeal. The Assessee has right reserve to Amend modify delete and make any additional grounds of As noticed from the assessment order, the addition was made by the AO in the absence of the confirmation from the third parties for the following case: However, during the course of the Appellate proceeding, the appellant has submitted the detailed clarification over the failure part from the third parties along with the affidavit and the confirmation. In this regard you are directed herewith to submit detailed Remand report after considering the appellant's submissions and allowing opportunities to submit further clarification (if required) on or before 12.12.2024 without fail. 8.4 Even after requesting multiple times and even communicating that the case has been flagged as Priority Communication, the JAO/AO has not provided any comment towards the Remand Report called. Considering the facts of the case and the constraint of the case been flagged in Priority Communication (subsequent to the order passed by Hon'ble High Court), I no longer find any point in keeping the case pending any further. Accordingly, the additional evidence submitted by the Appellant 1 are accepted and the case is decided as under:

8.5 As noticed from the assessment order, the prime reason towards the addition made by the AO was "non-submission of the replies against the notices issued u/s. 133(6) of the IT Act to the third parties". However the appellant has submitted detailed clarification along with the affidavits from the concerned parties stating the reason for non-submission during the assessment proceeding along with the confirmation and ledger copies. The same has been taken on record and following observation are made: 8.5.1 In regard to the claim of the purchases made from Bankim Rasiklal Shah (AAFPS4260H) (Supplier) of Rs. 1,97,53,367/-, the third party has confirmed of purchases made by the Appellant ot the tune of Rs. 1,94,37,800/- only. For the balance amount, the appellant/third party had nol submitted any satisfactory clarification. 8.5.2 In regard to the addition made of Rs. 3,81,327/-, Shri Virendrakumar S Maskara has confirmed the outstanding balance and submitted the ledger copy reflecting the payment of the same in subsequent time. 8.6 From the above observation, it is clear that the appellant claim ws reflecting in the third party's books of accounts and mere non- submission of the confirmation doesn't warrant the addition during the assessment proceeding. After considering the facts of the case as well as confirmation submitted from the third parties, the addition made by the AO is not accepted and the AO is directed to allow the relief to the quantum confirmed by the third parties (which is discussed in the Para 8.5). Accordingly, these grounds of appeal are hereby partly allowed.

4. We noticed from the above that, although, Ld. CIT(A) sought remand report from the AO but the AO did not submited the same within ‘reasonable time’. Therefore, Ld. CIT(A) accepted the additional evidence and deleted the additions on the basis of affidavit of CA and Bankim Rasiklal Shah.

5. After having gone through the entire facts discussed by us above, the fact still remains that the additional evidence filed by the assessee needs factual verification more particularly Motiwala And Sons Gold and Diamonds Pvt Ltd, Mumbai. when in the face of overwhelming material on record to negate the claim of genuineness of the transaction and to doubt the varicity of the transactions, the affidavit alone need not be accepted as reliable as has been held by Hon’ble Delhi High Court in the case of Nova Promotors and finlease Pvt Ltd., [2012] 342 ITR 169 (Delhi).

Motiwala And Sons Gold and Diamonds Pvt Ltd, Mumbai. 8. Before parting, we make it clear that our decision to restore the matter back to the file of the AO shall in no way be construed as having any reflection or expression on the merits of the dispute, which shall be adjudicated by the AO independently in accordance with law.