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Income Tax Appellate Tribunal, MUMBAI ‘E’ BENCH, MUMBAI
Vs Solid Machinery Co Pvt Ltd ……………………Respondent 396, Kamat Industrial Estate Veer Savarkar Marg, Prabhadevi Mumbai 400 020 [PAN: AAKCS6860R] Appearances by Samridhi Hande for the appellant Priyavrat Gupta for the respondent Date of concluding the hearing : October 14, 2022 Date of pronouncement : October 19, 2022 ORDER Per Pramod Kumar, VP:
1.
This appeal, filed by the assessee, calls into question the correctness of the order dated 26th April 2012, passed by the learned CIT (Appeals) in the matter of assessment under section 143(3) of the Income Tax Act, 1961, for the assessment year 2009-10. Upon conclusion of the hearing of this appeal on 14th October 2022, we reached a conclusion that “the appeal of the Assessing Officer is to be allowed, and the addition of Rs 19,22,05,496 is to be restored”, and, accordingly, following docket order was passed: The appeal is allowed. Pronounced in the open court. The detailed reasons for allowing the appeal will follow.
2. It is in this backdrop that the reasons for so allowing the appeal are now being set out in this detailed order. Let us first take a look at the relevant material facts. The assessee before us is a private limited company with a share capital of Rs 1,00,000 and reserves and surplus aggregating to Rs 7,866. On 26th September 2009, the assessee company filed an income tax return disclosing a taxable income of Rs 9,200. However, when the case was selected for scrutiny assessment and the matter was probed further by the Assessing Officer, it was noticed that the assessee has made purchases of textile items, i.e. fabrics, worth Rs 19,22,05,946 from a large Assessment year: 2009-10 Page 2 of 11 number of entities, and sold all these goods to three entities- namely Global Softech Limited, Ravi Raj Industries, and Tayal Energy Limited, for amounts aggregating to Rs 19,25,88,451. The Assessing Officer also noted that there was no proof of delivery of fabric, that no expenses were debited on account of transportation expenses and that there is no explanation for such inconsistencies. It was also noticed that barring confirmation of purchases from four parties- namely Eskay Knit India Ltd, Krishna Knitwear, Shri Ganesh Knitting and Manufacturing Mills Pvt Ltd, and Shanthi Synthetics and Fabricators Pvt Ltd- which were all sister concerns and group companies of the assessee company, all the notices served to the purported sellers of fabrics came back unserved with remarks like ‘not known’, ‘not found’ and ‘left’ etc. The assessee was confronted with these facts and called upon to explain the position. The explanation of the assessee was that these vendors are small parties who primarily work from tables spaces mostly in Bhiwadi and their addresses also keep changing, that the good supplied by them was found to be defective and that, as per trade practices, the goods are directly picked up by our buyers from the vendors, and as such, there is no question of payment for transportation etc. None of these contentions impressed the Assessing Officer. The Assessing Officer rejected these contentions and proceeded to make an addition of Rs 19,22,05,496, as unexplained credit under section 68, on the basis of the following reasoning:
6.6 The reply of the assessee has been perused carefully. However, the same is found to be acceptable for the following reasons: The contention of the assessee that – - All the sundry creditors which are more than 50 in numbers, have changed their placed therefore notices could not be served on them is noting but a bit too much of a coincidence. It is pertinent to note that it is the assessee who was categorically asked, no supposed to provide the latest address of the parties. Now, when all most all the notices have come back unserved, giving explanation that they might have changed their address, is noting but an after thought. The contention of the assessee that all the goods (Fabrics) were returned as they were all found to be defective, is also a product of imaginative thinking to explain the adverse finding. None of the replies (15 no.s) received so far till the date of this order, though not found be acceptable as evidence; did mention return of fabric despite specifically asked to file the details of subsequent payment received if any. Only on the strength of three such confirmations (the veracity of which is again challenged) filed with this letter dated 27.11.2011, the assessee is trying to explain the entire creditors. During the entire proceedings which was spread over three and half month, the assessee never submitted that the goods were all returned therefore payments were not made to those parties. Now suddenly coming up with the explanation after the receipt of final show cause, is noting but an attempt to explain the query which again is not backed by any material evidence. None of the parties who have filed the confirmation have confirmed having received their goods back. 6.7 In view of the above mentioned facts and circumstances, the replies filed by the assessee is not acceptable.
Assessment year: 2009-10 Page 3 of 11 7. In spite of being allowed several opportunities, the assessee has failed to substantiate with evidence the nature and source of these accretion to Sundry creditors representing purchases made during the year of Rs. 19,22,05,496/-. The onus is on the assessee company to explain with evidence the nature and source of these credits appearing in the books of account. The assessee company was allowed an opportunity to present the creditors in course of the assessment proceedings but has failed to do so. In this respect it is pertinent to note the provision of section 68 of the IT act 1961, as under:- "where any sum is found to be credited to the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, I the opinion of the assessing offices, satisfactory, the sum so credited may be charges to income tax as the income of the assessee for that previous year" In this respect it is well settled that the assessee has to prove all the three conditions jointly as under:- 1. The identity of the creditor, 2. Genuineness of the transaction, and 3. the capacity or credit worthiness of the creditor As detailed above, - In this case, as many as 57 notices u/s 133(6) were returned by the postal authority, (49 already intimated to assessee vide notice dated 23.12.2011, + 8 returned thereafter). In case of those 57 Creditors the very first condition of their identity or existence is not proved. - In the cases of remaining creditors including some other creditors whose confirmations have been placed on record, the second and third conditions are not fulfilled.
As regard genuineness of transaction, the same is doubted in the absence of any evidence in respect of actual sales, its logistics for purported movement of goods, and payment for the goods in the year or in subsequent years. - All these purchases are averaging more than Rs. 20.00 Lakh. Any person who happen to be dealing in fabrics worth Rs.20.00 Lakh and more, in one transaction and not being to assessed to Income Tax (in the absence of PAN) is unlikely and raises serious doubt its capacity to grant such large amount credit which extend to such long period of more than two year. - The assessee company has furnished only self-serving documents, such as, ledger accounts procured from few group concerns which do not explain the nature of transactions or substantiate its genuineness. - The assessee company has furnished ledger accounts of the parties which do not bear any PAN or any other details proving the identity, genuineness or creditworthiness of the parties. These are again self supporting documents having no evidentiary value. The assessee company has thus failed to prove the identity, genuineness and creditworthiness of the creditors.
Assessment year: 2009-10 Page 4 of 11 - The explanation offered by the assessee in its reply dated 27.12.2011 is not found to be acceptable. Accordingly since the assessee company has not offered satisfactory explanation about the nature and source on respect of accretion to the Sundry creditors, representing purchases made during the year of Rs. 19,22,05,496/-, is held as unexplained cash credits and is being charged to income-tax u/s. 68 of the I.T. Act as income of the assessee. Therefore a sum of Rs. 19,22,05,496/- is added to the total income of the assessee company.
Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the learned CIT(A). Learned CIT(A), in a very detailed order, inter alia held that the provisions of Section 68 could not be pressed into service so far as purchases on credit are concerned, as this provision pertains to the ‘cash credits’. The relevant observations are as follows: 4.6 ………………I am in agreement with appellant's submission that for making addition u/s. 68, it is needed that the sum should be credited. The legislation has chosen the word 'sum' with a specific intention to meet the "amount of money'. In this connection that the appellant's A/R has rightly drawn my attention to the meaning of the word 'sum' from P. Ramanatha Aiyar concise law dictionary and also to Merriam Webster's Collegiate Dictionary. The same is extracted as under:- "Sum. A quantity or amount of money [S.37(a)(1), T.P. Act (4 of 1882][S.43,(b), Indian Partnership Act (9 of 1932)]. Sum. "An indefinite or specified amount of money" 4.7 Even I took note from the Whartons's Law Lexicon Dictionary to ascertain the meaning of "Cash Credits", however, I find that there is no definition together of "Cash Credits" but the word CASH & CREDIT has been explained separately on page 259 and 436 respectively of the said Wharton's Law Lexicon Dictionary. The same is reproduced as under:- Cash- (fr. Caisse, Fr., a chest], money, properly ready money of the current coin of the realm, including Bank of Engiand notes. Credit-a transfer of goods in confidence of future payment, that side of an amount of any item set down in favour of one party against any sums or matters ('debit') which are set against him. 4.8 The perusal of the aforesaid definition also supports the contention of appellant that the word 'sum' which is used by the legislature in section 68 of the Act relates with a specific intent of the legislature i.e. money or cash as the credit word denotes to transfer of goods in connection to future payment, hence the same cannot anyway be said that on the date of such credit, which relates to purchase on credit relates to "CASH CREDITS'. Hence in my considered view the purchase of goods on credit cannot be said to be "Cash Credits" in the given circumstances of the appellant’s case. Hence the applicability of section 68 by the A.O. in the case of the appellant on outstanding balances in the name of such parties with Assessment year: 2009-10 Page 5 of 11 whom the appellant company affected the purchases during the accounting year is not correct and justified in the background of aforesaid stated facts of the appellant's case. 4.9 'Thus, in my considered view the outstanding balances were outstanding credit of near about 50 parties as the sales affected by the appellant through purchases made by these parties were lying outstanding and no payment was made by purchaser i.e. the appellant. The effective sales were made but as per the appellant's submission, it is explicitly clear that goods were returned back to seller of such goods being defective or damaged stock after it was noticed by purchasers. 4.10 I find that in the entire transaction of the appellant company, there was no movement of any money in said transaction of purchases, sales and sales return & purchase return. Thus, the entire transaction merely seems to be a book entry, which records the purchases, sales and subsequent sales return & purchase return, which is evident from copy of ledger account filed by the appellant in the form of paper book, along with which the confirmation letter from such creditors were also filed by the appellant company. Further to that, once the A.O. record in the assessment order that there is no movement of any fund and it was merely transaction of purchase of goods, which was shown as outstanding creditors then the same cannot be held as unexplained cash credits. In this regard a decision of Jharkhand High Court in the case of Amitabh Construction Pvt. Ltd. vs. Adul.CIT reported in 335 ITR 523. is very relevant in the perspective of appellant's case, wherein it has been clearly held that the Assessing officer had passed a contradictory order by holding that the books of account were not reliable while deciding the issue of the sundry creditors but had relied upon the return for accepting the profit shown to be correct which was supported by the books of account. The Assessing officer had committed an error of law by adding that amount under section 68 straightway merely because of the reasons that the genuineness of the transaction shown in the heading of sundry creditors was not found genuine." 4.11 I find that in the above case, the addition made by the A.O. us 68 was not held justified and matter was set aside to the A.O. by the Hon’ble Jharkhand High the addition was made by A.O. u/s 68 of the Act. 4.12 Further to that, it is also a fact on record that the appellant company submitted form 3CD report along with return of income as per section 44AB of the Act. The appellant company submitted that the goods were purchased and directly sent to its customer by the creditors itself, who happen to be supplier of goods, which was purchased by the appellant company and subsequently shown to its customer. The appellant company has filed confirmation letter from all such parties, which suggests that goods were returned back and a result thereof the balance of such creditors as on 31/03/2010 remains NIL. Thus taking note of the fact of the appellant's case, the entire purchase, sales, sales return and purchase return makes the entire transaction as merely of entry of the transaction in the books of accounts though no actual money or cash passed in the hands of any party in the said transaction. In view of the same, the same cannot be held to be cash credit. Thus, the fact remains that the provisions of section 68 only is applicable in respect of such cash credit, which is not explained and accordingly, the same is taxed as deemed income. But in the foretasted facts of the appellant's case, the said creditors cannot be said to be as unexplained cash credits. In view Assessment year: 2009-10 Page 6 of 11 of the aforesaid facts, I do not find any justification in A.O.'s action w/s 68 of the Act. 4.13 Further on perusal of section 68 of the IT Act, it reveals that the section deals with 'CASH CREDIT'. By no stretch of the imagination goods purchased on credit can be considered cash credit, as section 68 came into effect when there is cash credit in the accounts of the appellant. However in the instant case, the appellant has purchased goods on credit and the same were also returned brick to the suppliers, when found defective. In addition to this, I also find merits in the arguments of the appellant that section 68 starts with a specific direction that "where any sum is found credited in the books...". Here it is seen that intent of the legislation, while defining the Cash Credit dealt with the word that if any sum is found credited in the books of accounts then only section 68 will came into effect. Thus there is no provision when the goods purchased in credit will amount to cash credit. Further I find that the A.O. has accepted the purchases as genuine and also nowhere objected to the sale consideration shown by the appellant company, which was subjected to statutory Audit u/s 44AB of the Act. Further the sales were affected as outcome of such purchases only. This aspect also proves that A.O.'s action is completely contrary to the facts of the case. Thus, taking note of all these facts, I consider it proper and appropriate to hold that the A.O. was not justified in making the aforesaid addition. Accordingly this ground of appeal is allowed.
4. The Assessing Officer is aggrieved of the relief so granted by the learned CIT(A) and is in appeal before us. Grievance raised by the appellant Assessing Officer is as follows: “Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 19,22,05,496/- made by AO as unexplained cash credit u/s. 68 of the I.T. Act 1961 without appreciation of the fact the assessee could not prove the identity and existence of the creditors shown in the balance sheet after providing the reasonable opportunity.”
We have heard the rival contentions, perused the material on record and duly considered the facts of the case in the light of the applicable legal position.
We may at the outset mention that though the learned CIT(A) has observed that “The appellant company has filed confirmation letter from all such parties, which suggests that goods were returned back and a result thereof the balance of such creditors as on 31/03/2010 remains NIL”, no such document was shown to us. In response to our specific question about the existence of such a document, the learned counsel for the assessee could not throw any light on the same. We could also not find any reference to such documents in the paper book filed before us, which is said to contain all the submissions made before the CIT(A). In any case, these documents, even if they exist, pertain to the subsequent financial year, which is not the subject matter of our consideration at this stage. There is thus no basis for this observation by the learned CIT(A) that goods were returned by the purchaser directly to the vendor, and not even the smallest evidence on that aspect has been filed before us. The product that the assessee has purchased is fabric, and it does not take Assessment year: 2009-10 Page 7 of 11 complicated analysis to find out whether the fabric is defective or not; the acceptability of quality of fabric can be examined even at the time of delivery, and, by the way, delivery of the fabric, going by the version of the assessee, is taken directly by the buyer. If the buyer did not find it defective at the point of taking delivery, or let us say within a reasonable time of taking delivery, it does not sound a very convincing story that every part of the fabric, bought from each of the dozens of vendors, as found to be defective. That is too much of a coincidence. If the story of the assessee is to be believed, the assessee bought goods worth almost 20 crores from vendors who do not have fixed addresses, whom the assessee cannot even locate today, each one of whom gave 100% credit to the assessee, 100% of the goods supplied by them was defective, and the 100% of the goods purchased from them is said to have been returned in the subsequent year- even though there is not an iota of evidence about the goods being returned to them. On the one hand, the assessee submits that the vendors are so small that they operate from the table spaces on wafer-thin margins, and, on the other hand, they are so financially strong that notwithstanding the fact that neither any payment is made to them by the assessee nor there is any evidence of the goods having actually been returned to them, they have not raised even a whisper about such an inordinate delay in payment of dues to them. There is no material whatsoever to corroborate the statements made by the assessee with respect to the quality of the goods and the fact of the good having been returned to the assessee. While these vendors are so accommodating to the business concerns of the assessee, the assessee does not even have their current whereabouts. It is also an interesting coincidence, coincidence if it is, that all the supplies by all the vendors turned out to be defective, and not a single payment is made for any of the supplies by these vendors. Be that as it may, as we look at the balance sheet of the assessee at the year-end for the relevant previous year before us, it is interesting to note that on the assets side, all that the assessee has is a cash and bank balance of Rs 41,711, sundry debtors of Rs 5,46,331 apart from the loans and advances of Rs 36,00,00,000, and yet the current liabilities and provisions, including the creditors for supplies in question aggregating to Rs 19,22,05,496, stand at Rs 36,04,86,476. There is not a single payment for these supplies to the vendors as the goods are defective, but then neither is there any evidence of the actual return of the goods by the end buyer to the assessee, nor by the assessee to the vendor. That is, to say the least, pretty unusual. If the supplies are defective, it is only natural that the end buyers would not make the payments for the goods but then the entire debtors of the assessee are only Rs 5,46,331, and yet the assessee is so financially strong that with a capital base of just Rs 1 lakhs, and simply on the strength of sundry creditors of Rs 36.04 crores- including for these unpaid creditors for purchase of goods, the assessee has shown loans and advances of Rs 36 crores. These figures do not inspire any confidence in the explanation given by the assessee. It is inconceivable that the people who have to take monies from the assessee, and huge monies aggregating to Rs 19.22 crores, are not even traceable, and most of the notices served on them have come back unserved. The explanations given by the assessee do not appeal to us at all. We have no hesitation in rejecting the explanation given by the assessee in this regard.
It is also important that when we examine the genuineness of the transactions entered into by the assessee, we must also bear in mind Hon'ble Supreme Court's Assessment year: 2009-10 Page 8 of 11 observation, in the case of CIT v. Durga Prasad More [(1971) 82 ITR 540 (SC)], to the effect that "Science has not yet invented any instrument to test the reliability of the evidence placed before a court or tribunal. Therefore, the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities". Similarly, in a later decision in the case of Sumati Dayal v. CIT [(1995) 214 ITR 801 (SC)], Hon'ble Supreme Court rejected the theory that it is for alleger to prove that the apparent and not real, and observed that, "This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities.... Similarly the observation.... that if it is alleged that these tickets were obtained through fraudulent means, it is upon the alleger to prove that it is so, ignores the reality. The transaction about purchase of winning ticket takes place in secret and direct evidence about such purchase would be rarely available In our opinion, the majority opinion after considering surrounding circumstances and applying the test of human probabilities has rightly concluded that the appellant's claim about the amount being her winning from races is not genuine. It cannot be said that the explanation offered by the appellant in respect of the said amounts has been rejected unreasonably". We will be superficial in our approach in case we examine the claim of the assessee solely on the basis of documents filed by the assessee and overlook clear the unusual pattern in the documents filed by the assessee and pretend to be oblivious of the ground realities. As Hon'ble Supreme Court has observed, in the case of Durga Prasad More (supra),………"it is true that an apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real party who relies on a recital in a deed has to establish the truth of those recitals, otherwise it will be very easy to make self-serving statements in documents either executed or taken by a party and rely on those recitals. If all that an assessee who wants to evade tax is to have some recitals made in a document either executed by him or executed in his favour then the door will be left wide open to evade tax. A little probing was sufficient in the present case to show that the apparent was not the real. The taxing authorities were not required to put on blinkers while looking at the documents produced before them. They were entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents". As a final fact finding authority, this Tribunal cannot be superficial in its assessment of the genuineness of a transaction, and this call is to be taken not only in the light of the face value of the documents sighted before the Tribunal but also in the light of all the surrounding circumstances, the preponderance of human probabilities and ground realities. There may be a difference in subjective perception on such issues, on the same set of facts, but that cannot be a reason enough for the fact-finding authorities to avoid taking subjective calls on these aspects, and remain confined to the findings on the basis of irrefutable evidence. Hon'ble Supreme Court has, in the case of Durga Prasad More (supra), observed that "human minds may differ as to the reliability of a piece of evidence but in that sphere the decision of the final fact finding authority is made conclusive by law". This faith in the Tribunal by Hon'ble Courts above makes the job of the Tribunal even more onerous and demanding and, in our considered view, it does require the Tribunal to take a holistic view of the matter, in the light of surrounding circumstances, the preponderance of probabilities and ground realities, rather than being swayed by the not so Assessment year: 2009-10 Page 9 of 11 convincing, but apparently in order, documents and examining them, in a pedantic manner, with the blinkers on.
Viewed thus, the impugned credit entries reflecting creditors for purchases of goods, in our considered view, are not satisfactorily explained. As regards the claim that since sales are not being doubted, the purchases cannot be doubted either, as what is sold must have been purchased as well, this theory is relevant only when purchases are being sought to be disallowed as bogus, and profit on the sale is being thus computed without providing for the cost of purchases; that is not the case here. What is held to be unexplained is the bunch of entries showing credits in the names of certain vendors and the existence and means of these vendors is not proved and the genuineness of the transactions is not established. None of the three necessary ingredients of a credit, i.e. existence of the creditor, means of the creditor and genuineness of the transaction involved, are established on the facts of this case. In the case of CIT Vs Precision Finance Pvt Ltd [(1994) 208 ITR 465 (Cal)], Hon’ble Calcutta High Court has summed up this principle by observing that “It is for the assessee to prove the identity of the creditors, their creditworthiness and the genuineness of the transactions. In our view, on the facts of this case, the Tribunal did not take into account all these ingredients which have to be satisfied by the assessee. Mere furnishing of the particulars is not enough. The enquiry of the ITO revealed that either the assessee was not traceable or there was no such file and, accordingly, the first ingredient as to the identity of the creditors had not been established. If the identity of the creditors had not been established, consequently, the question of establishment of the genuineness of the transactions or the creditworthiness of the creditors did not and could not arise. The Tribunal did not apply its mind to the facts of this particular case and proceeded on the footing that since the transactions were through the bank account, accordingly, it is to be presumed that the transactions were genuine. It was not for the ITO to find out by making an investigation from the bank accounts unless the assessee proved the identity of the creditors and their creditworthiness. Mere payment by account payee cheque is not sacrosanct, nor can it make a non-genuine transaction genuine”. The onus on the assessee to prove the existence of the alleged vendors and the genuineness of the transaction is far from proven. There is not even a whisper of evidence before us to prove, or even prima facie indicate, that these alleged vendors did exist. Every statement of the assessee is on the basis of sweeping generalizations. So far as the genuineness of the transaction is concerned, there is nothing before us even to indicate, leave aside from establishing, the genuineness of the transaction. We reject the explanations of the assessee as wholly unacceptable. In CIT v. Nathulal Agarwala & Sons [(1985) 153 ITR 2921 (Pat)] full bench of Hon’ble Patna High Court had inter alia observed, though in a slightly different context, that "As to the nature of the explanation to be rendered by the assessee, it seems plain on the principle that it is not the law that the moment any fantastic or unacceptable explanation is given, the burden placed upon him would be discharged and the presumption rebutted. It is not the law and perhaps hardly can be that any and every explanation by the assessee must be accepted…. He may not prove what he asserts to the hilt positively but as a matter of fact materials must be brought on the record to show that what he says is reasonably valid." The above views were approved by the Hon’ble Supreme Assessment year: 2009-10 Page 10 of 11 Court in the case of CIT v. Mussadilal Ram Bharose [(1987) 165 ITR 142 (SC)]. Referring to the judgment of Hon’ble Patna High Court, Their Lordships observed that "The Patna High Court emphasised that as to the nature of the explanation to be rendered by the assessee, it was plain on principle that it was not the law that the moment any fantastic or unacceptable explanation was given, the burden placed upon him would be discharged and the presumption rebutted. We agree. We further agree that it is not the law that any and every explanation by the assessee must be accepted. It must be an acceptable explanation, acceptable to a fact-finding body." These observations are equally relevant in the context of explanations for the purpose of application of section 68. Viewed in this light, we reject the explanation of the assessee as an explanation unacceptable to this final fact finding body.
As regards the learned CIT(A)’s stand that the amount shown as outstanding for the credit purchases can never be covered by the scope of Section 68, in our considered view, that is a very superficial way of looking at the provisions of Section 68. Section 68 categorically provides that “where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year”. The law is simple and unambiguous. When a sum is found credited in the books of accounts of the assessee, he has to explain the same, and in the event of the assessee’s failure to do so, that amount is treated as unexplained credit under section 68. When an assessee purchases something from a vendor, obviously, the account of such a vendor is credited and the purchases are debited and, therefore, when the assessee does not have a reasonable explanation about the credit appearing in the account of the vendor- as in this case, the Assessing Officer is perfectly justified in making the addition under section 68. The assessee explains that these people keep changing their office and are not easily traceable, but could it be an acceptable explanation that someone owes huge amounts to the vendors and these vendors are untraceable? The answer, in our humble understanding, is emphatically in negative. Another explanation of the assessee is that the goods were found defective and, therefore, no payments were made but there is no evidence whatsoever of the goods having been returned; this explanation does not merit acceptance either. Yet another facet of the explanation is that “entire” supplies were found to be defective, and this explanation is also highly unlikely. There is no explanation for why did it take so long to discover that the goods were defective, and there is not even a whisper of evidence that there were any issues in this aspect. A lot of emphasis is then placed on the fact that section 68 is titled ‘cash credit’ and, therefore, purchases on credits cannot be covered by this section. This plea is also ex-facie incorrect as wordings of Section 68, as we have noted above, are categorical, and these words cover any unexplained credit in the books of accounts. This matter has been under hearing before this Tribunal for almost a decade, and a lot of papers are placed on record, but there is not one confirmation from the purported vendors evidencing the transaction, evidencing the goods return or evidencing the payment. When we specifically asked the learned counsel to point out one confirmation filed by the assessee, he could not do so. We have carefully Assessment year: 2009-10 Page 11 of 11 perused the submissions filed by the assessee before the CIT(A)- copies of which are placed before us at pages 31 to 33 and there is not one averment on this aspect. Learned counsel for the assessee expressed inability to file any confirmation from the persons from whom such purchases were purportedly made. It was once again explained that these persons being small traders of limited means and operating from table space etc are no longer available for any verification, but then these persons were not available even at the stage of the assessment proceedings. There is a mention about some confirmations having been filed by these persons in the next year but even those confirmations could not be produced before us. There is nothing to establish identity of these persons; no payments have been made to them, and there is no evidence before us about the current status of amounts payable to them. All that is being reiterated are the self-serving statements, based on sweeping generalizations, unverified statements, and without any supporting evidence. The onus is on the assessee to prove the identity of these persons, the means of these persons to have allowed these credits to the assessee, and the genuineness of the transactions leading to these credits. On each of these counts, the assessee has miserably failed in discharging his onus. The factual foundation of the case of the assessee is devoid of any substance or merits. The credits appearing in the books of the assessee, with respect to the purported purchase of goods on credit, in our considered view, are, therefore, not at all reasonably explained, and the Assessing Officer was, therefore, fully justified in making the impugned addition of Rs 19,22,05,496 under section 68. We must, therefore, restore the addition made by the Assessing Officer.
In view of these discussions, and bearing in mind the entirety of the case, we vacate the relief granted by the learned CIT(A) and restore the impugned addition of Rs 19,22,05,496, made by the Assessing Officer. The appellant Assessing Officer thus succeeds in his appeal. Ordered, accordingly.
In the result, the appeal is allowed. Pronounced in the open court today on the 19th day of October, 2022.