MANJU SHARMA,NEW DELHI vs. ITO WARD - 45(5), NEW DELHI

1. This appeal filed by the assessee is directed against the order dated 05.09.2019 passed by the ld. CIT(A)-15, New Delhi, relating to assessment year 2014-15.

Facts of the case, in brief, are that the assessee is an individual and is proprietor of M/s Eastern Galaxy which is engaged in the business of export of handicrafts and decorative items. She filed her return of income on 29.11.2014 declaring taxable income of Rs.47,10,000/-. The case of the assessee was selected for limited scrutiny under CASS with the reason that there is “Large increase in sundry creditors with respect to turnover as compared to preceding year.”

The AO, during the course of assessment proceedings, observed that the assessee has shown total sales of Rs.5,56,39,544/- and purchase of Rs.5,39,91,884/- whereas the sundry creditors are shown at Rs.6,71,74,832/- . The AO asked the assessee vide query No.8 of his first notice u/s 142(1) dated 19.04.2016 to furnish the list of sundry creditors and debtors and their ledger accounts with confirmation containing PAN and latest address.

Vide letter dated 21.12.2016 the JCIT, Range - 45 directed the AO to make local enquiries through Inspector in 6 cases where the sales made during the year were exceeding Rs. 10 lakhs and to issue summons u/s 131 for personal attendance and also for calling PAN/ITR with complete annexures, complete books of accounts with purchase and sale vouchers, ledger account of Smt. Manju Sharma in the books of creditors and ledger accounts of other parties in the books of creditors, bank account and any other information considered useful.

Accordingly, under the directions issued by the JCIT, the AO deputed the ward Inspectors namely Sh. Ankur Gupta and Sh, Manssh Sangwan to conduct enquiry in these 6 cases and to serve summons u/s 131 dated 21.12.2016 to these sundry creditors for their personal attendance on 26.12.2016 and to file Bank Statements for F.Y. 2013-14, ITR along with Balance sheet, PAN Card or Aadhar Card, Ledger accounts with copies of sale bills, Ledger accounts of sale made to other parties, complete Books of account.

After conducting the field enquiries, the ward Inspectors submitted their report on 23.12.2016, submitting therein that Sh. Lalmiyan, Sh. Mohd, Younus and Sh. Shakeel denied of having issued bills to the assessee. Further, Sh. Riyazudin, Sh. Ovais Khan and Sh. Irshad Khan were not found on the specified addresses. Since, the identity, creditworthiness and genuineness of the transactions with these 6 persons could not be established, therefore, the AO vide show cause notice dated 23.12.2016 asked the assessee to explain as to why the credit balance outstanding against the name of these 6 creditors amounting to Rs, 3,20,92,833/- be not added back to declared total income u/s 68 of I.Tax Act.

Later on, in response to summons u/s 131 of I.Tax Act, statement of Sh. Ovais Khan, Mohd. Younus, Sh. Shakeel were recorded on oath and vide order sheet entry dated 26.12.2016, copy of their statements were shown to the AR of the assessee and Sh. Keshav Dutt Sharma, husband of the assessee who were present there for confrontation/ cross examination of the persons whose statements have been recorded. However, no confrontation/ cross-examination of these parties were done by them. Finally, vide order sheet entry dated 26.12.2016, the assessee’s AR was asked to produce the remaining 3 creditors for verification namely Sh. Riyazuddin, Sh. Irshad Khan and Sh. Lalmiyan on 28.12.2016 at 11.00 AM with supporting documents mentioned in summons u/s 131 dated 21.12.2016.

The AO vide final show cause notice dated 29.12.2016 again giving the brief facts of the case and thereafter, highlighting the non- verification of sundry creditors, asked to assessee to show cause as to why the balance amount shown outstanding against the name of these 6 creditors amounting to Rs. 3,20,92,833/- be not added back and the case was fixed for hearing on 30.12.2016 at 11.00 AM.

The AO accordingly made an addition of Rs.3,05,34,283/- u/s 68 of the IT Act, 1961 on account of unverified/non-existent /bogus creditors by observing as under:- “Keeping in view of the facts and circumstances of the case and the statements of the creditors and documents and submissions place on record, the total income of the assessee is determined as under:

Sh. Shakeel, Shakeel Zari Art- Rs.81,24,743/- As per his statement recorded on oath, he did not know Manju Sharma and he has no dealing with Manju Sharma. The Husband and the A.R. of the Assessee also denied having known to him and have any dealings with him vide note sheet entry dated 26.12.2016. Accordingly vide note sheet entry dated 26.12.2016 the husband and A.R. of the assessee were asked to produce Sh. Shakeel for personal deposition and examination on oath. However, till 30.12.2016 they have neither produced Shakeel nor filed any documents as asked for vide show cause notice dated 29.12.2016. In the absence of examination/verification, the identity, genuineness of transactions and creditworthiness of the creditor is not proved as per section 68 of the Act by the assessee.

Lalmiyan- 66,65,105/-The ledger A/c of Lalmiyan bears the heading LALMIYAN, the heading in the copy of bill/cash memo bears the name LALMIYAN, whereas the signatures below spelled as "Lalmian". Also in the copy of the PAN CARD provided the signatures spelled as Lalmiyan. Also, as per the Inspectors report, the person does not file any ITR as he has income below taxable income. Also, summons u/s 131 of the Act dated 21.12.2016 was -served on him, but no reply/compliance has been made by him. The Husband and A.R. of the assessee also did not produce the creditor for personal examination on oath and also did not submit any bill/voucher and details of documents as asked for vide show cause dated 29.12.2016 to prove the genuineness of the transaction as asked for vide notesheet entry dated 26.12.2016 and show cause dated 29.12.2016. Hence, in the absence of examination/verification, the identity, genuineness of transactions and creditworthiness of the creditor is not proved as per section 68 of the Act by the assessee.

Mohd. Younus-14,67,100/- On perusal of the bank statement of Md. Younus, there are credit entries of substantial amount and these payments have been received through RTGS/NEFT from Eastern Galaxy. However, no bank detail for A.Y. 2014-15/ bill/ invoices has been submitted for the verification of payments in cash to Mohd. Younus in subsequent years as revealed from their ledger a/c. Hence, it is not certain whether these payments have been actually paid to Mohd. Younus or not or that any transaction of purchase and sale has been carried out. Therefore, I treat that 50% of these purchases in F.Y.2013-14 as unverifiable/ bogus.

Ovais Khan- 16,50,002 -Cr perusal of the bank statement of the assessee for F.Y.2015-16, there are payments through RTSS N5FT from Eastern Galaxy to Ovais Khan. However, Ovais Khan did not confirm the confirmation sent to this office from the Eastern Galaxy of the amount of Rs.16,50,000 for F.Y. 2013-14. However, no bank detail for A.Y. 2014- 15, bills/invoices has been submitted for the verification of payments in cash to Ovais Khan in subsequent years as revealed from their ledger a/c. Hence, it is not certain whether these payments have been actually paid to Ovais Khan or not or that any transaction of purchase and sale has been carried out. Also Mohd. Younus did not give any bill to its customers. Therefore, I treat that 50% of these purchases in F.Y.2013-14 as unverifiable/ bogus. Section 68 of the Act states 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. In view of the above enquiries and verification conducted by this office in respect of the above creditors and also after giving the assessee an opportunity of being heard from time to time it has been found that these creditors are either bogus or the liability shown by the assessee against them has not been proved by the assessee in terms of identity, creditworthiness and genuineness of these creditors. Since the assessee' has failed to discharge the onus cast upon her in respect of sundry creditors amounting to Rs.3,05,34,283/- which have been found credited in the books of accounts maintained by assessee ,these are being charged to Income Tax u/s 68 of the Income Tax Act, 1961 for A.Y. 2014-15”

In appeal, the ld.CIT(A) relying on various decisions confirmed the addition made by the AO u/s 68. The relevant final observation of the ld.CIT(A) is as under:-

Aggrieved with such order of the ld.CIT(A), the assessee is in appeal before the Tribunal by raising the following grounds:- “

The ld. Counsel for the assessee submitted that during the course of assessment proceedings, the assessee had given the list of creditors with their addresses and has explained the reason for increase in creditors. It was explained that sales as well as the purchases had increased over corresponding periods in earlier years. It was explained that since payments from debtors were delayed, the creditors could not be paid. He submitted that after receipt from the debtors belatedly, the creditors were subsequently paid much before the completion of the assessment. Although such details were filed before the AO, however, the AO did not take all these things into account and made addition u/s 68 of the Act.

Referring to the decision of the Hon’ble Supreme Court in the case of CIT vs. Century Plyboards (I) Ltd., reported in 103 taxmann.com 179 (SC), he submitted that in that case, after completion of the assessment, the Commissioner received a complaint from Director General that assessee had entered into bogus purchase transactions with one ‘D’. On the basis of the said complaint, the CIT(A) passed a revisional order setting aside the assessment. In appeal proceedings, the Tribunal, having noticed copies of invoices and challans, proof of payments, bank statements, transportation payments, vouchers for movement of goods and like documents, concluded that transactions between assessee and ‘D’ were not bogus or fraudulent. Accordingly, the order passed u/s 263 by the CIT was set aside.

So far as the decisions relied on by the ld.CIT(A) are concerned, he submitted that all these decisions relied on by the ld.CIT(A) relate to loans taken by the assessee and the assessee failed to substantiate the three ingredients of section 68 of the IT Act. However, in the instant case, there is no such cash transaction and the assessee has purchased the goods from these parties and has made payments to them in subsequent years before the completion of assessment. There is nothing on record to show that such payments made to them has come back to the assessee directly or indirectly. The sales of the assessee has been accepted and the books of account have not been rejected. Therefore, the order of the CIT(A) sustaining the addition made by the AO has to be set aside and the grounds raised by the assessee should be deleted.

The ld. DR, on the other hand, heavily relied on the order of the AO and the CIT(A). He submitted that the assessee in the instant case has shown unsubstantiated sundry creditors of Rs.6.71 crores on a total turnover of Rs.5.56 crores and purchase of Rs.5.40 crores. The AO has made the addition on account of bogus liability against sundry creditors because the assessee could not substantiate the identity and credit worthiness of the sundry creditors and genuineness of the transactions. He submitted that while deciding the issue we should go to the substance of the case and not the form of the case. The AO in the instant case has made extensive enquiries and made the additions which has been sustained by the CIT(A) after obtaining a remand report from the AO. He submitted that the assessee has miserably failed to substantiate the purchases from the six creditors to the tune of Rs.3.05 crores and, therefore, the addition made by the AO and sustained by the CIT(A) is fully justified. He further submitted that even though the assessee was given opportunity to cross-examine three of the sundry creditors, however, the assessee did not avail of the opportunity and, therefore, the assessee cannot make any plea that she was not given the opportunity to cross-examine.

The ld. Counsel, in his rejoinder, drew the attention of the Bench to the copy of the remand report and submitted that the AO himself has accepted in the remand report that the assessee has filed the bills of goods purchased from the six creditors, freight charges paid for purchases, details of freight charges of Rs.3.96 lakhs debited to the Profits & Loss Account and has also given a finding that the assessee has paid the amount outstanding against the name of six sundry creditors as on 31.03.2004 in subsequent assessment years either by way of cheque/RTGS/NEFT or by making cash payment. He has further given a finding that provisions of section 40(a)(3) are not applicable to the cash payments where it has exceeded the limit of Rs.20,000/- in view of Rule 60DD(f) of IT Rules vide Notification No.97/2008 dated 10.10.2008. Further, the assessee, in the instant case, has produced three of these six creditors before the AO. He further submitted that due to threat by the inspectors who visited the business premises of those creditors who are illiterate persons and village artisans and are not maintaining any regular books of account, they could not give proper replies to the AO as wanted by him. However, the chain of events indicate that the assessee had made purchases from the six creditors, maintained proper stock register giving date-wise and quantity- wise purchase and sale of goods and the entire sales were exported out of the country, therefore, making such huge addition is not only unjustified but also will ruin the business of the assessee. He accordingly submitted that the order passed by the CIT(A) should be reversed and the grounds raised by the assessee should be allowed.

We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find, the AO, in the instant case, made addition of Rs.3,05,34,283/- u/s 68 of the IT Act being unverified/non-existent /bogus sundry creditors in the books of the assessee in respect of six creditors on the ground that the assessee could not substantiate the identity and credit worthiness of the creditors and the genuineness of the transaction. We find, the ld.CIT(A) upheld the action of the AO. It is the submission of the ld. Counsel for the assessee that the assessee has maintained full quantity-wise details of the purchases from the above parties and the sales, which are export sales, have gone through various inspections by the Customs Department and the sales have been accepted by the AO himself. Further, the books of account of the assessee have not been rejected. The assessee has made the payments to the above parties in the subsequent assessment years which has been acknowledged by the AO in the remand report. Further, the assessee has produced three of the six creditors before the AO. Therefore, under the circumstances, the addition u/s 68 of the Act in respect of the trade creditors is not justified.

We find some force in the above argument of the ld. Counsel. It has been an undisputed fact that the books of account of the assessee have not been rejected and the sales of the assessee has been accepted. The assessee, in the instant case is maintaining stock register giving item-wise and quantity-wise items purchased, sold, opening stock and closing stock. Further, out of the six creditors, the assessee has produced three creditors, namely, S/Shri Ovais Khan, Mohd. Younus and Shakeel, whose statements were recorded u/s 131 of the IT Act. Although the statements recorded during the course of assessment proceedings from the above three creditors are not in favour of the assessee, however, during the remand proceedings, on being asked by the AO, the assessee has produced bills of goods purchased from the six sundry creditors, freight charges paid for purchases, details of freight charges, ledger account of these parties for subsequent assessment years highlighting the payments, etc. It is also pertinent to mention here that the AO himself in the remand report has accepted that the assessee has paid the amount outstanding against the names of six sundry creditors as on 31.03.2014 in subsequent assessment years either by way of cheque/RTGS/NEFT or by making cash payments. The relevant observation of the AO in the remand report reads as under:- “During the course of remand proceedings, the assessee was asked to furnish the bills of goods purchased from the 6 sundry creditors, freight charges paid for purchases, details of freight charges of Rs.3.96 lakhs debited in Trading account. Further, ledger accounts of these creditors for subsequent assessment years highlighting the payments made in subsequent years, item-wise purchases and sales made were called for. The same was filed by the assessee vide letters dated 11.09.2017, 26.09.2017 and 14.11.2017. On verification of details/documents submitted by the assessee in Remand proceedings, it is noticed that the assessee has paid the amount outstanding against the name of 6 sundry creditors as on 31.03.2014 in subsequent assessment years either by way of cheque/RTDS/NEFT or by making cash payments. Though the cash payments made were exceeding Rs.20,000/-, however, the same were claimed to be exempt under Rule 6DD(f) of I.Tax rules and in view of Notification No.97/2008 dated 10.10.2008. Except this, the assessee could not bring on record any documentary evidence to rebut the arguments put forth by the Assessing Officer in the assessment order passed for the year under consideration on 30.12.2016.”

As mentioned earlier, the books of account of the assessee has not been rejected and the addition u/s 68 of the Act has been made in respect of six creditors from whom the assessee has purchased goods, but, no payments have been made to those parties during the impugned assessment year and the assessee was unable to produce the above six parties before the AO during remand proceedings although three of them were produced before the AO during assessment proceedings. Under these circumstances, it is to be seen as to whether addition can be made of the whole of the amount or profit embedded in these purchases can be added to the total income of the assessee.

We find, somewhat identical issue had come up before the Hon’ble Bombay High Court in the case of PCIT vs. Jakharia Fabric (P) Ltd., 118 taxmann.com 406. In that case, information was received by the AO to the effect that eight parties from whom purchases were made by the assessee were hawala dealers who had issued bogus bills and the AO treated the aforesaid purchases as bogus purchases and accordingly addition was made to the total income of the assessee. The CIT (A) noted that without purchase of materials, it was not possible for the assessee to complete job work of dyeing and, thus, the entire purchases could not be added as bogus and profit element embedded in such transaction had to be added to the total income of the assessee. Since profit estimation ranged from 12.5% to 25%, the CIT (A) took the view that 17.5% as profit element would meet the ends of justice and he accordingly he directed the AO to estimate the profit at 17.5% of the total alleged bogus purchases and, thereafter, to delete the balance addition. The Tribunal concurred with the said view. On further appeal by the Revenue, the Hon’ble High Court upheld the order of the Tribunal and the appeal filed by the Revenue was dismissed by observing as under:-

In the appellate proceedings before the first appellate authority, it was held as under :- "2.15 The facts in the present case shows that the appellant was not in a position to prove the existence of the suppliers. The suppliers were found to be engaged in providing bogus bills without actual delivery of goods. Moreover few of the suppliers are not regular parties and they were found to have supplied only during the year and there were no supply either in the earlier year or in the subsequent year from such parties. This circumstantial evidence also prove the bogus nature of the transaction. On careful analysis of the finding of Hon'ble High Court of Gujarat in the above mentioned cases, I am of the firm view that without purchase of materials it was not possible for the appellant to complete the job work of Priya Soparkar 6 10 itxa 1354-17-o dying. As mentioned above the AO had never disputed or examined the aspect of job work receipts. Hence I am of the firm belief that the appellant had made cash purchases from other parties which were not recorded in the books. The appellant took only bills from these 8 parties as accommodation to explain the purchases. Therefore the entire purchase from these 8 parties cannot be added as bogus and what needs to be taxed is the profit element embedded in such transaction. The appellant carryout only the job work of dying the cloths on a contract basis. Estimation ranging from 12.5% to 25% has been upheld by the Hon'ble Gujarat High Court depending upon the nature of the business. As held in the case of Simit P. Sheth (supra) no uniform yardstick could be applied to estimate the rate of profit and it vary with the nature of business. Taking all the facts into consideration and the findings of the Hon'ble Courts on this issue, I am of the view that estimation of 17.5% of profit would meet the ends of justice. Therefore, I direct the AO to estimate profit of 17.5% on the total alleged bogus purchase which works out to Rs.20,11,270(17.5% of Rs.1,14,92,970/-). The appellant get the relief of the balance Rs.94,81,700/-. The grounds raised are partly Allowed."

In Bholanath Polyfab Limited (supra), Gujarat High Court was also confronted with a similar issue. In that case Tribunal was of the opinion that the purchases might have been made from bogus parties but the purchases themselves were not bogus. Considering the fact situation, Tribunal was of the opinion that not the entire amount of purchases but the profit margin embedded in such amount would be subjected to tax. Gujarat High Court upheld the finding of the Tribunal. It was held that whether the purchases were bogus or whether the parties from whom such purchases were allegedly made were bogus was essentially a question of fact. When the Tribunal had concluded that the assessee did make the purchase, as a natural corollary not the entire amount covered by such purchase but the profit element embedded therein would be subject to tax.

We are in respectful agreement with the view expressed by the Gujarat High Court."

On thorough consideration of the matter, we do not find any error or infirmity in the finding returned by the Tribunal. No substantial question of law arises from such finding returned by the Tribunal. Accordingly, the appeal is dismissed. However, there shall be no order as to cost.”

We find, similar issued had come up before the Hon’ble Delhi High Court in the case of CIT vs. SunriseTooling System (P) Ltd., 47 taxmann.com 20. In that case the AO during assessment proceedings made addition to assessee’s total income on the basis of statement of Director of Company that certain amount represented non-existent or bogus transaction. In appeal, the Tribunal took note of statement of ‘D’ and retraction made later on. It was also noted that said statement was recorded in course of survey under section 133A and, consequently, did not 24 have any evidentiary value. The Tribunal, thus, deleted the addition made by the authorities below. The Hon’ble High Court noticed from records that the Tribunal passed this order after taking note of materials before Revenue authorities which included assessee’s books of account. Besides, the Tribunal also noted that the authorities below had not even rejected the books of the assessee while treating the transaction in question to be bogus. Accordingly the order of the Tribunal was upheld by the Hon’ble High Court. The relevant observation of the Hon’ble High Court at para 5 of the order reads as under:- “5. This Court is of the opinion that the ITAT cannot be faulted in its approach in rendering the findings of fact. Although the learned counsel for the Revenue endeavoured to submit that the ITAT fell into error in overlooking and discounting the statement of D.K. Jain on the ground that it was retracted, the discussion quoted above would show that the ITAT took note of the materials before the AO and the CIT (A), which included the assessee's books of accounts as well as the Sales Tax records of Shree Laxmi Industrial Corporation. These established firmly and conclusively that the claim of the assessee that it had purchased goods from Shree Laxmi Industrial Corporation were borne out. The ITAT also noted - and we agree with that approach entirely - that the income-tax authorities had not even rejected the books of the assessee even while finding the claim as genuine transaction to be bogus.”

We find, the Hon’ble Gujarat High Court has also decided somewhat similar issue in the case of Principal Commissioner of Income Tax, Vadodara 2 vs. Synbiotics Ltd. (supra) In that case, the assessee was engaged in the business of manufacturing and marketing of various bulk drugs and pharmaceutical preparations. During that assessment year, the assessee incurred expenditure for purchase of chemicals for production of products. A search was carried out at the premises of one FHR in which it was found that the said party was running ten concerns which were mainly used for issuing bogus purchase bills and the assessee had also purchased chemicals from one of its concerns. The AO, invoking the provisions of section 69C, made addition to the total income of the assessee on account of bogus purchases. The CIT(A) noted that it was impossible to generate profit ratio of 107.95% and, thus, the assessee had produced goods by utilizing such bulk drugs purchased by it. In the light of the finding of fact, he restricted the addition on account of bogus purchase to 25%. The Tribunal upheld the action fo the CIT(A). On further appeal by the Revenue, the Hon’ble High Court dismissed the appeal of the Revenue by observing as under:- “14. In the light of the rival submissions, the question that arises for consideration is whether the restriction of disallowance in respect of bogus purchases to 25% thereof is justified. 15. As can be seen from the order passed by the Commissioner (Appeals), he, after appreciating the material on record, has recorded a finding of fact to the effect that the assessee had produced goods by utilising such bulk drugs and it is in the light of such finding of fact recorded by him that he has restricted the disallowance on account of bogus purchases to 25%. The Tribunal has not disturbed such finding of fact recorded by the Commissioner (Appeals). A perusal of the proposed questions shows that the appellant has neither challenged the concurrent finding of fact recorded by the Commissioner (Appeals) and the Tribunal, nor has it been pleaded that the findings of fact recorded by the Tribunal are perverse. The Tribunal has concurred with the finding of fact recorded by the Commissioner (Appeals) that the assessee had produced goods by utilising bulk drugs and has followed the decision of this court in the case of N.K. Industries Ltd. {supra), wherein the court has relied upon its earlier decision in Vijay Proteins Ltd. {supra), wherein it has been held thus:— "16. It is a matter of fact that the goods were not received from the parties from whom it is shown to have been purchased but, such material was received from a different source which is exclusively within the knowledge of the assessee and none else. Therefore, it is evident that the assessee had inflated the expenditure in question by showing higher amount of purchase price through the fictitious invoices in the names of 33 bogus suppliers.

Insofar as the decision of the Bombay High Court in the case of Shoreline Hotel (P.) Ltd. {supra) is concerned, the controversy involved in the said case was as regards the validity of exercise of power under section 263 of the Act and while the case involved bogus purchases, no principle has been enunciated in that regard. Moreover, in the facts of the said case, the assessee was engaged in running a hotel and there were no corresponding sales against those purchases. The said decision, therefore, would have no applicability to the facts of the present case.

Since, in the instant case, the sales made by the assessee has been accepted and the books of account have not been rejected and the assessee has made the payments to the sundry creditors in the subsequent years and there is nothing on record to suggest that the money so paid has come back to the assessee directly or indirectly in any form, therefore, making addition of the entire amount payable to the six sundry creditors in the instant case in our opinion is highly unjustified. However, the assessee also cannot get scot free by not producing the sundry creditors and making purchases from parties who are not maintaining proper records or who have made adverse statements and, therefore, the assessee cannot be equated with another assessee who is maintaining records meticulously and not making purchase from grey market. Since the assessee in the instant case is showing GP rate of less than 4%, therefore, considering the totality of the facts of the case, we are of the considered opinion that adoption of GP rate of 16% on such unsubstantiated purchases from the six creditors will meet the ends of justice. We, therefore, direct the AO to adopt GP rate of 16% on such purchases of Rs.3,05,34,283/- from the six creditors which comes to Rs.48,85,485/- as against the addition of the entire amount payable to the six parties u/s 68 of the IT Act.

So far as the decisions relied on by the ld.CIT(A) and the ld. DR are concerned, all those decisions relate to addition u/s 68 of the Act where loans or advances have been obtained by the respective assessees and they could not substantiate with evidence to the satisfaction of the AO regarding the three ingredients of section 68 of the Act. However, in the instant case, there is no such cash loan or advances from the six parties and the amount outstanding against their names represent outstandings payable for purchase of goods. Further such goods have been sold and such sales has been accepted and books of account have not been rejected. Further the payments have been made to them in the subsequent assessment years, a finding given by the AO in the remand proceedings. Therefore, those decisions are distinguishable and not applicable to the facts of the present case.

In view of the above discussion, we direct the AO to restrict the addition to Rs.48,85,485/- as against Rs.3,05,34,283/- made by him and sustained by the CIT(A). The grounds raised by the assessee are accordingly partly allowed.