SANJAY SHARMA,GHAZIABAD vs. ACIT CIRCLE-59(1), NEW DELHI

9 out of the aforestated 12 parties confirmed the transactions.

However, on account of three parties, no response was received in respect of the notices served under section 133(6) of the Act. The Assessing Officer completed the assessment by devising a formula not known to Income tax proceedings and came out with a whimsical result. The relevant findings of the Assessing Officer read as under:

“7. Since it is not possible to verify all outstanding sundry creditors and it would be logical if findings of the sample are extrapolated to the outstanding sundry creditors, thus giving benefit of majority of confirmed amount to the assessee. Accordingly, sundry creditors not found to be genuine to be added u/s 68 would be Unverified amount X total outstanding creditors sample size

799173 x 62158180 = 1186168 41878671

International, J.P. Industries, and B.P. Chemicals as under: i) U.V. International Rs. 4,176/- ii) M/s J.P. Industries Rs. 5,67,713/- iii) M/s B.P. Chemicals Rs. 2,27,484/-

The total purchases made from the three parties are as under: i) U.V. International Rs. 4,176/- ii) M/s J.P. Industries Rs. 5,67,713/- iii) M/s B.P. Chemicals Rs. 2,27,484/- During the year under consideration, the assessee has shown sales of Rs.13.41 crores on purchases of Rs.91.37 crores. The three purchases mentioned hereinabove are part of the total purchases.

“124 TTJ 554 (Del) Elnad International (p) Ltd. v DCIT

"5.4 we have considered the facts ofthe case and rival submissions. From the submissions made before us, it is clear that the transactions of purchase and sale were recorded in the books of account and these transactions led to profit to the assessee, which was brought to tax, If sales have been effected out of purchases made from these parties, then, it cannot be said that the purchases were bogus. The finding of bogus sale can only lead to the inference that the corresponding amount should be deleted from the turnover of the assessee. The Assessing Officerhas also not rejected the books of account to estimate profit on these transactions in case it was a firm finding that purchases and sales were bogus. The facts of the case of LA Medica (supra) are different in the sense that detailed enquiries were made into the purchases made by the assessee, which were held to be bogus by the AO. It was found that the purchase consideration got deposited in a bank account of an employee in Calcutta, which was opened with the introduction of the assessee. No such enquiry was made in this case. In the case of La Medica (supra), it was also not the case that sales were effected from the purchases made and, thus, the purchases could not be outrightly termed as bogus.We are of the view that the facts of the two cases are distinguishable. In absence of displacing the finding of the leamed CIT(A) and the fact that the assessee showed profit from these transactions, it is held that there is no such error in the orderof the leamed CIT(A) which requires correction from us. Thus, this ground is dismissed.” ii) 310 ITR 99 (AT) (SB) (Del) Manoj Aggarwal vs. DCIT

"For example, in the case of credit purchases, the account of the supplier is credited with the amount payable. In such a case, where the purchase is allowed as expenditure, it may not be possible for the Assessing Officer to again call upon the assessee to prove the nature and source amount credited for the reason that the purchase itself was allowed as expenditure only on being satisfied that itwas a genuine purchase on credit. Implicitly, the nature and source of the amount credited has also to be taken as having been explained satisfactorily. Another possible argument can be that in such a case, the amount credited is not a cash credit in the sense that mere monies have been received by the assessee, but the credit represents a liability payable by the assessee in future. Under accounting principles, a liability can only be brought into account by a credit entry in the books of account in favour of the person to whom the money is payable' Thus, there is marked difference between a credit representing a liability payable by the assessee and a credit representing monies received from another person. It is because of this distinction, a liability for purchase which has been credited in the account ofthe supplier cannot be added under section 68 of the Act, more so when the purchase has been accepted as genuine and a deduction therefore has been allowed.”

"8. I have carefully considered the order of the authorities below. It is not in dispute that the A.O made impugned addition of Rs. 4,97,5g9/- treating the purchases as bogus expenses. It is equally true that the purchases were debited in the regular books of account of the assessee. The sales out of the purchases were accepted by the A.O. I further find that the notices issued by the A.O on the address of Ms Kumar Sales were duly served. Nothing prevented the A.O to issue summons to M/s Kumar Sales to force its attendance and examine the transaction. I further find that the CIT(A) realisingthat Section 69C is not applicable on the facts of the case invoked Section 68 of the Act. In find that the assessee has furnished all the details of sales made to M/s Overseas and such details can be seen from the followings chart:-

9. The sale invoices are exhibited at pages 5 to 10 of the paper book. In my considered opinion, the power of the CIT(A) are co terminus to that of the A.O and, therefore, he should have examined the transaction if he wanted to invoke the provisions of Section 68 of the Act. Failing which the action of the CIT (A) cannot be upheld. The contention of the DR that fresh opportunity should be given to the CIT (A) to examine the transaction does not have any force. In my considered view, no second innings should be given to examine the same set of facts which were very much before the lower authorities. I do not find any merit in the order of the CIT(A). I have accordingly direct the A.O to delete the addition of Rs. 4,97,589/. The appeal filed by the assessee is accordingly allowed.”

The order is pronounced in the open court on 22.09.2020.