KAYSONS AGENCIES P.LTD,MUMBAI vs. ITO CIR 4(2)(4), MUMBAI

order ,dated 30.04.2014 of the CIT(A)-8,Mumbai the Assessee has filed the present appeal.Assessee-company,engaged in the business of trading in ready-made garments, iled its return on 28.10.2005,declaring income of Rs.12.02 lakhs.The Assessing Officer(AO)completed the assessment on 15/03/2013,u/s.143(3) r.w.s. 148 of the Act, determining its income at Rs.33.99 lakhs. Brief Facts: 2.Survey proceedings were initiated under section 133A of the Act at the business premises of Rakesh Kumar Gupta group concerns (Manoj Mills, Shree Ram Sales and Synthetics and Astha Silk Industries).During the survey,it was found that the group companies were engaged in the activity of issuing accommodation bills and that they were not a trading activity. Statement of Rakesh Kumar Gupta(RKG) were also recorded who admitted before the survey team that he and the other group concerns were engaged in activity of issuing bills for the past 9 years and were earning a commission of 1% on accommodation bills. As the assessee had purchased goods worth Rs.25.64 lakhs from above-mentioned group concerns, so, the AO directed it to explain as to why the purchases made from RKG group should not be treated as non-genuine purchases and should not be added to its total income. The assessee objected to the addition and contended that purchases made by it were genuine. It also asked for cross-examination of RKG.Vide his letter dated 11/12/2011 RKG confirmed the transac - tions of sale with the assessee and stated that amends had been received by account payee cheques.Besides copies of the Ledger accounts were also filed by the RKG group concerns.The AO served the notice on RKG to appear for cross-examination on 13/12/2011. But,he did not appear. He also did not appear on 14/12/2011. The assessee made elaborate 3812/M/14 Kaysons Agencies Pvt.Ltd. submissions before the AO and argued that purchases made by it were genuine. After considering the submission of the assessee and the cases relied upon by it, the AO refer to the statement of RKG recorded on 23/02/2009 and on 13/02/2009 he observed that RKG had given complete modus operandi of the business carried out by the group concerns, that he had admitted that he was in the business of providing accommodation bills to the parties, that he was not maintaining any stock register,that he was returning the money to the parties to home he was issuing bills, that assessee was not able to bring any proof on record to prove the genuineness of the purchases made by it from RKG and his family concerns.Finally, he made an addition of Rs.21.96 lakhs to the total income of the assessee. 3.Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authority(FAA).Before him the assessee challenged the reopening of the assessment u/s.147 of the Act and the additions made by the AO.Referring to his own order for the earlier AY.,the FAA held that the AO had rightly invoked the provisions of section 147 and had reopened the assessment on valid grounds. With regard to the purchases made from RKG group, the FAA again referred to his order, dated 15/10/2012 for the AY. 2006-07. In that order, he had held that no survey action or any further enquiry was carried out in the case of the assessee, that any meaningful enquiry/ investigation was not carried out in the case of the supplier of the goods, that the sole reliance was placed on the initial general statement of RKG, that no further enquiry/ investigation was carried out after restriction filed by RKG, that the AO could not have treated the entire purchase as unexplained when the supplier had filed a letter confirming the sales to the assessee and when the assessee was not granted opportunity of cross-examining RKG,that the supplier had given a sweeping statement without referring to the assessee,that the assessee had stated that payments were made by account payee cheques and goods were sold to 3rd parties, that the sales were not in doubt, that the only addition to be made could be for possible case relating to purchase,that no addition could be made under section 69 of the Act, that the assessee has made the purchases from RKG group and had accounted the same in the books of accounts,that it was not a case where investments/ purchases were not recorded in the books of accounts, that no addition u/s.69 could be made in the given facts of the case, that the purchases shown by the assessee from the RKG concerns were in doubt, that the supplies were accommodation bill providers, that sales /closing stock were not proved bogus,that the existence of purchases could not be denied, that the purchases might have been made from the open market/unregistered dealers, that the audit report contained quantitative details of closing stock/opening stock,that there was no evidence on record that payments 3812/M/14 Kaysons Agencies Pvt.Ltd. made by the assessee had come back to it in cash.Finally, he upheld the addition of 10% of the disputed purchases. Following the order for the AY. 2006-07,he confirmed profit at the rate of 10% of the purchase in question and restricted the addition to Rs. 2. 20 lakhs. 3.Before us,the Authorised Representative(AR)argued that the purchases made were genuine,that there was no possibility of any leakage, that the revenue authorities had not disturbed the gross profit shown by the assessee, that the statement of RKG were of general nature. The Departmental Represnetative (DR)supported the order of the FAA and stated that he had already given substantial relief to the assessee.