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Facts
The assessee, a jeweler, declared an income of Rs. 4,77,510 for AY 2013-14. The AO made additions of Rs. 15,20,750 for unconfirmed sundry debtors and Rs. 9,40,000 for bogus purchases. The CIT(A) dismissed the assessee's appeal.
Held
The Tribunal held that the addition of Rs. 15,20,750 for sundry debtors deserved to be deleted as it's not always possible to get full addresses in the jewelry trade. For the Rs. 9,40,000 purchase, the Tribunal confirmed 10% of the amount (Rs. 94,000) as a disallowance, stating it should not be taken as a precedent.
Key Issues
Whether additions for unconfirmed sundry debtors and bogus purchases are justified when the assessee has maintained books of account and evidence of stock movement?
Sections Cited
143(3), 133(6)
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Income Tax Appellate Tribunal, DELHI BENCH “SMC’’ : NEW DELHI
Before: SHRI MAHAVIR SINGH, HON’BLE
This appeal has been filed by the Assessee against the order dated 29.03.2023 passed by the NFAC, Delhi for the assessment year 2013-14 on the following grounds:- i) The AO has added of Rs. 15,20,750/- to the appellant’s income being sundry debtors not confirmed. The appellant has produced the books of account which the AO has accepted and no sales have been admitted as revenue receipts so by treating sundry debtors as taxable income will be double taxation. ii) The AO has erred in treating the amount of Rs. 9,40,000/- as appellants’ income and added to his total income. The AO has accepted books of account and also movement of stock so if bogus purchases taken then sales are not possible due to paucity of stock. That the several observations as made and inferences drawn are untenable incorrect, unwarranted.
Brief facts of the case are that the assessee is an individual carrying on the business of wholesale/ retail dealing as jewelers. The assessee has e-filed his return of income for the assessment year 2013-14 on 30.9.2013 declaring income of Rs. 4,77,510/-. The case was selected for scrutiny through CASS. The AO had during the course of scrutiny assessment proceedings u/s. 143(3) has made addition of Rs. 15,20,750/- being non confirmation by sundry debtors and s. 9,40,000/- being purchases from some unregistered person on the plea that confirmation letter has not been obtained from them. In appeal, Ld. CIT(A) dismissed the appeal of the assessee. Aggrieved, assessee filed the appeal before the Tribunal.
None appeared on behalf of the assessee, despite issue of notice of hearing, hence, I am proceeding exparte qua the assessee, after hearing the Ld. DR and perusing the records.
As regards, addition of Rs. 15,20,750/- being non-confirmation by sundry debtors is concerned, AO noted that assessee has not brought any material on 2 | P a g e record to justify and prove that the sales made to these sundry debtors are genuine and resultantly, the primary onus of the assessee has not been discharged, as the asssessee has not discharged its duties to confirm the sundry debtors. Hence, he added the addition of Rs. 15,20,750/- and Ld. CIT(A) confirmed the same. I note that before the lower authorities, it was the contention of the assessee that the sales were accepted and considered for determining income of the assessee and on the other hand amount received on account of sales made viz. sundry debtors have been added to the income because notices u/s. 133(6) sent to them came back. However, due to nature of trades of the assessee, it is not possible to get the address of all its customers. Even if customers give their address, there is no means available to the assessee to ensure that the such addresses were right. Assessee in the nature of its trade, cannot insist for an identification process akin to Know Your Customer (KYC) rules applied by banks. It was the contention of the assessee that there is no mandatory requirement in the business of jeweellery to maintain any records in line with KYC rules of bank. Because of the reasons that sales effected from certain parties did not carry full address, any disallowance ought not have been made, as such sales were recorded in the books of accounts of the assessee also shown in its stock. Even the assessee is maintaining a complete stock tally of each purchase / sales and there is absolutely no reason to doubt the same. In view of the above factual matrix, in my considered view, the addition of Rs. 15,20,750/- deserve to be deleted. I hold and direct accordingly. Accordingly, the ground no. 1 raised by the assessee is allowed. 3 | P a g e
As regards, addition of Rs. 9,40,000/- being a transaction or purchase treated as bogus purchases due to non-furnishing of confirmation of the concerned person is concerned, the AO made an addition of Rs. 9,40,000/- being the amount of old diamond jewellery purchased from Smt. Savitri Gupta against the sale of new jewellery to her. Notice u/s. 133(6) issued by the AO was returned back and hence, the AO treated the said addition as bogus purchases. In appeal, Ld. CIT(A) affirmed the addition. After carefully perusing the records, I have given my thoughtful consideration to the assessee’s contentions before the lower authorities and Revenue’s contention in support of the impugned addition. I find that it was the contention of the assessee during the appellate proceedings that assessee has maintained his books of account in the regular course of business and all transactions entered into books of account are related to business, hence, bogus purchase not be doubted fully. In this view, there is reason to not accept either parties stand in entirety. This is for the precise reason that neither the assessee has been able to properly explain the genuineness of the purchases nor the department could simply brush aside all the relevant evidence at one go. Be that as it may, the tribunal is of the considered view that in these peculiar facts, it is deemed appropriate in the larger interest of justice to confirm the purchases to the extent of Rs. 94,000/- being 10% of the total purchases of Rs. 9,40,000/-, only with a rider that the same shall not be as a precedent. Necessary computation shall follow as per law. 4 | P a g e