TaxTMI 
TaxTMI 
2012 (9) TMI 837
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....e. 3. Rejection of Books of accounts u/s 145 on irrelevant and incorrect grounds 4. Making addition of Expenditure which is not charged to P&L A/c nor claimed any deduction there of at any time. i. Addition of Expenses out of cash expenses 50,000/- ii. Disallowance of Donation Rs. 3,65,242/- 5. Addition of Expenses charged to Profit & loss A/c Rs.50,000/- out of cash, conveyance & telephone expenses. 6. Addition of Rs 10,27,199/- on estimation basis 5% of total expenditure of Rs. 2,05,43,980/- as a new ground of addition and without considering over all facts. 7. An applicant craves for leave to add, omit or alter grounds of appeal 8. Prayer: All additions may be removed" Grounds of Appeal for A.Y.2001-02: "The grounds of appeal are without prejudice to one another. Learned C.I.T (Appeals)/C/I and Learned ITO 9(3) (1) have erred in matter of fact as well as law as under: 1. Re-opening u/s 147/148 is without valid reasons. 2. Treating appellant as Permanent Establishment of a Foreign Company and treating receipts from the....
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.... paper book filed for the respective years. The main reason stated is that the assessee had received certain payments in the respective years from one UAE concern named as M/s. Miraj Pte. Ltd. (Sharjah ,UAE) on account of advertisement and business promotions and assessee had made certain expenditure against those receipts under various heads and all these entries were not routed through P&L Account. Certain donations were also debited which according to AO were not allowable as business expenditure. As no written agreement between assessee and the said concern was made available for receiving that money and making expenditure the AO has formed a belief that income chargeable to tax has escaped in the hands of the assessee. Year wise receipts and expenditure and also imports by the assessee from the said concern has been tabulized in assessment order and is reproduced below for the sake of convenience. A.Y Receipts from M/s. Miraj Pte. Ltd. Expenditure on a/c. of Agency Promotion Import by the assessee from M/s. Miraj Pte. Ltd. 2000-01 Rs. 2,86,04,581/- Rs. 2,05,43,980/- Rs. 1,42,34,490/- 2001-02 Rs. 5,88,73,000/- Rs. 4,81,93,425/-....
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....ad reasons to believe that income has escaped assessment. Ld. CIT(A) has also referred to the decision of Hon'ble Supreme Court in the case of Central Provinces Manganese Ore Co. Ltd. v. ITO [1991] 191 ITR 662 wherein it has been held that at the stage of initiation of action under section 147 of the Act, final outcome of the proceedings is not relevant but what is required is the existence of "reasons to believe" but not the established fact of escapement of income. Looking into the facts of the case Ld. CIT(A) has held that reassessment proceedings were rightly initiated by the AO. These findings of Ld. CIT(A) are challenged before us in respect of assessment year 2000-01 to 2002-03. 5. We have heard both the parties on this issue. The facts mentioned by Ld. CIT(A) in his order are not controvered by Ld. A.R. During the course of assessment proceedings for A.Y 2004-05 it had come to the notice of the AO that there were certain discrepancies in the bank account which lead the AO with the belief that certain income had escaped assessment in the hands of the assessee. Existence of information with the AO is not denied by the assessee. All these assessments were framed under secti....
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....ture of each & every transaction entered into by the assessee on day-to-day basis. The system of accountancy does not change depending upon each assessee but is static & is uniformly applicable to every assessee and any kind of business. Therefore I reject the books of accounts of the assessee as per the provisions of section 145 of the I.T. Act, 1961. 9. As discussed above, the profit is estimated at 5% of the receipt (i.e. expenditure during the year, as discussed above) of Rs. 4,81,93,425/-, which comes to Rs. 20,94,671/-. The same is added to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) are separately initiated by issuing notice u/s. 274 of the I.T. Act, 1961." 7. The assessee had submitted the following account in respect of receipt and expenditure incurred on behalf of the aforementioned party. "M.K.P. DISTRIBUTORS PVT.LTD Details of Expenses Charged to Agency promotion for the year 01/04/1999 to 31/03/2000. List -C Agency Promotion Balance B/o. 9,923,868.00 Addition during the year 28,604,581.00 Total 38,528,449.00 LESS: &nb....
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....egular exchange of communication between the assessee and the said party, therefore, there was no requirement of any valid contract. To run the business is a prerogative of the assessee. The dealing of the assessee with its foreign suppliers is on principal to principal basis. The activities carried out from the funds received from foreign buyers was being conducted from separate premises with separate staff including technical and supervisory staff who look after the activity of agency promotion. Separate account is maintained thereon. Annual financial statement is submitted with the return of income and remitter has also duly informed through regular exchange of communication and remitter has not created any dispute regarding the same. Copy of such submission submitted to AO has filed at page 5 to 7 in the shape of letter dated 27/9/2007. It is in this manner the assessee objected for any adverse inference to be taken in this regard. 9. Ld. CIT(A) has upheld the action of the AO. It is common ground in all these years whereby the assessee has challenged the sustenance of addition of 5% of the expenditure incurred by the assessee from the remittances received from M/s. Miraj Pt....
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....e benefit in the shape of increase in its business and, therefore, no income can be assessed simply on the basis of presumption as nothing has been brought on record by the department that assessee had earned any income out of the funds received by it from M/s. Miraj Pte. Ltd. 11. We have heard both the parties on this issue and their contentions have carefully been considered. We have also gone through the documents referred during the course of hearing. We found that the existence of the foreign party and its genuineness has not been doubted by the AO as the assessee apart from receiving separate funds has also imported goods from the said party for its own trade. The assessee had filed evidence with the AO in the shape of letters received from the said party that the amounts sent to the assessee was for the business of that party. The assessee is keeping and maintaining separate account for the same, which was filed before AO, The AO has not doubted the receipt of the same also. The only ground on which addition is made is that assessee must have earned certain income out of those expenditure. However, there is no material placed on record by the revenue to establish the same....
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.... (iii) Sales promotion : Rs. 1,42,430/- (iv) Conveyance : Rs. 1,72,902/- Total : Rs. 17,50,121 32. The Assessing Officer has stated that assessee could not furnish supporting/documentary evidences and has also not produced the cashbook to establish the genuineness and authenticity of these expenses. Hence, the AO disallowed 20% of Rs. 17,50,121 which comes to Rs. 3,50,024. In the first appeal, Ld CIT(A) has confirmed the action of Assessing Officer and the relevant para 5.15 which reads as under: "5.15 I have gone through the contention of the appellant and do not find any merit in its case. The argument made by the appellant is general and without supporting the claim made by it in respect of such huge expenses. Further, it is also seen from the facts of the case that the appellant was also carrying out the activities for and on behalf of M/s. Miraj PTE Ltd. merely as facilitator and that it could not be denied that the expenses in the instant case could be incurred for the purpose of such agency promotion activities. Further in the instant case the appellant has merely stated that expenses were incurred in cash were very less. However, it....