TaxTMI 
TaxTMI 
2013 (11) TMI 367
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.... conclusion that funds are mixed funds, accordingly the interest expenses can not be considered as fully utilized for the purposes of business, therefore, estimated 50% of the interest claimed as not pertaining to business and after considering the amount already disallowed by assessee made an addition of Rs.6,53,593/- to the declared income. Further, he also noticed that the assessee purchased goods from M/s. Triton Infotech Pvt. Ltd. and during the course of search, the director of the company admitted that these are accommodation bills provided. On the basis of the same, AO came to the conclusion that the assessee could have purchased from grey market by saving on local taxes like sales tax and VAT etc. As sales are declared by assessee, he was of the opinion that the goods could have been purchased at 20% less than the price shown and therefore, reduced the price of purchases by an amount of Rs.55,72,000/-. Since the assessee already offered 1% sales in the return, corresponding amount was reduced thereby making the disallowance at Rs.52,92,000/-. In addition to the above the Assessing Officer also worked out disallowance u/s. 14A at Rs.68,000/- as against Rs.2,000/- disallowed....
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....recorded who has stated that goods were not sold to the appellant company and only billing was made by his company. During the assessment proceedings, the AO has held that although the purchases are not proved from M/s. Triton Infotech Pvt Ltd. but sales shown by the appellant company were confirmed by the respective parties. Therefore, the AO has concluded that purchases were not made from M/s. Triton Infotech Pvt Ltd. but purchased from Grey Market to avoid the sales tax, VAT and other local taxes. Thus, the income of the appellant has increased and the AO has adopted an estimate @ 20% of the purchase of Rs.2,78,60,000/- and proposed addition of Rs.55,72,000/-. After allowing the relief of 1% declared during the course of search an addition of Rs.52,92,000/- was made. On the other hand, the appellant has submitted that since the sales have been confirmed by the AO, therefore, purchases cannot be rejected. The appellant has also given a reasonable view to estimate that on Software items, sales tax 4% is applicable. Therefore, the amount of sales tax on Software items to the value of Rs.2,80,000/- @ 4% will be at Rs.11,20,000/-. The appellant has further reduced 1% of sales already....
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....re, the ground is rejected. 8. The ground No.4 also does not arise in the facts of the case. It was the contention that entire bogus purchases should be disallowed as per the decision of ITAT Mumbai bench in the case of Life Line Drug and Intermediate Limited in ITA No.5535/Mum/2007. We were not informed about the facts in the above case and how same is applicable. Be that as it may, we were surprised at the ground raised by the revenue that entire amount is disallowable. There is a finding by AO that the sales are genuine. There is also a finding that the assessee did trade in goods stated to have been sold. AO gave a finding that even though the purchases from M/s Triton Infotech Ltd. are by way of accommodation bills, it can not be ruled out that assessee did purchase from grey market. AO only disallowed 20% of the so called purchases which was restricted to the possible savings and tax at 4%. In view of the factual position in this case and fact that AO only restricted to 20% of purchases claimed, it is surprising that the revenue now contends that the entire amount is disallowable. When Assessing Officer did not make disallowance of entire amount, ITAT can not improve upon ....
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....s submitted that the interest paid included interest paid to bank at Rs.16,78,379/- out of which Assessing Officer disallowed 50% of the amount. He also submitted that the assessee itself disallowed an amount of Rs.1,85,597/- being proportionate to disallowance on LC discounting charges, bill discounting,bank interest and other interest and referred to the workout in page 15 of the paper book filed. It was the contention of the assessee that it has already considered part of the amount for disallowance and it has more funds than amount advanced. No disallowance is required on the basis of principles available on the issue. He referred to the detailed submission made before ld. CIT(A) in this regard. 13. We have considered the issue and examined the record. After considering the rival contentions, we agree that the findings of the ld. CIT(A) and as submitted assessee had its own interest free funds in the form of share capital, reserves and debentures to an extent of Rs.41.00 crores and balance interest free loans and other funds totaling to Rs.77.23 crores. Further, the assessee itself disallowed proportionately interest to the tune of Rs.1,85,597/-. These aspects were rightly e....