TaxTMI 
TaxTMI 
2016 (4) TMI 1081
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....Rs. 35,79,224/-) incurred towards purchase of goods from M/s Divya Fabrics and M/s N M Corporation, respectively. She erred in not appreciating the fact that the purchases cannot be disallowed merely because the notices sent to the suppliers were returned undelivered. The learned CIT(A) ought to have appreciated the fact that if the goods were not purchased by the appellant; it would have not been possible for the appellant to sell the same and earn income therefrom which has been offered for tax. 2. The learned CIT(A) erred in disallowing Rs. 86,917/- under the provisions of section 14A of the Act which is in addition to Rs. 1,27,914/- suo moto offered for tax in the return of income filed by the appellant as expenditure incurred in connection with earning of exempt income. She ought to have directed the Assessing Officer to restrict the disallowance under section 14A of the Act at Rs. 1,27,914/-." 3. The brief facts of the case are that the assessee is engaged in the business of trading in grey cloth. 4. During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act , the AO observed that the assessee-firm has shown purchases of cloth from M/s. ....
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....ted after affording sufficient opportunities of hearing. The AO held that the assessee-firm was not prevented from producing the relevant evidences/details or documents at the time of assessment proceedings. On merits of the addition, the A.O. submitted that during the course of remand proceedings, the assessee-firm was asked to furnish the following information:- (i) Present address of the above two parties (ii) Original delivery challans, date of goods delivered, Lorry/Truck No. by which the goods have been delivered. (iii) Details of Octroi paid, if any, along with receipts. (iv) Details of payment, if the payments made to these parties, cheque No., date, amount paid, copy of bank account statement wherein reflect the payments. In response to the above, the assessee-firm submitted that assessee-firm has asked for the present addresses from the two parties and are expecting the reply from the parties within ten days. The assessee-firm submitted that the parties have acknowledged the copy of duplicate bills when they have delivered the goods to us, therefore the question of original delivery challan etc. does not arise. Since the goods have been purchased from Mumbai therefor....
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....ere made by the assessee-firm. The AO in remand proceedings thus observed that it is clear that the assessee-firm has failed to furnish evidences on which reliance can be placed and to conclude that the parties and the transactions are genuine, therefore, the assessee-firm had failed to prove the genuineness of the purchases claimed to be made from M/s. Divya Fabrics & M/s. N. M. Corporation of Rs. 18,83,061/- & Rs. 16,96,1631- respectively, aggregating to Rs. 35,79,224/-. A copy of the A.O.'s remand report was furnished to the assessee-firm for its comments thereon. In reply, the assessee-firm reiterated its earlier submissions and stated that the details available before the A.O. were sufficient to justify the genuineness of the purchases. The assessee-firm submitted that the company purchased 6550.40 and 5661.40 meters of cloth from the above parties respectively. The assessee-firm submitted that the quantities of cloth so purchased were sold to M/s Astha Silk Industries and M/s. Shree Ram Sales and Synthetics at various dates during the financial year involved. A statement summarizing the quantity of goods purchased, purchase value, vis-a-vis goods sold, sales amount and the g....
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....elow which are not repeated for sake of brevity and submitted that the assessee-firm purchased fabrics from two parties namely M/s. Divya Fabrics and M/s. N.M. Corporation. The payments to these two parties have been made through banking channels through crossed account payee cheques, the bank statement of the assessee-firm evidencing the clearance of these cheques are placed in the paper book filed with the Tribunal. The total purchases were to the tune of Rs. 1.29 crores and total purchases from these two parties were to the tune of Rs. 35,79,224/- and complete explanation was given with respect to the purchases from these two parties. Complete quantitative details were submitted with the details of purchases and sales duly reconciled were submitted. The assessee-firm also sold the goods valuing Rs. 43,96,524/- with respect to these purchases, and realized gross profit of Rs. 8,17,300/- with respect to the afore-stated purchases made from these two parties, which profit was offered to taxation in the return of income filed with the Revenue. The Revenue has not doubted the sales made and profit realized on sales of these goods which were purchases from these two parties , while th....
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....ion to the tune of Rs. 35,79,224/-. The assessee-firm has produced the copy of invoices with respect to the purchases made from these parties . The payments for these purchases have been made through banking channels vide crossed account payee cheques , copies of bank statement are placed in paper book filed with the Tribunal. The quantitative details of purchases were submitted and included in stock which was duly reconciled with sales made by the assessee-firm. The accounts of the assessee-firm were subjected to tax audit u/s. 44AB of the Act and stock was duly reconciled. The assessee-firm also submitted that it has made sale of Rs. 43,96,524/- as against these purchases of Rs. 35,79,224/- made from these two parties. The assessee-firm had submitted that it earned gross profit of Rs. 8,17,300/- from the sale transactions with respect to transactions of purchases with these two parties namely M/s Divya Fabrics and M/s. N M Corporation and the amount of profit has been duly offered for taxation. These facts have remained uncontroverted by the Revenue. As per the assessee-firm , trading in fabrics is exempt from the levy of Maharashtra Value Added Tax(MVAT) for which copies of the ....
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....m as set out above. Our view is fortified by the following decision's of the Tribunal: 1. Shri Hiralal Chunilal Jain v. ITO in ITA No. 4547/Mum/2014 , vide orders dated 01-01-2016. 2. Shri Ganpatraj A. Singhavi v. ACIT in ITA no. 2826/Mum/2013 , vide orders dated 05-11-2014 3. ITO v Eagle Impex in ITA No. 5697 & 5748/Mum/2010, vide orders dated 22.2.2013. Thus keeping in view the peculiar facts and circumstances and evidences on record, we are of considered view that it cannot be said that the transactions of purchases of Rs. 35,79,224/- as undertaken by the assessee-firm from M/s. Divya Fabric and M/s. N M Corporation are liable to be added to the income of the assessee-firm to fasten liability of taxation and we are of the considered view that the CIT(A) erred in confirming and sustaining the addition of Rs. 35,79,224/- to the income of the assessee-firm on account of purchases made by the assessee-firm from M/s Divya Fabrics and M/s N M Corporation as made by the AO in the assessment order and we delete the additions of Rs. 35,79,224/- made by the A.O. and as confirmed /sustained by the CIT(A) to the income of the assessee-firm. We order accordingly. 11. During course of as....
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.... it has debited administrative and other expenditure (other than expenditure directly attributable to purchase of traded goods) to Profit and Loss Account, which cannot be regarded as expenditure incurred for earning of exempt income as the same is purely incurred towards operational and other administrative purposes which are necessary for the purpose of running of the business and there is no nexus between the expenditure such as rent and amenities, sales promotion expenses etc. and the earning of tax exempt dividend income and long term capital gains. The assessee-firm relied on the decision of Hon'ble Punjab and Haryana High Court in the case of CIT v. M/s Hero Cycles Ltd (ITA No. 331 of 2009 - 4 November 2009) and the decision of Hon'ble Bombay High Court in the case of CIT v. Mirza Ataullaha Baig (1992) (202 ITR 291) which supports the view that as Rule 8D of Income Tax Rules,1962 is inserted from 24 March 2008 without any express mention about the retrospective amendment, the same would be applicable only from the assessment year 2008-09. The CIT(A) observed that the A.O. has worked out disallowance under section 14A of the Act in terms of the method prescribed under Rule 8....
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....e assessee-firm has earned exempt income of Rs. 19,96,264/- and total expenditure incurred is Rs. 11,09,724/- which was considered by the assessee-firm for disallowance u/s 14A of the Act (Paper book page No. 15), hence, the disallowance worked out at Rs. 1,27,914/- . The assessee-firm submitted that the total expenditure debited to Profit and Loss A/c is Rs. 16,58,665/- (inclusive of interest , administrative, operative expenses and depreciation ) out of which the assessee-firm has suo-moto disallowed of its own volition Rs. 5,42,880/- on account of sales promotions , STT of Rs. 6,036/- and necessary adjustment for depreciation as debited in P& L A/c vis-à-vis allowance as per the Act and the benefit of such expenses as revenue expenditure per-se of the business carried on by the assessee-firm was not claimed in the return of income filed with the Revenue, and the expenditure of Rs. 11,09,724/- only was claimed as revenue expenditure in the return of income filed with the Revenue , the working along with audited financial statements are placed in paper book pages 11-27 filed with the Tribunal. The ld. counsel submitted that then the proportionate disallowance u/s 14A of the....