TaxTMI 
TaxTMI 
2016 (5) TMI 170
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.... made in the joint venture business projects. However, the AO did not accept assessee's contention and after discussing the issue in para 5-6 made disallowance of Rs. 3,54,957/-. 5. By the impugned order, CIT(A) deleted disallowance after observing as under :- "I have considered the above submissions. The appellant objected to the average investment arrived at by the Assessing Officer as per the formula provided in Rule 8D(ii). The Assessing Officer adopted the value of investment as Rs. 1,19,57,766/- as on 31.3.2009. It is the submission of the appellant that Rs. 59,43,220/- was the actual investment in shares and the balance was the investment into the joint venture business projects which is not the assets of the appellant and should not be taken into consideration. As per the formula in Rule 8D(ii) i.e. 'A' x 'B'/'C', 'B' represents the average value of the investment, income from which does not or shall not form part of the total income as appearing in the balance sheet of the assessee on the first day and the last day of the previous year. 'C' represents the average of total assets as appearing in the balance sheet of the as....
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....ions of section 37(28). Since the expenditure was incurred wholly and exclusively for the purpose of business and was not in personal nature, there was no justification for disallowing the same. Accordingly, we confirm the order of CIT(A) on this issue. 11. The revenue is also aggrieved for deleting disallowance of interest of Rs. 4,61 ,376/-. The Assessing Officer had discussed this issue in para 8 of the assessment order, wherein he observed that the assessee had made advances to some parties from whom no interest has been charged. The assessee has been paying interest on the loans taken and hence Assessing Officer was of the view that interest attributable to interest free advances has to be disallowed at 12% per annum and accordingly Rs. 4,61,376/- was disallowed. 12. By the impugned order the CIT(A) deleted disallowance of interest after observing as under :- 6.3. I have carefully considered the above submissions. The opening capital as per the balance sheet as on 31 3.2008 was Rs. 8.4 cr and the closing balance Rs. 5.37 crores. which shows that the appellant had got huge surplus funds available in the form of capital. Hence the contention of the appellant that ....
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....A) are as per material on record, therefore, does not require any interference on our part. Accordingly, we confirm the action of the CIT(A) following the decision of jurisdictional High Court in the case of Reliance Utilities Ltd., 313 ITR 34. 14. The revenue is also aggrieved for deleting adhoc disallowance of Rs. 1,00,000/- on telephone expenses, vehicle expenses etc. The AO was of the view that the element of personal in nature in respect of the above expenditure cannot be ruled out and hence made an adhoc disallowance of Rs. 1,00,000/-. 15. By the impugned order, CIT(A) deleted the same after observing as under :- 7.3. I have considered the above submissions of the appellant. During the course of assessment proceedings itself the appellant had furnished evidences in the form of vouchers pertained to each and every heads of expenditure. The Assessing Officer had not found out any discrepancy. The Assessing Officer had no material in his possession to show that personal element is involved in respect of the above expenditure. In view of the above, the adhoc addition made by the Assessing Officer is hereby deleted. 16. We have considered rival contentions and fo....
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.... the scope of work in respect of the entire 14 contracts. One such scope of work with regard to Akhil Nalla is reproduced below to understand the nature of construction carried out by the appellant'- Scope of work:- 1. Construction of box type drain from Charkop Road Akhil Hotel to Kadsiddeshwar Roadto Manori Creek RIC Ward, Kandivali(W). 2. M25 RCC wall with M 25 RCC slab at top to cover the same 3. Construction of S.W Drain at other side in C.C. at 28 THD 4. Raising and construction of road from starting point to end. The scope of work in respect of all the contracts are almost identical which involves construction of the drain and slab to cover the top along with raising and construction of road from the starting point to end. This scope also gives the construction programme. The appellant was given the time to complete the work within 12 months. Hence to carry out the above civil construction work the appellant had to necessarily purchase the building materials such as cement, steel etc. without which it is not possible to complete he contract awarded. 8.3.2 During the course of assessment proceedings itself it ....
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....atory within 15 days from the receipt of the work order would result in levy of penalty of Rs. 500/- per day. Similarly a penalty of Rs. 500/- per day will be imposed if Quality Control Engineers is not found appointed/deployed on the work. Section 6 talks about technical specifications. Clause 6.2.2 & 6.2.3. deals with the material used in the contract and samples and test of materials. As per sub clause 6 of 6.2.3, the Contract shall not use any material without prior testing and clearance by Engineer in charge. In cases where the material is use without testing is liable for rejection either partly or fully. Similar clause is appearing in General Specifications in clause 6.4.3. All the above clauses clearly indicates that the material used at site undergoes a stringent quality control and the entire work is being monitored by the Site Engineer appointed by the MCGM. 8.3.6. As and when the work is going on the appellant raises a running bill which would be then checked and verified by the Sub-Engineer which is then checked and verified by the Assistant Engineer before the same got forwarded to the Executive Engineer. After final checking by the Executive Engineer, the bi....
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....tificate issued by the MCGM for testing the cement by Material Testing Laboratory for the period October, 2006 to Jan. 2009 for the work carried out in the case of I.B.Patel was also furnished. 8.3.9. All the above clearly indicates that material for the above contracts reached the respective site which got tested for its quality. Depending upon the stage of work, running bills were prepared and payments received after certification by the Site Engineers. All these clearly prove that the contract work has been executed to the satisfaction of the MCGM Authorities and due payments were received against the executed contracts. The Assessing Officer without examining the facts discussed above had come to the conclusion based only on the presumption that because the names of e suppliers were put in the internet as "suspicious dealers", the purchases were bogus without purchase of material such as cement, steel, brick etc, the appellant could not have completed the contract assigned to it. The Assessing Officer had no material on record to show that how the contracts have been completed by the appellant without purchase of material from the above suppliers. The books of accounts....
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....es used for execution of our contracts. I agree that I am not in a position to give the supporting documents to some of these bills such as the delivery challans, lorry receipts, octroi receipts etc to you right now in all the cases. I will be in a position to get them from the sites and submit to you in due course." A perusal of the above Answer it is crystal clear that the assessee actually purchased the material and all these purchases are bonafide purchases. He further stated that he is not in position to give some of the supporting of some of the bills right now. However the same can be produced and for which we gave the details in tabular form. This fact is mentioned in answer to question 8 of statement dated 02/05/2012. b. In reply to question no 15 the appellant has clearly stated that there may be some inflation of bills and if it is there money has been ploughed back into the business of the company in one way or other way. Thereby it has not suffered income tax It is pertinent to mention that the assessee has merely stated that there may be some inflation but not with 100% certainty. Hence the disclosure made without any corroborative evidence being fou....
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....purchases as bogus does not arise. After consideration of the question raised and replies given by the appellant the following facts emerges. i) Firstly the appellant gave the disclosure for AY 2010-11! 2011-12 and AY 2012-13 which has no relevance with the impugned assessment year for which we are in appeal before your honour. ii) Secondly the department did not find any evidences of inflation of expenses or having found in possession of cash being received back or any undisclosed investment during the course of survey action to prove that appellants purchases for the impugned AY i.e. AY 2009-10 are bogus. iii) Thirdly the statement given pursuant to survey action on 04/01/2012 and 02/05/2012 have no relevance with the affairs of the AY 2009-10. iv) Fourthly the statement recorded u/s. 133A is not a sworn statement as the officer is not empowered to examine any person on oath u/s. 133A. Hence statement recorded u/s. 133A has no evidentiary value and any admission made during such statement cannot be made basis of addition unless supported by any evidence as held by the Hon'ble Apex court in the following decision: CIT vs Kh....
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.... from Shri Arvind Jainjn para 6 and the suggestions given to the AO by the ADIT is available in para 8 which is reproduced as under, for the sake of convenience:- "Suggestions to Assessing Officer This report is only indicative and not exhaustive or all inclusive in nature. The Assessing Officer is requested to carry out in depth investigation and examine the impounded books of accounts/computed hard disks, statements recorded etc. to arrive at his/her own conclusion. The Trial balance and Profit & Loss Account of the above Survey Folders' of the respective entities. Nevertheless, while framing the assessment orders, due consideration may be given to the points discussed in this respect." The final finding of the ADIT is available in para 6.4 of the survey report which is reproduced as under:- "6.4. From the evidences gathered and the statements made by the assessee thereafter, it is evident that the assessee has indulged in bogus inflation of purchases. The survey has resulted a declaration of Rs. 22 crores as additional income whose break up is as under:- Financial Year In the hands of API Construction (Prop. Inervadan Jain) (in.Rs) ....
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....rvind Jain had given an evasive answers in respect of bogus purchase of materials by taking accommodation bills. The answers to question No.6 & 9 are reproduced as under:- "Q.6. Your statement was recorded during the course of survey proceedings under section 133A of the Act on 4th/5th January, 2012 vide answers to Question NO.6 & 7 you had stated that you know Mr.Mafatlal Shah and you had also stated that you might have taken accommodation entries from the concerns of Mr. Mafatlal Shah and also from the some other concerns in our statement. Please comment. Ans. again reiterate that Indra Construction Company and API Construction might have taken accommodation entries from the concerns of Mr.Mafatlal Shah and also from some other concerns for generation of cash for business needs. Q.9. . Do you know 21 about these fictitious concerns, some of which are being run by Mr.Mafatlal Shah(Serial No.1 to 19). S.No Name of the concern Sl. No. Name of the concern 1 Ajay Stone 20 Simplex Enterprise 2 AtmassEnterprises 21 Carbon Enterprises 3 Bharat Traders 22 Sandeep Steels 4 Geeta Enterprises 23 Sam Enterp....
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....t of actual expenditure incurred and finally he admitted undisclosed income of Rs. 22 crores in both the hands. 8.3.16. There were 39 fictitious concerns as per the Sales Tax Department out of which Mr.Mafatlal V Shah was running about 19 fictitious concerns( the names of which were enumerated in question No.9). As mentioned already the AO had issued notice u/s.133(6) to only two parties by name M/s.Deep Enterprises and M/s.Forum Traders out of 12 parties. For the reasons best known to the AO. no notice was sent to the remaining 10 parties. It is not clear as to why the AO who is at the rank of Addl. Commissioner of Income tax chose not to issue notice to the remaining parties to ascertain as to whether such parties are in existence or not. Without even doing the basic enquiries, he had jumped into the conclusion that the entire purchases are bogus. 8.3.17. The analysis done by me shows that Out of 12 parties alleged to have issued bogus bills,' only 4 concerns are figuring in the list of above 39 alleged fictitious concerns which are as under:- i) M/s.Sam Enterprises ii) M/s. Forum Traders iii) M/s.Shree Sai Enterprises iv)....
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.... Income-tax survey--Scope of section 133A--Difference between sections 133A and 132(4)--Statement in survey operations--Not conclusive piece of evidence--Statement by partner in survey operations regarding undisclosed income of firm--Subsequent retraction of statement by firm--Amount disclosed by partner not assessable as income of firm-- Income-tax Act, 1961, ss. 132, 133A. The principles relating to section 133A of the Income-tax Act, 1961, are as follows: (i) an admission is an extremely important piece of evidence but it cannot be said that it is conclusive and it is open to the person who made the admission to show that it is incorrect and that the assessee should be given a proper opportunity to show that the books of account do not correctly disclose the correct state of facts; (ii) in contradistinction to the power under section 133A, section 132(4) enables the authorised officer to examine a person on oath and any statement made by such person during such examination can also be used in evidence under the Act. On the other hand, whatever statement is recorded under section 133A is not given any evidentiary value obviously for the reason that the officer is no....
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....ey, the tax officials noticed some discrepancies in stock and cash in hand. During the survey, the assessee surrendered an amount of Rs. 99,50,000 and offered it for the purposes of taxation. The additional income offered included a sum of Rs. 45,00,000 on account of excess stock found during the course of survey and offered by one of the partners of the assessee as additional income. The answer by one of the partners of the assessee was he could not explain the difference and to buy peace of mind offering additional income of Rs. 43 lakhs for the current financial year, i.e., assessment year - 2005-06. However, subsequently, the assessee by letter withdrew the offer of additional income for taxation on account of excess stock stating that the statement about stock was incorrect and that the discrepancy had been reconciled as it was only a mistake. The Assessing Officer did not accept the plea of the assessee that excess stock during the course of survey had been reconciled. He relied upon the statement given during the course of survey under section 133A of the Act and concluded that the explanation/retraction by the assessee was an afterthought and had no element of truth. The Co....
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....09-10 to 2011-12 and hence the statements recorded has relevance only to assessments for A.Y.201 0-11 to 2012-13. 8.3.21. As mentioned in the above paras, the Assessing Officer also did not gather any material during the assessment proceedings. He had relied solely on the statement recorded during the course of survey & post survey which do not have any evidentiary value in the absence of any evidence to corroborate the same. There were no concrete evidence available before the Assessing Officer to show that there is inflation of materials purchased by obtaining bogus bills. Further the appellant had completed the contracts undertaken which were duly acknowledged by the Municipal Authorities and payments were made after due verification. Hence in the absence of any material to show that the purchases from the 12 parties are bogus no adverse inference can be drawn purely on the basis of statement alone recorded during the course of survey. 8.3.23. The appellant relied on the following decisions in support of his contention that the purchases are genuine:- (i) Hon'ble Gujarat High Court decision in the case of CIT vs. President Industries repor....