TaxTMI 
TaxTMI 
TaxTMI 
2017 (1) TMI 455
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.... as providers of accommodation bills by the Sales Tax Department to @% i.e. Rs. 1m31,30,609/- thereby granting a relief of Rs. 64,33,99,861/- ignoring the fact that the assessee failed to produce documentary evidences of purchases during the course of assessment proceedings as well in remand proceedings." Rest of the ground Nos. 2 and 3 are argumentative, hence need not to be reproduced. 3. Brief facts leading to the above issue are that the assessee company is engaged in the business of manufacturing and dealership of all kinds of Industrial power control, instrument cables and related items. During the course of assessment proceedings, the AO received list of persons from Sale Tax Department, Maharashtra Government, who were indulging in providing bogus hawala entries and purchase/sale bills. The Sale Tax Department also provided the list of beneficiaries of such bogus purchase/sales. From scrutiny of the list of bogus purchase/sales, the Assessing Officer observed that the assessee was one of the beneficiaries of such hawala purchase bills. The following are the details of transaction relating to bogus purchase bills:- Name of the party providing Bogus Bills/ Hawala Entries ....
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....s. In such cases total purchases being bogus, unproved and non-genuine straight way calls for disallowance on account of unproved expenses. ii) In another type involved in such transaction, is where there the person possesses the stock or goods which are not disclosed both to Income Tax Dept. or Sales Tax Dept. or any other Govt. department due to this handicap he is unable to sell the goods. In such a situation again he approaches the hawala giver and all other steps involved are identical to the same discussed earlier and therefore, repetition is avoided by reproducing the same. In such type of transactions by virtue of undeclared stock the provision of Sec 69 comes into play for bringing into tax an element of undisclosed income in the form of investment. iii) In the third type the person purchases goods from the Grey market at lower price without bills because goods available in Grey market is very cheap compared to white market. The consideration is paid in cash and to cover up this transaction the purchaser approaches the hawala giver seeking bogus purchase bill, who issues the purchase bill where in all the steps discussed in situation one are involved which are not disc....
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....in business of the assessee was manufacturing and dealership of all kinds of industrial power control instruments and related items but in the year under consideration it has shown trading of rs.65,65,30,470/out of the total purchases at rs.67,34,02,306/-. The gross profit shown in the year under consideration was at 5.71% as against 8.77% in the preceding year. From the perusal of the submissions made by the AR of the appellant, it is noticed that the contention of the appellant was correct that in the earlier years the main business of the assessee was manufacturing and in the year under consideration the major activity is of trading. The gross profit rate was also decreasing every year and in the year under consideration it has decreased to 3%. It is also an established fact that the gross profit of trading activity is lower than the manufacturing activity. The AR of the appellant has also offered that additional gross profit @ 32 % of the turnover can be added back. But, there is no reasonableness in adopting this 1/2% GP. Keeping in view the principle of natural justice and the decision of the Hon'ble courts on this issue, only the reasonable profit has to be added back on....
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....of the case and in law, the Ld. CIT (A) erred in not appreciating the fact that the expenditure claimed to have been incurred by the assessee under the head 'preliminary expenses written off' are not covered by the qualifying provisions of Sec. 35D (1) since it was not incurred in respect of commencement of any business or for purpose of extension of business or for setting up a new unit.?" 6. Brief facts are that the assessee has incurred expenditure in relation to increase in share capital amounting to Rs. 1,12,9,210/-. According to AO, the assessee has issued, subscribed and paid up share capital increased from Rs. 5,68,91,000/- to Rs. 68,91,000/- to Rs. 26,68,98,680/- and accordingly these expenses relating to increase in share capital cannot be allowed, in view of the decision of Hon'ble Supreme Court in the case of Brooke Bond India Vs CIT 225 ITR 798 (SC). Aggrieved assessee preferred appeal before CIT (A). The CIT (A) allowed the claim of the assessee by observing that these expenses on public issue of shares or debentures are in the nature of commission, brokerage and other charges for drafting, typing and printing. According to him these are covered as allowable as 1/5t....