TaxTMI 
TaxTMI 
2017 (1) TMI 560
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....fied instances enumerated in paragraph 6.2 of the impugned order is Rs. 1,38,45,354/-. 3. Without prejudice, on the facts and in the circumstances of the case of the appellant and in law, ld. CIT(A) has erred in not directing deduction for Assessment Year 2011-12 of the sum of Rs. 1,13,58,809/- as enumerated in paragraph 6.2 of the impugned order, more so when he himself has decided the appellant's appeal bearing no. CIT(A)-8/IT-598/13-14 for assessment year 2011-12 on even date and in not directing amount of Rs. 24,77,708/- for deduction for assessment year 2009-10 as held by him in the impugned order. 4. That the impugned order being contrary to law, material on record and facts of the case may kindly be set aside, amended and modified in the light of the grounds of appeal enumerated above and the appellant be granted such reliefs as is called for on the facts and in the circumstance of the case of the appellant and in law." 3. In the cross-appeal, Revenue has raised the following Grounds :- "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in restricting the disallowance of Rs. 17,55,85,788/- out of the total expenditure claime....
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....d out an exercise to verify the genuineness of the purchases and/or expenses recorded in the account books. The discussion in the assessment order reveals that notices u/s 133(6) of the Act were issued to various parties. In many cases, the notices returned un-served with the remark "party not known/left". It is also noted that in many cases notices were served but either no reply was received or if the reply was received, the figures reported by the parties did not tally with the figures presented by the assessee-company. In this background, the Assessing Officer issued a notice u/s 142(1) of the Act dated 11.3.2013 show-causing assessee the various discrepancies noticed in the course of notice u/s 133(6) of the Act. 7. The Assessing Officer notes that in response, assessee insisted that all the purchases and expenses were genuine and that the parties were regular suppliers. One pertinent point which was made by the assessee was that there was inadequacy of time inasmuch as the notice u/s 142(1) of the Act was issued on 11.3.2013 and that it was not possible to respond with all the requirements by 19.3.2013. In any case, assessee offered to produce two parties (contractors) and t....
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....quired to produce 59 parties in a short span of time during the fag end of assessment proceedings. Inspite of the short period, assessee had furnished considerable information which has not been properly appreciated by the Assessing Officer. Assessee also pointed out that it was engaged in the business of manufacture of heavy and light engineering iron & steel castings (Jobbing industry) as per requirements of its customers and also takes part in tenders issued by Public Sector Undertakings and that the books of account of assessee depict correct position. It was also pointed out that the action of Assessing Officer was not justified in view of judgment of Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises Pvt. Ltd. in ITA No. 5604 of 2010 dated 17.12.2012, which prescribes that no disallowance of expenditure can be made merely because the notices u/s 133(6) remained unserved or remained un-complied with. Before the CIT(A), assessee also pointed out that it had further obtained confirmations from few other parties also, which were produced before him, as the same could not be produced due to inadequacy of time during assessment proceedings. It was also pointed ou....
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....in para 6.2 of the order some of the discrepancies in date of recording of the purchases by assessee on one hand and by the supplier on the other hand. On that basis, CIT(A) records that certain payments have not been recorded in the relevant year by the assessee. The CIT(A) thereafter goes on to say that the aforesaid shows non-compliance with the mercantile system of accounting, which is otherwise adopted by the assessee. Be that as it may, CIT(A) restricted the disallowance to 25% of Rs. 17,55,85,788/- which came to Rs. 4,38,96,447/-. 13. In this background, the learned representative for the assessee vehemently pointed out that there was no justification for making the impugned addition because there is no specific failure on the part of assessee to furnish the relevant details. The learned representative pointed out that the Assessing Officer had issued notices to a large number of parties and that in a fair number of cases, replies were received and reconciliations were prepared by the assessee. It was pointed out that the reconciliations showed that the suppliers had recorded the purchases as per the date of bills issued, whereas the assessee had recorded the purchases as a....
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....ointed out that the addition made by Assessing Officer on account of non-reconciliation of balances of the parties is quite justified. 15. We have carefully considered the rival submissions. The crux of the controversy before us arises from the action of the Assessing Officer in holding that amount of certain purchases and expenses debited in the books of accounts could not be properly verified and, therefore, he added a sum of Rs. 17,55,85,788/- to the returned income. The CIT(A), on the other hand, has restricted the disallowance to 25% of Rs. 17,55,85,788/- , which came to Rs. 4,38,96,447/-. This action of the CIT(A) implies that he was not fully convinced with the stand of the Assessing Officer that the amount of purchases/expenses amounting to Rs. 17,55,85,788/- could be construed as unverifiable in toto. The reasoning of the CIT(A) is revealed from the discussion in Para 6.1 of his order whereby, it is recorded by him that even in the "remand report submitted by the AO and the reply to the said report filed by the learned AR during the course of appellate proceedings", the assessee could not file complete details with regard to the aforesaid amount. Thereafter, in Para 6.2 t....
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.... where purchases as per audited annual accounts of the assessee did not reconcile with the details received from the parties. In the said tabulation an amount of Rs. 3,61,41,082/- has been tabulated of cases where the parties have claimed sales made to the assessee more than the amount of purchases recorded by the assessee. In this context, we find that the assessee has been consistently explaining that the purchases recorded by it are based on the purchase invoices, which were available on record. It has also been explained that the instances noted by the Assessing Officer could not ipso-facto show that assessee had indeed effected any unrecorded purchases. At pages 45 to 62 of the Paper Book is placed a copy of the reply filed by the assessee with regard to the remand report submitted by the Assessing Officer during the appellate proceedings. At pages 50 to 62 of the paper book is placed the explanation of the assessee with regard to 24 such parties regarding the variation found by the Assessing Officer in cases where purchases recorded by assessee were of different amounts. In this regard, we may refer to one item of Simplex Engineering & FDR Works Pvt. Ltd. in whose case a sum ....
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....ket for sale of products manufactured by it. It was pointed out that the assessee manufactured and supplied products as per the drawings of the customers, which are users specific in nature. It was, therefore, pointed out that there was no reason to doubt the purchases effected by the assessee in a wholesale manner. In our considered opinion, the verification exercise carried out by the Assessing Officer does not result in unearthing of any falsity in the claims made by the assessee and thus, no addition is merited. Absence of receipt of any reply from the suppliers cannot by itself demonstrate any bogus claim by the assessee unless any of the attendant facts bear out any bogus nature of the claim of expenditure by the assessee. Under these circumstances, in our considered opinion, additions amounting to Rs. 4,85,27,686/- and Rs. 6,52,15,644/- enumerated in para -7 of the instant order are also not justified. 15.3 Now, we may come to the additions made of Rs. 1,47,91,709/- and Rs. 54,87,524/- with respect to the payment of labour charges and off-loading expenses respectively. In so far as, the payment of labour charges is concerned, the plea of the assessee is that most of the lab....