TaxTMI 
TaxTMI 
2017 (2) TMI 909
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....e on account of disallowance of expenditure incurred in relation to exempt income u/s 14A." 4. "On the facts and in the circumstances of the case and in law, the Id.CIT(A) erred in relying upon judgments of the CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. without appreciating that the facts involved in the of the appellant's case are different from the facts of the above case laws." 5. "On the facts and in the circumstances of the case and in law, the Ld CIT (A) has grossly erred in not appreciating the' fact that notice u/,~ 133(6) issued to the parties from whom alleged bills were received were returned undelivered by the postal authorities and inspector of this circle." 6. "On the facts and in the circumstances of the case and in law, the Ld CIT(A) has grossly erred in not appreciating the fact that assessee was not able to produce the parties, from whom alleged bills were received despite many opportunities were accorded to him." 7. "On the facts and in the circumstances of the case and in law, the Ld CIT (A) has grossly erred in not appreciating the fact that assessee failed to rebut findings of sales tax department vis-a-vis bogus purchases despite reasonable op....
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....and found that no where the Assessing', Officer has, stated the list of hawala givers by M/s.Siddhivinayak Steels and,' no where the, name of the appellant was specifically appearing in the hawala list given'. In this respect the appellants authorised representative' have relied on the decision, of the Gujarat High Curt in the case CIT vs. M.K: Brothers 163ITR Page 249 where the Gujarat High Court held as under.:- "During the accounting year relating to assessment year 1971-72, the assessee had' made, purchases of the total value of Rs. 52,254/- from certain parties. The Income Tax Officer required, the assessee to produce evidence regarding the purchases. In the mean time, the said parties had admitted to the Sales Tax Authorities that they had issued bogus vouchers. The Income Tax Officer held, that the purchases were not genuine and assessed .the amount of Rs. 52,254/- as income of the assessee from undisclosed sources. The Tribunal found that there was no evidence to show that the bogus vouchers had been issued to the assessee" that nothing had been shown to indicate that any part of the funds given by the assessee to these parties came back to the assesse....
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....ers (P,.) Ltd. v. Dy. CIT [2003] 87'ITD 607 (Mum.) Sharma Associates v. Asstt. CIT [1996] 217 ITR (AT) 1/[1995] 55 ITD~ 171 (Pune) (TM) , : Glorious Hospitlaity Pvt. Ltd. Vs Department of Income Tax ITAT Delhi Bench 'C' ITA No.2124/Del./2012 6.3.5. The addition by the A.O. cannot be accepted in view of judicial pronouncements. 'In this regard, I would like to refer and rely on the judgments below since the facts and circumstances of these judgements are similar to the present case and the ratio of judgments of these cases are applicable to the present case of the appellant. These are as under:- (i)The Hon'ble Gujarat High Court in the case of CIT v M.K.Brothers reported at 163 HR 249 has held that" It was clear from the Tribunal's order that whether the said transactions were bogus or not was a question of fact. The assessee was given credit, facilities for, a short duration and the payments were given by cheques. When that was so, it could not be said that the entries for the purchases of the goods made in the books of the account were bogus entries. Thus, the conclusion arrived, at by the Tribunal was not against the weight of evidence. The, Tribunal w....
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....roducing the vouchers of sales of the goods. The Assessing Officer had miserably failed to bring on record any clinching evidence to prove that these alleged purchases were bogus and not genuine. Further, the Assessing officer did not make requisite investigation against the two sellers. Therefore, the Commissioner (Appeals) had rightly held that the addition made by the Assessing Officer merely on the basis of observations of sales-tax department, without conducting independent enquiries was not justified. Since the purchase in question had been held as genuine purchase, addition of Rs. 55,632 could not be made to the income of the assessee. Hence, the revenue's appeal was liable to be dismissed" In this case, "the assessee was trading in narma, kapas, foodgrains and also derived income from commission. The Assessing Officer on the basis of information received from the sales-tax department held that the assessee had made bogus purchases from two parties and, therefore, he made certain addition to the income of the assessee under section 69. He also made an addition of Rs. 55,632 to the income of the assessee holding that the assessee did not pay any sales-tax or mandi tax o....
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....e decision of supreme Court in the case Kishinchand Chellaram vs CIT reported in 125ITR 713 where it was held , "1. The letters dated 14-2-1955 and 9-3-1959, did not constitute any material evidence which the Tribunal could legitimately take Into account for the purpose of arriving at the finding that the amount of Rs. 1,07,350 was remitted by the assessee from its Madras Office, and if these two letters were, eliminated from consideration, there was no material evidence at all before the Tribunal which could support its finding. What the manager of the, bank wrote in his letters could not possibly be based on, his personal knowledge but was based on here say. 'The revenue authorities ought to, have called upon the manager to produce the documents and papers On the basis of which he made the statement and confronted' the 'assessee with those documents and papers. No explanation' has, been furnished by the revenue as to what happened when the manager appeared in obedience to the summons and what statement he made. 2. It was not possible to hold, in the face of the .application for remittance signed in the name of T, that amount was remitted by the assessee and th....
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....ssee in the same shape,' size and weight, duly verified by the customs authorities, The Assessing Officer was not justified in doubting the genuineness of the claimed purchases made by the assessee from the four suppliers and making addition merely on basis that on subsequent occasion the parties were not found on the given addresses or in some other cases some connected person to the supplier had stated that they were only issuing bills without supplying goods or that the money paid by the 'assessee against the purchases was withdrawn, by those parties. Undisputedly, after completion of transaction a purchaser cannot have any control over the suppliers and suppliers are always at liberty to use the money paid to them against the goods sold 'by them. Thus, in the absence of any positive evidence that the goods were not purchased from the above parties but from some named person or that the money paid by the assessee against the goods was ultimately' returned to the assessee by the' suppliers, there was no occasion before the Assessing Officer to deny the claimed purchases, especially when the genuineness of the export of those goods by the assessee had been acce....
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.... the said 'partner or anybody else. A copy of the statement recorded by' the Central Excise authorities was never provided' to the assessee. No independent investigation was carried out by the Assessing Officer even though he proposed to make an addition under section 69 in the hands of the assessee. There was no evidence of suppressed sales, as the sales declared by the assessee had been accepted fully by the Assessing Officer and no action had been taken' by the Sales Tax Department despite there being information regarding the fact that the statement made by the said partner had been retracted in the very next opportunity immediately after making of the statement. The assessee had been maintaining complete financial and quantitative records at all stages of production and no specific defects had been pointed out by the authorities below. The Commissioner (Appeals had categorically mentioned that the Assessing Officer had not pointed out any defects in the books of account: nor brought any on record and that the Assessing Officer was not justified in rejecting the books of account against which the department had' not come in second. appeal. In the circumstanc....
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....gus. The purchase payments have been made by the appellant by cheque and there is no evidence not even a suggestion that the funds given by the appellant as purchase price were received back by the appellant. This judgment of the Hon'ble Gujarat High Court would therefore be squarely applicable to the appellant's' case.' Similarly Hon'ble Calcutta High Court in case of Diagnostics supra has held that where payments have been made" by account payee cheques adverse view cannot be taken if subsequently the dealers do. not' .co-operate with the A.O. for verification of the purchases: In this regard, I have already' referred to various decision of the Hon'ble Courts and placed reliance on the same. 6.3.9. However, in the case of the Appellant, the AO has neither established that the' sellers are incapable of making the sales nor that any of the sellers were employees of the Appellant. The ledger accounts of the aforesaid parties were produced and explained the same with reference to date of payment, Cheque No. etc .. In this regard, I would like to refer to the under mentioned judicial pronouncements and' place reliance on the same. (i) Reli....
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....r of the AO. On further appeal, Tribunal observed that the respondent-assessee had filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through Account Payee cheques to the suppliers, copies of invoices for purchases and stock statement. This reconciliation statement gave' complete details with regard to opening stock, purchases, sales and closing stock and no fault with regard to lt was found. Besides, substantial amount of sales made by the assessee was to Government Department and such sales could not be bogus. Also, the books of account of the assessee had not been rejected. Thus, Tribunal deleted the. disallowance of Rs. 1.33 crores by holding that the purchases were not bogus. In this case the' following question of law has been formulated for consideration of the Hon'ble Bombay High Court . "Whether on the facts in the circumstances of the case and in law the Tribunal was right in deleting the addition made by the Assessing Officer of Rs. 1,33,41,917/- towards bogus purchases even though the suppliers were nonexistent end one of the parties had categorically denied having any business dealings with the Assessee Company....
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....dated 19.08.2004, the CIT(A) upheld the order of the Assessing Officer interalia to the extent Rs. 1.33 crores disallowed as bogus purchases. 5. Being aggrieved by the order dated 19.08.2004 of the CIT(A), the respondent-assessee preferred an appeal to the Tribunal. The Tribunal in the impugned order dated 30.04.2010 while allowing the appeal records that the respondent-assessee had filed letters of confirmation of suppliers, copies of bank statement showing entries' of payment through Account Payee cheques to the suppliers, copies of invoices for purchases and stock statement i.e. stock reconciliation statement. This reconciliation statement gave, complete details with regard to opening stock,' purchases, sales and closing stock and no fault With regard to it was found. Besides, substantial amount of-sales made by the respondent assessee was to Government Department i.e. Defence Research and Development Laboratory, Hyderabad and such sales could not be bogus. Besides the Books of Account of the respondent-assessee have not been rejected. In view of the above, 'by order dated 30.04.2010 the Tribunal' deleted the disallowance of Rs. 1.33 crores by holding that the ....
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....ply has stated that the purchaser the Rolling Mill was not Claimed as' expenditure and the source of payment was fully explained for which there was no dispute. He has further narrated that the facts of the case which were produced at Para 2 of the reply submitted by the authorised representative. I have carefully considered the observations of the Assessing Officer in making the additions and the reply of the authorised representative' and found that the provision of the section 69C cannot be applied in the above case because 'the assessee has not claimed any expenditure in respect of the investments made in the Rolling Mill and further he has fully explained the source of the payment which was made from the Cash Credit Limit of the Karnataka Bank. Therefore there is nothing to disallow and nothing to make addition as deemed income. The other aspect of the Assessing Officer where the Assessing Officer has relied the statement of Shri Pramod Kumar Singh, proprietor of M/s Siddhivinayak Steel which was given before the, Sales Tax Department. It was the duty of the Assessing Officer that if he wants to rely on the statement given to some other authorities then he was duty....
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....els 27050389521V 40,19,776 7. The Rolling Mill so purchased from M/s. Siddhivinayak Steel was installed on 24/01/2011 was started in January 2011 and 1038 M/ts. CR polls were also produced during the year under consideration. We found that said provduction was also found to be recorded in Excise Register RG-23, consumption of electricity also increased and payments were made from bank account maintained with Karnataka Bank. However, the AO has disallowed the purchase of machinery only on the basis of statement of Proprietor of Siddhivinayak Steel which was made before the Sales Tax Department. However, it was general statement without specifying the name of the assessee. After relying on the decision of Jurisdictional High Court in the case of Nikunj Eximp Pvt Ltd., 2013-TIOL(Tax India Online.com)-04-HC-MUM-IT in the judgement dated December 17,2012 wherein Hon'ble High Court held that Section 69C can be applied if there is an unexplained expenditure and the source of payment is not proved. We found that purchase of Rolling Mill was not claimed as expenditure and the source of payment was fully explained for which there was no dispute. The CIT(A) has recorded a c....
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.... of scrap. On going through the submission and record, it is found that similar type of scrap were generated in earlier years and the sale value have been accepted by the department. The Assessing Officer has not given any reason for taking the value of the scrap sale at the price on which finished goods were sold, since the appellant agreed that there is no dispute over quantity of scrap sold which is already appearing in the sales. Therefore, it was argued that there is no reason to make any addition in respect of sale of scrap which is already accounted. The appellant has also submitted that the scrap generated is usual s per norms prescribed by the Director General of Foreign Trade, Standard Input / Output Norms as per Sl.No.C692 as notified by DGFT in the handbook (Vol.2) 2002-07. The relevant portion of item no.C692 of DGFT handbook is reproduced hereunder:- Sl.No. Export Item Quantity Import Item Qty. Allowed C692 Items manufactured out of GP Sheets 1 Kg GP sheets / Coils / Secondary 1.050 kg. On the basis of above, it was submitted that, the normal scrap allowed is 5% while the scrap of the appellant was 4.88%, which is within the limit ....
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....r scrap generated was as per norms prescribed by Director General of Foreign Trade, standard input / output norms as per survey No.C-692 has notified by DGFT in the handbook (Volume-2) 2002-07. According to this notification scrap sale is allowed at 5%, however, scrap of the assessee was 4.88% which is within the limit as mentioned in the above notification. The CIT(A) has also recorded a finding to the effect that sale of scrap has been recorded in RG-1 which has also been verified by the excise department. Detailed finding so recorded by CIT(A) at para 5.3 have not been controverted by learned DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the finding so recorded by CIT(A) which is as per material on record. Accordingly ground taken by Revenue is dismissed. 11. The AO has also disallowed expenditure u/s.14A amounting Rs. 3,49,424/- which was deleted by CIT(A) after observing as under:- I have carefully considered the reply given by the appellant, perused the order of the Assessing Officer. It is noticed that the Assessing Officer has disallowed Rs. 3,49,424/- u/s 14A as per Rule 8D in the said working at Para 8.3. The Asse....