AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2017 (2) TMI 1128
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.... Lower Authorities erred in holding on assumption and presumptions that purchases for Rs. 4,92,43,370/-from three parties are bogus. 4. The assessee denies liability to be assessed to interest u/s 234B and 234C of I.T. Act 1961. Without prejudice levy of interest u/s 234B and 234C of I.T. Act 1961 is unjustified, unwarranted and excessive. 3. The issue raised in the grounds of appeal no.1,2 and 3 is against the confirmation of addition of Rs. 4,92,43,370/- by the ld.CIT(A) as made by the AO on account of bogus purchases. 4. The facts of the case are that the assessee filed return of income on 27.09.2010 declaring total income of Rs. 8,39,89,526/-which was processed under section 143(1) of the Income Tax Act, 1961. Subsequently, the case of the assessee was selected for scrutiny and the statutory notices under section 143(2) and 142(1) were issued and served upon the assessee. The assessee was engaged in the business of manufacturing, marketing and sale of Indian made foreign liquor and other allied products. The AO during the course of assessment proceedings received an information from DGIT(Investigation), Mumbai that the assessee has entered into bogus transactions amounting....
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....0,47,620/- by making various additions inter alia of bogus purchase of Rs. 4,92,43,370/-. 6. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) who, after considering the submissions of the assessee as has been incorporated at pages 9 and 10 of the appeal order concerning the issue of purchases, decided the issue of bogus purchases against the assessee by observing and holding as under : "5.4. Ground Nos.6 to 8 are regarding the addition on account of bogus purchases from three parties amounting to Rs. 4,92,43,370/-which has been proved a hawala entry provider by the enquiries of the Sales Tax Authorities, the investigation wing of Income Tax Department and the inquiry of the AO. It is noted that the appellant during the assessment proceedings could not provide any documentary evidence of actual delivery of material allegedly purchased from said party. During the appeal proceedings also the appellant could not file any documentary evidence at all regarding the allegedly bogus invoices, which could show that it has actually purchased any material from the said party. Under these circumstances, prime facie such purchases does not appear genuine.....
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....he purchases as bogus and fictitious were on the ground that non service of notice under section 133(6) of the Act to the suppliers/parties. While drawing our attention to the copies of the written submissions made before the assessing officer dated 20.3.2013 filed at pages no.79 to 81 of the paper book, the ld. Counsel argued that bills and vouchers pertaining to the purchases made from three parties who were alleged to be hawala operators were furnished with the further details that the assessee purchased gift items from these parties which were used for promotional activities of its brand of Indian made foreign liquor which was corroborated by the photographs taken during the promotional activities. The ld. Counsel argued that stock register showing various gifts purchased from these parties and issued for promotional activities were duly maintained and were also produced before the authorities below. Further, the ld. AR in support of the contentions brought to the notice of the bench the delivery challans filed before the AO at page 2 of the written submissions which was forming part of paper book at page 80. The ld. AR drew our attention to the gift articles purchased for the ....
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....of his arguments the ld.AR relied upon the decision of Mumbai Bench of the Tribunal in the case of M/s MPIL Steel Structures Ltd V/s DCIT in ITA No.6602/Mum/2014 (AY-2011-012) dated 28.7.2016 (wherein Accountant Member and Author is one of the party) and the decision of Tribunal in the case of CIT v/s Tarla R Shah (2016) 46 CCH 0080 MumTrib. In the first decision the ld. Counsel submitted that one of the parties M/s Kotsons Impex P Ltd from whom the purchases were made of Rs. 13,77,050/- by the assessee also supplied material to M/s MPIL Steel Structures Ltd as appeared at sr.no.4 at page 3 of the said decision. The ld. Counsel further submitted that the statement recorded by the Sales Tax Department were neither available before the AO nor did the revenue make any independent inquiry to know the factual position. No opportunity to cross examine the deponents who gave affidavit before the Sales Tax Department was given which was in gross violation of the principle of natural justice. The assessee could have offered explanation or controverted the contents of the materials as provided by the Sales Tax Department and used against it only when the said material was supplied to the ass....
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....aged in the business of manufacturing of Indian made foreign liquor primarily Officers Choice Whisky. During the year the assessee purchased various gift items such as OCW glasses,OCW Steel jar,OCW T-Shirts,OCW Key chain,Ice Box with Company Logo,Crystal glass & bowls,Plastic jars with Company logo,Wall Clock, Wrist Watches, Pen sets,Key chains and OCW plates which used in the promotional scheme offered by the assessee such as on purchase of750 ml bottle get 3 crystal Glasses Free,on purchase of375 ml bottle get 2 Glasses Free and on purchase of 180 ml bottle get 1 Glass Free etc. The materials were purchased from three suppliers to the tune of Rs. 4,92,43,370/- as per the details given above. The AO, on the basis of information from DGIT (Inv), Mumbai and on the basis of notification issued by the sales tax department GOM declaring that these suppliers as hawala operators, made the addition of the total purchases from these parties by treating the same as bogus for the reasons that notices sent under section 133(6) to these hawala parties were returned un-served. The assessee filed before the AO complete books of accounts, items wise stock register evidencing the receipts of gift ....
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.... relied upon by the parties. We find that the AO made the addition of Rs. 7,48,31,548/- which was reduced to Rs. 63,29,735/- by the ld. CIT(A) on the basis of remand report called for during the appellate proceedings which was furnished by the AO vide letter dated 31.7.2014. We find that the assessee submitted the copies of ledger account, copies of bank statements, copies of purchase bills, material delivery challans in order to substantiate the purchases made from those parties. Besides the assessee also produced stock register in which the entries of material received and consumed for production in order to prove the case of assessee and ultimately sold all the finished goods for which no doubts were raised by the tax authority. We also note that the books of account were not rejected by the AO and only the purchases were doubted which were reduced by the ld. CIT(A) substantially. Now, the question before us is whether the purchases as made by the assessee were bogus despite the facts that the material was received with supporting bills and vouchers and payments were made through banking channels and all the material received was also consumed as shown in the stock register and ....
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....ara 11] In the result, the appeal filed by the assessee was to be allowed. [Para 12]" In the case of Rajeev G Kalathial (supra), it has been held as under : "The Assessing Officer had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. It was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal from their account. There is no such exercise was done. Transportation of goods to the site is one of the deciding factor to be considered for resolving the issue. The First Appellate Authority has given a finding of fact that part of the goods received by the assessee was forming part of closing stock. There is nothing, in the order of the Assessing Officer, about the cash withdrawal. Secondly, proof of movement of goods is not in doubt. Therefore, considering the peculiar facts and circumstances of the case under appeal, that the order of the FAA does not suffer from any le....
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.... the asses-see and not to someone else, much less to the loan of Rs. 2,500 which was shown to have been advanced by that person to the assessee-respondent. There is also no indication as to when that confession was made and whether it relates to the period from April 1, 1957, to March 31,1958, which is the subject-matter of the assessment sought to be reopened. The report was made on February 13, 1967. In the absence of the date of the alleged confession, it would not be unreasonable to assume that the confession was made a few weeks or months before the report. To infer from that confession that it relates to the period from April 1, 1957, to March 31, 1958, and that it pertains to the loan shown to have been advanced to the assessee, in our opinion, would be rather farfetched." After going through the facts in the assessee's case in the light of ratio laid down by the Hon'ble Apex Court and the decisions of the Tribunal, we are of the considered opinion that the order passed by the FAA is not correct and cannot be sustained. We, therefore, following the ratio laid down in the decisions referred to above are inclined to set aside the order of ld.CIT(A) and direct the AO to delet....
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....uring the year. 13. The ld. CIT(A) allowed the appeal of the assessee on this ground after considering the contention and submissions as made by the ld.AR during the course of appellate proceedings by observing and holding as under:- : The AO has disallowed an expenditure of Rs. 13,05,410/- in respect of provisions for Auditors fees under the head "Legal & Profession expenses which is payable to two parties of Mumbai for tax audit report and valuation of gratuity and leave encashment. The AO has disallowed the said sums on the ground that it is a contingent liability which is not allowable u/s 37(1) of the IT. Act. On the other hand, it was the plea of the appellant before the AO as well as during the appeal that such expenses are regular routine expenditure year after year and since the expenditure in question is in respect of the current financial year, therefore, in the mercantile system of accounting followed by the appellant it is an allowable deduction. After considering the rival submissions, I agree with the contention of the appellant that in mercantile system the appellant has to debit all expenses pertaining to the current year in its P&L account. Further, the provisio....
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....t Pvt.Ltd amounting to Rs. 5,00,62,122/- without charging any interest. The AO by notice dated 18.2.2013 called upon the assessee as to why the proportionate interest on the said advances should not be disallowed which was replied by the assessee vide letter dated 19.2.2013 stating that advances to Tracstar Investment Pvt. Ltd was business advances as the said company was providing bottling services to the assessee of Indian Made foreign Liquor (IMFL) manufactured by the assessee and therefore given out of business consideration and commercial expediency. The AO did not find the submissions of the assessee as substantive and convincing and accordingly disallowed a sum of Rs. 75,09,918/-. During the course of appellate proceedings, the ld. CIT(A) deleted the addition by observing and holding as under : "5.3 Ground Nos.4 & 5 are regarding' the disallowance of proportionate interest of Rs. 75,09,318/- on interest free advance to M/s Trackstar Investment Pvt Ltd. It is presumed by the AO that the advance may out of borrowed funds. However, it is claimed by the appellant that it is old advance which is in respect of business deals in the said party, which varied from year to year. ....