TaxTMI 
TaxTMI 
2017 (4) TMI 1092
X X X X Extracts X X X X
X X X X Extracts X X X X
....nder section 115JB (Ground No.3.1 and 3.2). (iv) Disallowance on account of alleged bogus purchases comprised of following:- Utilization of material as- Amount (Rs.) Treatment in Accounts Plant & Machinery/Moulds 23,79,82,268 Addition to Plant and Machinery Trail Run 13,94,92,838 Charged to Capital WIP account Trail Production 6,83,99,170 Charged to Capital WIP account Machinery Spares 14,97,74,663 Shown as Inventory in Balance Sheet Raw Material & Consumables 3,50,24,425 Charged to Profit and Loss account 63,06,73,365 (Ground No.4.1 to 4.6) (v) Credit of TDS amounting to Rs. 51,00,532/- (Ground No.5) (vi) Short period for advance tax amounting to Rs. 15 crore (Ground No.6) (vii) Charging of interest under section 234B and 234C (Ground Nos.7 & 8) (viii) Initiation of penalty proceedings under section 271(1)(c) (Ground No.9) 2. The assessee company is engaged in the business of manufacturing and trading of consumer electronics and home appliances, exploration crude oil and gas, investment in shares, securities and properties, lease and finance and other incidental activities. 3. The brief facts qua the issue relating to transfer pri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ch has been offered to the tax. As submitted earlier in the immediately preceding assessment year, the corporate guarantee provided by the VIL does not fall within the definition of international transaction as per the definition of International Transaction prevailing at the time of providing corporate guarantee. However, TPO in earlier years has taken a view that the Finance Act 2012 introduced Explanation to Sec 92B with retrospective effect from 01.04.2002 and as per the Explanation Corporate Guarantee is a type of capital financing transaction and within the meaning of definition of international transactions under 92B." 5. Apart from that the assessee also submitted a detailed analysis and reasoning to justify firstly; it is not an international transaction and therefore no bench marking is required; secondly, the rate of 3% as guarantee commission is not correct on the facts of the case; and lastly, charging of 0.25% of guarantee commission is justified from internal CUP. However, the Ld. TPO, after detailed analysis and discussion, held that the arms length guarantee commission/fee should be calculated at the rate of 3%. The relevant observations in the finding of the TPO....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. 8463,750. Hence the difference between ALP of guarantee commission and commission actually charged is to be adjusted as computed below: Arm's Length Guarantee Fee calculated above Rs.9,91,77,534/- Guarantee Fee received Rs.84,63,750/- Difference between arm's length price and price charged by the assessee Rs.9,07,13,784/- Thus, the above amount of Rs. 9,07,13,784/- is treated as transfer pricing adjustment being the difference between the arm's length guarantee fee receivable and the actual guarantee fee received by the assessee from its AE, Videocon Global Energy Holdings Ltd, British Virgin Islands for the FY 2010-11." 6. As regards the letter of undertaking in the case of Videocon Hydrocarbon Holdings Ltd., commission allowance, the adjustment was made in the following manner: "Outstanding Guarantee Amount Rs.18,056.00 Million No. of days the guarantee is outstanding during the FY 2010-11 (07-03-2011 to 31.3.2011) 25 days Arm's Length Guarantee Commission/Fee 1.5% p.a. Arms Length Guarantee Fee @ 2.0497% p.a. on the outstanding corporate guarantee for 24 days 1,78,08,658 Price Received vis-à-vis the Arms Length Price: T....
X X X X Extracts X X X X
X X X X Extracts X X X X
....011 9028.00 Value of security covering Loan 1.68 times Videocon Global Energy Holding Ltd. - Guarantee of USD 150 Million Particulars Amount rupees in million Security Margin Deposit of USD 30 Million @ 46.44 (as on 1.9.2010) 1393.20 Loans and advance (joint venture interest as on 1.9.2010) (230.89 millions) 10722.53 Approximate value of security (excluding Guarantee given) 12,115.73 Loan for which Guarantee Given 150 million at 46.44 as on 1/9/2010rupees) by Assessee as on 31.3.2011 6966.00 Value of security covering Loan 1.739 times Regarding letter of undertaking given to Videocon Hydro Carbon Ltd., he pointed out that State Bank of India has charged bank guarantee commission by giving 50% concession to assessee (i.e. 50% of 1.75%) which comes to 0.875%. If adjustment on account of entity risk, currency risk and country risk is given then it comes down approximately 0.44%. Thus, at the most the corporate guarantee commission can be taken at 0.4% to 0.5%. In support of this contention, he has relied on various decisions wherein this Tribunal has held that guarantee commission rate of 0.5% can be accepted as ALP. The list of such decisions....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ransaction or not. Whence assessee before us is not pursuing the matter, we are also not inclined to adjudicate the issue. On merits, Ld. CIT DR tried to justify the charging of corporate guarantee commission @ 3% and submitted that there are various decisions wherein corporate guarantee commission of 2% to 3% have been accepted. 11. After considering the rival submissions and on perusal of the impugned orders, we find that it is an undisputed fact that the assessee has given corporate guarantees to financial institution/banks in respect of loan or credit facilities extended to its two AEs and letter of undertaking to the lenders in the case of another AE. For providing such corporate guarantee it has recovered 0.25% as guarantee commission. In support of charging of 0.25%, the assessee, first of all, contended that the loans for which the assessee has given guarantee are primarily covered by pledged securities, hypothecation of debtors' balances and other assets of the AE, therefore, it cannot be said that the entire security of the loan was based on corporate guarantee given by the assessee. The details of loans vis-à-vis the security thereof had already been reproduc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....estment Division. Our investments as per Sch. 6 of our Balance Sheet are of Rs. 39,66,70,91,020. Our share capital of Rs. 347,95,82,540 and Reserves & Surplus of Rs. 79,65,27,57,457 total up to Rs. 83,13,23,39,997/- which amount is more than our investments. Hence, it is submitted that provisions of Sec. 14A of the I. T. Act, 1961, are not applicable in our case as held by B'bay H.C. in Reliance Utilities & Power Ltd., 313 ITR 340 (Bom) & followed in Godrej & Boyce Ltd., ITAT, Mum, No. 1629/MUM/09. We have inadvertently not claimed exemption u/s 10(34) of the Act, in respect of Dividend Income of Rs. 49,14,724/- included in accounts of our Investment Division. You are requested kindly allow the same and oblige." However, the Assessing Officer rejected the assessee's contention and held that, since assessee itself has not claimed dividend income as exempt and has included as part of miscellaneous income, therefore, it will not be treated as exempt. He was of the opinion that, since the assessee has made investments, therefore, disallowance u/s 14A r.w. rule 8D has to be made. Further assessee has led no evidence before him to show that own funds have been utilized for pur....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(Mum.) of 2009] (x) Asstt. CIT v. Lafarge India Holdings (P.) Ltd. [2008] 19 SOT 121 (Mum.) (xi) Asstt. CIT v. M Baskaran [2015] 152 ITD 844 (Chennai - Trib.) 15. That apart, he pointed out that the assessee had huge surplus fund in the form of 'share capital' and 'reserve and surplus' which aggregated to Rs. 8313,23,39,997/- which is far excess than the investments made which stood at Rs. 3966,70,91,020/-. Thus, in view of the decision of Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities & Power Ltd. [2009] 313 ITR 340; CIT v. HDFC Bank Ltd. [2014] 366 ITR 505 (Bom.); and again in HDFC Bank v. Dy. CIT 383 ITR 529 (Bom.), if assessee has surplus funds which far exceeds the investments, then no disallowance u/s 14A can be made. Regarding disallowance of indirect expenses, he pointed out that the assessee had huge strategic investments both on domestic investment as well as foreign investment which were purely for the business purpose. Apart from that, there were certain investments on which no tax free income was received. Thus, out of total investment of Rs. 3966,70,91,020/- the investments aggregating to Rs. 3946,46,16,195/- were either stra....
X X X X Extracts X X X X
X X X X Extracts X X X X
....total income liable for tax, then provisions of sec 14A does not get triggered. This basic postulate is not satisfied in the present case, because neither the assessee has claimed it as exempt income nor Assessing Officer has allowed any exempt income which was in the form of dividend income of Rs. 49,14,724/-. Once the revenue itself has treated the exempt income as part of the total income which has been held to be taxable, then the disallowance of expenditure under sec. 14A does not gets triggered, especially in light of the judgments of various High Courts as referred to above especially in the case of Cheminvest Ltd, (supra); Corrtech Energy (P.) Ltd, (supra); CIT v. Shivam Motors (P.) Ltd, (supra); Lakhani Marketing lnc, (supra); and Holcim India Private Limited, (supra). Even if we ignore this proposition completely, on merits also, as pointed by the Ld. Counsel for the assessee here in this case no disallowance of interest expenditure u/r 8D(2)(ii) can be made because, assessee had huge surplus funds of more than Rs. 8313 crores in the form of 'reserves & surplus' and 'share capital' as compared to investment of Rs. 3966 crores made by the assessee. The rati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to various additions made on account of purchases from certain dealers which has been treated as bogus and sums aggregating Rs. 63,06,73,365/- has been added to the income of the Assessee. 20. The relevant facts and background qua this issue are that, an information was received to the Assessing Officer vide letter dated 15.05.2014 from the Assistant Director of Income-tax (Inv.), Unit-Ill, Kolhapur, allegedly indicating that certain concerns from whom purchases has been shown did not actually sell material but only issued bills, that is, were providing accommodation entries. Based on the report of the ADIT (Inv.), Unit Ill, Kolhapur, the AO observed that during enquiries conducted by the ADIT (Inv), Unit-Ill, Kolhapur in the case of M/s. Jagdish Trading Co. and M/s. Mahalaxmi Distributors, it was gathered that these two entities and certain other entities based at Sangli were instrumental in providing accommodation entries to various business houses/industries/small businessmen spread all across Maharashtra. Shri Suresh Amrutlal Parekh, Proprietor of M/s. Jagdish Trading Company, resident of 542, Vishwas Bunglow, Ambedkar Road, Sangli was the master mind behind these hawala trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....28.03.2014 by DDIT (Inv.), Kolhapur and in his specific reply to question no.12, he admitted that he is in the business of providing accommodation bills without delivery of goods and this activity was being carried out by him from Sangli. He also referred to question No. 13 and 14 which was appearing at pages 32 and 33 of the assessment order. The relevant questions for the sake of ready reference are reproduced hereunder: "Q.12. As admitted by you on earlier occasions, you were indulged in providing of accommodation bills/entries to various business houses/business concerns/entities/persons without actual delivery of the goods by charging your commission. In this regard, during the course of present enquiries you were requested to provide complete details of the other persons who were with you in providing of accommodation. bills/entries, complete names, and bank account details of various entities from which such accommodation bills were given, total turnover of such accommodation bills provided etc. Accordingly, you have furnished such details, please explain the details submitted. Ans. At the outset, I admit that I had indulged in the activity of providing accommodation bills....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y each one of us either independently or in common, we have agreed to accept the following basis: 1. The turnover of accommodation bills independently carried out by each person has been identified and the same has to be taken separately. 2. The turnover of accommodation bills carried out in common between me and Shri Dinesh Parekh and where beneficiaries have been identified, such turnover has to be shared by me and my younger brother Shri Dinesh Parekh in the ratio of 50:50. 3. The turnover of accommodation bills carried out in common between me and Shri Dinesh Parekh and where beneficiaries have not been identified, such turnover of suspense entries has to be shared by me and my younger brother Shri Dinesh Parekh in the ratio of 75:25. 4. The turnover of accommodation bills carried out by Shri Sushant Ladda in M/s. Param Trading Company and M/s. Swastik Enterprises has been identified. The turnover which has independently carried out by him is taken as his turnover and the turnover which has independently carried out by me is taken as my turnover, there is no common turnover in order to share the same. The turnover of M/s. Param Trading Company and Swastik Enterprises carrie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....to them nor was there any physical movement of goods." Based on such reply, the Assessing Officer had concluded that Shri Suresh A. Parekh had received the cheques/RTGS from the corporate houses in the respective bank account maintained in the names of various entities and after the receipt of RTGS/clearance of cheque, cash was withdrawn and handed over to the respective corporate houses after deducting their commission. During the course of assessment proceedings, the assessee was asked to provide complete details of transaction with the abovementioned parties and the fitment in the books of account was also asked to reconcile. Further, the assessee was also show caused as to why the purchases made from these hawala dealers should not be treated as bogus and added to the total income. In response, the assessee submitted full item wise details of purchases, details of utilization of these purchases, treatment or these purchases in the books or account, confirmation or Shri Suresh Amritlal Parekh dated 7/1/2013 and affidavit dated 8/1/2013 confirming supply of these materials and submitted that it had received materials as per the invoices of the parties and had made the payments b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....concerns were his family members and friends. Thus, he categorically admitted that he had actually procured the material from grey market without sale bill and the said material procured from the grey market was supplied to M/s. Videocon Industries Ltd. along with the sale invoices of his concerns in various years. When the material was supplied to the assessee, he has received the payments by way of cheque/RTGS in the names of respective parties and after the clearing of cheques/RTGS in the respective bank accounts, cash has been withdrawn and the payment has been made subsequently to the grey market suppliers from whom he had duly procured/purchased the goods. In his reply, Shri Suresh A. Parekh had stated that he has received oral orders for supply of material from Videocon Industries Ltd., Aurangabad and as per their requirement he supplied material from grey market. However, the Assessing Officer noted that there is no specific written purchase order by the assessee company specifying the type of material, quantity, price etc. He further observed that assessee being a registered company has made substantial payments to the entities managed and controlled by Shri Suresh A. Pare....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ials of various specifications, however, no such supporting evidences of specific specification for supply of material has been attached to the bills/delivery challans. There is no single initial/stamp showing date and time of receipt, etc. From the statement of Shri Rajesh Methi, Accounts Manager of M/s. Videocon Industries Ltd., it is seen that in respect of purchases shown from other than hawala parties, there are proper documentary evidences viz., Tax Invoice, Delivery Challan, Gate Entry Stamp (i.e. stamp of the Guard on duty, date of challan, Challan No., Entry No., Time in, S.I on Duty, Reg. No. 16.1 In this regard, attention is invited to the discussion by the Assessing Officer in para 8.17 at pages 56 onwards in the assessment order. The Assessing Officer has analyzed nature of documentation in respect of a number of hawala entities. A.O has also given comments in respect of the documentation. Thereafter, at page 61 and 62 of the assessment order, he has pointed out that what is missing and why the bills do not appear to be genuine considering the case of a big company which is expected to have standing operating procedure relating to purchases and documentation thereof. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....resaid hawala parties. However, in support of purchase of goods Shri Parekh has not submitted any evidences. This demonstrates that he has not purchased any material, but issued bogus sales bills without supply of material. Hence, there is no mention in receipt of receipt of material by the assessee company. It is also important to mention that the assessee company has also not been able to show evidences of receipt of goods at the factory premises. It is common knowledge that the transporters carry multiple copies of goods being transported through the carrier and one copy is meant for the party receiving the goods. In this case, the assessee company has failed to show any credible evidence relating to transportation of material or receipt at the factory. 18. During the course of recording of the statement (March 2015) of Shri Suresh A. Parekh, the Principal Officer of the assessee company i.e., M/s. Videocon Industries Ltd., was also present and he has been allowed to cross examine the reply Shri Suresh A. Parekh for supply of goods, for which Shri C.P. Saroj, Principal Officer of the company, simply stated that the company has received the material and after verification of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tted by the assessee." 24. In view of the aforesaid finding the Assessing Officer made following additions/disallowances on account of bogus purchases: (i) disallowance of Rs. 8,98,22,987/- on account of depreciation on plant and machinery and moulds; (ii) reduced written down value of plant and machinery and moulds by Rs. 33,20,80,461/- by holding that the assessee does not have evidence in respect of purchase of said plant and machinery and moulds and assessee has never procured and put them into use; (iii) a sum of Rs. 20,78,92,008 was reduced from the book value of capital work-in-progress by holding that the assessee could not produce cogent evidence to substantiate the claim or purchases accounted under "capital work-in- progress on account or trial run and trial production"; (iv) disallowance or Rs. 3,50,24,425 on account or raw material and consumables purchased and debited to P&L Account on the ground that these purchases were bogus; (v) reduced the value of inventory to the tune of Rs. 14,97,74,663 by treating it as suspicious non genuine purchases from these dealers. 25. Before us the Ld. Counsel, Mr. Sonde after referring to the various observations made by the A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....in grey market without bill. With regard to the transportation cost and other related expenditure for delivering the goods at site or desired place of the Corporate Houses, Suresh Parekh clarified that the transportation costs were to be borne by the suppliers as the order was placed at a fixed rate, which included the overhead expenses from source to destination. He had submitted that the practice of purchasing materials from grey market is not uncommon and is prevalent since long. It is followed across cotton market, cloth market, sand market and so on. He emphasized that just because someone does not use or prepare written purchase order while purchasing the materials, it does not make relevant purchase void or bogus. He submitted that a purchase is not void for want of purchase order. 26-27. With regard to the specific contention of the Assessing Officer as raised in the assessment order and counter submissions/rebuttal of the assessee as placed before us are reproduced hereunder for better appreciation of facts:- "1. Contention of the AO The AO has stated that in the statement recorded on oath u/s. 131of the Act on 1803-2014 before ADIT (Inv.) Kolhapur, Shri Suresh Amritlal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....odus operandi adopted by him for giving accommodation bills and also his commission thereon. According to the AO, from the reply of Shri Suresh Parekh, it is amply clear that he had received the cheques/RTGS from the corporate houses, in the respective bank accounts maintained in the name of hawala entities and after receipt of RTGS/clearance of cheque, cash was withdrawn and handed over to the respective corporate house after deducting their commission. This according to the AO clearly establishes that no deliveries of physical goods were made. (Page No.36 of the Assessment Order) Submission of the Appellant Mr. Suresh Parekh has confirmed before AO on 12.3.2015 that he deals with a number of corporate houses. In certain instances as per the client requirement no goods have been supplied, where he had merely received RTGS/cheque and returned cash after deducting commission. As regards the supplies to Videocon Group i.e., M/s. Videocon Industries Ltd., M/s. Value Industries Ltd., and M/s. Videocon Realty Infrastructure Pvt. Ltd., he has confirmed that physical goods were supplied which were procured from grey market and bills were from parties other than the actual suppliers. Th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ade by the appellant as bogus. 5. Contention of the AO There are no details of 'Transportation'. Submission of the Appellant: Mr. Suresh Parekh has admitted and explained that the transportation costs and other related expenditure for delivering the goods at the delivery station was to be borne by the supplier as the order is placed at a fixed rate, which included all the overhead expenses from source to destination. Therefore, there are no transportation details available on the bills which were taken from the concerns other than the actual supplier. The details were obviously not put as the delivery was made by the grey market suppliers and not the providers of the bills. (Refer Reply to Question nos. 6 and 14 (Page No. 45 and 51 of the Assessment Order) Rajesh Methi Accountant of appellant company has also confirmed during survey proceedings at the factory on 22.03.2013 that the appellant's purchases are on FOR (Free on Road, Chitegaon) basis and therefore appellant did not maintain lorry receipts for goods received. Refer Question No. 13 during survey on 221 1/20 I] at Page 63 assessment Order). 6. Contention of the AO All the invoices produced have no pr....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... stamps in order to handle contingencies of emergency or number of consignment entering the premises at the same time. It is not the case of the assessing officer that in all other cases one single gate entry stamp was used. 9. Contention of the AO: The AO stated that there is no evidence regarding receipt of material other than the affidavit filed by Shri Suresh A. Parekh in support of supply of goods. (Page No. 71 and 75 of the Assessment Order) Submission of the Appellant The Appellant has submitted the written confirmation and affidavit of Suresh Parekh to the effect that he has supplied material to Appellant. Mr. .Suresh Parekh also confirmed before the AO in his statement u/s. 131 dated 12.03.2015, that materials were purchased from grey market and delivered by those suppliers to the Appellant. However bills of different parties (other than actual suppliers) were given as the suppliers of grey market did not give sale bills and hence, the other details were not available on these bills. Appellant also submitted to the AO, the party wise details of nature of material purchased, copies of ledger accounts, payment details etc. The appellant also submitted material utilizat....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es/RTGS by the appellant company." Apart from above rebuttal, reliance was placed on following judgments: (i) Ramesh Kumar & Co. v. ACIT, [IT Appeal No. 2959/Mum/2014]; (ii) ACIT v. Ramila Pravin Shah, IT Appeal No. 5246/Mum/2013; (iii) Ganpatraj A Sanghavi v. ACIT, [IT Appeal No. 2826/Mum/2013]; (iv) Hiralal Chunilal Jain v. ITO, [IT Appeal No.4547(Mum.) of 2014]; (v) CIT v. Nikunj Eximp Enterprises (P.) Ltd. [2015] 372 ITR 619 (Bom.) (vi) ACIT v. G. V. Sons, [IT Appeal No. 2238, 2239 & 2240 of 2012] (ITAT Mum); (vii) Dy. CIT v. Rajeev G. Kalathil [2015] 67 SOT 52 (Mum. - Trib.); (viii) Balaji Textile Industries (P.) Ltd. v. Third ITO [1994] 49 ITD 177 (Bom.); He also made distinction of various decisions which was relied by the Ld. DR. 28. We have carefully considered the entire gamut of facts, perused the relevant finding given in the impugned orders as well as the rival submissions made by the parties before us vis-a-vis the material placed on record. The assessee company is one of the leading manufacturing and trading company of consumer electronics, home appliances and other white goods etc. During the FY 2010-11 the assessee had made purchases to the tune....
X X X X Extracts X X X X
X X X X Extracts X X X X
....material in his sworn affidavit dated 08.01.2013 filed before ADIT, Kolhapur. He has also admitted to deal in number of corporate houses and he is in the business of supply of electronic items and material for several years. However, when confronted to specific supplies made to Videocon Industries group, he duly confirmed that physical goods were actually supplied which were procured from grey market and bills for purchases other than actual suppliers were given to the assessee. This aspect of the matter has been confirmed by him twice, once in his affidavit dated 08.03.2013 and other in his statement before the AO on 12.03.2015. The assessee to prove the genuineness of the purchases, that is, the purchase of materials have actually been supplied to the assessee had given the item wise details and utilisation of such materials in the manufacturing and how the same has been inventorised in the books of account. It has been pointed out that the assessee had also made purchases based on oral orders from other parties also and when material has been received and once the material purchased from any supplier enters the gate premise of the factory, gate pass is prepared and entries in re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....heet. There is no immediate effect on inflation of expenditure which can lead to an impression that assessee has tried to suppress its profit by entering into alleged bogus transactions with hawala dealers, which is generally resorted to by traders and such suppression of profit is often offset by applying some GP rate to factor in the profit element. The revenue cannot resort to approbate and reprobate on the statement of Shri Suresh A. Parekh, that is, it cannot chose to rely upon the first set of statements recorded in the year 2013/2014 and ignored his sworn affidavit and the second statement on oath which was recorded post direction of the Tribunal and cross examination conducted by the AO himself in the course of the assessment proceedings. Even if we agree that purchases have been made by the assessee through Shri Suresh A. Parekh who has arranged the supply of material from grey market and have issued accommodation bill, but in that case also so far as the assessee is concerned, the purchases cannot be treated as bogus, because the assessee had made the payment through cheques in lieu of which material has been supplied to the assessee. The supply of material is evidenced f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mpact of suppression of profit, at least on the amount which has been charged to capital WIP account or addition made to plant and machinery. Thus, we are of the opinion that the entire purchase cannot be disallowed by the department solely on the basis of first statement of Shri Suresh A. Parekh. As regards the submission and contention of the Ld. CIT, DR that there is lack of documentation in respect of purchases made from the hawala operators because supply of goods could not be proved, in this regard, one has to see the other attended facts and circumstances also which are that, the purchase of materials are backed by firstly, entry in the gate pass at factory premises; and secondly, entry in the books of account and manufacturing account showing item wise material purchase, material consumed, addition in the plant and machinery, inventory of parts etc. Once the factum of material consumed in the manufacturing or inventory is not disputed then no addition of purchases can be made even if the material have been purchased through the hawala operator. The crucial point to see here is that, the source of purchases have gone through books of account and in lieu of payments made mate....