TaxTMI 
TaxTMI 
2018 (4) TMI 1281
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....m/2016. The grounds of appeal raised by the assessee in the memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") for AY 2010-11, reads as under:- "1. The Learned CIT (A)-30 erred in confirming additions of Rs. 39,000/- made by the Assessing Officer being Revenue expenditure on the grounds that the appellant appeared as beneficiary of taking bogus bills without taking delivery of the good. 2. He further erred in confirming disallowance of Rs. 29,139/- being depreciation on capital expenditure of Rs. 2,91,392/- on the ground that the appellant appeared as beneficiary on account of taking bogus bills without taking delivery of the good. Appellant craves the leaves to add, alter or amend Grounds of Appeal, if felt necessary." 3. The brief facts of the case are that the assessee is in the business of manufacturing, retail trading and service of gold ornaments, silver articles and jewellery. An exhibition of gold/diamond jewellery and silver items was conducted by the assessee from 15.10.2011 to 17.10.2011 at Belgaum. After conclusion of the said exhibition, the assessee sent all papers of jewellery to Mumba....
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....29,139/- and further disallowance of revenue expenditure to the tune of Rs. 39,000/- was made by the AO which was added to income, vide assessment order dated 20-03-2014 passed by the AO u/s 143(3) r.w.s. 153A of the 1961 Act. 4. The assessee went in appeal before the learned CIT-A and the assessee contended that assessee is a family run concern being 100 years old partnership firm engaged in the business of manufacturing, trading and services of gold ornaments, silver article and jewellery spread all over India. The assessee submitted before learned CIT(A) that it opened a new showroom at Aurangabad and had incurred capital expenditure towards furnishing of the said showroom. It was submitted that the turnover of the assessee during the relevant year was Rs. 276.64 crores. It was also submitted that capital expenses were incurred to the tune of Rs. 2,76,71,895/-, out of which small amount of Rs. 2,91,392/- was disallowed which was small portion of the expenditure that mainly comprised of main electrical panel board in which volt meter, OEM meter, MCB circuit breakers, different types of switches, charger switches and hardware purchases used for construction. The certificate fro....
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....he balance amount of purchases appeared in the list of bogus purchases. AO perused the material on record and found that the appellant is one the beneficiary of such bogus bill as per the list supplied by the DGIT (Inv.), Mumbai. In view of the same, during the course of assessment proceedings which were under prepress, AO sent notices u/s 133(6) to all the three parties to verify the genuineness of such purchases. As all the notices sent were returned back unserved, the ITI attached to the Circle was sent for verification, who has reported that there is no concern existing at the given address, after conducting the on the spot inquiry. AO issued show cause notice on 05-02-2014 and also asked the appellant to produce the parties for verification. In response, it was explained by appellant that they have opened a new show room at Aurangabad and purchased material from said parties, but could not produce the parties. Out of total expenses of Rs. 3,30,392/-, the expenses of capital in nature were of Rs. 2,91,392/- and the rest of the expenses amounting to Rs. 39,000/- were of nature of revenue expenditure. Hence, AO disallowed the depreciation of Rs. 29,139/- @ 10% on capital expendit....
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....rded sufficient opportunities to prove the genuineness of the purchases by producing the parties along with the books of accounts. However, he failed to do so and merely furnished the purchase invoices, bank statements evidencing payments through banking channels by issuing a/c payee cheques, chart showing purchases from the alleged parties. The AO also asked the appellant to produce the persons for verification of the genuineness of the purchase transactions, and the appellant failed to do so once again. A person who is claiming certain expenditure is duty bound to prove the claim when asked to do so. However, in the present case, the appellant failed to do so. AO made full-fledged inquiries in the case by sending notices u/s 133(6) of the Act and asking the ITI to verify the actual situation on the given addresses, who reported that the concerns do not exist in the given addresses. AO given opportunity to the appellant to produce the parties and the appellant failed to avail the opportunities given at the time of assessment, and merely stated that the purchases are genuine. As the purchases are said to be used in the furnishing of show room which is a capital asset to the extent ....
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....hat the assessee is a partnership firm existing for more than 100 years having turnover of Rs. 276.64 crores (pb/page29-audited P& L A/c) and the amount of disallowance represented an minuscule amount. The assessee drew our attention to page no. 35 of the paper book where in all the details of disallowance made by the AO for all the three years viz. AY 2010-11 to 2011-12 are placed:- "M/s. WAMAN HARI PETHE JEWELLERS SUMMARY OF DISALLOWANCES A.Y. TOTAL AMOUNT OF SUSPECTED BOGUS PURCHASES CAPITAL EXPENDITURE REVENUE EXPENDITURE DEPRECIATION @ 10% TOTAL DISALLOWANCE 2010-11 3,30,392.00 2,91,392,00 39,000.00 29.139.00 68,139.00 2011-12 2,10,886.00 1,46,941.00 63,945.00 14,694.00 26,225.00 1,04,864,00 2012-13 36,828.00 36,828.00 Total Rs. 5,41,278.00 4,38,333.00 1,02,945.00 1,06,886.00 2,09,831.00" The assessee also drew our attention to the audited accounts for the year ending 31st march 2010, to contend that the turnover of the assessee was to the tune of Rs. 276.64 crores during the relevant year and it was submitted....
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....ding and service of gold ornaments, silver articles and jewellery. An exhibition of gold/diamond jewellery and silver items was conducted by the assessee from 15.10.2011 to 17.10.2011 at Belgaum. After conclusion of exhibition, the assessee sent all papers of jewellery to Mumbai by Road and Jewellery was transferred by Air. The General Manager of the assessee carried cash of Rs. 25.62 Lakh, old jewellery purchased from customers and two cheque amounting to Rs. 29,700/- by Air and was detained by the Police Authorities, Belgaum on Airport. The case was referred to Income Tax Department by Police Department and the Revenue requisitioned the cash and documents u/s. 132A of the 1961 Act. This was the background under which assessment proceedings were conducted by the AO leading to culmination of the assessment order dated 20-03-2014 passed by the AO u/s. 143(3) r.w.s. 153A of the Act. During the course of assessment proceedings conducted by the AO u/s 153A r.w.s. 143(3) of the Act, an intimation was received by the AO from DGIT(Inv) Mumbai wherein it was stated that information was received from Sales Tax Department, Govt. Of Maharashtra regarding bogus purchases/ Hawala transaction....
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....d in issuing accommodation bills without supplying material. The assessee was stated to be beneficiary of these alleged bogus purchases to the tune of Rs. 3,30,392/-. Out of Rs. 3,30,392/- being alleged bogus purchases from the said three parties, the assessee has stated to have purchased material from these three parties to the tune of Rs. 2,91,392/- which was stated to be used by the assessee for the purposes of furnishing of Aurangabad Showroom, while rest being Rs. 39,000/- were material purchased stated to be purchased towards lighting claimed to be revenue expenses by the assessee. The notices u/s 133(6) issued by the AO to these three alleged bogus dealers returned unserved as also inspector deputed to conduct field report gave adverse report as all these three parties did not existed at the given addresses. The assessee also could not produce these parties before the authorities below. The assessee gave details of the material being used in furnishing of Aurangabad showroom etc which was stated to be purchased under invoices from these three parties which are on record. The architect has given certificate that the said material was used by him for creation of asset at Auran....
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....lhi), wherein the Hon'ble High Court of Delhi in para 8 explained as to the application of theory of preponderance of probabilities as is applicable to the proceedings under the 1961 Act, as under:- " 8. We find it difficult to accept the approach and findings recorded for several reasons. The brief order does not examine and consider the entire explanation and material on record as withdrawal of Rs. 2,00,000/- in cash was undisputed. Naturally, the huge withdrawal was for a purpose and objective. From the beginning the explanation given was that withdrawal was to pay earnest money for purchase of immovable property, which deal did not fructify. Explanation given was not fanciful and sham story. It was perfectly plausible and should be accepted, unless there was justification and ground to hold to the contrary. Delay of some months in redeposit of part amount is the sole and only reason to disbelieve the appellant. Persons can behave differently even when placed in similar situations. Due regard and latitude to human conduct and behaviour has to be given and accepted when we consider validity and truthfulness of an explanation. One should not consider and reject an explana....