TaxTMI 
TaxTMI 
2019 (2) TMI 358
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....her and disposed of by this common order. 2. First we shall take-up appeal in ITA no. 4261/Mum/2017 for AY 2009-10 filed by the assessee . The grounds of appeal raised by the assessee in ITA no. 4261/Mum/2017 for AY 2009-10 in memo of appeal filed with the Income-Tax Appellate Tribunal, Mumbai (hereinafter called "the tribunal") reads as under:- "1) In the facts and circumstances of case and in law, the learned CIT(A)-1, Thane erred in confirming the disallowance of purchases of Rs. 2,00,678/- as hawala purchase a) without providing any opportunity of cross examination of the witnesses or documents relied upon by the Assessing Officer and thus violating the law laid down by Honorable Supreme Court in the case of Kishanchand Chellaram v, CIT (1980) 125 ITR 713 and Andaman Timber Industries v. Commissioner of Central Excise (Civil Appeal No. 4228 of 2006.) b) on surmises and allegation that the suppliers have refunded cash to the appellant without any piece of evidence and enquiry in this regard, c) by rejecting the books of account duly maintained by the appellant and audited u/s. 44AB merely on surmises and conjectures without pointing out any defect in the books of acc....
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....bmitted that stock of goods received vide these purchases were sold to customers and duly accounted for in books of accounts and credited to Profit and Loss Account. The assessee submitted that if purchases are disallowed then the whole corresponding sales against these purchases will become taxable which is not in accordance with law as the sale cannot happen without corresponding purchases. The assessee was asked by the AO to submit Invoices of Purchases, Bank Book, Cash Book, Ledger, Sales Register, Purchase Register , Financial Statements, Stock Register , Complete name and addresses of the parties from whom purchases were made and to whom corresponding sales were made. The AO also asked the assessee to furnish confirmation, delivery challans, lorry receipts and to produce the parties from whom purchases were made. The assessee failed to produce the aforesaid details before the AO during assessment proceedings which led the AO to make the additions to the tune of Rs. 2,00,678/- to the income of the assessee towards bogus purchases made by the assessee from these hawala dealers by invoking provisions of Section 69 of the 1961 Act. Further , additions of Rs. 65,18,663/- was made ....
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....29.03.2017 , by holding as under:- " 8. The appellant in response to this addition has made very detailed submissions placed in the paper book filed with the submissions. The appellant also filed the following chart to show the gross profit and net profit rate for the year under consideration and the preceding and succeeding years - Particulars 2008-09 2009-10 2010-11 Sales 3,27,97,864 3,31,94,606 3,78,21,332 G.P. 12,16,462 12,07,794 13,78,447 GP Ratio 3.71% 3.64% 3.64% Expenses 8,67,015 8,09,994 9,86,123 NP 3,50,730 4,00,610 3,96,026 NP Ratio 1.07% 1.21% 1.05% 9. The appellant's submissions alongwith additional evidence filed by the appellant were forwarded to the AO for his comments. The AO submitted his remand report dated 28.02.2017, making following observations - "05. .......... The assessee was also asked to produce the above mentioned parties for verification in support of genuineness of purchases of Rs. 3,45,048/-. The assessee furnished ledger extract, invoices, delivery challans and proof of payment made by cheque. In this regard the assessee furnished bank account statement and stated that all payment towards purchases ma....
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....er has not provided us opportunity to cross examine the witnesses and documents relied upon by him. Therefore the assessment order passed by AO is a nullity as held by Honorable Supreme Court in Andaman Timber Industries v. Commissioner of Central Excises (Civil Appeal No. 4228 of 2006), Kishanchand Chellaram v. CIT (1980) 125 ITR 713 and Bombay High Court in CIT v. Ashish International (Bom HC - IT Appeal No. 4299 of 2009). 1.5 Honorable Mumbai has deleted the similar additions made solely on the basis of information received from sales tax department in the following cases : i) DCIT v. Rajeev G. Kalathil ITA No. 6727/Mum/2012 [2014] 51 taxmann.com 514 (Mumbai - Trib.) ii) Ramesh Kumar & Co. v. ACIT 21(1) [ITA No. 2959/Mum/2014] iii) ITO v. Shri Deepak Popatlal Gala [ITA No. 5920/Mum/2013] iv) ACIT v. Shri Ramila Pravin Shah [ITA No. 5246/Mum/2013] v) DCIT v. Shri Shivshankar R, Sharma [ITA No. 5149/Mum/2014 & vi) ITA No. 4260/Mum/2015] vii) ACIT v. Tristar Jewellery Exports Private Limited [ITA No. 7593/Mum/2011] viii) M/s. Imperial Imp & Exp. v. ITO 20(1)(5) [ITA No. 5427/ Mum/2015] x) ITO vs. Shri Paresh Arvind Gandhi [ITA No. 5706/Mum/2013] x) ....
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....ablished that the goods shown as purchased from the above listed parties have been reflected into sales. For all these reasons it is held that the AO has rightly rejected the appellant's books of accounts u/s. 145(3) of the IT. Act. The addition of Rs. 3,45,048/-made by the AO on account of unproved purchases is therefore, confirmed. 12. The facts of the appellant's case for A.Y 2009-10 are similar to the facts of the A.Y 2010-11 as discussed above. The observations of the Assessing Officer in the remand report dated 26.03.2017 are also similar to the observations of the AO in the remand report dated 28.02.2017 for A.Y. 2010-11 discussed above. Therefore, for the detailed reasons discussed above, the addition on account of unproved purchases amounting to Rs. 2,00,678/- made for AY 2009-10 is confirmed." 5. The matter has now reached tribunal at the behest of the assessee and it was submitted by learned counsel for the assessee that the assessee has sale of Rs. 3,31,94,606/- for AY 2009-10 and small fraction of an amount of Rs. 2,00,678/- was added by Revenue to the income of the assessee on account of alleged bogus purchases from alleged Hawala Dealers. It was submitted th....
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....l. The assessee however have submitted reconciliation statement of purchases from these alleged hawala entry operators with sales made . The payments were also made through banking channels. The assessee could not produce these parties before the authorities below and also the facts remains that these parties have admitted to be indulging in bogus accommodation entries without supplying of any material wherein only bogus accommodation bills were only issued by these parties to several beneficiaries without supplying any material. The assessee could not produce confirmations from these parties before the authorities below . Under these circumstances , it is the profit embedded in these purchases which is required to be brought to tax wherein the assessee had obtained bogus bills from these parties to avoid paying taxes and to inflate costs , while the material/goods were actually purchased from grey market at lower costs and also without paying taxes while the sales were made by the assessee which is recorded in books of accounts and reconciliation statement also reveals that purchases of these materials were supported by sales. The estimation of embedded profits in these purchases ....
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.... in cash and no documentary evidences were submitted by the assessee. The learned CIT(A) confirmed the additions to this extent by holding as under: " 13. As already discussed above, the appellant had not attended the assessment proceedings before the AO in response to various notices. The AO held that in the absence of documentary evidence, the various expenses claimed by the appellant remained unverified. He therefore, made a further addition of Rs. 74,16,051/- being 20% of the expenses claimed by the appellant at Rs. 3,70,80,258/- (i.e. Rs. 3,74,25,306 - 3,45,048/-). 14. During the course of present proceedings the appellant submitted that the disallowance out of expenses had been made without asking for requisite details. It was submitted that the appellant had complete details of all expenses claimed in the Profit & Loss account alongwith necessary documentary evidence. The appellant's submissions were forwarded to the AO for his comments. The AO submitted his remand report vide his letter dated 28.02.2017 making the following observations - 06. The AO also made addition of Rs. 74,16,051/- being 20% of total expenses of Rs. 3,70,80,258/- which were unverifiable as ....
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....this respect, we have to submit that, in the course of business, such expenses are routinely incurred in cash and it is not possible to produce any evidence other than voucher for such expenses. In para 11.1 of our earlier submission, we have submitted the GP and NP ratio of the preceding years. The, NP ratio of the current year is in line with the preceding year and hence there is no suppression of profits. Further, reliance is placed on ACIT v. Arthur Anderson & Co. [2006] 5 SOT 393 (Mum) that no ad hoc disallowances can be made by the AO. 2.3 Further the appellant has already disallowed donation of Rs. 2,500/- in this computation of income, while filing return of income. We therefore request your goodself to kindly delete the ad hoc addition of Rs. 74,16,051/- and oblige. " I have carefully considered the appellant's submissions, observations of the AO in the assessment order and remand report and the facts of the case. As far as the appellant's contention that the scope of reassessment cannot be extended to matters other than those arising out of reasons recorded u/s. 148 unless some other income escaping assessment come to the knowledge of Assessing Officer in....
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....nations could not be allowed in the absence of supporting bills/details and its connection with business of the assessee or in the absence of requisite confirmatory details to be eligible for allowability as deduction u/s 80G or other relevant provisions of the 1961 Act. In the absence of supporting invoice/details , the disallowance of expense of donation of Rs. 4,001/- stood confirmed. We order accordingly. We have also observed that rent expenses of Rs. 54,000/- was paid and claimed as business expenses but no details as to premises and its user for business, payer/landlord and rent deed etc. were furnished by the assessee before authorities below and in our considered view, in the absence of details of premises taken on rent by the assessee and its user wholly and exclusively for business purposes, these rent expenses cannot be allowed as business deduction. The assessee has only submitted self supporting vouchers with respect to payment of rent in cash without any details as to the premises on which rent its paid and its user for business purposes and under these circumstances, we disallow the claim of the assessee and confirm additions to the tune of Rs. 54,000/- claimed to ....