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2020 (2) TMI 264

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....and in law, the Ld. CIT(A) has erred in restricting the addition to the extent of 12.5% of the bogus purchases of Rs. 3,40,80,030 [Rs. 99,00,821 from Aadit International Rs. 1,52,01,540 from Embee Metal Deals (India) Pvt. Ltd., Rs. 49,00,300 from NKB Metal Deals (India) Pvt. Ltd.] booked by the assessee after setting off the GP shown by the assessee. 2. Same as Ground No.1 3 On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in directing the AO to delete the disallowance u/s 14A of the IT Act r.w.r. 8D of Rs. 2,89,114 relying upon the decision in the case of Chettinad Logistics (P) Ltd. (80 taxmann.com 221) where the Hon'ble Supreme Court has dismissed the SLP of the department. However, vide CBDT Circular No. 5/2014 dated 11.02.2014 it is clarified that rule 8D read with Section 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. 4. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in deleting the disallowance u/s 36(1)(iii) of the IT Act, 1961 where assessee failed to prove that interest paid have been utilized wholly and exclusively f....

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....the primary onus of proving the purchase transactions, relying upon various judicial pronouncements, Ld.AO termed the said purchases as non-genuine purchases and added the same to the income of the assessee. 2.3 The Ld. CIT(A), at para-6.6 of the impugned order, took note of the fact that during the course of survey action, soft copy of the books of accounts were impounded which also had quantitative details of corresponding sales booked against the purchases so made. It was further observed that the assessee had booked back to back sales against the purchases made from various suppliers including purchases made from 4 suspicious dealers. Therefore, since there was one-to-one correlation between the purchases and sales, the entire tainted purchases could not be added to the income of the assessee but only the profit element embedded in such transactions could be added keeping in view settled legal proposition that tax could be levied only on real income. Reliance was placed on the decision of Hon'ble Bombay High Court in Hariram Bhambhani (ITA No. 313 of 2013) for the conclusion that only profit attributable to the unaccounted sales could be brought to tax. Similar reliance was pl....

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....rofit rate of 5.43% already reflected by the assessee, we restrict the estimation to net 5% of alleged bogus purchases of Rs. 3,40,80,030/- which comes to Rs. 17.04 Lacs. The balance addition stands deleted. 5. Resultantly, the assessee's appeal stand partly allowed whereas Ground Nos. 1 & 2 of revenue's appeal stand dismissed. Disallowance u/s 14A 6.1 During assessment proceedings, it transpired that the assessee had closing investment of Rs. 435.28 Lacs as compared to opening investment of Rs. 4.62 Lacs. The assessee earned exempt dividend income of Rs. 51,250/- but did not offer any suo-moto disallowance u/s 14A by submitting that no expenditure was incurred to earn the exempt income. However, not satisfied, Ld. AO applying Rule 8D, computed aggregated disallowance of Rs. 2.89 Lacs which comprised-off of interest disallowance u/r 8D(2)(ii) for Rs. 1.79 Lacs and expense disallowance u/r 8D(2)(iii) for Rs. 1.09 Lacs. 6.2 Before Ld. CIT(A), the assessee pointed out that the dividend income of Rs. 51,250/- was not exempt income but a taxable income. Accordingly, Ld. CIT(A) directed Ld. AO to include this income as taxable income but directed for deletion of disallowance u/s 14....

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....rable decision rendered by its predecessor for AY 2012-13 could not be applied in this year since interest free advances of Rs. 620.42 Lacs were more than own capital of Rs. 609.09 Lacs. However, Ld.AO was directed to exclude interest on letter of credit & interest on car loan aggregating to Rs. 6.01 Lacs while computing the disallowance and consider only the balance interest component of Rs. 5.65 Lacs while computing the proportionate disallowance. 7.4 Upon due consideration, we find that Ld. CIT(A) has clinched the issue in correct perspective and met the assessee's submissions with due application of mind. No fault could be found in the directions of Ld. CIT(A) for exclusion of interest on letter of credit and interest on car loan since the same did not have any nexus with interest free loans advanced by the assessee. Resultantly, this ground stand dismissed. Disallowance u/s 40(a)(ia) 8.1 It was observed that the assessee did not deduct tax at source (TDS) on certain expenses aggregating to Rs. 17.44 Lacs stated to be paid to various parties. The same are tabulated in para-19 of the quantum assessment order. These expenses were stated to be incurred in the course of import ....