TaxTMI 
TaxTMI 
2021 (4) TMI 580
X X X X Extracts X X X X
X X X X Extracts X X X X
....d together and disposed off by way of this common order. 2. The assessee is a company and is in the business of trading in paper and board. It filed its return of income for the Assessment Year 2013-14 on 26/09/2013 and for the Assessment Year 2014-15 on 29/11/2014. The Assessing Officer passed a best judgment assessment U/s. 144 of the Act for both the Assessment Year determining the total income of the assessee at Rs. 13,14,75,970/- for the Assessment Year 2013-14 and Rs. 21,52,86,940/- for the Assessment Year 2014-15. 2.1. Aggrieved the assessee carried the matter in appeal disputing the passing of ex-parte order without giving adequate opportunity to the assessee and also disputing the manner in which the assessment was completed ignoring the past records of the assessee and violating various principles of law based on which best judgment assessments were to be passed. The Ld. First Appellate Authority called for a remand report. The Assessing Officer submitted the remand report on 9th August, 2017, claiming that the assessee showed no inclination to comply with the statutory notices and hence the assessment was completed U/s. 144 of the Act. He justified the passing of o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee's non-compliance in original proceedings. 2. Whether on the facts and in circumstances of the case and in law, the Ld. CIT(A) has erred in deleting Rs. 92,20,409/- on account of unexplained cash credit. 3. Whether on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting Rs. 4,36,97,031/- on account of unexplained trade payables without appreciating the facts of the assessee's failure to prove or substantiate the same. 4. Whether on the facts and in circumstances of the case the Ld. CIT(A) has erred in deleting Rs. 11,86,90,207/- on account of current liabilities without appreciating the facts of the assessee's failure to prove or substantiate the same. 5. Whether on the facts and in circumstances of the case the Ld. CIT(A) has erred in allowing commission payment of Rs. 69,20,273/-. 6. Whether on the facts and in circumstances of the case the Ld. CIT(A) has erred in deleting Rs. 1,48,827/- U/s. 14A read with Rule 8D. 7. Whether on the facts and in circumstances of the case the Ld. CIT(A) has erred in deleting Rs. 2,96,05,303/- as net profit @ 2% of gross receipts. 8....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d additions which cannot be sustained in law. 5.2. He submitted that the ld. CIT(A) had called for a remand report not only on the issue of violations of principles of natural justice but also on the issue of additions made in the assessment proceedings. He pointed out that the Assessing Officer had issued notices to the assessee to appear before him during the remand proceedings and that the assessee had again appeared before the Assessing Officer and drew the attention to all the papers filed on record but the Assessing Officer did not refer to any documents and simply supported his orders passed U/s. 144 of the Act. He relied on the following judgments for the proposition that repeated opportunities need not be given to the Assessing Officer, when the Assessing Officer does not avail all the opportunities granted to him during the course of assessment proceedings as well as in the remand proceedings:- * Veto Electropowers [2012] 20 taxmann.com 279 (Jaipur) * Rajesh Babubhai Damania [2002] 122 taxman 614 (Guj.) 6. On merits, the Ld. counsel for the assessee took this Bench through the submissions of the assessee, for each of the additions, which are brough....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... very cryptic manner stated as follows:- "5. In course of hearing dated 12.01.2018, the A.R. of assessee could not substantiate as to how the assessment order dated 09.03.2016 was devoid of natural justice and merit." 11. The assessment orders, apparently, show arbitrariness and lack of judicious approach by the Assessing Officer. When the Ld. CIT(A) has called for a remand report, the Assessing Officer was provided sufficient opportunity to substantiate the additions made by him in the assessment order. This is not done. The Assessing Officer neither during the assessment proceedings nor during the remand proceedings examined the information or documents filed by the assessee. Under these circumstances, and on examination of the facts of the case, we are of the considered opinion that this is not a fit case for being set aside to the file of the Assessing Officer for fresh adjudication, in accordance with law. 12. Now, we consider the additions on merits for both the Assessment Years. 13. Disallowance of commission: The Assessing Officer disallowed the commission payments claimed by the assessee based on the assessment order for the Assessment Year 2011-12. On....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ny and its agent Sugam Vinimay Pvt. Ltd. by which the agent had the right to receive commission and Sugam Vinimay also filed the return showing the commission income. The AO also has not alleged that assessee company and Sugam Vinimay are related to each other or that the payments were not genuine or that the payments having been made by the assessee to the recipient have found their way back to the assessee some way or the other. This being the case, AO cannot summarily reject the commission payment to Sugam Vinimay as 'shyam transaction', even though the agent did not respond to his summon. It is well settled law that once the assessee has discharged the primary onus, AO cannot hold a transaction bogus without bringing any material evidence on record to the contrary. In view of such, balance addition of Rs. 21,90,181/- is also deleted." 5.1. The Ld. D/R, could not point out any infirmity in these findings of the Ld. CIT(A) hence we uphold the same. For similar reasons for the Assessment Year 2010-11, the disallowance of Rs. 9,05,612/-, made for the sole reason that the party has not been produced before the Assessing Officer, is hereby deleted. The assessee filed....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or non-compliance to the summons issued to Section 131 of the Act. The Statute provides for relevant remedial measures thereon. The Ld. AO without resorting to such measures, cannot proceed to disbelieve the claim of commission paid by the assessee when the same are supported by various documents and confirmed by the said parties. In the instant case, the primary onus has been duly discharged by the assessee proving the claim of commission payments made by the assessee. There is absolutely no reason for the Ld. AO to doubt the veracity of the said transactions. Admittedly none of the commission agents were relatives of the assessee or interested parties with the assessee so as to allege some mala fide on the part of the assessee. Hence, in our considered opinion, there is no case made out by the Ld. AO to treat the commission transactions as ingenuine transactions in these facts and circumstances. We hold that mere nonappearance of the said commission agents in person before the Ld. AO would not make the transaction of payment of commission as ingenuine. Hence, we hold that the Ld. CIT(A) had rightly deleted the disallowance of commission made by the Ld. AO. Accordingly, ground Nos....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fin Commodities Ltd., JIT Finance Pvt. Ltd., Konoi Transport Ltd., Prime Rose Commonages Pvt. Ltd. and Trust Worthy Vinimay Pvt. Ltd. The confirmation letters and details in respect of all the aforesaid 6 parties were submitted to the AO. The AO says that the details of three parties were not submitted to him. The Assessing Officer also states that he issued notice u/s. 131 to these parties on whom these notices were duly served. When the details were not furnished, it is not understood as to how the AD was able to issue notice U/s. 131 to these three parties. Further, the Assessing Officer also states that notice was served on them. When notice were served, then the AO should have proceeded further to enforce their attendance specially in an ex-parte assessment order. The Assessing Officer did not proceed further to make enquiry or force the attendance of these three parties. It was more essential when the assessment was being completed u/s. 144. When the Assessing Officer did not precede further in spite of the fact that the assessee filed the confirmation letters and other details and the notices were duly served on the parties the addition was not justified in view of the judgm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....same. The matter was also sent back to the AO for remand report and the AD again did not availed the opportunity to examine these parties on merit. No adverse comments/finding has been given by the AO in the remand report. The AO in the remand report has mentioned that details were filed but since nobody appeared for hearing, to explain and or reconcile various issues involved. Keeping in view of above, the AO is directed to delete addition." For the Assessment Year 2014-15, at page 10 & 11, the Ld. CIT(A) held as follows:- "I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the Assessing Officer during the assessment proceedings. The AR of the appellant has submitted that there was increase in unsecured loans from Directors and their relatives and full details were filed before the A.O. even though the same were received by all the directors were having brought forward balances and such loans were duly accepted in earlier years. During the relevant year, all the transactions relating to the loan (whether fresh infusion or re....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the revenue for both the Assessment Years. 15. Unexplained cash deposits in banks:- The Ld. CIT(A) has given a factual finding that all these cash deposits in bank, were recorded in the regular books of accounts and the details of the same furnished to the Assessing Officer. As these deposits are part of the regular books of accounts, the addition was deleted by the Ld. CIT(A). We find not infirmity in the same. Thus, we uphold this factual finding of the Ld. CIT(A), which is not controverted by the Ld. D/R and dismiss this ground of the revenue for both the Assessment Years. 16. Unexplained trades payable:- Trade payables arise on account of credit purchases of goods or services. The purchases and sales of the assessee were not disturbed. The arbitrary addition has be made of the trade creditors. Even credit purchases made from ITC Limited, amounting to Rs. 2.23 Crores and Rs. 1.83 Crores for the Assessment Year 2013-14, were added. This is highly arbitrary. The Ld. CIT(A) has given the following findings of fact for the Assessment Year 2013-14:- "I have considered the submissions of the authorized representative of the appellant as well as the assessment orde....
X X X X Extracts X X X X
X X X X Extracts X X X X
....with assessment year 2013-14 is enclosed herewith, which shows that there appeared credit in the name of Multiwal Paper and Board Mill Limited in assessment year 2011-12 too. The credits in the name of Spast Marketing Ltd. was only Rs. 3741/- in the name of NAP Limited the credit was Rs. 11,83,393/- and Rs. 613625/- and said credit has been accepted in Assessment Year 2014-15. The credit in the name of Nextgen Printers Pvt. Ltd. was only Rs. 1,52,541/-. The major increase in the Sundry creditors was Rs. 2.34 Crores in ITC (BCM), Rs. 1.8 Crores in ITC Ltd. (Geeta Press) and S. Murli Industrial Rs. 40 lakh credits in Asst. year 2011-12 were duly accepted including credit in the name of MAP Paper and MAP Shilpa. The AO has made the addition only on the ground that proper address, furnished. However, all the addresses were available with the AO in the assessment year 2011-12 for which he himself completed the assessment on 11.3.2016 and duly accepted all these trades payable. I find that the AO made three assessments of the appellate company in nine days. The assessment order for the asstt year 2014-15 was passed on 09.03.2016, the assessment order for the asstt year 2011-12 w....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of trade payables as per balance sheet and no specific party wise addition has been made by the AO. The notice U/s. 131 was issue to ITC for the year 2011-12 and reply was received to the AO but the AO while making the addition for the year under consideration made the addition even trade payable relating to ITC. The AO was not bother to see his own record and even when all these three assessment were made in only nine days. The matter was also sent for remand report to the AO and even than the AO did not look into his own record and his other two assessment orders which were passed in nine days i.e. from 09.03.2016 to 18.03.2016. The AO in the remand report has mentioned that details were filed but since nobody appeared for hearing, to explain and or reconcile various issues involved. Keeping in view of above, the AO is directed to delete the addition. This ground of appeal is allowed." For the Assessment Year 2014-15, he held as follows:- "I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... The AO while making the addition has mentioned that considering the facts of the case it is apparent that the assessee failed to satisfied the assessing officer about the correctness or completeness of the accounts of the assessee that whether the method of accounting provided in section 145(1) has been following by the assessee or income, has been computed in accordance with the standard notified under section 145(1) of the act or not. Hence, addition of 2% GP was made. The AO has further added Rs. 1,68,80,801/- in the final computation of income as last item. The AR of the appellate has submitted that the AO was wrongly added back Rs. 2,53,82,407/- as net profit at 2% of the gross receipts without any basis ignoring the past records and the books of accounts duly audited in accordance with law. The AO has estimated the net profit at 2% of the turnover and further separately added the other items of income as other income in this process the AO has estimated the business income at 2% at Rs. 2,53,82,407/- and separately added Rs. 1,68,80,801/- as income from other sources which was part of the business receipts and so considered in earlier years. In fact, the in comparati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t was 4.10% in the year 2014-15. The gross profit in the year under consideration is higher in these three years. The AO has also separately added Rs. 1,68,80,801/- as income from other sources which was part of the business receipts. In fact, in the comparative statement filed before the AO as called for by him, the computation of net profit and gross profit have been made by including such income. The AO should have started his computation of the return income and further add all the addition/disallowance made by him in the assessment order. Keeping in view of above, the AO is directed to delete these addition. These grounds of appeal are allowed." Similarly, for the Assessment Year 2014-15, he held as follows:- "I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before assessing officer during the assessment proceedings. The AO while making the addition has mentioned that considering the facts of the case it is apparent that the assessee failed to satisfied the assessing officer about the-correctness or completeness of the accounts of the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....been controverted by the Aa. In fact the comparative figures were also given to the AO in the course of assessment proceedings and he himself wanted the same. He has not given any reason as to why the earlier years comparative figures were not acceptable to him. The AO while completing the assessment of the assessee u/s. 144 cannot ignore the past records which can be the best guide for estimating the income, even if he considered that the-assessee's income is to be estimated particularly when the AO has not brought on record of any comparable case to justify the net profit estimated by him. When the earlier year's comparative figures of the rate of profit is taken into account and keeping in mind the increase in the turn over the net profit declared by the assessee was quite fair and reasonable. No addition of any nature in the trading account was called nor made in any earlier year when regular assessment was made. The assessee has already cited judgments in the written submissions. The elaborate submissions have been made in written submissions filed. The issue is covered by the order of Ld. CIT(A) for the assessment year 2011-12 and 2013-14. The Assessing Offic....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 18. Addition on account of current liabilities:- (only for Assessment Year 2014-15) The ld. CIT(A) while disposing Ground No. 7 for the Assessment Year 2014-15, held as follows:- "I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AR of the appellate has submitted that the AO has added back Rs. 11,86,90,207/- (taken in ground No. 7) as other current liabilities. The list of other current liabilities were available in the schedule to the balance sheet duly filed before the AO. The details were filed before the AO, a copy of which is enclosed herewith. From the details it is evident that the amount of Rs. 11,86,90,207/- can be bifurcated into two parts he Rs. 1,28,09,245/- which is against the advances from customers and Rs. 11,05,01,600/- which is against various other liabilities. As against the outstanding balance of Rs. 1,28,09,245/- it is submitted that the same are the money advanced by various customers with whom the assessee is doing regular business. The A.O. ought ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ngs are not controverted by the Ld. CIT D/R. Hence, we uphold the same and dismiss this ground of the revenue. 19. Foreign Exchange Loss:- (only for Assessment Year 2014-15) The Ld. CIT(A) while disposing off the Additional Ground 1 for the Assessment Year 2014-15, at page 26 & 27, held as follows:- "I have considered the submissions of the authorized representative of the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment proceedings. The AR of the appellate has submitted that the assessee has taken additional ground relating to the disallowance of Rs. 50,43,859/- being foreign exchange loss by the AO treating the same as speculation loss. The assessee is an exporter and has to make provision for rate difference of the foreign currency at the time of export and fluctuations afterwards. It was categorically mentioned in the profit and loss account that there was fluctuation on the purchase of goods in respect of foreign currency at the time of placement of order and at the time of actual payment. Such loss on foreign currency was debited the trading account und....