TaxTMI 
TaxTMI 
2021 (8) TMI 365
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....erred in law and facts by confirming the addition of Rs. 25,12,43,170/- out of the purchases and therefore the learned AO should be directed to delete the said addition while computing the total income. 3. That the learned CIT(A) has erred in law and facts by confirming the addition of Rs. 1,65,71,352/- of Ld. Counsel Charges and therefore the learned AO should be directed to delete the said addition while computing the total income. 4. That the appellant craves liberty to add, amend alter and delete any grounds of appeal before the final hearing. 3. In the first ground of appeal, the assessee has challenged the validity of the reassessment proceeding framed under section 147 of the Act. 4. The facts to adjudicate the issue on hand are that the assessee is a public limited company and engaged in the business of manufacturing and trading of steel items. The assessee in the year under consideration filed return of income declaring loss which was accepted in assessment framed under section 143(3) of the Act vide order dated 15th March 2013. Subsequently the AO received information from the VAT department, Maharashtra that the entities namely M/s. Induja Traders....
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.... the basis of this information after due application of mind the AO recorded the reasons. The reason recorded were enough to reopen the assessment and therefore, the same cannot be held to be bad in law. The appellant has not provided any details and documents to state that any change of opinion has taken before issue of the notice u/s. 148 of the I.T Act. The appellant has not brought anything on record in support of its contention that the issue of purchase and sales to the respective parties was fully examined by the AO in the original assessment proceedings and no adverse view was warranted upon the same. 2.5 In view of the aforesaid discussion, the objections raised by the appellant are found untenable in the eyes of law, and hence the reopening and consequent reassessment completed are found in order. 5. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 6. The learned AR before us challenged the validity of the reassessment framed under section 147 of the Act on 4 counts. The 1st submission of the learned AR is that the information gathered from the VAT department, Maharashtra was very much available with the AO at the time....
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....f the mind on such information by the AO. It was very clearly pointed out by the AO in the reasons recorded that the bogus purchases have been shown under the head consumables stores. As such the AO has not acted in mechanical manner rather he applied his mind on the information gathered from the VAT department, Maharashtra for initiating the proceedings under section 147 of the Act. Thus it cannot be said that the reopening was made based on borrowed satisfaction. 6.6. There is no provision under the Act specifying that the AO is duty-bound to supply the reasons recorded for the reopening of the assessment under section 147 of the Act within a period of 60 days. Furthermore, there is no jurisdictional High Court judgment on this point for supplying the reasons recorded within a period of 60 days. The learned DR vehemently supported the order of the authorities below. 7. We have heard the rival contentions of both the parties and perused the materials available on record. The proceedings initiated under section 147 of the Act, in the case on hand, has been challenged by the assessee on various counts. The 1st basis for challenging the assessment proceedings initiated under se....
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....e prescribed in notice.- ii. AO shall supply reasons within 30 days of filing Return without waiting for demand of reasons from the assessee. iii. Assessee should raise his objections within 60 days of receipt of the reasons. iv. AO shall dispose off the objections within 4 months of receipt of the objections.- v. The above time limits shall apply to AO where the assessee also adheres to the same.- vi. The procedure provided in GKN Drive Shafts shall apply notwithstanding whether the above time limit is followed or not.- vii. The Chief Commissioner of Income -tax and Cadre Controlling Authority of the Gujarat State, shall issue a circular to all the Assessing Officers for scrupulously carrying out the directions contained in this judgment. 7.3. However, it is pertinent to note that the aforesaid judgment was delivered by the Hon'ble Gujarat High Court dated 31st March 2014 whereas the notice under section 148 of the Act was issued by the AO dated 15th May 2013 and objection raised by the assessee was disposed off vide separate order dated 14th February 2014. In other words, the notice under section 148 of the Act was issu....
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....the assessee and thereafter found that the assessee has shown creditors in its books in the name of the aforesaid entities on account of purchases of consumables. The amount of consumables purchase from the aforesaid entities shown in the books of accounts was exactly matching with the information received from the VAT department, Maharashtra. Thus what is inferred is this that the AO after application of his mind arrived on the reasons to believe that the income of the assessee has escaped assessment. Furthermore, the AO at the time of issuing notice under section 148 of the Act has to form prima facie opinion for the escapement of income rather than he has to reach to the conclusion that the income has escaped assessment. In this regard we draw support and guidance from the judgment of Hon'ble Allahabad High court in case of Pannala Mahesh Chandra Jewelers vs. DCIT reported in 188 Taxman 95 where the Hon'ble court observed as under: The expression 'reason to believe' in section 147 does not mean purely subjective satisfaction on the part of the Assessing Officer. The belief must be held in good faith; it cannot be merely a pretence. 8.1. In view of the....
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....were duly recorded in the books of accounts which were subject to audit under VAT/excise but no defect of whatsoever was pointed out by the auditor. None of the transaction was found outside the books of accounts. All the payments for the purchases and sales of the goods were carried out through the banking channel/letter of credit. Accordingly, such transactions of purchase and sales cannot be doubted merely on the basis of the statement, particularly in a situation where such transactions were duly recorded in the books. 12.2. However, the AO found that the assessee has shown sales of the goods to M/s. Color Shops Pvt. Ltd. which were purchased from M/s. Induja Traders private Ltd. Both the transactions of purchases and sales were recorded on the same day in the books of the assessee. In both these companies, Shri Jitendra Bi Salecha was the common director who accepted before the sales tax officials during search and filed affidavit during Vat proceeding that the assessee has approached to him for discounting the letter of credit by showing the transactions of purchase and sales for a commission at the rate of 0.05%. For this purpose, the assessee itself generated the bogus b....
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.... The learned CIT(A) after considering the submission of the assessee and the assessment order made certain observations as detailed under: i. The assessee has shown gross profit against the sale and purchase of the companies namely M/s. Induja Traders Pvt. Ltd. and M/s. Kotsons Impex Pvt. Ltd. at Rs. 87,84,167.00 which is 0.866% only whereas the assessee in the earlier year has shown the GP at the rate of 19.82% and 20.03% effectively. In other words, the assessee has shown losses with respect to the transactions with the aforesaid companies after taking into consideration the administrative expenses. ii. There was no evidence brought on record by the assessee regarding the physical movement of the goods. Therefore simply the payment was made through the banking channel cannot establish the genuineness of the transactions. iii. Since, the assessee failed to discharge the initial burden by substantiating the genuineness of the transactions based on documentary evidence, the plea of the assessee for providing the cross-examination opportunity cannot be entertained. iv. There was no doubt raised by the AO about the payments which were made through t....
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.... DR contended that the assessee failed to produce any documentary evidence for the physical movement of the goods. Furthermore, it has been established during the proceedings before the sales tax department that the aforesaid companies were providing accommodating entries. 17.1. Both the learned AR and the DR vehemently supported the order of the authorities below to the extent favourable to them. 18. We heard the rival contention of both the parties and perused the materials available on record. The facts of the case have already been elaborated in detail in the preceding paragraph. Therefore we are not inclined to repeat the same for the sake of brevity and convenience. The 1st issue that arises for our consideration is whether the transaction of purchase and sales shown by the assessee is bogus in nature. In this regard, we note that the primary onus lies upon the assessee to justify the transaction of the purchase and sales based on the documentary evidence. From the preceding discussion, we note certain undisputed facts as detailed under: i. The assessee has purchased the goods from the company namely M/s. Induja Traders Pvt. Ltd. for Rs. 54,34,97,318 and sold t....
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....s regard we draw support and guidance from the judgment of Hon'ble Gujarat High Court in case Vijay Trading Co. vs. ITO reported in 76 taxmann.com 366, where the Hon'ble court held as under: we are of the opinion that the Assessing Officer's action in treating the purchases as bogus and adding the entire cost of purchases in the assessment ought not to have been restored by the Tribunal. The view taken by the Tribunal in the case of Vijay Proteins Ltd. v. CIT [1996] 58 ITD 428 (Ahd.) has been approved. In that view of the matter, keeping in mind the fact that not the entire amount covered under such purchase, but the profit element embedded therein would be subject to tax, we find that it shall be appropriate to restrict the disallowance made in this regard to 25% of the cost of such purchases in each year. 18.3. In the light of the above stated discussion, now it has to be seen the income which has been generated to the assessee out of such bogus transaction of purchase and sales. There is no standard jacket formula to work-out the income from the bogus activity carried out by the assessee. Some element of guesswork is required to determine the income of th....
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....rashtra along with copy of statement furnished and affidavit filed by the directors of the respective parties. The assessee was asked to substantiate the physical movement of goods and genuineness of the goods purchased and corresponding sales made to sister concern of suppliers. But the assessee failed to controvert the same based on documentary evidence, but demanded for cross examination of the directors. From the facts as elaborated above what is inferred is that the AO not only relied on the statement of directors made during search proceeding carried out by the Maharashtra VAT officials for holding the purchase as bogus but also he had other evidences which were not rebutted by the Assessee. In such facts and circumstances in our considered view the action of the AO is not void though providing cross examination of witness is an important part of the judicial proceedings. In this regard we find that the Hon'ble Supreme Court in case of Andaman Timber Industries vs. Commissioner of Central Excise Kolkata reported in 62 taxmann.com 3, where the Hon'ble Apex Court has held that it is necessary where addition is solely based on the statement of third party. The relevant f....
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....en held to non genuine and bogus as has been held in the preceding paras of this order, and therefore, the LC charges pertaining to the said alleged bogus purchases cannot be allowed as deduction against the business income of the other business activities. Thus, the claim cannot be said to be allowable u/s. 37(1) of the I.T. Act as the same is not incurred wholly and exclusively for the genuine other business activities of the appellant. Therefore, disallowance made by the AO is found correct and justified and hence, the same is confirmed. 22. Being aggrieved by the order of ld. CIT(A), the assessee is in appeal before us. 23. The Learned AR before us contended that the LC charges were incurred in the course of the business. These charges were paid to the bank and therefore the genuineness of such expenses cannot be doubted. 23.1. The learned AR alternatively contended that major part of the purchases have been admitted by the learned CIT(A), therefore if any disallowance needs to be made, then the same should be in proportion to the purchases disallowed by the learned CIT(A). 24. On the contrary, the Learned DR vehemently supported the order of the authorities below. ....
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.... facts by confirming the addition of Rs. 8,69,374/- of late payment of Employees contribution to Provident Fund and therefore the learned AO should be directed to delete the addition while computing the total income. 4. That the learned CIT(A) has erred in law and facts by directing not directing to allow the expense of Rs. 2,32,22,722/- disallowed under section 14A of the Act and therefore the learned AO should be directed to delete the addition while computing the total income. 5. That the learned CIT(A) has erred in law and facts by confirming the addition of Rs. 56,94,49,965/- out of the purchases and therefore the learned AO should be directed to delete the addition while computing the total income. 6. That the learned CIT(A) has erred in law and facts by confirming the addition of Rs. 2,50,28,509/- of advertisement expanses and therefore the learned AO should be directed to delete the addition while computing the total income. 7. That the learned CIT(A) has erred in law and facts by confirming the disallowance of Rs. 3,19,231/- of additional depreciation and therefore the learned AO should be directed to allow the said allowance while compu....
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.... 15CA and 15CB to the department at the time of making payment in which no tax liability was calculated. Thus it has no liability to deduct tax on such payment. The assessee in this regard also placed reliance on the order of the co-ordinate bench of this ITAT in ITA No. 3065/Ahd/2010 of Pankaj A. Shah vs. ITO. 32. Further the Assessee submitted that the Double Taxation Avoidance Agreement stipulate where there is DTA Agreement between India and resident country of party to whom payment made then such income will be taxed in India only in the case such party is having permanent establishment India. Accordingly the assessee submitted that there is tax treaty between India and UAE which has been notified vide notification number GSR 356(E) dated 21-04-1995. Therefore it was not liable to deduct tax on such payment of commission. 33. The learned CIT(A) after considering the facts in totality directed the AO to verify nature of services received and allow the claim accordingly by observing as under: It is the submission of the appellant before the AO that the agents do not have permanent establishment in India. It is also admitted facts as noted by AO in Para 4.2 of the ....
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....ission paid to foreign agents for providing services outside India and they were not having permanent establishment or business connection in India. Therefore such payment is not income accruing or arising in India within the meaning of section 9 of the IT Act. It was also explained that non-residents were not chargeable to tax in India due to Double Taxation Avoidance Agreements. However, the learned CIT(A) observed that the nature of services were not explained by the assessee. Accordingly the learned CIT(A) directed the AO to verify the nature of services and allow the claim if commissions were paid for procurement of sales otherwise disallow the same if commission paid for services provided in nature of managerial or technical know-how as provided under section 9 of the Act. 38. At the outset we note the assessee before authorities below only contended that the agents have no establishment or business connection in India and payments were made outside India. As such the assessee has not substantiated the nature of services provided by the foreign agent. Accordingly we direct the assessee to provide the details of the services obtained from the commission agents to the AO. Th....
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....ssessee is that the learned CIT(A) erred in not directing the AO to delete the addition of Rs. 2,32,22,722/- under section 14A of the Act. 44. Briefly stated fact is that the AO found that the assessee during the year made investment in share and mutual funds and also incurring interest expenses but did not offer any disallowances of expenses. The assessee also failed to substantiate that the investment were made out of own fund available with it. Thus the AO held that the disallowances under section 14A of the Act was mandatory on account of expenses incurred for earning income not forming part of total income irrespective of the fact that such income is earned or not in year under consideration. Accordingly the AO computed the amount of disallowances under section 14A(2) read with rule 8D of income tax rule to the tune of Rs. 2,32,22,722/- being Rs. 2,0342,997 on account of interest expenses and Rs. 28,90,725/- on account of administrative expenses. 45. Aggrieved assessee preferred an appeal to the learned CIT(A). 46. The Assessee before the learned CIT(A) submitted that it had sufficient interest free fund to the tune of Rs. 10308.49 million in the form of shares, reser....
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....s. 72.69 million. The assessee in support of its claim has also submitted copy of balance sheet before the learned CIT(A). We find that the claim of the assessee was not controverted by the learned CIT(A) or by the learned DR. At the outset we note that it has been now settled position of law by the various courts that where own interest free fund of the assessee is sufficient enough to meet the investment then no any disallowances is warranted under section 14A r.w.r. 8D of the Act on account of interest expenses. In this respect we draw support from the judgment of Hon'ble jurisdictional high court in the case of CIT vs. Torrent Power Ltd. reported in 363 ITR 474 where it was held as under: It was noted from records that the assessee was having shareholding funds to the extent of 2607.18 crores and the investment made by it was to the extent of Rs. 195.10 crores. In other words, the assessee had sufficient funds for making the investments and it had not used the borrowed funds for such purpose. This aspect of huge surplus funds is not disputed by the revenue which earned it the interest on bonds and dividend income. [Para 7] 50.2. Respectfully following the same w....
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....n amount of Rs. 2,50,28,509/- deferred by the assessee in the books of account maintained under Companies Act for the reason that the benefit of same will arise in future. But the assessee while computing the income under the Act claimed the same as allowable expenses being the expenses incurred in the year under consideration. 55.1. However the AO disallowed the same by holding that the assessee failed to establish that the impugned amount was incurred for business purposes. The assessee also failed to provide the details such as name, address, PAN of the person to whom such amount was paid. 56. Aggrieved assessee carried the matter to the learned CIT(A) who sustained the addition by observing as under: The appellant submitted that payment of certain expenses are affected, benefit of which will be available over a period of time and accordingly, the said expenses are deferred over the period of benefit in books of accounts to match marketing concept. The explanation given by the appellant is very vague. It has not been properly explained about the business requirement of incurring the expenditure benefit to business of the appellant on incurring such expenditure, pa....
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....nds in negative provided part of the expenses were allowed by the AO and part of the expenses which were disallowed by the AO were pertaining to the same parties. However, such facts are not arising from the order of the authorities below. In such a situation, we are inclined to restore the issue to the file of the AO for de-novo adjudication as per the provisions of law. It is also directed to the assessee that it shall cooperate in the set-aside proceedings before the AO and liberty is also granted to it for filing the necessary evidences in support of its claim. Hence the ground of appeal of the assessee is allowed for the statistical purposes. 61. Next issue raised by the assessee vide ground no- 7 is that the learned CIT(A) erred in confirming the disallowances of additional depreciation for Rs. 13,19,231/- only. 62. At the outset, the learned AR for the assessee submitted that he has been instructed by the assessee not to press this ground of appeal. Accordingly we dismiss the same as not pressed. 63. The last issue raised by the assessee vide ground no. 8 is that the learned CIT(A) erred in confirming the addition of Rs. 3,63,06,857/- on account of claim made under ....
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....nbsp; 4,11,16,813 64.4. The AO further observed that the assessee in annexure to form 3CD as sated above has claimed project development cost for Rs. 2,40,49,956/- and claimed 1/5 of the same for Rs. 48,09,965/- but the same was not claimed in the statement of income. Thus the assessee has taken contradictory stand. Further the assessee also not provided the detail of expenses despite given various opportunities. 64.5. The AO also found that claim of deferred revenue expenses under section 35D were not examined by the revenue in the assessment proceedings of previous years. Accordingly the AO, in view of the above disallowed the claim of the assessee for Rs. 3,63,06,857/- and added the same to the total income of the assessee. 65. Aggrieved assessee carried the matter before learned CIT(A) who also confirmed the disallowances made by the AO by observing as under: The submission filed by the appellant during assessment proceedings were considered by the AO, but did not find satisfactory for the reasons given in the assessment order. During the appellant proceedings, the appellant stated that this expenditure has been allowed while passing assessment or....
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....he assessee. Thus the ground of appeal of the assessee is allowed in terms of above. 69.1. In the result the appeal of the Assessee is partly allowed for the statistical purposes. Coming to ITA No. 3195/Ahd/2016 of Revenue's appeal for A.Y. 2011-12 70. The Revenue has raised following ground of appeal: 1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance made u/s. 14A r.w. Rule 8D amounting to Rs. 2,32,22,622/- without properly appreciating the facts of the case and the material brought on record. 2. The 'Ld. CIT(A) ' has erred in law and on facts in restricting the addition @ 25% amounting to Rs. 56,94,49,965/- as against Rs. 227,77,99,860/- on account of bogus purchases without properly appreciating the facts of the case and the material brought on record. 3. On the facts and in the circumstances of the case, the 'Ld. CIT(A) ' ought to have upheld the order of the Assessing Officer. 4. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 71. The first issue raised by the Revenue is that the learned CIT(A) has erred in deleting the addition of....
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....15/Ahd/2016 corresponding to A.Y. 2011-12 which is decided against the assessee vide paragraph no. 42 of this order. For detail discussion, please refer the above mentioned paragraph. Accordingly, we dismiss the ground of appeal of the assessee. 79. The second issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 4,35,75,893/- on account of claim made under section 35D of the Act. 80. At the outset we note that the similar ground raised by the assessee in ITA no. 2915/Ahd/2016 corresponding to A.Y. 2011-12 which is decided in favour of the assessee subject to the verification vide paragraph no. 69 of this order. For detail discussion, please refer the above mentioned paragraph. Accordingly we allow the ground of the assessee subject to verification. 81. The issues raised in ground 3 and 4 by the assessee in its appeal are either premature to decide or consequential. Therefore we dismiss the same. 81.1. In the result the appeal of the assessee is partly allowed. Coming to ITA No. 942/Ahd/2018 of Revenue's appeal for A.Y. 2012-13 82. The Revenue has raised following grounds of appeal: 1. The Ld. CIT(A) has erred....
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..... 2. That the learned CIT(A) has erred in law and facts by confirming the disallowance on account of Deferred tax Expense u/s. 35D of the Act of Rs. 2,92,40,917/- and therefore the learned AO should be directed to allow the said claim of Rs. 2,92,40,917/- while computing the total income. 3. The learned AO be directed to drop the penalty proceedings initiated under section 271(1)(c) of the Act. 4. That the appellant craves liberty to add, amend, alter and delete any grounds of appeal before the final hearing. 88. The first issue raised by the assessee is that the learned CIT(A) erred in upholding the addition made on account of late payment of EPF contribution for Rs. 20,22,968/-. 89. At the outset we note that the similar ground raised by the assessee in ITA no. 2915/Ahd/2016 corresponding to A.Y. 2011-12 which is decided against the assessee vide paragraph no. 42 of this order. For detail discussion, please refer the above mentioned paragraph. Accordingly the ground of appeal of the assessee is dismissed. 90. The second issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 2,92,40,917/- on account claim....
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.... 98. At the outset we note that the similar ground raised by the Revenue in ITA no. 3195/Ahd/2016 corresponding to A.Y. 2011-12 where we have decided the issue against the Revenue vide paragraph no 72 of this order. For detail discussion refer the above mentioned paragraph. Accordingly we dismiss the ground of the revenue appeal. 98.1. In the result the appeal of the Revenue is dismissed. Coming to ITA No. 320/Ahd/2018 of Assessee's appeal for A.Y. 2014-15 99. The assessee has raised following grounds of appeal: 1. That the learned CIT(A) has erred in law and facts by confirming the addition of Employees Contribution to PF and ESI u/s. 36(1)(va) of Rs. 52,93,615/- and therefore the learned AO should be directed to allow the said claim of Rs. 52,93,615/- 2. That the learned CIT(A) has erred in law and facts by confirming the disallowance of claim u/s. 35D of Rs. 2,04,21,124/- and therefore the learned AO should be directed to allow the said claim of Rs. 2,04,21,124/- 3. That the learned CIT(A) has erred in law and facts by confirming the addition of undisclosed income of Rs. 2,50,965/- on the basis of TDS reflected in 26AS and therefore the ....
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....n income of Rs. 5,82,896/- in its books of accounts. Thus, the AO added the same to the total income of the assessee. 106. Aggrieved assessee preferred an appeal to the learned CIT(A). 107. The assessee before the learned CIT(A) furnished the details with respect to certain parties and contended that the income has already been shown in the books of accounts. The details of the same stands as under: 1. Narayan Steel Rs. 1,87,661/- 2. Piyush Finhold Pvt. Ltd. Rs. 84,270/- 3. Directorate of Purchase and Store Rs. 60,000/- 107.1. The assessee with respect to the other parties contended that the above income does not belong to it and therefore it was not shown in the books of accounts. 108. However, the learned CIT(A) after considering the submission of the assessee deleted the addition made by the AO in part by observing as under: As the income of Rs. 1,87,661/- in respect of Narayan Steel Rs. 84,270/- from Piyush Finhold Pvt. Ltd. and 60,000/- in respect of Directorate of purchase and stores are reflected in the books of account and show as income the addition will amount to double addition, and therefore is deleted. As the balance amou....
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....g Officer. 2.1 The Ld. CIT(A) has failed to appreciate that the onus lies on the assessee to demonstrate that it had interest free funds available with it for making such investment and not other way around. 2.2 The Ld. CIT(A) has failed to appreciate that as per Section 106 of Evidence Act, when any fact is especially within the knowledge of any person, the burden of proving the fact is upon him. 3. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary. 116. The first issue raised by the Revenue is that the learned CIT(A) erred in deleting the disallowances of commission expenses for Rs. 2,22,91,328/- under section 40(a)(i) of the Act. 117. At the outset we note that the similar ground raised by the assessee in ITA no. 2915/Ahd/2016 corresponding to A.Y. 2011-12, which is decided in favour of the assessee vide paragraph no 37 to 38 of this order. For the detailed discussion, please refer the above mentioned paragraph. Accordingly we dismiss the ground of the revenue's appeal. 118. The second issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition of Rs. 13,58,818/- u....