TaxTMI 
TaxTMI 
2019 (8) TMI 1772
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....iness of Trading, Manufacturing and Export of Fabrics. A survey under section 133A of the Income-Tax Act, 1961 was conducted on the assessee company on 11th July, 2011 at business premises of the assessee company. After affording full and adequate opportunity to the assessee, the assessment proceedings have been completed. The assessing officer noted that during the course of survey proceedings certain loose papers were found, inventoried and impounded as a BF (different coloured) Himalaya files SEL-I to SEL-X and loose paper files SEL-XII, XIII and XIV, computer backup SEL CD1 were also impounded. The details of the same are mentioned in para 3 of the assessment order. The above impounded material consists of files. More importantly the loose paper file SEL-XIV consists of 187 pages, out of which, pages from 1 to 169 and 173 to 187 are ledger copies of various transactions made by the company. Pages from 170 to 172 pertain to correspondence regarding search carried out by Commercial Tax Department. On perusal of these documents, it revealed that the company had made purchases from the family concerns of the employee of the assessee company Shri Shailesh Damor. All the concerns are....
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....sive. Since the assessee received the goods at its own premises and made exports which are not in dispute, therefore, purchases could not be treated as bogus. Without purchases, sales/exports could not have been made. If there is no delivery of purchases, corresponding sales be excluded. The purchases are supported by bills and vouchers along with quantitative details duly audited which are mentioned in the audit report also. All the parties are assessed to tax. Merely because email address of Shri Viral Vora have been mentioned is no ground to reject the explanation of assessee. All the purchases are made through banking channel. The seller is also registered under Shop and Establishment Act and Registration Certificate have been issued. Because of the survey, the parties are afraid to come before the Income Tax Department. That is why they may not be responding to the notices although they have asked for the adjournments. It would, therefore, prove the existence of the seller parties. Since the payments have been made through banking channel and that there is no evidence that amounts have returned back to the assessee would prove genuine purchases which are exported by the assess....
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.... of income under section 44AD of the Income Tax Act. The Assessing officer also noted that in some other cases even 100% disallowance of purchases have been made. The statement of Director of assessee-company was recorded on oath under section 131 of Income Tax Act, in which he has stated that they have a procedure to put stamp on all the purchase bills which are paid. But, in the case of these parties no details have been mentioned. The A.O, therefore, noted that all the purchases are made from Damor family, but, no business have been conducted at their address, no day today stock register have been maintained. The Damor family has filed return of income only under section 44AD of the Income Tax Act. Therefore, A.O. treated the entire purchases of Rs. 38.81 crores made from Damor family as bogus cash credit under section 68 of the Income Tax Act. The addition of the same was accordingly made. 4. The assessee challenged the addition before the Ld. CIT(A). The written submissions of the assessee is reproduced in the appellate order, in which the assessee reiterated the same facts. Before the Ld. CIT(A), it was highlighted that all the payments are made through account payee chequ....
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....d and the name of the broker through whom said purchases have been made. Smt. Jenifer Damor stated that she is not having any knowledge of the business and on her behalf Shri Rakesh Damor was arranging the business and she was only putting the signature. Likewise statement of a Damor family have been recorded. The assessing officer, therefore, concluded that these persons were dummy persons only and being used to use their names. The Assessing officer also issued summons under section 131 to several persons from whom Damor family claimed to have made purchases. Most of the summons received back unserved. No such person attended the proceedings before assessing officer, but, in some of the cases, replies have been received through DAK. The assessing officer did not accept reply of such parties send through DAK. The assessing officer noted that no names of Proprietor, Letter Pad, Phone Number and Copy of the ITR have been produced before him. The assessing officer again issued notices under section 133(6) of the Income Tax Act through Inspector of his office. But, Inspector has reported that no such business entities exists by their names and they are not at the concerned address. So....
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....urn filed by Damor family. The assessing officer also examined as to how the parties have entered into the transaction of making purchases. All the payments have been made through banking channel and no evidence have been brought on record that purchase money came back to the assessee. The delivery of the goods have been made at the door step of the assessee. The parties are not related to the assessee. The assessee also furnished quantitative details of finished goods purchased from the said parties and exported which have not been doubted. The assessee has made purchases from other parties also which have not been doubted by the assessing officer. The quantitative details submitted by the assessee have not been disputed by the Assessing officer. Merely because email of Shri Viral Vora who is also a professional Chartered Accountant have been mentioned in the ITR of Damor family, is no ground to disbelieve the explanation of assessee. No incriminating material was found during the course of survey to suggest non-genuine purchases. During the course of survey, only bills and invoices were found which have already been entered into the books of account of assessee. No findings have ....
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....e present case. Learned Counsel for the Assessee further submitted that in assessment year 201011, the Assessing officer accepted the similar purchases in the scrutiny assessment order under section 143(3) of the Income Tax Act, 1961 and the Ld. CIT initiated revision proceedings under section 263 of the Income Tax Act, 1961. Copy of the show cause notice under section 263 of the Income Tax Act is filed at page 15 with the written submissions, in which, Ld. CIT wanted to examine the similar issue. The order of the Ld. CIT-2, Surat have been set aside by the ITAT in ITA.No.787/Ahd./2015 vide Order Dated 19th February, 2016. Learned Counsel for the Assessee, therefore, submitted that issue is covered by order of ITAT, Ahmedabad Bench in the case of assessee for the assessment year 2010-2011 on identical facts. He has also relied upon Order of ITAT, Delhi Bench in the case of Bhatia Diamonds Private Limited vs., Income Tax Officer in ITA No.2822/Del./2018 for the assessment year 2013-2014 Dated 24th June, 2019, in which, on identical facts, the addition have been deleted. He has, therefore, submitted that there is no evidence on record to prove that purchases made by assessee were bog....
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....ed by the Hon'ble Supreme Court reported [2018] in 94 taxmann.com 325 (SC). The ITAT, Delhi Bench, in the case of Bhatia Diamonds Pvt., Ltd., vs., ITO, Ward-4(4), New Delhi, vide Order Dated 24.06.2019 in para-8 following its earlier order in the case of same assessee, in which it was held in para-8 as under : "8. We have considered the submissions of both the parties and gone through the material on record. It is an admitted fact that an identical issue have been considered by ITAT, Delhi SMC-Bench in the case of the same assessee in preceding A.Y. 2011-2012 and similar addition have been deleted on merits and this fact is also stated by the Ld. D.R. that facts are identical in assessment year under appeal as have been considered in A.Y. 2011-2012. In the present case also, two of the parties have denied making any sales to the assessee. No entries of such sales have been recorded in the books of account. Two parties have admitted to have made sales to the assessee and filed reply under section 133(6) of the I.T. Act, 1961, supported by bill and Affidavit, on which, no adverse inference have been drawn by the A.O. All the payments of purchases have been made through....
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....ts. The explanation of assessee as regards exports supported by all the documentary evidences which have not been disputed. The assessee filed confirmation statement of all the purchase parties. The assessing officer in the remand proceeding also examined the purchase parties and their auditor, who have confirmed the genuineness of the transaction. There is no evidence on record to prove that amount of purchases given to Damor family have come back to the assessee. In survey, no incrementing material was found to prove that assessee made bogus purchases. Whatever evidence was found during the course of survey i.e., bills and invoices of purchases have already been recorded in the books of account. The sellers are also assessed to tax and have declared the transaction in their returns which have been accepted by the Revenue Department. The seller party have also replied to the notice under section 133(6) of the Income Tax Act. The assessing officer did not reject books of account of assessee under section 145 of the Income-Tax Act. If the aforesaid addition is confirmed, according to explanation of assessee, it would give gross profit rate of 41.4 % which is impossible to earn in th....
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....bove discussion, we set aside the Orders of the authorities below and delete the entire addition. Ground No.1 of the appeal of Assessee is accordingly allowed. 8. On Ground No.2, assessee challenged the disallowance of Rs. 2,24,741/- under section 14A of the I.T. Act. 9. The A.O. found during the assessment proceedings that the assessee had shown investment in equity shares of Rs. 1,41,72,500/- as on 31.03.2012 under the head "Non-current Investments" and also shown interest expenses of Rs. 88,96,241/- . The A.O. issued show cause notice regarding the disallowance of interest expenses under section 14A of the Income Tax Act, 1961. The assessing officer disallowed proportionate interest expenses under Rule 8D of the Rules of Rs. 2,24,741/-. The assessee submitted before assessing officer that there is no exempted income earned during the year and, therefore, the disallowance made by the assessing officer is wholly erroneous. The Ld. CIT(A) also did not accept the contention of assessee and confirmed the addition. 10. Learned Counsel for the Assessee submitted that since assessee had not earned any exempted income during assessment year under appeal, therefore, Section 14A o....
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....ting which meant that Excise Duty will never be offered as income of the assessee. The assessee did not furnish copy of the ledger account of the parties and explanation that what steps had been taken by the assessee to recover the debts before the assessing officer. The assessing officer, therefore, disallowed bad debts of Rs. 2,57,30,902/-. 15. The assessee challenged the addition before the Ld. CIT(A) and it was submitted that assessing officer has given finding in reference to Government liabilities only. The assessing officer in reference to PK Textiles of Rs. 41,51,476/- which have been recovered and shown as income, has still made the addition. The assessee in regard to the claim of total bad debts submitted that import duty amounting to Rs. 12,67,980/- was on account of Yarn imported earlier for the amount of Rs. 3,16,99,500/- and, therefore, this was an additional import benefit and not a regular duty. This type of additional import duty can be set off against the Yarn sold in local market only and in the case of assessee this Yarn was used of Rs. 3,16,99,500/- as captive consumption for sale of exports of gray cloth. Since, they had not traded in local sales, therefore....
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....oss on account of nonrealization of excise export incentive income offered in earlier years in the nature of DEPB License Income, Excise Duty Refund receivable and Additional Import Duty refund receivable and loss on account of lesser claim being recovered from New India Assurance Company. The details of the same are noted in the Order of the authorities below. The assessing officer disallowed the claim of assessee in respect of Government liabilities on the proposition that such liabilities cannot be converted into bad debts. He has submitted that bad debts have not been claimed in respect of Government liabilities, but, it has in fact been claimed in respect of amounts receivable from the Government towards export incentive income. It was pointed-out that this export incentive income were offered in P & L A/c in earlier years, however, in the current year on account of rejection thereof by the Government, the same has been written-off. He has submitted that assessing officer has failed to appreciate that assessee had offered excise duty refund as income separately on the face of its P & L A/c of the earlier years as export incentive income and the same being rejected in the year ....
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.... in deleting the addition of Rs. 29,17,91,322/- on account of advances received from the customers. 24. During assessment proceedings, assessing officer found that assessee has shown advances from the customers/debtors of Rs. 29,17,91,322/- from various parties including M/s. Najeeb Aimal Ltd. of Rs. 19.41 crores. The assessing officer found that assessee was shown loose paper file at pages 175 to 187 with ID remark SEL XIV where M/s. Najeeb Aimal Ltd., of Kabul, Afghanistan has made advance of Rs. 36.49 crores since 27.10.2010 till the date of survey. No finished goods since then have been supplied by the assessee. The assessee was requested to explain such a huge advance in the books of account. The assessing officer did not accept explanation of assessee and made the aforesaid addition. 24.1. The assessee filed various details before the Ld. CIT(A) along with documentary evidences to show that advances have been received from customers and time to time exports have been made. The details of exports along with invoices were filed to show that advances were genuine. The Ld. CIT(A) called for the remand report from the assessing officer, which the assessing officer has furnis....
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....es, local sales etc. The Chart AD-2 gives the details of the consignee wise advance payments, statement from 01.04.2011 to 31.3.2013 giving details of the advances received during the year closing advance, invoice amount, exchange gain/loss etc. The AO has submitted that after due verification it was found that the amount received from Najib Ajmal Ltd. during the FY 2010-11 of Rs. 15,64,55,395/- and against it during FY 201112, the appellant has received invoice of Rs. 17,28,83,257/- and also claimed exchange loss of Rs. 1,64,27,862/- and further stated that in the same year, further advance of Rs. 19.41 crore was received by the appellant company against which goods were claimed to be dispatched in subsequent financial year and in that year again advance of Rs. 17.24 crores received and goods dispatched in FY 2013- 14. So far the advances/debts of the other customers is concerned the AO reported that the verification has been made as claimed by the appellant that against the advances received of Rs. 9,76,42,264/- in FY 2011-12, the finished goods amounting to Rs. 9,78,75,059/- were dispatched and exchange loss of Rs. 2,32,795/- was booked in AY 2013-14. 6.4.6. In vi....