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2022 (1) TMI 228
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....in ITA No. 7439/Mum/2019 for AY 2012-13), CO No.88/Mum/2021, (Arising in ITA No. 7532/Mum/2019 for AY 2013-14), CO No.89/Mum/2021, (Arising in ITA No. 7526/Mum/2019 for AY 2009-10), CO No.90/Mum/2021, (Arising in ITA No. 7527/Mum/2019 for AY 2010-11), CO No.91/Mum/2021, (Arising in ITA No. 7528/Mum/2019 for AY 2012-13), CO No.92/Mum/2021, (Arising in ITA No. 7530/Mum/2019 for AY 2013-14), ITA No.7409/Mum/2019, ITA No. 7526 to 7531/Mum/2019, ITA No. 7482/Mum/2019 Sri Rajesh Kumar, AM And Sri Amarjit Singh, JM For the Appellant : Shri Nirav Mehta, AR For the Respondent : Shri Vinay Sinha, CIT DR ORDER PER RAJESH KUMAR, AM: The above titled appeals have been preferred by the Revenue and different assessees against different orders of the Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] relevant to assessment years 2009- 10 to 2015-16. Since all these appeals pertain to the same group and also covered by the same search with most of the issues being, therefore all these appeals are being decided by this consolidated order for the sake of brevity and convenience. First of all we shall take up Revenue's appeal and cross objection by Man Global Ltd for A.....
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....e issued and duly served upon the assesse. Finally the assessment under section 143(3) r.w.s. 153A of the Act was framed vide order dated 26.12.2016 at a total income of Rs. 3,68,63,798/- by making additions under section 14A of the Act of Rs. 23,03,070/- and on account of bogus purchases from M/s. Karma Ispat Ltd. 2,11,22,938/-. Aggrieved assesse challenged the assessment order before the ld CIT(A) on jurisdictional issue as well as on merit. 5. The ld. CIT(A) dismissed the appeal of the assesse on jurisdictional issue that AO has no jurisdiction to make addition to the total income in an unabated assessment year with incriminating materials seized during the search. The ld. CIT(A) after taking into consideration the contentions of the assesse dismissed the legal issue by observing and holding as under: "7.2 The submissions of the Learned Counsel have been carefully considered. It is the contention of the Learned Counsel that during the course of search no incriminating material was found. Therefore, the provisions of section 153A are not applicable nor does the AO has jurisdiction to make the additions in the order passed u/s. 153A which are not pertaining to any undisclosed i....
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....r are not supported by any evidence or material found during the course of search proceedings. In support of its contentions the ld AR strongly relied on the following decisions a) Commissioner of Income-tax (Central)-III vs. Kabul Chawla [2015] 61 taxmann.com 412 (Delhi). b)The Hon'ble Delhi High Court further dealt with its decision in the case of CIT v/s Anil Kumar Bhatia (24 taxmann 98) c) CIT v. Continental Warehousing Corporation (Nhava Shava) Ltd. [SLP (Civil) No. 18446/2018] dated 09.07.2018 d) CIT v. Continental Warehousing Corporation (Nhava Shava) Ltd. & Other [374 ITR 645 (Bom)] e) PCIT v. Meeta Gutgutia [96 taxmann.com 468 SC] f) PCIT v. Meeta Gutgutia [395 ITR 526 (Del)] g) PCIT v. Meeta Gutgutia [96 taxmann.com 468 SC] h) PCIT v. Meeta Gutgutia [395 ITR 526 (Del)] j)CIT Vs. Saumya Construction Pvt Ltd (Tax appeal No. 24 of 2016) dated 14th March 2016,(Guj) k)Pr. Commissioner of Income Tax-3 V/s Anil Bholabhai Patel Dated- 30/08/2017.(Guj) 9. The AR also submitted that no addition can be made on the basis of statement recorded during search or enquiries made during post search period. In the following cases decision the Hon'ble Gujarat High Court ....
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....h incriminating to make the additions. The ld DR submitted that taking into account the circumstances evidences and statements of directors of Karma Ispat Ltd , statement of the Chairman of Man Group, the AO made the additions and therefore the legal ground raised by the assesse was rightly dismissed. 13. We have heard the rival contentions of both the parties and perused the materials as placed before us including the decisions as cited above. The undisputed facts are that on the date of search the assessment for the current assessment year was not pending and therefore it has attained finality and thus it was unabated on the date of search. It was also undisputed that except the statement recorded u/s 132(4) of the Act of director of Karma Ispat Ltd as well as Director of Man Group of Industries there was no incriminating materials which was seized during search to back the additions. Therefore the AO has no jurisdiction to make addition in an unabated assessment year without there being incriminating materials and accordingly the jurisdiction of the AO can not be justified. The case of the assesse is squarely covered by the a series of decisions as discussed below: a)Commissi....
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....arch enquiries. In the following decisions the Hon'ble Gujrat High Court has held that if no incriminating material is gathered during the course of search, then addition cannot be made even on the basis of statement of director recorded post search proceedings. (a) Pr. Commissioner of Income Tax Vadodara-1 V/s RSA DIGI Prints Dated- 06/09/2017. (b) Principal Commissioner Of Income Tax V/s Sanghvi Fincap Ltd. Dated-20/02/2018. (c) Principal Commissioner of Income Tax- 2 V/s Kamlesh Prahladbhai Modi. Dated- 18/04/2018. (c) Sunrise Finlease (P.) Ltd. reported in 89 taxmann.com 1. The case of Assessee is far better wherein no evidence in support of additions have been found either during search proceedings or during post search proceedings. Hence order passed u/s 153A is bad in law and deserves to be quashed. 14.1. Further we find merit in the contentions of the ld A.R. that statement recorded during search do not constitute incriminating material as the same can not be said to be found during the course of search but is recorded to elicit more information/explanation of the searched person on the incriminating documents/gold/jewellery found during search. Therefore after pe....
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....ion is not justifiable and deserves to be deleted in toto. 2. On the facts and in the circumstances of the case, the CIT(A) erred in confirming addition on account of disallowance under section 14A of the Act of Rs. 62,887/-. The disallowance is not justifiable and deserves to be deleted. 3. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same." 20. On the facts and in the circumstances of the case, the CIT(A) erred in confirming addition on account of disallowance under section 14A of the Act of Rs. 62,887/-. The disallowance is not justifiable and deserves to be deleted. 21. The issue raised in the first ground of appeal is against the order of CIT(A) partly upholding the order of AO on the issue of on-money by directing to apply 25% as against the 100% added by the AO. The revenue in its cross appeal has challenged the part deletion of addition on account of on money to the extent of 75%. 22. As stated above the assesse is engaged in the Real Estate Development. The Assessee has developed two projects called MAN Opus and Shanti Sadan. The assesse filed the retur....
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....d out total receipts on the basis of said alleged "Excel Sheet" which is extracted as under for ready reference: Rs. In lacs Sr. No. Name of the parties A.Y. 2015-16 A.Y. 2014-15 A.Y. 2013-14 A.Y. 2012-13 Total 1 Man Industries (India) Limited 640.49 747.57 397.10 418.25 2203.4 2 M/s M Concepts Retail LLP 0.14 0.15 4.32 46.65 51.56 3 M/s Merino Shelter Pvt. Ltd. 95.72 85.00 306.24 163.20 650.16 4 M/s Man Global Limited 589.64 171.17 410.75 426.00 1597.56 Total 1325.99 1003.89 1118.41 1054.40 4502.69 24. The A.O. after comparing receipt worked out as above vis-à-vis bifurcation of receipt given vide letter dated 31.03.2015. The addition of Rs. 3,62,11,000/- (i.e. Rs. 426.00 lacs receipt as per A.O's working Less Rs. 63.99 additional income offered to tax in return filed under section 153A of the Act ) is added on substantive basis. Further the difference between the Assessee's receipts bifurcation as per letter dated 31/03/2015 and receipt as per A.O.'s working i.e. Rs. 2,12,99,000/- is added on protective basis. Thus the assessment under sectio....
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....M Concepts Retail LLP 0.14 0.15 4.32 46.96 51.57 Less: On money (Scrap) to be considered in Man Industries (India) Limited 96.45 - 3.00 19.25 116.90 Balance on money Receipt to be considered in Man Global Ltd 932.97 649.16 847.02 742.20 3171.35 8.16 I have examined the contention of the AO that entire cash receipts on account of on money should be treated as taxable income without allowing any expenditure there from. I have also examined various documents, replies, rejoinders, charts and final submissions etc. given during the appellate proceedings and taken note of applicant's assertion of justifying that only profit embedded in such receipts would be taxable as an income. The Hon'ble ITAT, Mumbai in the case of Prime Developers Vs. DCIT has held that the entire sales proceeds of the assessee should not be added to its income and a reasonable estimate of expenses needs to be made considering the nature of business of the assessee. Thereafter, the Hon'ble ITAT has made an addition of 17.08% of gross on money receipts and the same has also been upheld by Hon'ble Bombay High Court in ITA No. 2452 of 2013. I have also considered ....
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....do not qualify for deduction under section 40A(3) of the Act. The ld AR invited the attention of the bench to the statement of Shri Ramesh Chandra Mansukhani and submitted that in first statement only, Shri Ramesh C Mansukhani spoke about inconsistencies, duplicity and irregularity found in Excel sheets prepared and maintained by Mr. Vinod Tiwari. The ld AR submitted that in first statement only Shri Ramesh C Mansukhani made it clear that entries reported in Ms Excel sheet inter alia included expenditure of Man group and additional income would be offered after claim of expenditure in due course. The ld AR also brought to our notice payments by the assesse as per the said excel sheets. Therefore, ld AR prayed that in view of what is stated hereinabove the additional income found from the seized material should be taxed net of expenditure. In defense of his arguments, the ld AR relied on the following decisions: a) CIT(A) Vs. Abhishek Corporation in ITA No. 15 of 2003. b) Commissioner of Income-tax v. Samir Synthetics Mill reported in [2010] 326 ITR 410 (GUJ.) c) Commissioner of Income-tax v. President Industries [2002] reported in 1024 TAXMAN 654 (GUJ.). d) M/s Prime develo....
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....tted that incriminating material/documents were found during the course of search on the assesse in the form of hard disk and excel sheets which contained the jottings/notings qua cash transactions by the group entities including the assessee. The ld AR submitted that once the incriminating material is found during search then there is question of allowing any deduction from that on money towards expenses incurred as assesse has already accounted for the expenses in the regular books. The ld DR therefore prayed that the order of CIT(A) is wrong and against the facts on records and therefore the same may be set aside on this issue and AO's order may be restored. 29. We have heard the rival contentions and perused the materials on records including the appellate orders and decisions cited before us. We note that during the course of search a hard disc and some excel sheets were found and seized which contained the notings/jottings qua the some receipts and payments which according the assesse were relating the real estate projects. Even during the course of recording of statement u/s 132(4) of the Act Shri Ramesh Chandra Mansukhani director of the assesse admitted the fact of having....
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..... Abhishek Corporation in ITA No. 15 of 2003 , Hon'ble Gujrat High Court has upheld the order of the tribunal wherein it has been held that in case of on money only profit has to be added to the income of the assesse and not the entire undisclosed receipt (ii) In the case of Commissioner of Income-tax v. Samir Synthetics Mill (supra), the Hon'ble Gujarat High Court has held as under: "Where assessee could not even be able to reconcile production, sales and closing stock although specific opportunity was provided by Assessing Officer, addition was justified on account of suppression of sale consideration but only to the extent of profit [In favour of assessee] As a result of search by the Excise Department in the business premises of the assessee, various discrepancies were noted in the production of the assessee. The assessee could not even be able to reconcile the production, sales and the closing stock although the specific opportunity was provided by the Assessing Officer. Accordingly addition to the assessee's income was made on account of suppression of sale consideration. Held that, the addition was justified on account of suppression of sale consideration but only to....
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....nterest, even in case of estimated net profit - Held that:- There can be no quarrel with the submissions of Mr. Kotangale. In any event, the Assessing Officer would need to redetermine the book profits of the respondent-assessee as a consequence of the impugned order of the Tribunal. At that stage the ceiling provided under Section 40(b) of the Act would also be considered while allowing deduction on account of remuneration and interest paid to the partners. No substantial question of law (v) In Case Of M/S Ekta Housing Pvt. Ltd Versus Dy. Commissioner Of Incometax- Central Circle 6 (2), Mumbai And (Vice-Versa) , Dy. Commissioner Of Incometax-Central Circle 6 (2), Mumbai Versus M/s. Ekta World Pvt. Ltd; and M/s Pahli Hill Developers vs. Dy. Commissioner of Income tax-Central Circle 6(2), Mumbai and (viceversa)( supra). In this case the Mumbai Tribunal has directed to restrict addition on account of on money receipts to 15%. (vi) In the case of Principal Commissioner Of Income Tax] (Central) 4, Mumbai Versus Income Tax Settlement Commission (ITSC)] Additional, M/s. Lodha Developers Pvt. Ltd. And Others (supra)- in the said decision the Hon'ble Bombay High Court agreed to the fin....
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....out any incriminating material found during search. 33. The issue is similar to one as decided by us in ground no, 3 in CO: 81/Mum/2021 A.Y. 2011-12 (supra) wherein we have decided that AO has no jurisdiction to make addition in absence of incriminating materials in an unabated year. Therefore our decision in ground no. 3 in CO: 81/Mum/2021 would, mutatis mutandis, apply to ground no. 2 in the present cross objection as well. Consequently ground no. 2 is allowed. ITA No.7534/Mum/2019 & CO 83/Mum/2021AY2013-14 ITA No.7535/Mum/2019 & CO 84/Mum/2021AY 2014-15 ITA No.7536/Mum/2019 & CO 85/Mum/2021AY2015-16 34. The issue raised in ground no. 1 in CO No.83, 84 & 85/Mum/2021 is similar to one as decided by us in ground no. 1 in CO 82/Mum/2021 A.Y.20012-13. Therefore our decision in ground no. 1 in CO 82/Mum/2021 A.Y.20012-13 would, mutatis mutandis, apply to ground no.1 in CO Nos.83, 84 & 85/Mum/2021 and accordingly the order of CIT(A) is modified and AO is directed to apply a profit rate of 12.50% on the on money. The ground 1 in the above three cross objections in AY 2013-14 to 2015-16 is partly allowed. 35. The issue raised in ground no .1 in revenue appeals no. ITA No.7534, 7435....
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.... appeals no. ITA No.7539 & 7432 /Mum/2019 is similar to one as decided by us in ground no. 1 in 7533/Mum/2019 A.Y.20012-13. Therefore our decision in ground no. 1 in 7533/Mum/2019 A.Y.20012-13 would, mutatis mutandis, apply to ground no. 1 in ITA No.7539 & 7432 /Mum/2019 and accordingly the appeals of the revenue in AY 2012-13 & 2013-14 become infructuous and are accordingly is dismissed. 42. The ground 2 raised by the revenue in ITA No. 7539 & 7432/Mum/2019 is against the order of ld CIT(A) deleting the addition as made by the AO book profits u/s 115JB on account of on money. 43. According to the AO the on money has not been shown by the assesse in the books of accounts which have prepared in accordance with Companies Act and Income Tax Act. Thus the profit has not been calculated as per companies Act. Therefore the AO came to the conclusion that the book profits need to be recalculated as the on money has not been included in the book profits and accordingly addition was made to the book profits. 44. The assesse challenged the order of AO before ld CIT(A) and ld. CIT(A) allowed the appeal of the assesse on this issue by holding that the decision relied upon by the AO in the ca....
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....cisions as referred to above and may kindly be upheld on this issue by dismissing the appeal of the assessee. 47. The ld DR on the hand submitted that the AO has correctly made addition to the book profit in respect of on money received by the assesse which was shown in the books of accounts. Thus the books of accounts prepared and audited by auditors do not show the correct book profit and needs to be adjusted accordingly. The ld DR submitted that how the book profits can be correct when the amount of receipts is not shown fully but understated resulting into understatement of book profit. The ld DR submitted that this is certainly misrepresentation on the part of the assesse and book profits need to recalculated. The ld DR argued that the AO has correctly applied the decision of the tribunal in the case of Rishiroop Rubber International Ltd Vs DCIT (supra). The ld DR therefore prayed that the order of ld CIT(A) maybe reversed and that of AO may be restored. 48. After hearing the rival contentions and perusing the material on records we find that the AO has increased the book profits by amount of on money. Now the issue before us whether AO has jurisdiction to change the book pr....
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....incorrectly adopted for preparation of profit and loss account laid before the Annual General meeting. In our considered view none of the aforesaid conditions laid down by the tribunal gets fulfilled in the case of the assessee. Therefore we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue. Consequently ground no 2 in both the appeals of the revenue are dismissed. ITA No.7482/Mum/2019 Assessment Year: 2015-16 (Revenue's Appeal) 49. The ground raised by the revenue is reproduced as under: "Whether on the facts and circumstances of the case snf in laws , the ld. CIT(A) erred in deleting the addition of Rs. 1,69,86,000/- on protective basis without appreciating the fact that the substantive addition has not yet been confirmed and accepted by the assesse and there is possibility of revenue loss in case substantive addition is deleted by higher authorities." 50. The facts in brief are that the assessee is engaged in the business of retailing of readymade garments and furniture. A search under section 132 of the Act was conducted in case of the Assessee on 10.12.2014. During the course of search and seizure operation, a hard disk and some excel s....
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.... reworked by ld CIT(A) has been accepted both by the assesse as well as revenue and we have directed the AO to assess the on money @ 12.50%. Therefore we are inclined to uphold the order of ld. CIT(A) by dismissing the appeal of the revenue. ITA No. 7526/Mum/2019 & CO No. 89/MUM/2021 Assessment Year: 2009-2010 CO No.89/Mum/2021 (Assessee's CO) 53. The grounds raised by the assesse are as under: "1. On the facts and in the circumstances of the case, the CIT(A) ought to have deleted addition of Rs. 52,50,000/- made on account of unaccounted cash receipt from scrap sales. 2. On the facts and in the circumstances of the case, the CIT(A) ought to have deleted disallowance under section 14A of the Act amounting to Rs. 31,42,069/-. The disallowance is not justifiable and deserves to be deleted in toto 3. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same." 54. The assesse has challenged in ground no. 1 the order of CIT(A) confirming the addition made by the AO without any incriminating materials found during search in an unabated assessment year. 55. The facts in br....
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....ralia included commission payment were incurred for the business purpose only which left no scope for any adverse inference to be drawn in this regards. It is therefore submitted that the ld. Assessing Officer has simply gone beyond the scope of the provisions of section 153A of the Act which comes into operation only after a search has been carried out u/s 132 of the Act and to assign power to the Income-tax authorities for a specific purpose only i.e. for unearthing concealed income. The following facts will prove that the analogy on which addition on account of Foreign Commission is made in case of Assessee is not supported by any incriminating material found during the course of search and hence order passed u/s 153A is bad in law and deserves to be quashed. In view of above, it is evident that the observation of AO is not supported by any evidence or material found during the course of search proceedings. 58. The issue raised in ground no. 1 above is identical to one as decided by us in CO No.81/Mum/2021AY 2011-12, therefore our decision in Co No.81/Mum/2021AY 2011-12 would ,mutatis mutandis, apply to ground no. 1 as well. Accordingly we set aside the order of CIT(A) on this ....
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....the assessee on the legal/jurisdictional issue by holding that the AO has no jurisdiction to make addition without incriminating materials in an unabated assessment year and consequently additions made will not survive. Consequently the appeal of the revenue becomes infructuous and is accordingly dismissed. ITA No. 7528/Mum/2019 & CO No. 91/Mum/2021 A.Y. 2012-13: CO No.91/Mum/2021 66. The issue raised in ground no. 1 is identical to one as decided by us in CO No.81/Mum/2021AY 2011-12, therefore our decision in Co No.81/Mum/2021AY 2011-12 would ,mutatis mutandis, apply to ground no.1 as well. Accordingly we set aside the order of CIT(A) on this issue by holding that AO has no jurisdiction u/s 153A to make additions without incriminating materials found during search. Resultantly all additions made by the AO are directed to be deleted. Ground no. 1 is allowed. 67. The issues raised in ground no. 2 & 3 are on merit of the additions made towards unaccounted scrap sales of Rs. 19,25,000/- and disallowance of Rs. 20,00,000/- u/s 14A of the Act. Since we have allowed the appeal of the assesse on jurisdictional/legal issue, the ground no. 2 and 3 are not being adjudicated. 68. The cro....
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....sse as to why the Rule 8D should not be invoked to calculate the disallowance. The AO however rejected the disallowance made by the assesse and was calculated by the AO at Rs. 1,76,24,031/- and Rs. 15,00,000/- was disallowed and added to the income of the Assessee. 74. In the appellate proceedings, the ld CIT(A) partly allowed the appeal of the assessee by deleting the disallowance to the extent of Rs. 10,00,000/- out of total disallowance of Rs. 15,00,000/- made by the AO. The ld. CIT(A) has upheld disallowance to the extent of Rs. 5,00,000/- by observing that in the original return of income the assesse has suo-motto disallowed Rs. 1,66,24,000/- whereas in the return in response to notice u/s 153A, the assesse disallowed only Rs. 1,61,24,000 which is less by Rs. 5,00,000.- The ld CIT(A) noted that AO calculated the disallowance at Rs. 1,76,24,000/- which was typo error. So on this basis the ld CIT(A) deleted the addition to the tune of Rs. 10,00,000/- and confirmed Rs. 5,00,000/-. 75. The ld AR submitted before us that no proportionate interest disallowance u/s 14A of the Act is called for when assessee has sufficient interest free funds available for making investments yieldin....
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....the assesse over and above that. Ground no. 3 is allowed. 79. The cross objection by the assesse is allowed. ITA No. 7530/Mum/2019 (Revenue Appeal) 80. The revenue has challenged the deletion of addition of Rs. 3,97,10,000/- by ld CIT(A) as made by the AO on account of on money. 81. The facts in brief are that according to the AO the bifurcation given by the assesse before the investigation wing was incomplete and it had only surrendered Rs. 74 Cr as against Rs. 78 Crores surrendered during search. Accordingly the AO added Rs. 397.10 lacs to the income of the assessee. Further the said working was never shared with assessee and it did not have any proper basis. The receipts bifurcation given vide letter dated 31/03/2015 was tentative and not final as has been submitted elsewhere in this order. 82. During the course appellate proceedings it was explained to the Ld. CIT (A) that the excel sheet in question contained many irregularities and duplicate entries. Further the on money receipts and payment mentioned in excel sheet other than scrap sales belongs to the real estate operation of Man Group. Two entities i.e. Merino Shelter Pvt. Ltd and Man Global Pvt. Ltd. are engaged in t....
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....e appellate order. It is pertinent to state that the additional income was offered to tax to just buy peace of mind and was not for any particular issue. Having considered the facts on records and rival contentions, we do not find an infirmity in the order of Ld. CIT(A) who has correctly allowed the telescoping. Accordingly the order of ld. CIT(A) is upheld in this issue by dismissing the ground no. 2 of the revenue's appeal. 86. The issue raised in the 3rd ground of appeal is against the deletion of addition Rs. 3,61,48,001/- as made by the AO on account of commission paid to M/s. Alpine Enterprise LLC. 87. The facts in brief are that during the year under consideration the assessee has paid / provided commission of Rs. 3,61,48,001/-to the Alpine Enterprise L.L.C for rendering various services in UAE in connection with the export to M/S Abu Dhabi Gas Industries Ltd., UAE. Accordingly the AO called upon the assesse to justify the commission payments. In order to justify the payment of commission, the assessee furnished the copy of invoice for commission, copy of contract entered between assessee and agent, copy of Form A2 - Application for payment other than imports and remittanc....
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....ted that it did not know the two companies M/s Alpine Enterprise LLC and M/s Sun Overseas Trading and have had no business relationship with them of any nature. Accordingly commission paid to M/s Alpine Enterprise LLC and M/s Sun Overseas Trading in connection with the sale made to M/s Kala Gas Company cannot be accepted. The assessee also submitted that the alleged letter was part of the petition filed by Mr. J C Mansukhani, brother of the Chairman Mr. Rameshchandra Mansukhani of the Company before the Company Law Board (CLB) against the Company and its Chairman vide petition no. 72/397- 398/CLB/MB/2012/603 filed in October-2012.Therefore, it is an official document filed by the then director of the Company who is in dispute with the Chairman of the Company. The alleged letter was not at all obtained or was addressed to the Company but the same was obtained by Mr. J. C. Mansukhani for the reason best known to him and only to put Company into trouble and drag the Company into unnecessary litigation. Further, the Mumbai bench of Hon'ble Company Law Board in its judgment dated 31.05.2013 has reconfirmed its decision given on 12.09.2011 (in the petition no. 78/2010 filed in October 20....
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....e company law Board in a petition by the Director Mr. J. C. Mansukhani has held that the assesse has not siphoned off money by paying these commission and these were paid for genuine business requirements of arranging exports to UAE. Hence there is no scope to doubt the commission payment on the basis of letter of M/s Kala Gas Company already dealt by "CLB" in petition of Mr. J.C. Mansukhani. 89. The ld DR submitted before the bench that the commission payment was rightly disallowed by the AO after the overseas clients to whom the assessee exported material has denied any link with the agents to whom the commission has been paid. The ld DR submitted that mere fact that the commission is paid after complying with all the statutory formalities and paid through banking channel would not ipso facto prove the genuineness of the commission. With regards the order of Company Law Board on the issue of siphoning off money in the form of commission payment, the DR argued that the genuineness of the commission has to be judged by the AO from the income tax perspective and not by any other authority. Therefore while relying heavily on the order of AO, the ld DR prayed that the order of ld CIT....
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.... the commission payment on the basis of letter of M/s Kala Gas Company already dealt by "CLB" in petition of Mr J.C. Mansukhani. It is also noteworthy that in the year under consideration, the commission was paid for exports made to M/S Abu Dhabi Gas Industries Ltd. and not to Kala Gas Co, however, the A.O. without applying the mind has only referred the letter from Kala Gas Co. without appreciating fact that in AY 2013- 14 there is no sale to Kala Gas Co. The AO on the basis of addition made in AY 2009-10 on alleged letter of Kala Gas Co. also made disallowance in AY 2013-14 without appreciating the facts correctly that there is no export to Kala Gas Co. We note that similar payment of commission has been allowed by the revenue in the earlier years and therefore even on the principal of Consistency, impugned addition on account of Export Commission can not be sustained. Besides the commission paid was in line with the practice in the industry. We observe that even the giant of the industry Jindal Saw Ltd and Welsoun Corp Ltd has even paid similar commission for export sales. Therefore we have no reasons to deviate from the conclusion drawn by ld CIT(A) on this issue who has passed....
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....e AO was not satisfied with the explanation of the assesse and disallowed the service charges of Rs. 48,84,570/-. 94. The ld CIT(A) allowed the appeal of the assesse after taking into account the various contentions of the assessee by observing and holding as under: "11.2 I have considered the order passed by the Id. AO and submissions of the appellant. The Id. AO has not considered the documentary evidences submitted by the appellant. He has also not considered the fact that although the major work Is done by the agents the representatives of the appellant need to visit the customers and their offices, Also the fact presented by appellant that it has huge export turnover to oil companies and all oil companies have their offices in Dubai cannot be ignored. Therefore, it becomes imperative for appellant to have an office in the country through where its major turnover is being generated. 11.3 Now, it is important to consider provision of section 37 of the Act which reads as under: 37. (1) Any expenditure (not being expenditure of the nature described In sections 30 to 36 [**] and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or....
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....y stated above, I have to see the payment of service charges from the point of view of commercial expediency. Also the id. AO has not disallowed the service charges paid in AY 2014-15 and AY 2015-16 thereby contradicting his own stand. 11.7 Considering the provision of section 37 of the Act and decision of Apex Court in the case of S.A. Builders Ltd. v. Commissioner of Income-tax (Appeals), Chandigarh (2007] 158 TAXMAN 74 (SC) and Hon'ble Gujrat High Court in case of CIT V. Suzion Energy Ltd. (2013) 33 taxmann.com 151 (Gujrat), [2013] 354 ITR 630, the appellant's claim of payment service charges of Rs. 48,84,570/- is allowed. Hence, this ground of appeal is ALLOWED." 95. We note after hearing both parties and perusing the material on records including service agreement and evidences filed by the assesse. We note that the service charges were paid for rendering miscellaneous services under service agreement entered into with that party. The clauses of service and fee clause is extracted for ready reference as under: "1. Services MIL is engaging Man Overseas who has the requisite skills and abilities and experience in rendering services viz., Promoting & Marketing the products....
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....accommodation entry of Rs. 48,84,570/- which is just 0.03% of total turnover to avoid the payment taxes and thereby invited long drawn litigation. The expression "commercial expediency" is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The case of the assesse finds support from the decision of Hon'ble Apex Court in the case of S.A. Builders Ltd. v. Commissioner of Income-tax (Appeals), Chandigarh (2007] 158 TAXMAN 74 (SC) wherein the Hon'ble court has held that the AO can not decide what is right for the business and decide what are the expenses to be incurred for the business. We note that ld CIT(A) has dealt with the issue regarding the allowability of service charge in para no. 11 of the appellate order. Considering the provisions of section 37 of the Act and decision of Supreme Court in case of S.A. Builders Ltd Vs. Commissioner of Income Tax (Appeals) and reasoned order of CIT(A) we are inclined to uphold the order of CIT(A) on the issue of service charges by dismissing the ground no.4 of the revenue's appeal. 97. The issue raised in the 5th ground of appeal is against the deletion of addition as made by....
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....e, then, for the purposes of deduction of tax under those provisions such income shall be increased to such amount as would, after deduction of tax thereon at the rates in force for the financial year in which such income is payable, be equal to the net amount payable under such agreement or arrangement." 101.1 We note that the case of the assesse is squarely covered by the decisions in the case of Commissioner of Income Tax V. Standard Polygraph Machines (P) Ltd. (2002) 124 taxman 669 (Madras High Court) and ACIT 2(1) V. M/s. BOB Card Ltd. ITA No. 7660/Mum/2011 - Tribunal, Mumbai wherein the issue has been decided in favour of the assesse. We therefore respectfully following the ratio laid down in the above decision uphold the order of ld. CIT(A) by dismissing the ground no.6 of the Revenue's appeal. ITA No. 7529/Mum/2019 (A.Y 2014-15) 102. The grounds raised by the Revenue are as under: "1. Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition of Rs. 7,47,59,000 as alleged receipt of on money without appreciating the fact that the AO had done extensive study and investigation of the excel extracts of the seized Hard ....
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....ation of the excel extracts of the seized Hard Disc to arrive at the figure of Rs. 640.49 Lakhs which is clearly specified in the assessment order. 2. Whether on the facts and circumstances of the case and in the law, the Ld CIT(A) erred in allowing the commission paid to M/s. Alpine Enterprises LLC, without appreciating the fact that M/s. Alpine Enterprises LLC was found to be owned by Shri Lavin Mnasukhani, who was the nephew of Shri Ramesh Chandra Mansukhani and Jagdish Chandra Mansukhani, the Chairman and Director of Man Group. 3. Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition made to the 115JB income without appreciating the fact that Apex Court in the case of Apollo Tyres Ltd has decide the issue in favor of the revenue. 4. Whether on the facts and circumstances of the case and in the law, the Ld. CIT(A) erred in deleting the addition of Rs. 4,57,46,796 on account of G.P. on additional bogus purchase without appreciating the fact that Ld CIT(A) has himself confirmed the addition made by the AO on account of bogus purchases made by the assessee from M/s Harmony Exim Pvt Ltd which clearly indicates that the....
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....ctual material and received a commission of Rs. 0.25%. A statement was also recorded under section 132(4) of Shri Sachin Surekha on 11.12.2014 and 12.12.2014 during the course of search proceedings on Man group and it was found that Shri Sachin Surekha was mediator for arranging bills to M/s. Man Industries (I) Ltd. Similarly a statement was recorded under section 132(4) of Shri Dilip Chokra and Shri Ashok Kumar Gupta of CFO of Man group on 13.12. 2014. Shri Ashok Kumar Gupta was confronted with other statements recorded during search and survey in which he stated that material of Rs. 9,15,00,000/- was never received and even confirmed that no physical material has been received at the plant from M/s. Harmony Exim Pvt. Ltd. On the basis of this, the AO came to the conclusion that M/s. Harmony Exim Pvt. Ltd. provided sales bills to the assessee of Rs. 9,14,75,919/- crores against which no materials were received. Besides, the assessee could not provide any transport receipts or freight receipts in support of purchases. Accordingly, AO came to the conclusion that material purchased from M/s. Harmony Exim Pvt. Ltd. was not genuine. The AO noted that assessee is in the business of manu....
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....d. But in this case, both the parties have confirmed to the transactions and therefore, estimating of additional GP is not warranted. The addition made by the AO is deleted. This ground of appeal is ALLOWED." 113. The ld DR submitted before the bench that during the course of search on the assesse and survey on Harmony Exim Pvt. Ltd., as is clear from the statements recorded u/s 132(4) and 133A and 131 of the Act of various key persons as stated above, all the purchase were not genuine. The ld DR submitted that the subsequent retraction by Shri Ramesh Chandar Mansukhani vide statement dated 09/12/2016 that these purchases were genuine is an after thought and was planned to evade the action of the department. The DR strongly objected to the findings of ld CIT(A) on the issue that purchases of Rs. 1,36,29,35,933/- were genuine and not disputed by any of persons whose statements were recorded. The ld DR contended that the statements were matching earlier however these were contradicted by Ramesh Chandar Mansukhani vide statement dated 09/12/2016 by filing various evidences. The ld DR therefore prayed that the order of ld CIT(A) deleting the addition of Rs. 4,57,48,001/- may kindly be....
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.... dated 09/12/2016 has furnished detailed rebuttal and also filed evidences in the form of stock register, confirmation by vendor of goods, consumption reports etc., which were suffice to explain the genuineness of purchase made from M/s Harmony Exim Pvt. Ltd. The evidences and further clarification by the chairman of the assessee company proved beyond doubt that statement of Dilip Chokra was given under distress and undue pressure consequent to extensive search proceedings without verification of facts of the case and cannot be relied upon. On the allegation of the A.O. that vide statement dated 13/12/2014 Shri Ramesh Chandra Mansukhani has accepted that purchases from M/s Harmony Exim Pvt. Ltd. of Rs. 9,14,75,919/- crores is unsubstantiated purchase whereas in the statement dated 09.12.2016 the stated the purchases as genuine. The ld AR stated that the detailed explanation was given by the chairman of the assessee. On account of extensive search proceedings and continuous recording of statement under section 132 of the Act, the chairman of the assessee Shri Ramesh Chandar Mansukhani was under the state of trauma and distress. Shri Ramesh Chandara Mansukhani has not verified the fa....
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....n relying to the statement is not justifiable. As regards to the validity of statement given by Shri Ramesh Chandar Mansukhani on 09/12/2016 the Assessee relies to the following judicial pronouncements: (i) Commissioner of Income-tax, Karnataka Vs. Shri Ramdas Motor Transport Ltd. [2015] 55 taxmann.com 176 (Andhra Pradesh) (ii) Manjit Singh Vs. Assistant Commissioner of Income-tax, Circle (iv), Amritsar* [2017] 85 taxmann.com 210 (Amritsar - Trib.) (iii) Deputy Commissioner of Income-tax Vs Narendra Garg & Ashok Garg (AOP) [2016] 72 taxmann.com 355 (Gujarat) (iv) Kailashben Manharlal Chokshi v. Commissioner of Income-tax [2008] 174 Taxman 466 (Gujarat) 118. The ld AR finally submitted that in view of the above facts the order of ld CIT(A) in respect of deletion of estimated addition 4,57,48,001/-may kindly be upheld by dismissing ground no. 4 of the revenue's appeal. 119. After hearing the arguments of both the sides and perusing the material on records including the impugned order of the ld CIT(A), we find that the purchases of 1,36,29,35,933/- were not at all disputed and it was accepted by assesse as well as supplier that these supplies were in fact made to the assesse....
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....rokerage on sale of automobile parts - Whether Explanation to section 132(4) is retrospective in nature - Held, yes - Whether since statement recorded under section 132(4) had been retracted and revenue did not press into service any other supporting material, assessee was entitled for deduction towards commission and brokerage - Held, yes [Para 22] [In favour of assessee]" 121. In view of these facts and circumstances and judicial decisions as discussed above we find that ld CIT(A) has taken correct view after taking into accounts facts on records and accordingly the order of ld CIT(A) is upheld by dismissing the ground no.4 of the revenue appeals. ITA No. 7409/MUM/2019(Assessee's Appeal) 122. The ground raised by the assessee is as under: "The learned Commissioner of Income Tax (Appeals) - 49, Mumbai erred in confirming the addition of Rs. 9,14,75,919/- made by the learned Dy. Commissioner of Income Tax, Central Circle - 7 (2), Mumbai on account of raw materials purchased from M/s. Harmony Exim Pvt Ltd by treating it as bogus purchases." 123. The issue raised is against the confirmation of addition of Rs. 9,14,75,919/- by ld CIT(A) as made by the AO on account of non genuin....