TaxTMI 
TaxTMI 
2021 (9) TMI 1408
X X X X Extracts X X X X
X X X X Extracts X X X X
....al grounds. 2. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making disallowance of Rs.19,46,05,259/- allegedly on account of bogus expenses claimed with respect to M/s Shri Ram Exports, more so when no incriminating material has been found as a result of search and impugned addition has been made by recording incorrect facts and findings and without observing the principles of natural justice and without appreciating/considering the submissions of the assessee. 3. That in any case and in any view of the matter, action of Ld. CIT(A) in confirming the action of Ld. AO in making disallowance of Rs.19,46,05,259/- allegedly on account of bogus expenses claimed with respect to M/s Shri Ram Exports, is bad in law and against the facts and circumstances of the case. 4. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in making addition of Rs.27,19,08,768/- allegedly on account of bogus purchases from M/s Akansha Fashion and M/s Jindal Fashion, more so when no incriminating material has been found ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in sustaining the disallowance of Rs.72,740/- made by Ld. AO u/s 14A, more so when no incriminating material has been found as a result of search 11. That in any case and in any view of the matter, addition made in the impugned assessment order are beyond jurisdiction and illegal also for the reason that these could not have been made since no incriminating material has been found as a result of search. 12. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the action of Ld. AO in passing the impugned assessment order without there being requisite approval in terms of section 153D and in any case approval if any is mechanical without application of mind and is no approval in the eyes of law. 13. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in not reversing the action of Ld. AO in charging interest u/s 234B of Income Tax Act, 1961. Departmental Grounds of Appeal i) Whether on the facts and in the circumstances of the case, the Ld. CIT (A) has erred in del....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) 91 taxmann.com 154 (SC), that as per section 14A(1) of the Act, deduction of that expenditure is not to be allowed which has been incurred by the assessee "in relation to income which does not form part of the total income under this Act". vii) Whether on the facts and in the circumstances of the case and in law, the Ld CIT(A) is justified in deleting the addition made on account of section 14A of the Act without adjudicating on the proposition of law u/s 14A of the Income Tax Act, 1961 as propounded by the CBDT Circular No. 5 of 2014 dated 11.02.2014 i.e. section 14A is triggered for disallowance of expenditure incurred which is relatable to tax-exempt income even though no tax-exempt income under the Act has been earned during a particular year. viii) Whether the CBDT Circular No 5 of 2014 is illegal and not in consonance with legislative intent behind Section 14A and the charging sections 4 and 5 of the Income Tax Act 1961 which lay down that total income under the Act would include income from all sources whether "received", "deemed to be received", "accrued" or "deemed to accrue". ix) The appellant craves to add, amend, alter or modify grounds of appeal at the time ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Only evidence which have been referred in the assessment order was that at the address mentioned in the income tax return of Sh. Subhash Chand Gupta of Shri Ram Export, search was undertaken and that premises was occupied by the sister and brother in law of Sh. Subhash Chand Gupta in which the sister and brother in law told to the search team that Sh. Subhash Chand Gupta resides in district Rohtak, Haryana and that Sh. Subhash Chand Gupta runs a business of selling belts and earns only Rs. 15,000/- per month. And that Auditor of Sh. Subhash Chand Gupta prop. of M/s Shri Ram Export is M/s V.K. Dhingra & Co. who happens to be Auditor of the appellant company also and that email-id on income tax return of Sh. Subhash Chand Gupta and on the return of the appellant company is that of an employee of the appellant company and further that statement of the wife of Sh. Subhash Chand Gupta was recorded according to which Sh. Subhash Chand Gupta was in the business of trading in belts with monthly income of Rs. 10,000 and having no connection with M/s Orient Craft Ltd. 8. From the findings recorded in the assessment order, it can be said that there is no incriminating material found as a res....
X X X X Extracts X X X X
X X X X Extracts X X X X
....et etc of the job worker for a y 2015-16, 2014-15, 2013-14, copy of actuarial certificate, copy of license to work at factory under the Factories Act etc are the evidences of M/s Shri Ram Export clearly establish that genuineness of job work charges incurred by the assessee company through M/s Shri Ram Export and therefore the disallowance made in the assessment order and confirmed by CIT(A) is not sustainable on merit. The adverse observations made by the A.O. in the assessment order have been met by the assessee one by one in its written submissions (PB 1882-1884) filed before CIT (A) which is part of the paper book before us and we have taken ourselves to these adverse observations and response of the assessee and we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. CIT (A) have mentioned in his order the adverse observations of the A.O. only which in our opinion are misplaced on facts. Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O., are bald assertion. It would be enough for us to say that voluminous d....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Akansha Fashion from whom the purchases were made, show that bills raised to the appellant by the said concern had mostly consecutive serial numbers and the payments made to the said concern were always in the round figures and that the bank account of the supplier revealed that it received payments and on the same day or within a short span of time, the funds were used to be transferred to other entities and further mentions that the names of certain parties to whom the payments have been made by the said concern and the names of such parties have been mentioned by the Ld. AO in the assessment order and that several adverse things regarding the above supplier based upon some alleged enquiries made. 13. We have considered the entire facts and circumstances as referred in both the orders, submissions of the assessee and Ld. CIT(DR) and various pages of the paper books filed. From the findings recorded in the assessment order, it can be said that there is no incriminating material found as a result of search in respect of purchase of fabric made by the appellant from M/s Jindal Fashion and M/s Akansha Fashion which can be regarded as incriminating material. Even the survey proceedi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t to burden our order by repeating the whole hosts of documentary evidences filed in this case which establish that the purchases made by the assessee from the above said two suppliers are genuine purchases. We have gone through the observations made by CIT(A) in his appeal order and we do not agree with them. Opening of the bank account by the suppliers in the same bank in which assessee had bank account is not something which is unusual as it may be necessary for the smoothness of the banking and avoid the loss of time in collecting the cheques etc. We find that the burden to prove purchases was very well discharged by the assessee. We have deleted similar disallowance made in AY 2013-14 and 2014-15. Facts are identical in those years also. In the result ground of appeal number 5 & 6 of the assessee's appeal of the assessee are allowed and the addition of Rs. 27,19,08,768- is deleted. 16. Ground No. 7, 8, 9 & 10 of the assessee's appeal are in respect of disallowance of Rs. 1,04,00175/- and Rs. 6,63,79,551/- aggregating to Rs. 7,67,79,726/- made by the A.O. and confirmed by CIT(A) and on account of purchases made by the appellant from M/s Super Connection India P. Ltd. (SCIPL)& ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ere made by M/s SCIPL from the entities controlled by Sh. Sanjay Jindal and since amount remitted were withdrawn in cash it shows that ultimate beneficiary was the appellant company and entities controlled by Sh. Sanjay Jindal were mere entry providers and that several adverse things regarding the above supplier based upon some alleged enquiries made. 19. In our considered view, from the findings recorded in the assessment order it can be said that there is no incriminating material found as a result of search in respect of purchases fabric made by the appellant from M/s Super Connection India P. Ltd. & other companies and whatever has been mentioned in the form of statements cannot be regarded as incriminating material. Even the survey proceeding referred in the assessment order does not indicate any incriminating material. 20. Arguments were made on the basis of evidences referred at page 1869-1879 of the paper book and It is seen from the evidences placed before us and relied upon by Ld. Counsel for the assessee that the purchases of fabric made by the appellant from M/s Super Connection India P. Ltd. & other companies are genuine purchases, which is evident from voluminous do....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., M/s Starline clothing P Ltd, & M/s Trendy Attire P Ltd for A.Y. 2015-16. PB 165-192 is the copy of acknowledgment of return, computation of income, audited balance sheet, profit & loss account and tax audit report for A.Y. 2014-15 of M/s Super Connection India P Ltd. in support of this fact. PB 351-422 is the copy of acknowledgment of return, computation of income, audited balance sheet, profit & loss account together with all annexure for A.Y. 2014-15 of M/s, Fashionable Attire P Ltd, M/s Fashionara Apparel P Ltd, M/s Modernistic Attire P Ltd, M/s Starline clothing P Ltd, & M/s Trendy Attire P Ltd. PB 179-199 is the copy of acknowledgment of return, computation of income, audited balance sheet, profit & loss account and tax audit report for A.Y. 2013-14 of M/s Super Connection India P Ltd. in support of this fact which are already enclosed in the paper book for A.Y. 2014-15. It is also submitted that a detailed submissions vide letters dated 11.12.2017 (PB 160-162), 12.12.2017 (PB 163-164) was made during the course of assessment proceeding a copy of which is enclosed in the paper book and which has been reproduced in the assessment order also, in which and along wit....
X X X X Extracts X X X X
X X X X Extracts X X X X
....r book for A.Y. 2013-14). Therefore, purchases made by the assessee from M/s, Fashionable Attire P Ltd, M/s Fashionara Apparel P Ltd, M/s Modernistic Attire P Ltd, M/s Starline clothing P Ltd, M/s Trendy Attire P Ltd & M/s Super Connection India P. Ltd were the genuine purchases and the addition made may therefore please be deleted. Adverse observations made by Ld. A.O. are met as under:- 1. Ld. A.O. has mentioned in para 5.1.3 to 5.1.5, 5.2 to 5.2.5, of the assessment order that the statements of the directors namely Sh. Vijender Kumar Jain, Sh. Vijay Kumar Sharma and Sh. BalkishanLuthra, Sh. Ashok Kumar Sharma, were recorded on 29.04.2015, which shows that they did not have knowledge of the affairs of the company. In reply, it is respectfully submitted that assessee was not made aware at any point of time during assessment proceeding that any statement of these four persons were recorded nor the copies of such statements were supplied to the assessee. So much so copies of such statements have not been made part of the assessment order. Therefore such statements have to be excluded from consideration in view of Hon'ble Supreme Court decision in the case of Kishnichand Che....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ideration in view of Hon'ble Supreme Court decision in the case of KishnichandChellaram vs. CIT 125 ITR 713. Moreover, no opportunity of cross examination has been allowed to the asseseee for that reason also such settlements have to be excluded from consideration. It has also come to the notice of the appellant that such statements were recorded at the back of the assessee and by calling these persons in the income tax department and therefore under what circumstances, these statements were given is not known to the assessee. According to the appellant there is no reason why should the directors of M/s Super Connection India P. Ltd. (SCIPL), would have no knowledge of the affairs of SCIPL. Therefore this objection of Ld. A.O. may please be rejected. 4. Ld. A.O. has also mentioned in para 5.6.2 of the assessment order that Sh. Sudhir Dhingra, director of the appellant company has provided personal guarantee for the loan raised by M/s SCIPL from Kotak Mahindra bank. In reply, it submitted that what is sought to be conveyed by Ld. A.O. from this observation has not been clear. Business relationship of the appellant company with M/s SCIPL was there and therefore, out of business....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t alone be taken as the basis to hold that purchases made by the appellant from such entities of Sh. Sanjay Jindal are not genuine. Similarly, if the payment made by these entities from M/s Akansha Fashion and M/s Jindal Fashion are withdrawn in cash by the supplier, how could it establish that beneficiary was none other than the appellant and the suppliers were entry providers. In fact entire case made out by Ld. A.O. seems to have proceeded on a preconceived notion that purchases made by the appellant are nothing but bogus purchases. It is settled law that suspicion howsoever grave cannot par-take the character of evidence. It is submitted at the cost of repetition that assessee has established the genuineness of the purchases with the help of direct and documentary evidences on the one hand and circumstantial evidences on the other. Detailed submissions was made in the assessment proceeding, which is reproduced in the assessment order by which appellant has sought to show and submit that the exports could not have been possible but for the purchases made by the assesssee and in this regard assessee has sought to prove this by filing quantitative reconciliation standard input / o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....elf-serving documents and circumstantial evidence leads to the conclusion of A.O. It would be enough for us to say that voluminous documentary evidences filed by the assessee are clearly establishing the genuineness of purchases fabric from M/s Super Connection India P. Ltd. & other vendor companies. Other indicators such as percentage ratio of material to sale etc also establish the genuineness of the purchases. We do not agree with the observations made by the first appellate authority. In our considered opinion, assessee has been successful to discharge the burden of proving the purchase from M/s Super Connection India P Ltd. & other vendor companies. In the result, ground no. 7 to10 of the assessee's appeal of the assessee are allowed and the aggregate addition of Rs. 7,67,79,726/- is deleted. 22. Ground no. 11 of the assessee's appeal & ground no. (iii) to (viii) of the departmental appeal are in respect of addition of Rs. 4,50,90,494/- made by AO under section 14A out of which a sum of Rs. 72,740/- was confirmed by CIT(A) and on the ground that assessee company has shown dividend income on mutual fund / shares amounting to Rs. 72,740/- and balance was deleted by CIT(A). That....
X X X X Extracts X X X X
X X X X Extracts X X X X
....) and hence we dismiss ground no. (i) of the revenue's appeal before us. 32. Ground no. (ii) of Revenue's appeal is in regard to the relief allowed by CIT(A) amounting to Rs. 9,20,23,623/- on account of unexplained cash sales the addition of which was made by AO in his assessment order vide discussion made at page 39-41 of the assessment order whereas CIT(A) has deleted this by making discussion at page 77-78 of the appeal order. 33. Facts leading to the present controversy are that seized document showed the cash sale of scrap and this was so admitted by the director at the time of search on 29.5.2015. Addition was accordingly made by the assessing officer which was however deleted by the first appellate authority. 33. Ld. CIT(DR) relied upon the findings recorded by the assessing officer whereas Ld. Counsel for the assessee relied upon the order of CIT(A). 34. It would be appropriate to reproduce the written submissions filed by the assessee before learned first appellate authority: It is respectfully submitted that assessee has credited the sales account in its books for this very amount in aggregate on 31.03.2015 and therefore, a separate addition of this amount by Ld. A.O....