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2022 (10) TMI 387
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....lected for scrutiny under CASS and notice u/s.143(2) and 142(1) of the Act were issued and served on the assessee along with the questionnaire. In response AR of the assessee attended and submitted the information as called for. 4. Assessee is engaged in the business of importers/traders of rubber, bearing and steel hardware and also providing operations and maintenance services. During assessment proceedings, Assessing Officer observed that assessee has borrowed unsecured loans of Rs.3,89,04,334/-. Since assessee has not filed confirmations in some of the cases, the assessee was asked to submit the details of the parties i.e., name, address, confirmations, loan amount, interest rate etc.,. Assessing Officer issued notice u/s. 133(6) of the Act to the loan creditors calling for confirmation with copy of ITR, bank statement etc., to the following parties: - Name of the party Borrowed / unsecured loans (Rs.) a) Trident Mercantile 7,23,000 b) Sunil More 43,75,000 c) Chinmai More 66,75,000 d) Anil More 25,00,000 e) Nirmiti Construction 40,00,000 Total 1,83,73,000 5. Since none of the parties confirmed the transactions nor submitted any do....
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.... 3. "Whether on the facts and circumstance of the case and in law, the Ld. CIT(A) was right deleting the disallowance made by the Assessing Officer on account of bogus purchases from parties without appreciating the fact that the assessee failed to produce any evidence regarding the genuineness of purchase of goods such as delivery of goods/purchase orders/consumption details, stock register alongwith transportations details?" 10. We shall deal the above issues ground wise. 11. With regard to Ground No. 1 relating to deletion of unsecured loans by Ld.CIT(A), assessee has filed detailed submissions before the Ld.CIT(A) in which it is submitted that assessee has furnished all the details required by the Assessing Officer in relation to borrowing including confirmation of the parties whose loan amounts was considered as unsecured loans. It was submitted these loans include loans from shareholders of the company and also had opening balances. It was submitted that Assessing Officer has issued notice u/s. 133(6) of the Act and however, Assessing Officer did not give any show cause notice and information about non-compliance from these parties to the assessee. However, assessee ....
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....the bank statements of the appellant company highlighting the loans transactions between them during the captioned year evidences the genuineness of the transactions. Thus, it will be appreciated that the three main ingredients of section 68 i.c. identity of the lenders, genuineness of the transactions and creditworthiness of the lenders is proved and accordingly the nature and source of the loans is explained by the above mentioned documents. The source of the loans received by the appellant is already proved by the relevant extract of the bank statements and the above mentioned documents of the said lenders and there is no requirement for explaining the source of the source for the purpose of section 68 of the Act. Further, the comment in remand report that 3 parties are not giving the amount to appellant company from their own sources but they themselves are receiving amount from other sources, is totally baseless without any such material and without application of mind or further enquiry. b) As regards the comment in the remand report that the confirmation of M/s. Trident Mercantile Pvt Ltd is not stamped and in fact it is signed by Anil More, we have to state that th....
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....ciated that the appellant has submitted sufficient evidences before your good self to prove that the loan transactions of the appellant with the said parties are genuine." 14. Along with the above replies, assessee has given the date wise details of notices issued by the Assessing Officer asking for details of the replies/details submitted by the assessee during the assessment proceedings together with the copies of notices and covering letters of the replies made. 15. After considering all those details Ld.CIT(A) deleted the additions made by the Assessing Officer with the following observations: - "On examining these Copies of the notices, it is seen that all the notices issued by the AO were replied to and details asked in the notices were furnished by the appellant. With regard to the loans taken during the year, it is seen that the AO had asked the details of interest paid vide notice dated 27.10.2015 and time was fixed for Compliance on 25.01.2016. In response to this, the appellant vide letter dated 28th January, 2016 (Paper book page 49), had submitted the said details of interest paid. There was no requirement of loan confirmations in the notices dated 04.09....
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.... loans on 10.05.2012 of and on 29.05.2012 of Rs.50,000/ the said party, This amount of Rs.3,00,000/- was received back on 13.06.2012. Thereafter, between 23.06.2012 and 07.11.2017, there are 7 credit entries i.e. receipt of loans. aggregating Rs.7,20,000/- which was repaid on 23.11.2012 together with net interest of Rs.29,957/- (Gross interest paid Rs.33,288/- less TDS of Rs.3,329/-).Thus, the balance as on 23.11.2012 was NIL and no further transactions took place thereafter. The maximum outstanding credit balance was Rs.7,20,000/- which was reported in Tax Audit Report (whereas Rs. 7,23,000/- has been added by the AO u/s.68 in the assessment order). All the receipts and payments are by cheque transfers as can be seen in the relevant bank statements of the appellant (Page Nos.112 to 120 of paper book) and the corresponding bank statements of Trident Mercantile Pvt. Ltd. (Page Nos. 122 to 133 of paper book). As per ITR V, acknowledgement of the return of income of Trident Mercantile P. Ltd., PAN: AAACT3330K for AY 2013-14 (Page 110 of the Paper book) it has declared total income of Rs. 11,23,040/- for AY 2013-14. The AO has not made any comment on these documents o....
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....of loan. The maximum credit balance during the year was Rs. 66,75,000/- which was reported in Tax Audit Report (which has been added by the AO u/s 68). The appellant has credited interest for the year of Rs. 5,65,790/- (Gross Rs. 6,28,656/- less TDS of Rs.62,866/-) on 31.03.2013 to the account of Chinmai More. All the receipts and repayments of loans are by chrques as is seen from the bank statements of the appellant (Page Nos 159 to 164 of the paper book) and corresponding entries in the bank pass book of Chinmai More (Page Nos 165 to 169 of the paper book). From the Copy of the acknowledgement of return of income filed by her for AY 2013-14 (Page No. 157 of paper book), it is seen that the gross total income declared by her is Rs. 10,21,970/- and taxable total income is Rs.9,14,620/- for the said year. She also, as explained, being an Individual and not having business income, is not required to and has not filed balance sheet and capital account with return of income. The above explanation is accepted and therefore the addition u/s 68 is deleted. 3. Loan from Anil More : From confirmation of the ledger account, it is seen that there was an ope....
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.... appellant has stated that the loans from all these parties in AY 2012-13 have been held genuine and no addition was made in the scrutiny assessment order u/s 143(3) of the Act dated 23.03.2015 passed by the same AO. (page nos. 52 to 54 of the paper book). In the remand report also the AO has not commented or raised doubt on the genuineness of these documents. As the outstanding balances are added which is not proper, therefore the same is deleted. Thus, it is noticed that there are several mistakes in considering the amounts of loans taken by appellant and actually added by the AO in the assessment order, which have been pointed out by the appellant in its submissions. In case of M/s Trident Mercantile Pvt ltd, Sunil More, Chinmai More and Anil More the amounts added by the AO are not the amounts borrowed during the year. In case of Nirmitee construction, there is no transaction during the year, there is opening balance of Rs. 40,00,000/ which is carried forward as closing balance as on year end i.e. 31st March, 2013. It appears that the AO has simply picked up the figures shown in the column of maximum amount outstanding during the year as shown in the Tax Audit Report t....
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....orporate Bodies. 18. Considered the rival submissions and material placed on record, we observe that assessee has taken unsecured loans from Directors / Shareholders and also from sister concerns. All these loans were taken only through banking channels and Ld.DR argued that assessee has not proved the creditworthiness of these parties. It is fact on record the parties Sunil More, Chinmai More and Anil More, are Shareholders cum Directors of the company and all these people have filed their return of income and declared gross total income of Rs.22,83,870/-, Rs.10,21,970/- and Rs.10,98,102/- respectively. We observe that Ld.CIT(A) has deleted the addition with the observation that all these transactions are only routed through banking and Assessing Officer has observed in remand report that these people have not filed balance sheet and capital account. However, he observed that these parties are individuals and not having any business income, therefore, there is no need to file any financial statements. By accepting the same he has deleted the additions. After considering the reasons for deletion, we are in agreement that since these are related parties and they are not required ....
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....d Anil More, respectively, after deducting the tax under section 194A of the Act during the relevant financial year in respect of loans taken from them. No interest was paid to Nirmitee Constructions & Design Pvt. Ltd. 2.2 During the assessment proceedings, the Ld. A.O. asked the appellant company to furnish the details of interest paid i.e. name, address, confirmations, rate of interest paid & interest amount. The AR of the appellant company vide his letter dated 28.01.2016 furnished the details of interest paid and TDS deducted before the Ld. A.O. The confirmation letters of all these parties were also filed vide letter dated 28.03.2016. The Ld. A.O. has wrongly mentioned in the assessment order that no confirmations are filed in some of the cases. 2.3 As mentioned in para 1.2 hereinabove, the Ld. A.O. has made additions of the loans u/s.68 and also has disallowed the interest paid to the said parties, on the reasoning that they did not comply with the notices issued u/s 133(6) of the Act. Hence, the said addition of interest expense is consequential to the above addition of unsecured loans u/s 68. 2.4 Further the Ld. A.O. has wrongly added the interest....
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....f Rs.149.87 Lacs which was treated by the Assessing Officer as bogus purchases after verifying the same. Assessing Officer in order to verify the genuineness of the purchases issued notice u/s. 133(6) of the Act to those parties and since none has submitted any documents, he disallowed the same. On the other hand, assessee preferred an appeal before the Ld.CIT(A) and before the Ld.CIT(A) assessee has filed detailed submissions along with additional evidences, as under: - "Ground of Appeal No.3- Disallowance of purchases of Rs. 1,49,87,000/- by treating it as bogus purchases. 3.1 Appellant has during the year purchased material and paid labour charges amounting to Rs. 3,12,32,263. The Ld. AO had during the assessment proceedings asked for details of purchases made during the year. The AR of the appellant vide letter dated 08.02.2016 submitted the details of purchases, including labour charges, for the F.Y. 2012-13 alongwith the names and addresses of the parties. Ledger account of labour charges was also submitted to the Ld. AO. The Ld. AO has apparently, as mentioned in the assessment order, issued notices u/s 133(6) of the Act to all the parties from whom purchas....
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....Act issued by the Income Tax Officer-2(2)(3), Mumbai and in response the same they had submitted reply to the Ld. AO together with a copy of ledger extract of the appellant in their books for the F.Y. 2012-13 alongwith the copies of the sample invoices. The copy of the said reply filed by Phifer to the Ld. AO alongwith the supporting documents as received by the appellant in reply to their request are enclosed as additional evidences at Sr. No. 3(a)(ii) of the paper book (Index-II). Hence the Ld. AO's contention that these parties have not confirmed or responded to the notices issued by him u/s 133(6) is wrong. We also enclose the sample copies of sales invoices at Sr. No.3(a)(u) of the paper book (Index-II) reflecting sales of fabrics purchased from Phifer, the copies of bank statement showing payments made to Phifer at Sr. No. 3(a)(iv) of the Paper book (Index-II). Sample copies of credit notes for commission earned by the appellant on sales directly executed by Phifer in the western region are enclosed as Additional evidence at Sr. No. 3(a)(v) of the paper book (Index- II). It will be appreciated that no sales (which has not been doubted by the Ld. AO) could have be....
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....fferent airports/sites. Thus, the appellant procured the labour from the two parties ie. Jay Engineering Works and J.J. Enterprises and provided the same to the vendors as and when required. In view of the above it will be appreciated that no labour services could have been provided by the appellant to the customers without procuring the labour services from Jay Engineering Works and J.J. Enterprises and hence the said purchase/ labour charges cannot be treated as bogus. No adverse material has been brought on record by the Ld. AO to treat these purchases and labour charges as bogus other than the statement that these parties did not reply to his notices under section 133(6) of the Act. 3.7 Appellant had submitted during the assessment proceedings whatever details asked by the AO in connection with said purchases and labour charges. AO did not ask for any further details. If he had asked for said details, appellant could have provided the same as said details were readily available with the appellant. Further, appellant could have asked or followed up with the said parties to send response to the notice u/s 133(6). AO passed the order without giving any opportunity to the ....
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.... came to the conclusion that the assessee has discharged the burden that lay on him then it could not be said that such a conclusion was unreasonable or perverse or based on no evidence. The High Court was, therefore, right in refusing to refer the questions sought for." 3.10 In view of the above facts and the evidences, the appellant company prays that the addition of purchases including labour charges of Rs. 1,49,87,000/- by treating it as bogus purchases be deleted." 26. After considering the detailed submissions and additional evidences Ld.CIT(A) remitted the same to the Assessing Officer and Assessing Officer has submitted the remand report dated 10.10.2012 and in reply assessee has submitted as under: - "Reg. Ground of Appeal No. 3 - Disallowance of purchases/labour charges paid of Rs. 1,49,87,000/ The Ld. AO in the remand report made various comments such as: a) That the appellant company did not submit the invoices during the assessment proceedings. - In this regard we have to state that ld. AO vide his notice dated 27.10.2015 issued u/s 142(1) of the Act called for the details of purchase and sales during the year and fixing the date ....
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....t the PAN of both the parties are mentioned on the copies of their invoices submitted to your goodself as additional evidence. Further, it submitted that tax can be deducted at source only when the party has a PAN. The appellant has deducted TDS from the payment to labour. charges to both M/s. Jay Engg. Works and J.J. Enterprises. Thus, it will be appreciated that the said parties are genuine and were in existence. On perusal of the ledger confirmations provided by the parties, relevant bank statements and the invoices it is evident that the labour services purchased by the appellant are genuine. Hence, it cannot be held that the said labour purchases are bogus purchases. It is never alleged in the assessment order that these parties are found to be bogus by anybody. Further, it will be appreciated that no services at airports could have been provided by the appellant to the customers without procuring the labour services from Jay Engineering Works and J.J. Enterprises and hence the said purchase/ labour charges cannot be treated as bogus. This is not the case that parties are not available or they are not ready to confirm their supplies. It is submitted that the confirmat....
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....s not doubted by the ld. AO. Also, on perusal of the additional evidences submitted to your goodself as described briefly in point 2.2(b) above, it will be appreciated that bills were raised by the parties as per the labour provided for particular sites. Further the appellant raised the sales invoices as per the manpower provided at different airports/sites. Thus it will be appreciated that the purchases of labour from the said 2 parties and its corresponding sales are already linked which is evident from the profit and loss account itself. In view of the above it will be appreciated that no labour services could have been provided by the appellant to the customers without procuring the labour services from Jay Engineering Works and J.J. Enterprises who have duly confirmed and hence the said purchase/ labour charges cannot be treated as bogus. II) Reg.: Phifer India P Ltd: M/s Phifer Ltd. is a 100% subsidiary of US based multinational company. During the financial year the appellant company had made purchases of Rs. 66,15,000/- from Phifer India P. Ltd. The id AO has treated this party also as non genuine party by alleging that the said ....
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....s squarely applicable to the case of this assessee. Conservently the assessee has again produced the supporting evidences. Reliance is also placed on the decision in the case of Continental Carbon India Ltd. V.ITO (Delhi Tribunal (ITA No. 5269, 5270 & 5271/Del/2010). It is submitted that the additional evidences provided to your goodself is evident enough to prove the genuineness of transactions and the details of linking of purchases right from placing the order from the supplier, receipt of goods to its location, appearance of the same in the stock register and reduction of the same in the stock register after its sale, as pointed by the ld. AO in its remand report, will only be the additional documentary evidence which will corroborate the facts on record. Thus in light of the above facts, the ld. AO has wrongly contended that the appellant has not provided sufficient evidence to prove the genuineness of the purchases made by the appellant from Phifer India P Ltd. In view of the above, we request your goodself to kindly admit the additional evidences filed by the appellant and consider them and provide appropriate relief to the appellant." 27. After consider....
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.... purchases made during the year, thus, in the absence of any further requirements, the AO has wrongly alleged that the assessee did not submit any evidence. The AO in the remand report has stated that neither PAN is evident on the confirmation of Jay Engineering Works and J. J. Enterprises nor ITR and Profit and Loss Account is evident and that the assessee is contending to allow purchases merely on payment entries without establishing the genuineity and existence of purchases. In the appellant's rejoinder to the remand report, it has submitted that PAN of both the parties are mentioned on the invoices as well as in TDS certificates which have been submitted as additional evidences. Further, it is submitted that tax has been deducted at source from the payment of labour charges to both the parties and copies of TDS Certificates have been submitted. I have examined the evidences submitted being confirmation on the ledger accounts, relevant bank statements, the invoices and the TDS Certificates. Further, it is submitted that it was never alleged in the assessment order that these parties are found to be bogus by any authority or anybody else. Further, as explain....