TaxTMI 
TaxTMI 
2022 (11) TMI 1219
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....eleting the addition of Rs. 177,31,37,509/- on account of unexplained purchases while holding that the books of accounts of the assessee were defective. 2. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in deleting the addition on account of unexplained purchases of Rs. 177,31,37,509/- and substituting the same with GP addition of 0.23% amounting to Rs.42,13,198/- only, which was without any basis. 3. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in not upholding the action of the AO in disallowance of Rs.108,34,15,088/- u/s 40A(3) of the Act and in holding that no addition was made by the AO u/s 40A(3) whereas the AO had categorically mention this addition in the order and also initiated penalty u/s 271(1)(c); though no separate addition was made considering the disallowance of higher amount on account of bogus purchases. 4. On the facts and in the circumstances of the case, the Ld. CIT (A) has erred in adjudicating the addition made under section 40A(3) of the Act when the assessee had not taken any ground in this respect. 5. On the facts and in the circumstances of the case, the Ld. ....
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....- being 15% of paddy husk expenses made by the AO without there being any incriminating material on record." C.O. No.29/Del/2016 : A.Y. 2010-11 (Assessee) Jurisdictional issue. Ground No. 1 & 2 4. The assessee has raised the issue of satisfaction and also assessment of undisclosed income not based on seized document. With regard to the recording of satisfaction note, the matter stands adjudicated in the case of the assessee in CO Nos. 26, 27 & 28/Del/2016 by relying on the Judgment of Hon'ble Apex Court in the case of Super Malls Pvt. Ltd. in CA No. 2006 to 2007 of 2020, by following the very same ratio since the satisfaction recorded by the ACIT, Central Circle-21 who is the common AO of the searched person and the other person, the Ground No. 1 raised by the assessee are liable to be dismissed. 5. With regard to the objection that the addition has not been based on seized material, we hold that the instant assessment is not an abated assessment owing to the recording of satisfaction and issue of notice u/s 153C on 26.09.2012 and filing of the regular return of income on 30.09.2011. The assessment cannot be said to be unabated. Hence, the judgment in the case of PCIT V....
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.... the ld. CIT(A) are as under:- S.No Particulars of the disallowance made by the A.O. A.Y 2010-11 A.Y 2011-12 By order of A.O By order of CIT(A) By order of A.O By order of CIT(A) Addition Relief Sustained Addition Relief Sustained 1 Transportation charges 43,60,977 29,07,318 14,53,659 62,25, 643 41,50 462 20,75,181 2 Unexplained Purchases 1,77,31,37,509 1,76,89,24,311 42,13,198 2,24,99,95.254 2,23,81 36,837 1,18 58,417 2 Administrative & distribution expenses 14,15,900 13,14,692 1,01,208 14,56,184 13.21.106 1,35 078 4 Financial Charges 75,65,166 75,65,166 85,16,323 85,16, 323 5 Purchase & Operative expenses 1,38,75,017 1,04,49,191 34,25,826 1,80,67,134 1,36,56,961 44,10,173 6. Deemed dividend 72,18,132 72,18,132 Total addition made 1,80,75,72,701 1,79,83,78,810 91,93,891 2,8,42,60,538 2,26,57,81,689 1,84,78,849 On account of purchases u/s 40A(3) 1,08,34....
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....mentioned at page 4 to 7 of the Assessment Order. The Assessing Officer issued notices u/s 133(6) of the Act to various parties for verification of purchases. The said notices have not been complied with. In view of the non-compliance, the Assessing Officer made addition of the total purchases made by the assessee holding that the purchases were unverifiable. For the sake of ready reference, the relevant portion of the Assessment Order is reproduced hereunder: "5. Unexplained Purchases During year under consideration the assessee has shown total purchases of milk from milk suppliers amounting to Rs. 1,77,31,37,509/- against the sale of Rs. 1,83,18,25,469/-. To verify the purchases the assessee has been asked to submit copies of account of milk suppliers, bills and vouchers, along with the books of account. The assessee neither filed party wise details of purchases made nor copies of account of suppliers, neither bills and vouchers nor byoks of account have been produced for verification of purchases claimed. Notices u/s 133(6) has been issued to various suppliers. However, they remained un-complied. Vide letter dated 15.03.2013 the assessee was confronted....
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....mounts mentioned below:- S. No. Party Name Amount 1 Himalaya Foods Industries 104774168.00 2 Lakshya Dairy (P) Ltd. 55646170.00 3 Malook Foods Industries 100958317.00 4 Malook Milk Plant 103126618.00 5 Misrar Khan 134729142.00 6 Prem Dairy 121597148.00 7 Rishi Dairy 70447135.00 8 Rohit Dairy 91552444.00 9 Sarvan Dairy 126887839.00 10 VLC Shakarpur 173696107.00 1083415088.00 5.4 The payments made in cash for the purchases claimed by the assessee attracts the provisions of section 40(A)(3) and therefore being considered for disallowance in the later part of this order. Notwithstanding disallowance of the same u/s 40A(3), these purchases remain unverified, and therefore purchases made in cash as mentioned in the audit report amounting to Rs. 108,34,15,088/- is being disallowed along with the remaining purchases, which comes out to Rs. 177,31,37,509/- totaling to Rs. remain unverified as discussed above and therefore being disallowed." 14. The ld. CIT(A) has summoned all the parties u/s 131 who did not turn up during the proceedings u/s 153C before the A....
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....ly returned by them to the appellant. Merely because the appellant could not produce the suppliers on an earlier occasion during the course of assessment proceedings u/s 153C or in some cases the parties did not respond to the summons served upon them, it did not automatically lead to the conclusion beyond doubt that the purchases claimed and the suppliers were not genuine. (xxiii) It was in the knowledge of the revenue that the said suppliers were the income-tax assessees. The revenue, apart from issuing notices under section 131 at the instance of the appellant did not pursue the matter further. There was no effort made by the AO erstwhile to pursue the so-called alleged suppliers. In those circumstances, the appellant could not do any further. In the premises the appellant had discharged the burden that lay on him during 153C proceedings. (xxiv) In respect of suppliers upon whom notices could not be served, it was found that they had changed their places of business and new addresses had been furnished along with full particulars as to purchase.etc. Thus, the identities of all the parties had been proved. In respect of non-compliance with notices under section ....
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....ls on the basis of the submissions made during the 153C proceedings as under to substantiate its claim that all the payments in excess of Rs.20,000/- were made on holidays as per Rule 6DD. The assessee furnished the total purchases of milk in cash under the exemption provided by Rule 6DD of the Income Tax Rules, 1962 in a tabular form before the ld. CIT(A) which could not be disputed by the Assessing Officer. 19. During the arguments before us, the ld. DR argued that in case the purchases have been proved genuine, still the assessee is liable to be taxed as per the provisions of Section 40A(3) and Rule 6DD is not applicable to the facts of the assessee's case. 20. Rule 6DD reads as under: "6DD. No disallowance under sub-section (3) of section 40A shall be made and no payment shall be deemed to be the profits and gains of business or profession under sub-section (3A) of section 40A where a payment or aggregate of payments made to a person in a day, otherwise than by an account payee cheque drawn on a bank or account 2[account payee bank draft or use of electronic clearing system through a bank account or through such other electronic mode as prescribed under rule 6ABB....
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....es specified in the rule. The CBDT has issued certain guidelines giving certain circumstances and those circumstances are illustrative and not exhaustive and the underlying idea of the circular is that if the identity of the payee is known, it would be possible for the ITO to cross check whether the transaction had in fact taken place CIT vs. K.K.S.K. Leather Processor P. Ltd (2007) 292 ITR 669, 693(Mad.). 22. While adjudicating the issue, the ld. CIT(A) held as under: "In cases where the authorities are satisfied about the genuineness of the transaction and the identity of the payee, there would be no occasion to disallow such kind of payment in the circumstances of acute financial stringency. Thus, where the transaction is found to be genuine and the identity of the payee is established, a liberal view of compelling and mitigating circumstances would be taken - Walford Transport (Eastern India) Ltd vs. CIT (1999) 240 ITR 902, 907 (Gauh.) Sub-sections (3) and (4): Payments Exceeding Rs 20,000. The provisions of s. 40A(3) are not attracted where the parties are identified and there is no material on record to doubt the genuineness of the payment. These....
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....nd creditworthiness. iv) The competitive environment in the milk industries was also overlooked by the AO. The payments and receipts were all reflected in the payers and the payees accounts. v) The money paid in cash to the village level collectors or suppliers by the appellant was all given for the dhoodies of the milk who insisted on immediate settlement of the accounts. vi) The suppliers accounts also revealed that the dhoodies creditors were almost nil. The reason was the immediate payment of cash given by the appellant to the suppliers for the dhoodies who refused to accept cheques. vii) The AO overlooked the fact that the appellant gave incentives to the suppliers for supplying bulk of the milk to it in the form of payment within short notice to them (suppliers). viii) In the end it was concluded that the AO invoked section 40A(3) for academic purposes only as he did not make any addition thereon. The adverse remarks concering 40A(3) in the case of the appellant proceeded from the hyper technical view taken by the AO in the process of which he failed to discern the sprit underlying the relevant provisions. ix) The factors ....
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....tracted in this case, the decision of which, we decline to interfere with the order of the ld. CIT(A). As a consequence, the adhoc estimation @ 0.23% of the sales made by the ld. CIT(A) is also liable to be deleted. 24. In the result, the Ground No. 3 to 5 of the Revenue on the grounds of purchase u/s 40A(3) is dismissed. Ad-hoc Disallowances: 25. The Revenue's Grounds of Appeal No. 6 is regarding ad-hoc disallowance which has been restricted by the CIT (A) to 10%. And the Assessee has raised Ground No. 3 on sustaining ad-hoc estimated disallowances. Since, both the Grounds are on the very same issue, the same are dealt together as under. 26. The AO made ad-hoc disallowance of 30% on the power fuel, packing material and repairs & maintenance. The Ld. CIT (A) restricted it to 10% on adhoc basis. Similarly, the AO made 30% disallowance on administrative & distribution expenses and also on finance charges. The ld. CIT(A) has restricted the disallowances to 10% and deleted the disallowance made on financial charges. We hold that no disallowance is called for on financial charges owing to submission of complete documentary evidences. Hence, the order of the ld. CIT(A) deleti....