TaxTMI 
TaxTMI 
2022 (11) TMI 1219
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....nt 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. CIT (A) has erred in misinterpreting the provisions of Rule 6DD of the I.T. Rule....
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....010-11 (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 Vs. Kabul Chawla 380 ITR 573 is not applicable to the instant case. Accordingly, we do not find merit in the Ground No. 2 of the C.O. Thus, we dism....
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....(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) 1,08,34,15,088 1,08,34,15,088 1,55,66,86,340 1,55,66,86,340 20,75,181 8. As against the deletion of the above additions, the Department has filed ITA No. 5474/Del/2015 (A.Y 2010-11) & ITA No. 5475/Del/2015 (A.Y 2011-12) The assessee has also preferred the COs No. 29/Del/2016 & 30/Del/2016 by challenging the order of the Ld.CIT (A) in sustaining partial addi....
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....ssessment 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 with the fact that the notices u/s 133(6) have been received back unserved in the below mentioned cases along with the remarks mentioned and therefore purchases remains unverified. Name of the person to whom letter u/s 133(6) sent Postal remarks Rohit Dairy, Nawada Road, Gajraula U.P. No such dairy in the name of Rohit Dairy is functioning at the address given Village Level Connection (VLC), Village Shakarpur, Hapur, Ghaziabad No s....
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....racts 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 AO. The statement of the parties were recorded on oath in the presence of the AO concerned. All the parties have deposed that they had indeed supplied milk to the assessee and payments have been received in cash as well as cheque. Hence, the ld. CIT(A) came to a conclusion that the purchases as alleged by the Assessing Officer, cannot be treated as bogus. For the sake of ready reference, the order of the ld. CIT(A) is reproduced as under: "(xvii) All the parties who did not turn up during 153C proceedings were summoned u/s 131 by the undersigned and their statements were record....
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....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 133(6) of the Act, the Assessing Officer could have taken appropriate action against the defaulters. It was not the case of the Assessing Officer that the Appellant did not make any purchases. Nothing was pointed out to show that any purchases were inflated, or bogus." 15. During the hearing before us, the fact of production of the parties by the ld. CIT(A) in the presence of the Assessing Officer has not been in dispute. The fact that the parties supplied milk to the assessee company could not be disputed. The AO has also held that milk purchases were made not from farmers but through the intermediaries of the milk traders, thus co....
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....e 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 6ABBA, exceeds ten thousand rupees] (a) where the payment is made to- (i) the Reserve Bank of India or any banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949); (ii) the State Bank of India or any subsidiary bank as defined in section 2 of the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959); (iii) any co-operative bank or land mortgage bank; (iv) any primary agricultural credit society or any primary credit society as defined under section 56 of the Banking Regulation Act, 1949 (10 of 1949); (v) the Life Insurance Corporation of India established under section 3 of the Life Insurance....
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.... 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 exceptions are not exhaustive and where the genuineness of the, transaction, the payment and identity o receiver is established, the requirements of Rule 6DD(j) must be deemed to have been satisfied. In order to get the shelter of this exception, the genuineness of the transaction and the existence of circumstances warranting payment by cash has to be proved by the assessee. But, while considering the exceptional circumstances, the business exigencies, convenience and security should also be looked into. Further, where a transaction's found to be genuine and the identity of the payee is established, a liberal view of compelling and mitigating circumstances should be taken. Payments made after the close of banking hours or payments made to new parties" or payments where the seller or the purchaser did not have ....
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....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 of business expediency, exceptional/extraordinary circumstances, financial stringency of the dhoodies who insisted on cash payments against supply of milk to the suppliers. x) In earlier and subsequent years similar position in relation to 40A(3) prevailed which on scrutiny was not disturbed by any of the AOs in the past. xi) Finally reliance was placed by the appellant on the following cases:- 1. Anupam Tele Services v s. ITO (2014) 43 taxmann.com 199 (HC Gujarat) 2. Sri Laxmi Satyanarayana Oil Mill vs. C1T. A.P. Hyderabad (2014) 49 taxmann.com 363 (Andhra Pradesh) 3. CIT vs. C. V. Sebastian (2014) 45 taxmann.com 349 (Kerala) 4. CIT, Aligarh vs. Sunil Kumar Agarwal (2013) 38 taxmann.com 386 (Allahabad) 5. CIT-II vs. Hindustan Equipment (P) Ltd (2013) 30 taxmann.com 295 (Madhya Pradesh) 6. CIT(Central) Ludhiana vs. S.A. Builders Ltd. (2013) 38 taxmann.com 255 (Punjab & Haryana....
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.... disallowance is called for on financial charges owing to submission of complete documentary evidences. Hence, the order of the ld. CIT(A) deleting the financial expenses is affirmed. With regard to the ad-hoc disallowances on account of transport and administrative expenses, since they are ad-hoc in nature and indistinct rather than a generalized solution adaptable to collateral instances, we restrict to disallowance to 5% on ad-hoc basis. Accordingly, the Revenue's Ground No. 6 in ITA and Assessee's Ground No. 3 in the C.O are partly allowed. Addition on account of Deemed Dividend u/s 2(22)(e) of the Act. 27. The Ground No. 7 is regarding the action of the Ld. CIT(A) in deleting of addition of Rs. 72,18,132/- made by the A.O. u/s 2(22)(e) of the Act. 28. The AO has made an addition of Rs. 72,18,132/- on account of deemed dividend under section 2(22)(e) of Income Tax Act, 1961 for the reason that on perusal of annexure 12 of the balance sheet, assessee company has to pay Rs. 1,15,40,789/- to M/s AIMS Promoters Private Limited as advance taken from said concern and Shri Malook Nagar was having 84.11% share holding in M/s AIMS Promoters Private Limited and 66.81% in the assessee ....