TaxTMI 
TaxTMI 
2023 (2) TMI 123
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....ct is bad and illegal both on facts and in law and by such order income as determined is not correct nor the same can be called real income of the appellant hence the declared income should have been accepted. 2. That in any view of the matter entire action u/s 132 of the income tax act and in consequence to which notice issued u/s 153A of the income tax act is illegal and without jurisdiction and also determined income is not based on any incriminating material nor undisclosed income related to the appellant found in the course of search therefore the assessment framed is illegal and the income so determined at Rs. 1,48,02,960.00 for the year under consideration as against the returned income of Rs. 13,51,050.00 is highly unjustified and against the provision of the income tax act hence such order is a nullity, void and liable to be declared illegal. 3. That in any view of the matter a sum of Rs. 5,07,352.00 out of the addition of Rs. 27,76,936.00 (as per Para 5 of the assessing officer's order) as maintained by the Commissioner of Income Tax (Appeals) as per Para 8.2 of his order under the head "Difference in creditors for goods" is highly unjustified and un....
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....of the matter action under Section 132(1) of the income Tax Act in consequence to which the notice issued under section 153A of the Act without any incriminating material or any undisclosed income found during the course of search the block assessment made determining the income of Rs. 16,74,550.00/- as against returned income Rs. 8,42,480.00/- is illegal, arbitrary and against the provisions of the Income Tax Act. 3. That in any view of the matter while passing the order of the learned Commissioner of Income Tax (Appeals) totally failed to consider the facts of the case, paper book filed and argument advanced and the total relief prayed for has been negative and a very small relief has been considered to be allowed by ignoring the judicial norms which is highly unjustified and incorrect. 4. That in any view of the matter disallowance of Rs. 1,77,709/- maintained on account of sale promotion, telephone, travelling, freight, conveyance and vehicle running and maintenance at the rate of 5% when there is no provision in the Income Tax Act to maintain disallowance on percentage basis is highly unjustified and illegal. 5. That in any view of the matter the exp....
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....iew of the matter disallowance under the head marketing expenditure made by the assessing officer and partly maintained by the Commissioner of Income Tax (Appeals) is highly unjustified in so far as the expenditure was incurred and not appearing in the balance sheet under the head payable hence the provision of Section 40(a)(ia) of the income tax act is not applicable. 6. That in any view of the matter disallowance of Rs. 1,79,350/- maintained by the Commissioner of Income Tax (Appeals) @ 5% as per para 9.2 of his order is highly unjustified in so far as the expenditures relate to the business and are recorded in books in regular manner, hence disallowance is unwarranted. 7. That in any view of the matter the assessee reserves his right to take any fresh ground of appeal before hearing of the appeal. 8. That in any view of the matter penal interests charged under different sections of the income tax act is highly unjustified in the facts and circumstances of the case." ITA no. 78/Alld/2013-Grounds of Appeal for ay:2008-09 "1. That in any view of the matter assessment was framed under Section 153AB of the Act without any search material t....
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....shes of the lower authorities. 7. That in any view of the matter the assessee reserves his right to take any fresh ground of appeal before hearing of the appeal. 8. That in any view of the matter penal interests charged under different sections of the income tax act is highly unjustified in the facts and circumstances of the case." ITA No. 159.Alld/2013-A.Y.: 2005-06 3. First , we shall take up appeal of the assessee for ay: 2005-06.The brief facts of the case are that the assessee company is engaged in the business of purchase and sale of spices and masala and other food items manufactured by Bhola Food Products Private Limited. In pursuance to authorization issued u/s 132 , a search and seizure operations were carried out by Revenue on 27.08.2009 in the Business and Residential premises of group cases of Kesarwani Zarda Bhandar , Sahson, Allahabad and its partners and directors. The assessee company is sister concern of M/s Kesarwani Zarda Bhandar. Notice u/s 153A was issued by AO, on 07.07.2010, which was claimed by AO to have been duly served on Director of the assessee company. In compliance thereof, the assessee company filed return of income disclosin....
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.... return of income and the trial balance seized during search operations marked as Annexure LP-3/page 18-26 , which seized trial balance is reproduced by AO at page number 4-12 of assessment order. This document being seized trial balance of the assessee as at 31.03.2005 was found and seized from Residential premises 404, Gokul Apartment , Kanpur. The AO observed that as per aforesaid seized document as well in the Balance Sheet filed with the return of income , show investment in FDR of Rs. 15,00,000/-. In order to examine sources of investment in FDR, the AO examined the liabilities created in Balance Sheet. The AO while examining the liabilities as shown in Balance Sheet filed with Return of income with the seized material by way of trial balance, observed that the assessee has created bogus liabilities , as under: Liabilities Shown As per seized trial balance (In Rs.) As per balance sheet filed with the return (In Rs.) Unsecured Loan 5,00,000 15,23,406 AD World 58,247 2,50,965 Saturn Advertising Private Limited 31,580 40,921 Bhola Food Products Private Limited 28,30,454 26,28,496 The AO observed that Sundry Creditor in the name of ....
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....7,76,936/- as the assessee failed to explain aforesaid differences in creditors for goods. Aggrieved by assessment framed by the AO , the assessee filed first appeal, and ld. CIT(A) after considering replies filed by assessee granted relief of Rs. 22,69,584/-, while ld. CIT(A) confirmed the additions to the tune of Rs. 5,07,352/- . The addition confirmed by ld. CIT(A) was firstly on account of difference of Rs. 14,000/- on account of addition made in the opening balance. The ld. CIT(A) observed from the perusal of account of Bhola Foods Private Limited in the books of the assessee, that opening credit balance is Rs. 5,32,870/- while the assessee has claimed the opening balance as at 01.04.2004 at Rs. 5,46,870/-, and the assesee has added Rs. 14,000/- in the opening balance without giving any supporting evidence. Secondly, ld. CIT(A) also observed that the assessee has claimed that it has made purchases to the tune of Rs. 2,52,20,732/- from Bhola Foods Private Limited as shown in Annexure-B clause 18 of Form No. 3CD which the assessee claimed is inclusive of sale tax, while the figure of sale in the books of Bhola Foods Private Limited to the tune of Rs. 2,47,27,380/- is exclusive o....
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....T(A) in its written submissions filed but ld. CIT(A) did not properly appreciated the contentions of the assessee. The ld. Counsel for the assessee submitted that the matter can be restored to the file of the AO for verification, and the assessee will demonstrate and prove its contentions before AO that there is no difference between the purchases reported by the assessee and sales reported by Bhola Foods Private Limited, and the difference has arisen mainly due to treatment of sales tax/VAT in the books of accounts. Our attention was drawn to page 136 of Paper Book, where audited Profit and Loss account of the assessee is placed. The ld. CIT-DR on the other hand submitted that the search took place on 27.08.2009 and the trial balance was found and seized during the search operations which pertained to year ended 31.03.2005 i.e. 4 years prior to search and how it can be said that the audited accounts are reliable in the teeth of seized trial balance. The ld. CIT-DR relied upon appellate order passed by ld. CIT(A) . After hearing both the parties and perusing the material on record, we are of the considered view that the matter need to be restored to the file of the AO for verificat....
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.... that the assessee has inflated expenses in comparison to figures mentioned in the seized trial balance. The details as reproduced by AO in the assessment order are as under: Indirect Expenses As per seized trial balance (In Rs.) As per balance sheet filed with the return (In Rs.) Advertisement and Publicity 9,11,223 17,47,471 Computer repair and maintenance 8,300 11,700 Diesel Expenses 42,181 58,283 Discount 75,664 2,20,474 Freight 4,23,157 4,33,909 Insurance 9,864 14,756 Salary 6,95,843 7,97,059 Sales Promotion 10,400 2,70,110 Scheme 82,000 1,10,882 Telephone 47,662 54,072 Travelling and conveyance(sales) 6,99,348 8,20,580 Total 30,05,642 45,39,296 The AO observed from the above chart that it is clear that the assessee has claimed bogus expenses to the tune of Rs. 15,33,654/-. The AO further observed while examining of books of accounts, that some of the vouchers are not fully vouched and produced, and most of the vouchers are self made vouchers. The AO disallowed expenses of Rs. 15,33,654/- and added the same to the income of the assessee as bogus expenses. Fur....
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....uring the search operations were for the year ended 31.03.2005 i.e. 4 years prior to search and how it can be said that the audited accounts are reliable. It was submitted by ld. CIT-DR that at Kanpur, the assessee had administrative office at Kanpur and not BO at Kanpur. The ld. CIT-DR relied upon the appellate order passed by ld. CIT(A) and prayed for confirming the addition . After hearing both the parties and perusing the material on record, we are of the considered view , in the interest of justice, that the matter need to be restored to the file of the AO for verification of claim of the assessee that the seized trial balance reflected transaction of Kanpur B.O., while it did not included transactions of Head office situated at Sahson,Allahabad transactions, while audited accounts was prepared after consolidation of transactions of Sahson Allahabad(HO) as well Kanpur BO transactions. There is some merit in the contention of the assessee, as on perusal of the seized trial balance as reproduced in the assessment order, we have observed that there is an credit entry in the name of 'Head Office' and credit balance of Rs.7,99,113.00(balance not completely legible) against it is re....
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....in as to why this should not be treated as unexplained expenditure. The assessee submitted that inadvertently, some cash received from customers have been entered in cash book on wrong dates, which was later rectified. The AO rejected the contentions of the assessee, and made additions to income of the assessee to the tune of Rs. 1,86,513/- towards unexplained expenditure . The assessee filed first appeal with ld. CIT(A) and reiterated the same contentions. The assessee also submitted before ld. CIT(A), without prejudice, that peak negative balance was Rs. 1,07,527/- as on 06.11.2004 on page 27 of LP-11. The contentions of the assessee stood rejected by ld. CIT(A) keeping in view provision of Section 292C and the assessee having failed to rebut the presumption by cogent evidence. The ld. CIT(A) also rejected the theory of peak negative cash balance, as the assessee failed to explain that the same was circulating. Thus, the ld. CIT(A) sustained the additions. Still aggrieved , the assessee filed second appeal with tribunal. The ld. Counsel for the assessee reiterated its submission and submitted that opening cash balance was Rs. 69,014/- as on 01.04.2004 and closing balance was Rs. ....
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....to rebut the presumption u/s 132(4A) and 292C by cogent evidences/explanations which assessee fails to substantiate and the explanation of making entries of receipts from customer on the wrong dates is merely to come out of tax liability. The onus was squarely on the assessee to rebut the presumption, which assessee fails to do so. Thus, we hold that payments of Rs. 1,86,513/- were made towards unexplained expenditure of which sources for making such payment could not be explained by the assessee, and the same is held to be made out of undisclosed income of the assessee. Thus, this ground of appeal is decided against the assessee.We order accordingly. 3e Ground No.7 is regarding chargeability of interest consequent to assessment made by the AO u/s 234A, 234B and 234C, and is merely consequential in nature and accordingly stand dismissed. Reference is drawn to judgment and order of Hon'ble Supreme Court in the case of CIT v. Anjum S Ghaswala , reported in (2001) 119 Taxman 352(SC), decision of Hon'ble Supreme Court in the case of CIT v. Bhagat Construction Company Limited , reported in (2016) 383 ITR 9(SC) and also to decision of Hon'ble Supreme Court in the case of Kalyankumar Ray ....
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....ision Bench of ITAT, Allahabad Bench, in the proceedings conducted in Open Court hearing through physical hearing mode. Now, we propose to dispose of the appeal filed by the assessee on merits in accordance with law for ay: 2006-07, ground wise. 11.At the outset ld. Counsel for the assessee stated before the Bench , that the assessee does not want to peruse grounds of appeal number 1-3 and 6-7 raised by it in memo of appeal filed with tribunal, and prayers were made before the Bench by ld. Counsel for the assessee to dismiss ground number 1-3 and 6-7 raised by assessee before tribunal , as not being pressed. The Ld. CIT-DR has no objection, if Ground No. 1-3 and 6-7 are dismissed , as not being pressed. After hearing both the parties, we dismiss Ground No. 1-3 and 6-7 raised by assessee in memo of appeal filed with the tribunal as not being pressed. We order accordingly. 12. Ground No. 4 and 5 raised by assessee in memo of appeal filed with tribunal, concerns itself with disallowance of expenses to the tune of Rs.3,41,407/- made by the AO which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 1,77,709/-, being additions made towards expenses claimed to be incurred ....
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....tention was drawn to relevant para's of assessment order and appellate order passed by ld.CIT(A), and it was submitted that the AO made additions by estimating disallowance @10% of these expenses, which was reduced by ld. CIT(A) to 5% of these expenses . It was submitted that no disallowance of expenses is warranted on estimation basis , and no specific defects were pointed out by both AO as well ld. CIT(A). It was submitted that complete details were filed by assessee before ld. CIT(A) and our attention was drawn to page 12 of the paper book , wherein vide para V it is stated(vide handwriting additions) that vide page 31-248(copies not filed with tribunal), the details were furnished. It was submitted that the ITAT, 'SMC' Bench, while adjudicating appeal for ay: 2004-05 has deleted the additions, in ITA No. 69/Alld/2013 vide appellate order dated 2.2.2016 , wherein some pucca bills could not be produced. The prayers were made by ld. Counsel for the assessee that the matter can go back to the file of the AO for fresh adjudication on merits. On the other hand, the ld. CIT-DR submitted that no details were furnished before the AO, while it was submitted before ld. CIT(A). It was subm....
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....ssee, was also the failure to furnish the complete details and to discharge onus cast on the assessee. In our considered view, in the interest of justice, one more opportunity is to be given to the assessee , as well to the AO for examination and verification of these expenses as these evidences were so far not produced before the AO, for its examination on merits by the AO. We are restoring the matter back to the file of AO for re-adjudication on merits in accordance with law, after giving proper and adequate opportunity of being heard to the assessee. We clarify that we have not commented on the merits of the issue. We order accordingly. 13. In the result appeal filed by assessee in ITA No. 76/Alld/2013 for assessment year 2006-07 stand partly allowed for statistical purposes. We order accordingly. Appeal No. ITA No. 77/Alld/2013-Assessment Year 2007-08 14. We shall now take up appeal of the assessee for ay: 2007-08.The brief facts of the case are that the assessee company is engaged in the business of purchase and sale of spices and masala and other food items manufactured by Bhola Food Products Private Limited. In pursuance to authorization issued u/s 132 , a search an....
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....peal filed with the tribunal as not being pressed. We order accordingly. 16. Ground No. 4 and 5 raised by assessee in memo of appeal filed with tribunal, concerns itself with disallowance of marketing expenses to the tune of Rs.12,63,138/- made by the AO which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 3,98,526/- , being additions made by invoking provisions of Section 40(a)(ia) read with Section 194C of the 1961 Act. The ld. AO observed that the assessee has claimed to have debited Marketing expenses to the tune of Rs. 12,63,138/- in the Profit and Loss Account. The AO observed that the payments were made to distributors for pushing up the sales. The AO observed that payments were made under contract and no income tax was deducted at source on such payments. The AO asked assessee to explain why these expenses be not disallowed. The assessee submitted before AO that marketing expenses incurred by the assessee is towards reimbursement of payments made by the distributors appointed by the assessee as per instructions of the assessee. The assessee submitted that TDS is not applicable on such reimbursement of payments. The AO observed that the assessee has submitted....
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....te order passed by ld. CIT(A). Our attention was drawn to page 25-39 of the Paper Book filed by the assessee, where Marketing expenses ledger accounts in the books of the assessee is placed. It was submitted that the AO disallowed entire marketing expenses of Rs. 12,63,138/- , while ld.CIT(A) restricted disallowance of expenses to Rs. 3,98,526/- after considering requirements of Section 194C, that the payment/credit to a party in a day in aggregate should exceed Rs. 20,000/- and further in a year aggregate payments/credits to a party should exceed Rs. 50,000/- . It was submitted that the distributors were acting as agents on behalf of the assessee. The ld. Counsel for the assessee relied upon the judgment and order of Hon'ble Supreme Court in the case of Hindustan Coca Cola Beverage Private Limited v. CIT , reported in (2007) 163 Taxman 355(SC). The ld. CIT-DR relied upon the appellate order passed by ld. CIT(A) and submitted that if the ratio of decision in the case of Hindustan Coca Cola Beverages Private Limited (supra) is to be applied, then the assessee will be liable to pay interest liability as upheld by Hon'ble Supreme Court. After hearing both the parties and perusing the ....
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....nance expenses, being disallowance @ 5% of these expenses being confirmed by ld. CIT(A) , as against additions made by the AO @10% of these expenses . We have already adjudicated this issue , while adjudicating appeal for ay: 2006-07, and facts being similar in this year, our decision for ay: 2006-07 shall apply mutatis mutandis to the issue raised by assessee in this year. The issue is restored to the file of the AO for fresh adjudication with similar directions as were given by us for ay: 2006-07. We order accordingly. 18. Ground No. 8 being general in nature, does not require separate adjudication , and hence stand dismissed. We order accordingly. 19. In the result appeal filed by assessee in ITA No. 77/Alld/2013 for assessment year 2007-08 stand partly allowed for statistical purposes. We order accordingly. ITA No. 78/Alld/2013- Assessment Year 2008-09 20. We shall now take up appeal of the assessee for ay: 2008-09.The brief facts of the case are that the assessee company is engaged in the business of purchase and sale of spices and masala and other food items manufactured by Bhola Food Products Private Limited. In pursuance to authorization issued u/s 132 , a searc....
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....o of appeal filed with the tribunal as not being pressed. We order accordingly. 22. Ground No. 5 raised by assessee in memo of appeal filed with tribunal, concerns itself with disallowance of Marketing expenses to the tune of Rs.15,71,921/- made by the AO which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 7,48,442/- , being additions made by invoking provisions of Section 40(a)(ia) read with Section 194C of the 1961 Act. We have already adjudicated this issue , while adjudicating appeal for ay: 2007-08, and facts being similar in this year, our decision for ay: 2007-08 shall apply mutatis mutandis to the issue raised by assessee in this year. The issue is restored to the file of the AO with similar directions as were given by us for ay: 2007-08. We order accordingly. 23. Ground No. 6 raised by assessee in memo of appeal filed with tribunal, concerns itself with disallowance by AO of expenses to the tune of Rs.4,91,664/- , which disallowance of expenses stood reduced by ld. CIT(A) to Rs. 2,45,832/-, being additions made towards expenses claimed to be incurred by the assessee, under the head sales promotion expenses, telephone expenses, travelling and conveyance(....