AI Drafter 
TaxTMI 
TaxTMI 
2023 (5) TMI 358
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....) allowed the appeals of the assessee in part. Hence both the parties have filed these appeals before the Tribunal. 3.0 We shall now take up the appeals filed by both the parties for AY 2014- 15 and 2015-16. Certain common issues are urged in these appeals. Following issues are urged in the appeals of the assessee:- (a) Partial confirmation of addition relating to alleged bogus purchases. (b) Disallowance of expenses u/s 37 of the Act. (c) Partial confirmation of addition relating to Corporate Guarantee commission. 4. The revenue is in appeal on the relief granted by Ld CIT(A) in respect of additions relating to alleged bogus purchases and Corporate Guarantee Commission in both the years. 5. The first common issue in both these years relates to the addition made on account of alleged bogus purchases. Since the Ld CIT(A) has given partial relief, both the parties are in appeal before us on this issue. 5.1 During the course of search proceedings, it was noticed that the assessee has purchased goods from M/s Samnik General Trading Company, M/s GSP International, M/s Ankit International, M/s SPA Heights P Ltd, M/s Godwin Metal Trade P Ltd, M/s Saj....
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.... if the assessee could prove the receipt of materials, then only the incremental gross profit should be added. The Ld CIT(A) further observed that the manufacturing loss disclosed by the assessee would prove whether the materials have been received or not, i..e, if the materials have not been actually received, the assessee would be showing more manufacturing loss in order to tally the quantity details. He submitted that the Ld CIT(A) has given a finding that the manufacturing loss declared by the assessee is within the prescribed limit of Standard Input Output Norms (SION) published by the DGFT, Government of India. The Ld CIT(A) also relied upon the findings of DGCEI, wherein it was found during the search conducted by them that the assessee has received materials from other parties, while the bills were issued by different parties. Under these set of facts, the Ld CIT(A) restricted the addition to 6% of the value of purchases in all the above said years. 5.5 The Ld A.R further submitted that the assessee has furnished all the details to prove the genuineness of purchases. He further submitted that the statement given by the employee was general in nature and not with regard t....
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....e further submitted that the assessee has claimed that lorries registered in other states have been used for transportation of materials, which is not permitted. Hence transportation of materials has not been proved. The assessee has not furnished the details of octroi payments. Accordingly, he submitted that the purchases made from the accommodation bill providers cannot be said to have been proved by the assessee. Accordingly, he submitted that the AO has rightly disallowed entire amount of purchases and the same should be retained and the orders passed by Ld CIT(A) on this issue should be reversed. 5.8 In the rejoinder, the Ld A.R placed his reliance on his written submissions. 5.9 We have heard rival contentions on this issue and perused the record. The assessee is engaged in the business of manufacture and sale of Stainless Steel Products. In the manufacturing of products, the materials purchased by it is melted and converted into the finished products. In the case of trading of goods, the sales quantity could be reconciled with the purchase quantity. However, in the case of manufacturing of goods and when the raw materials is converted into other type of finished goods,....
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....sumption have been duly submitted before AO during assessment proceedings. The manufactured goods have been further exported by the assessee. The assessee has submitted the entire evidence to support the receipt of material, consumption of the same and its output which has been exported. Further, the assessee has also submitted the input output ratio wherein the average manufacturing/burning loss in respect of main product 'billets' is 7.14% as against standard of 10% prescribed by DGFT. The same is placed at page no. 75 of the paperbook. AO has mechanically rejected the same on the ground that no one to one correlation has been submitted by the assessee. It is important to note that in assessee's business where measurement of input and output units is same, the extent of use of raw material can be seen from the quantitative chart showing purchase of raw material and its consumption without going into one to one correlation. Therefore, in such case, input output ratio needs to be accepted. k. Accordingly, the receipt of material and its consumption in the manufacture cannot be doubted. This is more-so when the AO has himself stated that the material has been re....
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....cepted the T.P study, meaning thereby, the TPO has accepted the gross profit margin of the assessee to be at par or more than the industry average. Under these set of facts, we are of the view that the Ld CIT(A) was justified in holding that the assessee has actually received materials and hence disallowance of entire amount of purchases is not justified. When the receipt of materials is accepted, the AO's reliance on the statements given by the suppliers or employee/other persons shall become insignificant. 5.13 We notice that the Ld CIT(A), having held so, has proceeded to hold that the assessee would have made profits in purchasing materials from other suppliers. In this regard, the Ld CIT(A) has taken support from the decision rendered by Hon'ble jurisdictional Bombay High Court rendered in the case of Rishabhdev Technocable Ltd (2020)(115 taxmann.com 333)(Bom), wherein it was held by the High Court that in a case where the parties from whom such purchases allegedly made were bogus but the purchases in themselves were not bogus, only a gross profit ratio could be added to the income of an assessee. We notice that the Ld CIT(A) has estimated the said incremental profit @ 6% o....
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....nd hence it cannot be considered as an International Transaction. The TPO did not accept the contentions of the assessee. By considered the commission charged by State Bank of India, the TPO made transfer pricing adjustment @ 1.50% of the Guarantee amount given by the assessee. 6.2 The ld CIT(A) noticed that an identical TP adjustment made in the assessee's own case in AY 2010-11 has been adjudicated by the Tribunal and the Guarantee Commission was restricted to 0.50% following the decision rendered by the Hon'ble Bombay High Court in the case of Everst Canto Cylinders Ltd (2015)(58 taxmann.com 254; 378 ITR 57)(Bom). Following the said order, the Ld CIT(A) directed the AO to restrict the Commission on Corporate Guarantee given by the assessee @ 0.50% of actual value of loan taken by the Associated Enterprises. Both the parties are aggrieved. While the assessee seeks further reduction, the revenue contends that the guarantee commission should be retained @ 1.50%. 6.3 We have heard rival contentions on this issue and perused the record. We notice that the co-ordinate bench of Tribunal has examined an identical issue in the assessee's own case in AY 2010-11 and the Tribunal has ....
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....of search due to continuous pressure from search officials. Hence, these persons have filed affidavits explaining the nature of services rendered by them to the assessee company. He submitted that (a) Ms. Ramita Jain is an engineering graduate and is running her own concern named M/s Su Parshuanath Enterprises from her home, which was providing financial advisory services. She has also disclosed her income details in the sworn statement. Hence it is not correct to suspect the professional fees paid to her. (b) Ms Sangita Jain has admitted that she has worked for the assessee herein. She was handling sales and business promotion and she has also recalled name of a customer. He further submitted that Shri Raman Kumar has affirmed that these two persons have provided services to the assessee company. He further submitted that the search officials or AO did not verify their contentions made in the retraction affidavits by making enquiries with other employees. Accordingly, the Ld A.R contended that the AO could not have placed reliance on the retracted statements for making the above said additions. 7.4 The Ld D.R, however, supported the orders passed by the AO ....