AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2023 (10) TMI 257
X X X X Extracts X X X X
X X X X Extracts X X X X
.... condoned and admits the appeals for adjudication. 3. The Cross Objections filed by the assessee for both the assessment years are delayed by 11 days in filing the CO, for which, the assessee has filed affidavits for condonation of delay, to which the ld. DR has not raised any serious objection. Consequently, since the assessee was prevented by sufficient cause, the delay of 11 days in filing the COs stands condoned and admits the Cross Objections for adjudication. 4. The Revenue has raised following grounds for the AY 2013-14: 1. The order of the ld.CIT(A) is contrary to the provisions of the Income Tax Act, Rules and facts of the case. 2. The CIT(A) has deleted the additions made by the Assessing Officer under the head special salary, additional salary, management salary, special management salary, sworn statement given by the commission etc. The learned CIT(A) failed to note the Executive Director, D Kabilan, one of the Directors on 17.11.2015. 3. (a) The learned CIT(A) deleted the additions made to the contractors on the ground that they are labourers and TDS deduction is not applicable to such payments. The seized materials verification reveal ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....also furnished before the Assessing Officer vide letter dated 14.12.2017, wherein the assessee has explained that as per SAP, the wastage of packing materials were deducted only at the end of the each financial year. Also it was explained that as per the SAP, the closing stock Was valued at weighted average rate of raw material, but as per the return the closing stock was valued at the cost price existing at the end of the month i.e. 31st March which is the accounting standard followed by the company. The assessee has not explained clearly about the grounds on which the difference has cropped up. In assessment year 2014-15, the Revenue has raised following grounds: 1. The order of the ld.CIT(A) is contrary to the provisions of the Income Tax Act, Rules and facts of the case. 2. The CIT(A) has deleted the additions made by the Assessing Officer under the head special salary, additional salary, management salary, special management salary, commission etc. The learned CIT(A) failed to note the sworn statement given by the Executive Director, D Kabilan , one of the Directors on 17.11.2015. 3. (a) The learned CIT(A) deleted the additions made to the contrac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cer under the head special salary, additional salary, management salary, special management salary, commission etc. The learned CIT(A) failed to note the sworn statement given by the Executive Director, D Kabilan, one of the Directors on 17.11.2015. 3. (a) The learned CIT(A) deleted the additions made to the contractors on the ground that they are labourers and TDS deduction is not applicable to such payments. The seized materials verification reveal that the payments were made under salary head and not under contract head. Further from the verification of the materials it is observed that the EPF deduction is made to the labourers who are working under the contractors. Mere coverage of staff of the contractors under EPF does enable them to claim as labourers. (b) The learned CIT(A) has erred in disallowing the addition by subscribing to the views of the representative that they are labourers having regular PF subscription and for the convenience the payment is made through head labourers. It is pertinent to note that during the course of search proceedings, Shri S Murugesan, Accountant has categorically deposed that entire sum was paid to the respective contracto....
X X X X Extracts X X X X
X X X X Extracts X X X X
....cial year. Also it was explained that as per the SAP, the closing stock Was valued at weighted average rate of raw material, but as per the return the closing stock was valued at the cost price existing at the end of the month i.e. 31st March which is the accounting standard followed by the company. The assessee has not explained clearly about the grounds on which the difference has cropped up. 7. The learned CIT(A) had deleted the addition made by the AO regarding on money payment made by the assessee company for Rs. 17,68,655/-. The assessee company has produced bank account copies, and the relevant copy of property registration for having made the payment of Rs. 17,68,655/-. The assessee has produced the bank details for the source for having made the payment and also property registration document. However, second appeal is suggested to consider the case on merits. 8. The learned CIT(A) has deleted the additions made by the AO under purchase of copra from market committee on the ground that the assessee company has not made direct purchase from market committee and purchases of copra were from traders and which were recorded in the books. The assessee has furn....
X X X X Extracts X X X X
X X X X Extracts X X X X
....m market committee on the ground that the assessee company has not made direct purchase from market committee and purchases of copra were from traders and which were recorded in the books. The assessee has furnished reply to the AO at the time of search assessment proceedings. Also suitable reply was furnished in letter dated 29.02.2016 address to the ADIT (Inv.), Tirunelveli. On verification of the details available on record, the purchases of copra were made through traders and not directly from the market committee. Second appeal is suggested to consider the issue on merits. 5. Brief facts of the case are that the assessee, M/s. VVD and Sons (P) Limited is engaged in manufacture & sale of coconut oil & gingili oil, in operating wind mill and also in letting out ware-house etc. The assessee originally filed its return of income for the assessment year 2013-14 on 30.09.2013 admitting a total income of Rs..16,84,97,950/-. A search and seizure operation under section 132 of the Income Tax Act, 1961["Act" in short] was conducted on 17.11.2015 in the group cases of M/s. VVD and Sons (P) Ltd. During the course of search, several incriminating documents relating to unaccounted transa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....they have been duly adhered to. In support of the claim of the AR, the copies of the returns of income filed by the recipients, TDS returns which have been filed during assessment proceedings have also been produced during appellate proceedings. The AR further submitted that the AO solely relied on the oral statement of Mr. Kabilan recorded at the time of search in the late hours of the night and did not conduct further enquiry with the persons to whom salary and remuneration was paid. After going through the assessment order and the submissions of the AR it is seen that the assessing officer did not examine the nature of services rendered by them and did not record a finding that that the remuneration paid was unreasonable and excessive compared to similar services in other cases. This onus of proof lies on the assessing officer, which he failed to discharge, and he miserably failed to make out a case under section 40A(2). Further as pointed out by the AR, the very same officer did not make any disallowance while completing the assessment under section 143(3) r.w.s. 147 for AY 2009-10 on 31/12/2016 and under section 143(3) on 31/12/2017 for AY 2016-17. Further, the AO has....
X X X X Extracts X X X X
X X X X Extracts X X X X
....tion 153A of the Act is invalid or not. In a recent decision, in the case of PCIT v. Abhisar Buildwell Pvt. Ltd. (149 Taxmann.com 399), the Hon'ble Supreme Court has held that in case no incriminating material is unearthed during course of search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessment/ unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition can be made by the AO in absence of any incriminating material found during the course of search under section 132 or requisition under section 132A of the Act, 1961. In order to implement the law laid down by the Hon'ble Supreme Court in the above judgement, the CBDT issued Instruction No. 1 of 2023 dated 23.08.2023 vide letter F. No. 279/Misc./M-54/2023-ITJ. Under the above facts and circumstances, without any incriminating material evidence found during the course of search under section 132 of the Act, the assessment order passed under section 143(3) r.w.s. 153A of the Act for all the assessment years under appeal are liable to be quashed in view of the above decision of the Hon'ble Supreme Court as well as subsequent instructi....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... as follows: Name Contract Amount (Rs.) Neethirajan Filling charges 74,38,845 Navaneethakrishnan Filling charges 8,10,951 Uthirapandi Unloading, drier charges 13,86,641 Esakkimuthu Filling & drier charges 20,54,178 Veerapandi Filling charges 65,048 Total 1,17,55,663 Since the assessee has not deducted tax at source on the above payments of Rs..1,17,55,663/- to contractors for the assessment year 2013- 14, the Assessing Officer invoked the provisions of section 40(a)(ia) and made the disallowance. Similarly, the Assessing Officer disallowed Rs..1,28,43,955/- for the assessment year 2014-15 Rs..1,53,27,125/- for the assessment year 2015-16 and Rs..1,13,62,992/- for the assessment year 2016-17. 9.1 The assessee carried the matter in appeal before the ld. CIT(A). While deleting the addition, the ld. CIT(A) has observed as under: 6.2. Coming to the ground relating to payment made to contractors without making TDS, it is submitted by the AR that S/Shri Uthirapandi, Navaneethan, Easakkimuthu, Veerapandi and Kumar are the head-labourers and the workers under them are in the muster roll of the appellant and....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AR requested for deletion of the entire addition made on this score for the AY 2013-14 to 2016-17. After going through the assessment order, it is seen that Mr. A. Chandrasekar has filed his return of income for the AYs 2013-14 and 2014-15 belatedly as per section 139. Hence the disallowance made by the AO viz., Rs. 74,38,845 (AY 2013-14) and Rs. 75,13,892/- (AY 2014-15) is hereby confirmed. Hence the grounds of appeal for the above two AYs are dismissed. For the AY 2015-16, the AO disallowed 30% of Rs. 1,02,11,284/- The contractor Shri Chandrasekar has filed the return of income on 18.10.2016 which is within the time limit prescribed u/s. 139. For the AY 2016-17 the AO disallowed 100% i.e. Rs. 77,14,276/-. For this AY Shri Chandrasekar has filed the return of income on 17.10.2016 which is within the due date u/s. 139. Accordingly the disallowance made for the AYs 20 15-16 (Rs.30,63,385- 30% of Rs. 1,02,11,284) & 2016-17 (Rs.77,16,274) is hereby deleted. This ground of appeal for the above two AYs is allowed. 9.2 Aggrieved, the Revenue is in appeal before the Tribunal. The Ld. CIT-DR submitted that the payments were contractual in nature which would require TD....
X X X X Extracts X X X X
X X X X Extracts X X X X
....labourer and therefore, there was no liability to TDS. Considering the above facts and circumstances, we are of the opinion that the ld. CIT(A) has rightly deleted the disallowance made under section 40(a)(ia) of the Act and thus, the ground raised by the Revenue is dismissed for the all the assessment years under appeal. 10. With regard to the addition towards variation in stock, during the course of search proceedings, a sworn statement was recorded on 19-11- 2015 from Shri D. Kabilan, director of the assessee-company. While answering to Question No.9, Shri Kabilan had admitted before the Assessing Officer that the variation between physical verification of stock and the books stock in respect of production of oil. It has been submitted that as per SAP software application maintained, the yield ratio for copra to coconut oil was prefixed as 63%, whereas the actual production is higher than that of 63% leading to discrepancy. The said discrepancy is noted in the books of accounts as 'vain'. Also, it was noticed that there was invariable excess stock in the physical inventory ranging from 500 to 1000 litres than the stock as per computerized SAP for each year. The details of adj....
X X X X Extracts X X X X
X X X X Extracts X X X X
....entage as excess stock (as if not accounted for) and compute the value thereof and added the same as unaccounted (excess) stock. This is a gross mistake. It is not proved anywhere that the stock was sold and cash was received. On the basis of the excess noted on the date of search in the stock register, the officials worked out the retrospectively the excess stock for the financial year 2009-10 to 2015-16 without taking any figures in the earlier year records. Any addition has to be made on finding of material evidences only. For the financial year 2009-10 to 2013-14 no such evidence was found. The simple arithmetic calculation will not be applicable for the earlier years. Further the AO has not proved, admitting for a while that there was excess stock, that such excess stock was sold and unaccounted income has been earned through the same. By following the same methodology the AO reworked the excess and notional stock for the earlier AYs viz., 2010-11 to 2015-16 also. In the circumstances, the AR pleaded for deletion of the entire addition made in all the AYs i.e. 2010-11 to 2016-17. I have gone though the elaborate submissions made by the AR. It is an admitted fact that ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... more or less depending upon the quality of the copra fed in the crusher. This excess / deficiency of crushed oil is used to be accounted in the books as either (-) % or (+) %. However, the Assessing Officer has taken the (+) percentage as excess stock (as if not accounted for) and computed the value thereof and added the same as unaccounted (excess) stock. By considering the submissions of the assessee, the ld. CIT(A) has observed that Assessing Officer had mistakenly considered the (+) as excess stock and arrived at the value of such notional stock and thereby calculated the value and added the same as excess stock. Moreover, in the assessment order, the Assessing Officer has not anywhere brought on record that such excess stock was sold in the market and resultant unaccounted income was earned. The standard yield of oil of 63% fixed by the assessee was to monitor the quality of copra for internal purposes and it does not mean that the appellant did not account the actual production in excess of 63%. The actual production whether more or less than 63% was accounted in the stock book and further shown as sales in the Profit and Loss Account. In view of the above facts, the ld. CIT....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hri Shajahan has also admitted that he acts as a commission agent only for bogus invoices and that he issued invoices in the names of his own concerns mentioned above. The copra purchased from various traders in pollachi would come M/s. VVD & Sons, as if they were sent from kerala parties. I do not know about the details of Pollachi Traders, which are only known to Shri Kandasamy, a broker for copra purchase for M/s. VVD & Sons. These Pollachi Traders get supply of copra from the farms at Pollachi. " 6.2 During the course of search assessment proceedings Shri Kandasamy, a broker of copra purchase of M/s, VVD & Sons, was issued a summons u/s. 131 and a sworn statement was recorded from him on 16.11.2017. The reply to Q. No, 8, 9 & 10 are reproduced as under: About the details of traders arranged by him Shri Kandasamy stated that the following are the traders in Kerala who supply copras to M/s. VVD & Sons viz. 1. Achu Traders, Palakkad 2. Appu Traders, Palakkad 3. Madeena Traders, Palakkad. 4. Alfas Traders, Palakkad. 5. Shajahan Traders, Palakkad The actual purchases made Pollachi were shown as if they ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... one hour, again the lorry driver with load copra returns to Tamil Nadu with the sales bills drawn by Shri Shajahan in favour of Ms. VVD & Sons. He has stated to have not known the details of where the copras were supplied. He has also stated that with the raising of purchase bills and thereafter raising sales invoices in favour of Ms VVD & Sons, his work is done/over. For which work done Shajahan he has stated to have received a commission amount of Rs. 1000-2000 per load from M/s. VVD & Sons Pvt. Limited. Shri Shajahan has also stated that he is not aware of the money deposited by M/s. VVD & Sons (P) Limited for his having supplied to copra t M/s. VVD & Sons. The assessee has also stated that the money transactions are known only to Shri Chinna, Senthil and Natarajan. 6.4 From the above facts, it is learnt that the real suppliers are Shri Chìnna, Senthil and Natarajan of Pollachi and not Shajahan since he has supplied the copras in the capacity of a commission agent alone and not as a seller. This fact is also confirmed from the above mentioned facts and also from the statements recorded from the three persons Shri Chinna, Natarajan and Senthil. 6.5 Durin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the three persons at Pollachi. It is also confirmed from their sworn statements that the sms regarding the payment made through RTGS by M/s. VVD & Sons has also received by the three persons. Moreover, the said three persons only have withdrawn the payments credited through RTGS by presenting the self cheques issued by Shajahan. After withdrawing the payments from RTGS, the three persons have made in turn payments to the farmers from whom they have purchased the copras and commission to Shri Shajahan, who is a commission agent. Having played the major role in supplying the copra to VVD & Sons, the three persons have failed to disclose the farmers' identity such as name, address, quantity purchase, PAN No. Whether any returns filed in their names, bank account details of the farmers made by them. It is worth to mention the three persons have made note of purchase of copra from farmers in loose sheets only, that would be destroyed by them then and there, as averred by them in their statement. The said three persons stated during hearing that they do not maintained any books of accounts for such a voluminous purchase of copras and supply. It is surprised to note that the purchase....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ayments said to be made by M/s. VVD & Sons have not at all reached the farmers either. Shri Shajahan has also stated in his statements that he has worked as commission agent alone, for which he has stated to have received his commission part. In this circumstances, it is not ascertainable whether the entire RTGS payment has been received by Shri Shajahan or the three persons or other then the four persons. 6.11 From the above facts it is not ascertainable as to who is the final and actual with receiver of the RTGS payments made by VVD & Sons. In such a situation as regard to copra purchases said to have been made remained doubtful as to who is the real supplier of copra to VVD & Sons, since Shajahan and the three persons remains silent and stated throughout the proceedings that they are only the agents for supplying copras by getting only commission payment. 6.12 From the findings made as discussed in the earlier paragraphs, a fact is obvious that Shri Shajahan has been paid by the VVD & Sons only a sum of 1000/- to 2500/- per load as his part of commission. Shri Shajahan was asked to raise fake purchase invoices to M/s. VVD & Sons and provide sales accommodation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s. Achu Traders, M/s. Alfas Traders, Madeena Traders, Shajahan Traders, Achu Trades) have not been brought into limelight by the three persons and Shri Shajahan. In the absence of such an identity of farmers (suppliers of copra) the entire payment made to Shri Shajahan through RTGS is considered as payment made in violation of Section 40A(3) of the I.T. Act. 6.15 The assessee's authorized representative has filed his reply on 20.12.2017 regarding the purchases of copra from Shajahan group concerns. The content of his reply were fully considered and the same are not acceptable. An amount of Rs. 21,09,09,180/- is disallowed and added u/s 40A(3) towards violation of the provisions of the said Section for the A.Y 2012-13, since the payments towards purchase from Shajahan were made through bearer-cheques and not through account payee cheques or account-payee demand drafts as required u/s 40A(3). 6.16 It is abundantly clear that actually no sale of copra took place between M/s. Appu Traders and M/s. VVD & Sons. Only in order to reduce the tax liability as well as to avoid provisions of Sec. 40A(3) , M/s. VVD & Sons had resorted to a kind of dubious method, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....payments were made. Any how the fact remains that the appellant paid the entire money only through RTGS and without appreciating these facts, resorted to disallowance u/s.40A(3) as if cash payments were made by the appellant. It is seen from the assessment order that the AO has admitted the fact that payments were made through RTGS. In fact the AO attached the photo copy of the bearer cheque issued by the Kerala supplier only and nowhere the AO has proved that appellant indulged in cash payment. The AO has not made a mention or proved that for the purchase of copra cash payments were made by the appellant. Likewise, the AO has also not refuted the purchase of copra. I am of the considered view that so long as the appellant has not made cash payments and all the payments were through RTGS, invoking the provisions of section 40A(3) is not correct and hence the resultant disallowance also is uncalled for. Further, the main contention of the appellant is that all the payments to the group concerns of Mr. Shajahan were made by RTGS and the same is not disputed by the AO. On the other hand, the assessing officer relied on the books of accounts seized from the residential premise....
X X X X Extracts X X X X
X X X X Extracts X X X X
....efore the Tribunal. 11.4 The Ld. CIT-DR submitted that the findings of Ld. AO establishes that the actual purchases were made from Pollachi parties and not from Kerala parties as claimed by the assessee. The Pollachi parties were paid in cash which justifies invocation of section 40A(3) of the Act. 11.5 The Ld. AR, on the other hand, controverted the same and submitted that the purchases were evidenced by copies of invoices. All the payments were made to Kerala parties through RTGS. All these parties were filing Sales Tax return. Considering all these evidences, the impugned additions have been deleted. 11.6 We have considered the rival contentions. The case of the assessee is that the assessee used to acquire copra from wherever they are available at competitive price with an eye on the quality of the same. As per the invoices raised by the Kerala suppliers, payments were made by the assessee through RTGS. However, the Assessing Officer disallowed the entire expenditure by holding that the assessee made bogus purchase. On appeal, the ld. CIT(A) has noted from the documents produced before the him as was furnished to the Assessing Officer that all the payments to the Keral....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in the invoices raised by Shajahan group concerns are compared with that quoted by another supplier on a particular date, it is found that the rate quoted in the invoices prepared in the name of Shajahan group concerns is higher than that of the another supplier. The inflated value of copra purchased from Shajahan group for the financial year 2012-13 relevant to the assessment year: 2013-14 is worked out at Rs. 57,38,397/- and the same is treated as bogus purchase for the said Assessment Year: 2013-14. It is noticed from the invoices of Shri.Shajahan group that the inflated value of purchases made during the F.Y 2012-13 relevant to the Assessment Year 2013-14 was arrived at Rs. Rs. 57,38,39 7/- (for a quantity of 4904613.18 on an inflated rate of 1.17 per kg), The said amount of Rs. Rs. 57,38,39 7/- I- is treated as bogus purchase from Shajahan group concerns for the A.Y 2013-14. The same is disallowed and added. 12.1 Similarly, the Assessing Officer made disallowance towards bogus purchase of copra for the assessment year 2014-15 of Rs..1,08,59,175/- and for the assessment year 2015-16 of Rs..1,13,40,886/-. 12.2 On appeal, with regard to the deletion of addition ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... doubt, suspicion, assumption, and surmises. Hence I am of the considered view that the addition made on this count is unwarranted and delete Rs. 57,38,397(AY 2013-14), Rs. 1,08,59,175/- (AY 2014-15) and Rs. 1,13,40,886/- (AY 2015-16). This ground of appeal for the AYs 2013-14 to 2015-16 is allowed. 12.3 Aggrieved, the Revenue is in appeal before the Tribunal for the assessment years 2013-14, 2014-15 and 2015-16. 12.4 The Ld. CIT-DR supported the findings of Ld. AO that the comparison of purchase price with other parties would show that there was inflation of purchase expenditure. 12.5 The Ld. AR submitted that there is no scope of presumption or assumptions and the additions have to be based on concrete evidences only. 12.6 We have considered the rival submissions. In the assessment order, the Assessing Officer has observed that there is rate variation in the purchase of copra resulting in inflation of purchase price. After considering the submissions of the assessee, the ld. CIT(A) has observed that the assessee was in the business for the past several years and has acquired a reputation for its products. It was further observed that in order to get high qual....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rence amounting to Rs. 2,47,72,535/- in the Assessment Order u/s.; 143(3) r.w. Sec.153A for the Assessment Year: 2012-13 in the assessee-company's own case, the opening stock for the subsequent assessment years may be re-worked by giving credit for the aforesaid addition of Rs. 2,47,72,535/- to the closing stock value which in turn would modify the opening stock value for the previous year: 2012-13 i.e. Assessment Year: 2013-14 and so on. The assessee's above plea is considered and the same is acceptable. Owing to this, the addition on account of suppression in the value of closing stock is worked out at Rs. 21,33,110/-. This sum is treated as suppression of stock for the Assessment Year: 2013-14 and is added to the total income. 13.1 Similarly, the Assessing Officer made addition towards difference in closing stock as per SAP vs. Return of income for the assessment year 2015-16 at Rs..32,25,318/-. 13.2 On appeal, the ld. CIT(A) has observed as under: 6.9. The last ground relates to AY 2013-14 to 2015-16 purported suppression of closing stock. The AR submitted that during the FY 2011-12 the appellant company switched over from Tally system o....
X X X X Extracts X X X X
X X X X Extracts X X X X
....y to SAP. In fact, for the AY 2012-13 the value of closing stock of Rs. 2,47,72,535/- added by the AO, was deleted in the appellate order vide ITA No.344. 345 and 346/17-18 dated 16.4.2018. Accordingly considering the above addition in the closing stock, for the AY 2012-13, addition on account of telescopic effect was made in the AYs 2013-14 and 2015-16 for Rs. 21,33, 110/- and Rs. 32,25,318 respectively. Now that the value of closing stock of Rs. 2,47,72,535/- has been directed to be deleted in the AY 2012-13, the addition on account of telescopic effect made for the AYs 2013- 14 and 2015-16 for Rs. 21,33,110/- and Rs. 32,25,318 respectively is hereby deleted. This ground of appeal for both the AYs is hereby allowed. 13.3 Aggrieved, the Revenue is in appeal before the Tribunal for both the assessment years 2013-14 and 2015-16. 13.4 The Ld. CIT-DR supported the computations made by Ld. AO. However, ld. AR submitted that the variation was only due to the fact that the assessee switched to SAP based accounting software. 13.5 We have considered the rival contentions. In the assessment order, the Assessing Officer has noted that there is variation in the value of stoc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mam 39,69,048 Pethappampatti 51,53,600 Total 1,36,46,648 During the search, it was found that the copra purchased from various market committees are not recorded in the books of accounts of VVD Company. The said market committees are governed by Department of Agricultural marketing and agricultural business Government of Tamilnadu. The entire purchases were made by remitting cash in the respective market committee with 1% cess levied by the committee. During the post search also, when enquired about the purchase made from market committee, Shri Kabilan, one of the Executive Director of VVD & Sons has not given any proper evidence/explanation. Even during the course of search assessment proceedings, the assessee company did not gave any explanation about the cash purchase made from market committee. In the absence of any corroborative evidence about the cash purchase of Rs. 1,36,46,648/- from market committee the undisclosed production out of unaccounted copra purchase from market is arrived by adopting the gross profit ratio adopted at 20.16%. The gross profit of undisclosed production out of unaccounted copra purchases for the A.Y. 2015-16 is worked out at ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....at the deemed gross profit. For the Ay 2015-16 the purported total purchases from the market committee had been taken at Rs. 1,36,46,648/- The gross profit arrived at on this illusory purchase is computed at Rs. 2,09, 10,485/- This is to say the gross profit has been worked out at 153.22% By no stretch of imagination this gross profit can be achieved. In the AY 2016-17, such purchases have been taken at Rs. 4,53,75,915/- and no gross profit has been worked out and surprisingly added the entire purchase cost. It is needless to say that the value of purchases made from the traders, who participated in the auction conducted by the Market Committee, has already been booked in the regular accounts. Thus it can be seen that the AO indulged in a futile exercise in making the impugned addition. After going through the various documents produced by the appellant such as Permit to move the copra from the market committee to the appellant, proof of cess payment by the successful bidder etc. which were furnished before the AO during assessment proceedings, I am of the view that the explanation offered by the appellant are plausible. The permit to move the copra from the place....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ess receipt No, 467694 dated 15.11.2015) and (2) related Permit (No.552894 dated 15.11.2015) through which the trader transfers the copra to the assessee. From this, the ld. CIT(A) has noted that the assessee had not indulged in purchases directly from market committee and the purchases were only from traders, which purchases were duly accounted. Without understanding these modalities the Assessing Officer came to the conclusion that the assessee had purchased copra from market committee and accordingly the impugned addition was made. Based on this wrongful conclusion, the Assessing Officer also calculated deemed gross profit. The ld. CIT(A) has further observed that for the AY 2015-16 the purported total purchases from the market committee had been taken at Rs..1,36,46,648/-. The gross profit arrived at on this illusory purchase was computed at Rs..2,09,10,485/-. This is to say the gross profit has been worked out at 153.22%. Thus, it was observed that by no stretch of imagination this gross profit can be achieved. In the AY 2016-17, such purchases have been taken at Rs..4,53,75,915/- and no gross profit has been worked out and surprisingly added the entire purchase cost. It is ne....
X X X X Extracts X X X X
X X X X Extracts X X X X
....revised fund requirement statement was seized vide ANN/VRH/VVD/LS/S-I dated 19.11.2015. The statement was prepared on 10.11.2014. As per the materials, the assessee company purchased 5.96 areas of land in Melaiyur Village, Aruppukottai Taluk, Virudhunagar District from ShriK Srinivasan for a sum of Rs. 3,40,000/- per acre. It was also seen that the company has paid Rs. 14,70,655/- as cash to Sri K Srinivasan, While raising a specific question in this aspect Shri D. Kabilan, vide his sworn statement in answer 6 has stated that the amount of Rs. 14.70.655/- is the difference between the actual sale consideration agreed and the guidelines value prescribed by the Government. Sri Kabilan has agreed to admit the said amount as undisclosed income for the respect assessment year. Therefore, the payment of on money for the purchase of land at Rs. 14,70,655 and the brokerage paid by cash of Rs. 2,98,000/- are brought to tax for the A.Y, 2015-16. 15.1 On appeal, the ld. CIT(A) has observed as under: 6.6. The next ground relates to addition on account of alleged on-money payment in acquisition of land. This addition relates to the AY 2015-16. The facts are that the company has purc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e evidence supported by any sworn statement from the vendor I am inclined to agree with the explanation offered by the appellant. Further the appellant has offered substantial additional income for AYs 2010-11 to 2016-17 towards bogus bought notes as per the details given below: Bought Note Purchase offered in the return of income filed in response to notice u/s. 153(A) Sl.No. AY Rs . 1 2010-11 14268681 2 2011-12 17132430 3 2012-13 6935852 4 2013-14 11245946 5 2014-15 15874995 6 2015-16 19948175 7 2016-17 11315448 Total 96721527 Considering the above offer, AR requested that such additional income can be telescoped against on-money payment assessed by the AO. The AR's submissions have been considered. It is a fact that the appellant had made the payments for the acquisition of the immovable property through accounted source only, as has been evidenced by the entries in the books of account. Rejecting the claim of the appellant, the AO has not fortified his decision with any documentary proof that the sources are from outside the books. Further the AR submitted that....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....2,98,000/-. The ld. CIT(A) has observed that while resorting to the said addition, the Assessing Officer has not examined the vendor and recorded any sworn statement to bring on record that the vendor received any on-money payment. In the absence of any corroborative evidence supported by any sworn statement from the vendor, the ld. CIT(A) was convinced with the explanation offered by the assessee. Further, the ld. CIT(A) has observed that the assessee has offered substantial additional income for AYs 2010-11 to 2016-17 towards bogus bought notes to the extent of Rs..9,67,21,527/-. Under the above facts and circumstances, the ld. CIT(A) has rightly deleted the addition of Rs..17,68,655/- and thus, we find no infirmity in the order passed by the ld. CIT(A) on this issue. 16. The assessee has preferred Cross Objections for the assessment years 2013-14 and 2014-15 challenging confirmation of addition towards disallowance of Rs..74,38,845/- and Rs..75,13,892/- under section 40(a)(ia) of the Act respectively with regard to the non-deduction of tax at source in respect of payments made to Mr. A. Chandrasekar. With regard to the addition towards labour payment, before the ld. CIT(A), ....