2015 (5) TMI 112 - AT - Income Tax

Bogus transactions - Addition on expenditure for purchase of packing material - Unexplained share application money - Applicability of revised monetary limits for filing appeal to Tribunal at ₹ 4 Lacs - Instruction No. 5/14 issued by the CBDT on 10.7.2014 - Held that - It is indisputable fact during the course of assessment proceedings, the Assessing Officer had issued summon to M/s S.R. Enterprises (seller of packing material). The notices were returned unserved and same was duly intimated to the assessee. The two Inspectors who carried out local enquiries on 18.10.2010 also could not locate the address of M/s SR Enterprises given by the assessee. None of the outlets in the area had ever heard of M/s SR Enterprises. In the course of appellate proceeding, the assessee had given an affidavit of Sri Rajnish Tyagi, detailing the dealings of the assessee with that of M/s SR Enterprises. It was categorically found by the Assessing Officer in the course of remand proceeding that Sri Rajnish Tyagi was no way connected with either of M/s SR Enterprises nor the assessee. The Bank account of M/s SR Enterprises also was verified by the Assessing Officer. It was noted the amount that was received from the assessee was withdrawn immediately by cash. Though the goods were sold in beginning of the financial year by SR Enterprises no payment was made by the assessee during the entire financial year. Some payments were made in the subsequent year to M/s SR Enterprises and as mentioned earlier the beneficiaries of these payments could not verified. The findings of the Income Tax authorities have clearly established that so called purchases made by the assessee from M/s SR Enterprises are nothing but bogus transactions, just to inflate the expenses. - Decided against the assessee. Applicability of revised monetary limits for filing appeal to Tribunal at ₹ 4 Lacs by revenue - In view of the order of the Tribunal in the case of Sushila Saraogi 2014 (11) TMI 294 - ITAT KOLKATA which have elaborately considered the identical issue, we hold that instruction No. 5/2014 issued by the CBDT on 10.7.2014 is applicable to the pending appeals. In the instant case, the tax effect being below ₹ 4 lacs, without going into the issue on merit, we dismiss the appeal of the revenue in liminee. It is to be mentioned that Ld. DR was unable to point out any exceptional circumstances /situation (mentioned inboard instruction No. 5 /2014) for filing an appeal despite the monetary limit being below the prescribed limit. - Revenue appeal dismissed.

Summary

Issues involved:
1. Addition of Rs. 67,21,611 on account of expenses on packaging material in the assessee's appeal.
2. Deletion of the addition of Rs. 12,00,000 made by the AO under section 68 of the Act on account of unexplained share application money in the Revenue's appeal.

Detailed Analysis:
1. In the assessee's appeal, the primary issue revolved around the addition of Rs. 67,21,611 for expenses on packaging material. The Assessing Officer (AO) raised concerns about the legitimacy of the purchases made by the assessee from M/s S.R. Enterprises. Despite the assessee's submissions and evidence, including a purchased order from overseas buyers, the AO deemed the purchases as bogus. The AO highlighted discrepancies in the assessee's claims regarding packing expenses and export values, ultimately disallowing the expenditure. The CIT(A) upheld the AO's decision, emphasizing the non-existence of M/s S.R. Enterprises after thorough investigations. The CIT(A) concluded that the purchases were part of a scheme to inflate expenses, leading to the rejection of the books of accounts under section 145 of the Act. The ITAT confirmed the lower authorities' findings, dismissing the appeal and upholding the addition.

2. The Revenue's appeal focused on the deletion of the addition of Rs. 12,00,000 under section 68 of the Act related to unexplained share application money. The counsel for the assessee argued that the tax effect fell below the prescribed limit for filing an appeal before the ITAT, citing relevant instructions and precedents. The ITAT considered the applicability of instruction No. 5/2014 issued by the CBDT, following the decision in the case of Deputy Commr. of Income Tax vs. Sushila Saraogi. As the tax effect was below Rs. 4 lakhs, the ITAT dismissed the Revenue's appeal without delving into the merits of the case. The dismissal was based on the lack of exceptional circumstances for filing an appeal despite the monetary limit being below the prescribed threshold.

In conclusion, both the appeals filed by the assessee and the Revenue were dismissed by the ITAT, with detailed analysis and considerations provided for each issue raised in the judgment.