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2021 (9) TMI 1408 - AT - Income TaxBogus job work expenses - HELD THAT - Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O., are bald assertion. It would be enough for us to say that voluminous documentary evidences filed by the assessee as referred above and considered by us clearly establish the genuineness of the job work expenses covered by the grounds of appeal under consideration. We have gone through the arguments of the assessee in respect of observations made by CIT(A) of the synopsis filed before us and we find that the evidences filed by the assessee to prove genuineness of the job work have not been found fault with by CIT(A) and there is no corroborative evidence produced against the assessee. We further find that CIT(A) misappreciated the nature of job work being done by this job worker and was not related to the assessee company or its directors. Statement of the wife of the proprietor cannot be used against the assessee. In the result grounds of appeal of the assessee in this regard are allowed the addition is hereby deleted. Addition of not-genuine purchases of fabric - HELD THAT - The adverse observations made by the A.O. in the assessment order have been met by the assessee one by one and we have taken ourselves to these adverse observations and response of the assessee and we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. CIT(A) too has mentioned in his order the adverse observations of the A.O. only which in our opinion are misplaced on facts. Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O. It would be enough for us to say that voluminous documentary evidences filed by the assessee are clearly establishing the genuineness of purchases fabric from M/s Jindal Fashion and M/s Akansha Fashion. We do not want to burden our order by repeating the whole hosts of documentary evidences filed in this case which establish that the purchases made by the assessee from the above said two suppliers are genuine purchases. We have gone through the observations made by CIT(A) in his appeal order and we do not agree with them. Opening of the bank account by the suppliers in the same bank in which assessee had bank account is not something which is unusual as it may be necessary for the smoothness of the banking and avoid the loss of time in collecting the cheques etc. We find that the burden to prove purchases was very well discharged by the assessee. We have deleted similar disallowance made in AY 2013-14 and 2014-15. Facts are identical in those years also. Assessee s appeal of the assessee are allowed and the addition is deleted. Bogus Purchases from vendors - HELD THAT - we agree with the Ld. Counsel for the assessee that the adverse observations made by the A.O. are not of substance and misplaced on facts. CIT(A) too has mentioned in his order the adverse observations of the A.O. only which in our opinion are misplaced on facts. Contention of CIT(A) that evidence filed by the assessee self-serving documents and circumstantial evidence leads to the conclusion of A.O. It would be enough for us to say that voluminous documentary evidences filed by the assessee are clearly establishing the genuineness of purchases fabric from M/s Super Connection India P. Ltd. other vendor companies. Other indicators such as percentage ratio of material to sale etc also establish the genuineness of the purchases. We do not agree with the observations made by the first appellate authority. In our considered opinion, assessee has been successful to discharge the burden of proving the purchase from M/s Super Connection India P Ltd. other vendor companies. Addition u/s 14A - HELD THAT - It is seen that there is exempt income only to the extent of Rs. 72,740/- and for this reason also, disallowance under section 14A could not have exceeded this amount in view of the decision of Delhi High Court in the case of Joint Investment Ltd. 2015 (3) TMI 155 - DELHI HIGH COURT and hence we uphold the order of CIT(A) to this extent. In the result, ground no. 11 of the assessee s appeal is dismissed and grounds no. (iii) to (viii) of the departmental appeal are also dismissed. Disallowance of treating the product development expense as deferred revenue expense - addition deleted by CIT-A - HELD THAT - As decided in own case 2016 (9) TMI 1634 - DELHI HIGH COURT appeal of assessee allowed. Unexplained cash sales - HELD THAT - It is seen that assessee has taken into account this sale in its profit and loss account and thus the sale of scrap has been considered while working out the result of this year. Separate addition of this very amount would lead to double addition. This was so held by CIT(A) also. We do not find any infirmity in the order of the first appellate authority in this regard and hence dismiss the ground of revenue s appeal and uphold the deletion of the addition
Issues Involved:
1. Assumption of jurisdiction under section 153A. 2. Disallowance of expenses claimed for job work by M/s Shri Ram Exports. 3. Addition on account of bogus purchases from M/s Akansha Fashion and M/s Jindal Fashion. 4. Addition on account of unexplained transactions with M/s Super Connection and other companies. 5. Disallowance under section 14A. 6. Approval under section 153D. 7. Interest under section 234B. 8. Disallowance of product development/sampling expenses. 9. Addition on account of unexplained cash sales. Detailed Analysis: 1. Assumption of Jurisdiction under Section 153A: The grounds relating to the assumption of jurisdiction under section 153A were not pressed by the counsel for the assessee and hence were dismissed. 2. Disallowance of Expenses Claimed for Job Work by M/s Shri Ram Exports: The assessee argued that M/s Shri Ram Exports was a genuine job worker and provided various evidences such as invoices, payments through account payee cheques, and tax deductions at source. The Tribunal noted that no incriminating material was found during the search to support the disallowance. The voluminous documentary evidence provided by the assessee established the genuineness of the job work expenses. The adverse observations made by the Assessing Officer (AO) were found to be misplaced and not substantiated. The addition of Rs. 19,46,05,259/- was deleted. 3. Addition on Account of Bogus Purchases from M/s Akansha Fashion and M/s Jindal Fashion: The assessee provided evidence showing genuine purchases of fabric from these suppliers, including payments through account payee cheques. The Tribunal found that there was no incriminating material found as a result of the search. The documentary evidence provided by the assessee was sufficient to establish the genuineness of the purchases. The addition of Rs. 27,19,08,768/- was deleted. 4. Addition on Account of Unexplained Transactions with M/s Super Connection and Other Companies: The assessee argued that the purchases from M/s Super Connection and other companies were genuine, supported by documentary evidence and payments through banking channels. The Tribunal noted that no incriminating material was found during the search. The documentary evidence provided by the assessee was sufficient to establish the genuineness of the purchases. The addition of Rs. 7,67,79,726/- was deleted. 5. Disallowance under Section 14A: The AO made an addition under section 14A, which was partly confirmed by the CIT(A). The Tribunal upheld the CIT(A)'s decision to limit the disallowance to the amount of exempt income earned, i.e., Rs. 72,740/-, in line with the Delhi High Court's decision in Joint Investment Ltd. The assessee's appeal on this ground was dismissed, and the department's appeal was also dismissed. 6. Approval under Section 153D: No specific submissions were made by the assessee regarding the approval under section 153D. Therefore, this ground was dismissed. 7. Interest under Section 234B: This ground was noted to be consequential in nature and did not require specific adjudication. 8. Disallowance of Product Development/Sampling Expenses: The AO treated the product development expense as deferred revenue expense, but the CIT(A) deleted this disallowance. The Tribunal upheld the CIT(A)'s decision, noting that similar issues had been decided in favor of the assessee in previous years by both the Tribunal and the Delhi High Court. 9. Addition on Account of Unexplained Cash Sales: The AO made an addition based on seized documents showing cash sales of scrap, which was admitted by the director during the search. The CIT(A) deleted this addition, noting that the sales were already accounted for in the profit and loss account, and a separate addition would result in double taxation. The Tribunal upheld the CIT(A)'s decision, dismissing the department's appeal on this ground. Conclusion: The Tribunal allowed the assessee's appeals on the grounds of disallowance of job work expenses, bogus purchases, and unexplained transactions, and upheld the CIT(A)'s decisions on product development expenses and unexplained cash sales. The disallowance under section 14A was limited to the amount of exempt income earned. The grounds related to the assumption of jurisdiction under section 153A and approval under section 153D were dismissed.
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