2019 (10) TMI 396 - AT - Income Tax

Assessment u/s 153A - Addition u/s 69C on account of bogus purchases - AO also taxed such disallowances u/s 115BBE - HELD THAT - Addition made by the AO in the assessment without any reference to incriminating seized material was considered by the Hon'ble Rajasthan High Court in the case of Jai Steel Ltd. vs ACIT 2013 (6) TMI 161 - RAJASTHAN HIGH COURT wherein held in case of completed assessment, no addition can be made if no incriminating seized material is found during the course of search. CIT(A) has also considered the judgement of Hon'ble Delhi High Court in the case of Kabul Chawala vs ACIT 2015 (9) TMI 80 - DELHI HIGH COURT and other related judgements which are specifically mentioned in his order and he had rightly concluded that the addition made by the AO without any reference to the seized material is not legally sustainable. Thus this issue was rightly decided by the ld. CIT(A) in favour of the assessee. AO had made addition by merely relying on the statement of one Shri Rajendra Jain which cannot be termed as an incriminating material as said statement should have related to incriminating material found during the course of search or statement must be made relatable to material by subsequent enquiry/ investigation. Addition @ 25% of alleged bogus purchases - In the present case, no opportunity to cross examine said Shri Rajendra Jain was provided by the Revenue authorities. Thus it was rightly held that not providing cross examination tantamount to denial of natural justice and does vitiate the assessment. CIT(A) has also considered that the AO himself had recorded in the assessment order that letter was issued to Custom Authorities SEZ-II, Sitapura Industrial Area, Jaipur to verify the said purchases and the AO has recorded a finding that SEZ authorities have confirmed that said purchases are genuine as duly recorded in their records. This itself cast a doubt on AO s conclusion that purchases made by the assessee were bogus. More particularly, when it is certificate from another Govt. Agency by certifying the genuineness of the purchases and it tilts preponderance of probability in favour of the assessee. It is pertinent to mention that the ld. CIT(A) has explicitly dealt with the issue and deleted the addition made by the AO giving full justification to the issue in question and we find no reason to interfere with the order of the ld. CIT(A) on the issue raised by the Revenue Delayed employees s contribution towards PF and ESIC - HELD THAT - Employee s contribution towards GPF, CPF and ESI deposited by the assessee on or before the due date of filing the return u/s 139, though beyond the due dates as given under the respective Acts, cannot be disallowed u/s 43B or 36(1)(va). SEE CIT Vs. Jaipur Vidyut Vitran Nigam Ltd. 2014 (1) TMI 1085 - RAJASTHAN HIGH COURT

Summary

Issues Involved:
1. Deletion of additions under Section 69C for bogus purchases.
2. Allowance of deduction under Section 10AA/10A.
3. Addition under Section 36(1)(va) for delayed employee contributions to PF and ESIC.

Detailed Analysis:

1. Deletion of Additions under Section 69C for Bogus Purchases:

The Revenue challenged the deletion of additions made under Section 69C for bogus purchases for the assessment years 2010-11, 2011-12, and 2012-13. The Assessing Officer (AO) made these additions based on information from the Mumbai Investigation Wing that the assessee took accommodation entries from entities controlled by Rajendra Jain and Banwari Lal Jain. The AO treated 25% of the purchases as bogus and added them under Section 69C, also disallowing deductions under Section 10AA/10A.

The CIT(A) deleted these additions, stating that the AO's additions were based solely on statements from third parties without any incriminating material found during the search. The CIT(A) referenced several judgments, including those from the Rajasthan High Court and Delhi High Court, which held that additions in completed assessments require incriminating material found during the search. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's reliance on third-party statements without corroborative evidence and the lack of opportunity for cross-examination violated principles of natural justice.

2. Allowance of Deduction under Section 10AA/10A:

The Revenue also contested the allowance of deductions under Section 10AA/10A, arguing that the provisions of Section 69C and Section 115BBE disallow such deductions when purchases are made from the grey market in cash. The CIT(A) allowed these deductions, and the Tribunal agreed, noting that the AO's basis for disallowance was not legally sustainable without incriminating material. The Tribunal reiterated that the CIT(A)'s findings were well-reasoned and dismissed the Revenue's grounds.

3. Addition under Section 36(1)(va) for Delayed Employee Contributions to PF and ESIC:

For the assessment year 2012-13, the AO added ?32,868 under Section 36(1)(va) for delayed employee contributions to PF and ESIC. The CIT(A) deleted this addition, citing judgments from the Rajasthan High Court, which held that contributions made before the due date of filing the return under Section 139(1) cannot be disallowed under Section 43B or Section 36(1)(va). The Tribunal upheld the CIT(A)'s decision, referencing similar judgments and the Supreme Court's stance on the issue.

Conclusion:

The Tribunal dismissed the Revenue's appeals for all the assessment years, upholding the CIT(A)'s decisions on all grounds. The Tribunal emphasized the importance of incriminating material for additions in completed assessments, the need for cross-examination to uphold natural justice, and the legal precedents supporting the allowance of deductions and deletion of additions.