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2024 (5) TMI 24 - AT - Income TaxEstimation of income - Bogus purchases under the head fuel/diesel purchased from three parties - CIT(A) sustained the disallowance to the extent of 10% of total purchase from three parties - HELD THAT - There is no rational behind restricting disallowance to 10% when the complete list of bills and delivery location along with vehicle numbers used for supplying goods/materials were provided to the AO during the assessment proceedings. In our opinion, the CIT(A) is not justified in sustaining 10% diesel/fuel expenses as bogus merely for the reason that 10% disallowance has been made in respect of bogus purchases by the Assessing officer. In the case of PCIT Mumbai v. JK Surface Coatings Pvt. Ltd. 2021 (10) TMI 1323 - BOMBAY HIGH COURT relied upon by the ld CIT(A), the bogus purchases were undisputedly confirmed and only issue was of the percentage of disallowance. In said case delivery of material was not established whereas in the instant case the AO has neither doubted delivery nor doubted consumption of the diesel and therefore, sustaining ad-hoc disallowance, merely on the basis of the presumption, cannot be upheld and accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition sustained by him. Decided in favour of assessee. Disallowance on account of alleged bogus tyre purchase bills - disallowance of 10% of expenses out of expenses on purchase of tyres shown from M/s Om Shree Siddhivinayak tyres during year under consideration - HELD THAT - In view of the observations during the course of the survey, the director of the assessee company Shri Satish Mandhania admitted fact of the bogus purchase. The cashier of the assessee company also stated of receipt of cash back from M/s Om Shree Siddhivinayak tyres. In view of those statements coupled with failure on the part of the assessee in providing complete details of delivery challans of the bills in respect of M/s Om Shree Siddhivinayak tyres, the Assessing Officer held 10% of the purchases as bogus and accordingly disallowed. The assessee also failed to produce details of delivery challans in respect of purchase bills where tyre numbers and size were not mentioned in the invoices before the ld CIT(A). Before us, also no such details to support that goods were actually delivered in respect of bills where tyre numbers and sizes were not mentioned. In absence of any such supporting documents, the statements get corroborated that part of the purchases from M/s Om Shree Siddhivinayak tyres are in the nature of bogus. In absence of complete details provided, the AO is justified in making estimated disallowance @ 10% of total expenses on tyre purchase. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground No. 2 of the appeal of the assessee. Disallowance for unsubstantiated expenses - HELD THAT - We find that the sufficient documentary evidences have been produced by the assessee in respect of rent paid for RMC plant and labour supply at Pune before the lower authorities. In our opinion, once the CIT(A) is satisfied with the documentary evidences maintained in respect of those expenses, particularly when he himself mentioned that no lacuna or defect has been found in documents filed during assessment proceedings, then he is not justified in sustaining disallowance to the extent of 10% of the expenses for the reason that those parties did not respond to the notice u/s 133(6) of the Act. It is not the case that those parties have not been found that their address because, the notice issued u/s 133(6) of the Act has not been claimed to be returned unserved. Once, notice were served it was the duty of the AO to enforce their attendance or carry out inquiry by sending Inspector at their site. In absence of any such evidence of non-existence of those parties, the action of the Ld. CIT(A) in sustaining addition @ 10% of the total expenses purely on ad-hoc basis is not justified. The finding of the Ld. CIT(A) on the issue in dispute is accordingly set aside. Addition for the share application money u/s 68 - HELD THAT - Assessee has submitted during the appellate proceedings that said company has been stricken off by the Registrar of Companies (ROC) ,therefore, no reply was received. CIT(A) is justified in accepting this explanation of the assessee and therefore, no adverse view could be taken on this account. Secondly, CIT(A) has further rejected the argument of the Assessing Officer in the original assessment order that director of the assessee was a non-filer. In our opinion the status of the director of company as non-filer is not relevant while deciding the identity, creditworthiness and genuineness of the transaction of a company. Thirdly, the AO in assessment order mentioned that cash deposits were made in bank account of said party, however, the ld CIT(A) has pointed out that not a single instance has been brought on record by the AO. Before us also no such instance has been brought by the ld Departmental Representative. In our opinion, once the AO in the remand report has accepted the identity and creditworthiness of the share subscriber and genuineness of the transaction, then, filing of further appeal before the Tribunal on the said issue, is not justified. Ground of appeal of the Revenue dismissed. Addition of share application money received from one party - CIT(A) deleted addition - AO has doubted the creditworthiness of M/s Kasturi only for the reason source of money in the hands of said party was share application money from other 13 companies, whose credential were not verified - HELD THAT - The assessee has already filed a copy of ITR and other document in respect of said party. The identity of M/s Kasturi has not been doubted by the AO. Regarding creditworthiness, the ld CIT(A) observed that the Assessing officer has not mentioned as what happened in the assessment in the case of Kasturi and those 13 parties, which had been termed as shell companies by the investigation wing of Kolkatta. The ld CIT(A) opined that if source of money is not explained in their hand, then addition warrants in their case and not in the case of assessee. We are of opinion that if addition has been already made in the case of Kasturi, then no further addition is required in the case of the assessee. In view of above, in principle we do not find any error in the order of the Ld. CIT(A) on the issue in dispute but for verification of the fact addition in respect of source of money has been already done in assessment of Kasturi, we restore the matter back to the AO - Revenue ground allowed for statistical purpose. Disallowance of depreciation on unaccounted sales of old vehicles - As per AO assessee company had unaccounted sales of vehicles - CIT(A) deleted addition - HELD THAT - We find that only evidence of unaccounted sale of old vehicles has been found in respect of assessment year 2018-19 and no documentary evidences have been found for the year under consideration. The Assessing Officer has merely extrapolated such unaccounted sale on the basis of presumption that assessee would have earned unaccounted cash on the sale of old vehicle during the year under consideration. The Ld. CIT(A) has rejected this contention of the Assessing Officer and deleted the addition made merely on the basis of the extrapolation of the figures of the subsequent year. In our opinion, finding of the Ld. CIT(A) on the issue in dispute is well reasoned and no interference is required on our part. Decided against revenue. Bogus loan u/s 68 - deposit received from two parties unexplained - CIT(A) deleted addition - HELD THAT - We find that the sums of money received from those parties against the sales have not been doubted by the AO and therefore, we do not find any reason for specifying the sum received from those two parties against the deposits for the distribution agreement as unexplained cash credit. Both the parties have filed all the documents to support the identity, creditworthiness and genuineness of the transaction. Further, in respect of statement by the director of the respective parties the Ld. CIT(A) has recommended for taking action of reassessment in their hand. In our opinion there is no infirmity in the finding of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same - Decided against revenue.
Issues Involved:
1. Disallowance of alleged bogus purchases of fuel/diesel. 2. Disallowance of alleged bogus tyre purchase bills. 3. Disallowance of unsubstantiated expenses. 4. Disallowance u/s 40(a)(ia) of the Income Tax Act. 5. Deletion of disallowance of share application money. 6. Deletion of disallowance of depreciation on unaccounted sales of old vehicles. Summary: 1. Disallowance of Alleged Bogus Purchases of Fuel/Diesel: The Assessee challenged the addition of Rs. 9,90,97,267/- for alleged bogus purchase of fuel/diesel. The Assessing Officer (AO) had disallowed the entire amount but the CIT(A) restricted the disallowance to 10% (Rs. 99,09,726/-) based on statements made during survey proceedings. The Tribunal found no justification for the 10% disallowance when the AO had verified all documentary evidence and given a clean chit to the assessee. The Tribunal deleted the addition sustained by CIT(A). 2. Disallowance of Alleged Bogus Tyre Purchase Bills: The Assessee contested the addition of Rs. 29,54,983/- for alleged bogus tyre purchase bills. The AO had disallowed 10% of the total tyre purchases due to discrepancies in bills found during the survey. The CIT(A) upheld the disallowance. The Tribunal found that the assessee failed to provide complete delivery challans and other supporting documents for tyre purchases, thus justifying the 10% disallowance. The Tribunal upheld the CIT(A)'s decision. 3. Disallowance of Unsubstantiated Expenses: The AO had disallowed Rs. 53,19,316/- for unsubstantiated expenses, which the CIT(A) reduced to Rs. 5,31,931/-. The Tribunal found that the assessee provided sufficient documentary evidence for the expenses and that the CIT(A) was not justified in sustaining the 10% disallowance. The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal on this issue. 4. Disallowance u/s 40(a)(ia) of the Income Tax Act: The Assessee's appeal related to the disallowance of Rs. 36,79,111/- u/s 40(a)(ia), of which Rs. 5,69,535/- was sustained by the CIT(A). This ground was not pressed before the Tribunal and was dismissed as infructuous. 5. Deletion of Disallowance of Share Application Money: The AO had added Rs. 11,85,74,000/- as unexplained cash credit, which the CIT(A) deleted. The Tribunal found that the AO in the remand report had accepted the identity and creditworthiness of the share subscriber and the genuineness of the transaction. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal. 6. Deletion of Disallowance of Depreciation on Unaccounted Sales of Old Vehicles: The AO had disallowed depreciation of Rs. 6,75,000/- for unaccounted sales of old vehicles based on extrapolation from subsequent years. The CIT(A) deleted the addition, and the Tribunal upheld this decision, dismissing the Revenue's appeal. Further Appeals for Subsequent Years: For subsequent assessment years (2014-15 to 2018-19), similar issues were raised. The Tribunal followed its findings for AY 2013-14, deciding the grounds mutatis mutandis. The appeal of the Revenue for AY 2014-15 was partly allowed for statistical purposes, while the appeals for AY 2018-19 were dismissed. Conclusion: The Tribunal partly allowed the assessee's appeals for AY 2013-14 to AY 2018-19, dismissed the Revenue's appeal for AY 2013-14, partly allowed the Revenue's appeal for AY 2014-15 for statistical purposes, and dismissed the Revenue's appeal for AY 2018-19.
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