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2017 (11) TMI 177 - AT - Income TaxAdditions u/s. 69C for disallowing alleged bogus purchases - Held that - No prejudice is caused to the assessee by non granting of opportunity of cross examination by the authorities below as right of cross examination is not absolute as in the instant case even primary onus that fell on the assessee did not stood discharged. Had assessee discharged its primary onus, but still the authorities proceed to prejudice assessee based solely on the incriminating statements/affidavits of third parties recorded at the back of the assessee, the right of the assessee to cross examine these third parties will become absolute. It is not a case that the authorities below have merely/solely relied on the statement/affidavit of third parties namely hawala dealers recorded at the back of the assessee to cause prejudice to the assessee rather primary onus that lay on the assessee was not discharged by the assessee . Thus we uphold/sustain the orders of learned CIT(A) in which we donot find any infirmity, which we confirm/sustain . The assessee fails in this ground. Disallowance of interest paid to the members of AOP by invoking provisions of Section 40(ba) - Held that - The assessee has now filed an additional evidences by way of supplementary partnership deed dated 22.09.2008 amending original JV agreement dated 12-09-2008 and it is now claimed that the status of the assessee is of the partnership firm and not AOP . The assessee has also filed correspondence with registrar of firms, which are all placed in paper book filed with the tribunal. These documents needs verification by the authorities below and we are inclined to set aside and restore this issue to the file of the AO for necessary verification and enquiry before adjudicating denovo on merits in set aside proceedings after giving an opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. One peculiar facts we have observed that the supplementary partnership deed is dated 22.09.2008 modifying J.V agreement dated 12.09.2008 . The stamp paper used for aforesaid supplementary partnership deed are issued by treasury on 28-04-2008,while the original J.V agreement was executed on a stamp paper issued by treasury on 02.09.2008. The A.O shall verify this aspect and its genuineness as to why old stamp papers which were issued by treasury even prior to the execution of JV agreement were used by the assessee for modifying original JV agreement to execute supplementary partnership deed.
Issues Involved:
1. Disallowance of alleged bogus purchases aggregating ?44,78,415/- under Section 69C. 2. Alleged violation of provisions of Section 40A(3). 3. Disallowance of interest of ?83,97,919/- paid to partners under Section 40(ba). Issue-wise Detailed Analysis: 1. Disallowance of Alleged Bogus Purchases Aggregating ?44,78,415/- Under Section 69C: The assessee challenged the disallowance of ?44,78,415/- for alleged bogus purchases from three parties: Hemal Enterprises, Navkar Corporation, and Om Sai Enterprises. The AO observed that notices sent to these parties returned unserved, and the assessee failed to produce these parties or provide their latest addresses. The AO noted that Navkar Corporation and Om Sai Enterprises were listed as bogus purchase dealers by the Maharashtra Sales Tax Authorities, with their sales tax registrations canceled. Statements from these parties indicated they issued accommodation bills without supplying actual goods. The AO concluded that the purchases were made from the grey market, adding ?41,26,961/- as unexplained expenditure under Section 69C. The CIT(A) upheld this disallowance, noting the lack of evidence for the consumption/utilization of the materials and the failure to produce necessary documents like stock registers and delivery challans. The tribunal observed that the assessee could not discharge the primary onus of proving the genuineness of the purchases and their utilization. Despite the assessee's contention that cross-examination of the parties was not allowed, the tribunal held that the non-granting of cross-examination did not prejudice the assessee as the primary onus was not met. The tribunal upheld the disallowance, referencing the Supreme Court decision in N.K. Proteins Ltd. 2. Alleged Violation of Provisions of Section 40A(3): The AO concluded that the purchases from Navkar Corporation and Om Sai Enterprises were made in cash, violating Section 40A(3). This was based on the observation that funds were withdrawn in cash immediately after cheque payments were cleared. The CIT(A) upheld this view, noting the lack of evidence for the movement of goods and the assessee's failure to produce relevant documents. 3. Disallowance of Interest of ?83,97,919/- Paid to Partners Under Section 40(ba): The AO disallowed the interest paid to partners, treating the assessee as an AOP, which is not allowed to deduct interest paid to its members under Section 40(ba). The assessee argued that it was a partnership firm, not an AOP, and submitted additional evidence, including a supplementary partnership deed dated 22.09.2008. The tribunal noted discrepancies in the dates of the stamp papers used for the partnership deeds and set aside this issue for verification by the AO. The AO was directed to verify the genuineness of the supplementary partnership deed and adjudicate the issue de novo. Conclusion: The tribunal upheld the disallowance of ?44,78,415/- for bogus purchases under Section 69C and the alleged violation of Section 40A(3). The issue of disallowance of interest paid to partners under Section 40(ba) was remanded to the AO for further verification. The appeal was partly allowed for statistical purposes.
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