2018 (11) TMI 947 - AT - Income Tax

Addition on account of alleged bogus purchases - as per assessee he has placed on record documentary evidences in the shape of purchase summary, copies of challans, purchase orders - Held that - As rightly noted by AO, the assessee has failed to provide transport details / any other documentary evidences to substantiate the delivery thereof. It is also undisputed fact that the all suppliers were listed as hawala dealers by Sales Tax Department, Maharashtra and the assessee failed to produce even the single supplier to confirm the transactions. The complete onus to prove the genuineness of the purchases was upon assessee and the same, in our opinion, has remained unfulfilled. Therefore, the stand of first appellate authority, under the circumstances, in making estimated additions, was quite fair and justified. However, keeping in view the overall factual matrix including VAT rates, we find that estimation to be slightly on higher side and therefore, we reduce the same to 8%. Secondly, upon perusal of details, it is noted that the net amount of expenditure excluding VAT as debited by the assessee in the profit & loss account aggregates to ₹ 47,92,345/-. Therefore, by modifying the impugned order, we restrict the impugned additions to 8% of net alleged bogus purchases of ₹ 47,92,345/- which comes to ₹ 3,83,388/-. - Decided partly in favour of assessee. Disallowance of foreign education expenses - Allowable revenue expenditure - expenditure incurred in relation to knowledge enhancement of the key personnel of Assessee Company namely Nakul Toshnival aged around 36 years - Held that - The program was designed as an executive program for experienced professionals having relevant work experience who wished to develop analytical and leadership skills necessary to formulate and advocate policy on key international issues - the said arrangement was duly supported by an agreement dated 13/01/2011 having onerous stipulations for the director to return back to India after completion of the program and serve the assessee for a minimum period of 5 years. Also, the director was liable to refund the said expenditure in case of breach of various terms of the agreement. The expenditure was duly authorized by the Board of Directors of the assessee company. The offer letters of the concerned universities offering the aforesaid course to the director has also been placed on record - thus the aforesaid expenditure as incurred by the assessee fulfilled the conditions of Section 37(1) and was incurred in furtherance of assessee s business interest and hence, allowable. - Decided in favour of assessee.

Summary

Issues:
Cross appeals for AY 2011-12 contesting estimated disallowance on alleged bogus purchases and foreign education expenses.

Analysis:
1. Alleged Bogus Purchases:
- The AO disallowed purchases of stationery items based on information from hawala dealers, as the assessee failed to provide documentary evidence.
- The AR argued purchases were genuine for business purposes, citing regular incurring of similar expenses.
- The ITAT found the assessee failed to substantiate deliveries and suppliers' genuineness, reducing the estimated addition to 8% of net purchases.
- The ITAT allowed the appeal partly, reducing the addition to Rs. 3,83,388.

2. Foreign Education Expenses:
- The AO disallowed expenses for education programs attended by the director, lacking nexus with business and necessary documentation.
- The AR contended the expenses fulfilled Section 37(1) conditions and were business-related.
- The ITAT noted the director's qualifications, program details, and agreement terms, concluding the expenses were allowable under Section 37(1).
- The ITAT allowed the appeal, deleting the disallowance of foreign education expenses.

3. Conclusion:
- The ITAT dismissed the revenue's appeal and partly allowed the assessee's appeal, reducing the estimated addition for bogus purchases and deleting the disallowance of foreign education expenses.
- The order was pronounced on 16th November 2018 by the ITAT Mumbai.

This detailed analysis of the judgment highlights the key issues, arguments presented, and the ITAT's findings and decisions regarding alleged bogus purchases and foreign education expenses for the assessment year 2011-12.