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TMI Blog2014 (11) TMI 295X X X X Extracts X X X X X X X X Extracts X X X X ..... f purchases and sales have been reconciled by the assessee - CIT(A) was not justified in confirming the disallowance of purchases – Decided in favour of assessee. Donation expenses disallowed – Held that:- CIT(A) has confirmed the disallowance on the reasoning that the payment is not related to the carrying on of the business – the order of the CIT(A) is upheld – Decided against assessee. Disallowance out of telephone expenses – Held that:- Since the assessee could not furnish proper explanations - the assessee did not furnish any convincing explanation or the letter obtained from Shri Mahendra Sanghvi regarding the usage of telephone – the order of the CIT(A) is upheld – Decided against assessee. Disallowance of 20% amount under Hamali and Cartage Charges – Held that:- The expenses incurred entirely on cash payment and further they were not supported by any evidence - no fresh evidence or arguments were advances – thus, the order of the CIT(A) is upheld – Decided against assessee - I.T.A. No. 2826/Mum/2013 - - - Dated:- 5-11-2014 - Shri B. R. Baskaran (AM) And Amit Shukla, (JM),JJ. For the Appellant : Shri V. K. Tulsian For the Respondent : Shri Pavan Kumar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sts at the given address and the inquiries with the nearby shops revealed that nobody is aware about these parties. The report of the Inspector forms part of the assessment order. On the basis of detailed enquiries, the AO came to the conclusion that the assessee has managed to obtain the signatures of these parties, but actually these parties does not exists at the given address. The AO has further observed that (i) the receiver s signature are not affixed on the delivery challans of the purchase from these parties. (ii) the mode of transport for delivery of these goods is not mentioned on the purchase bills of these parties whereas the purchases invoice of other parties contains the lorry number etc.(iii) Major portion of purchases are still shown outstanding in the list of sundry creditors. On the basis of all these facts, the AO has held that the assessee has merely obtained accommodation entries for these purchases. If at all such purchases have been made from some other party, to make corresponding sales, the same would obviously be in cash, which would attract the provisions of section 40(A)(3) of the IT Act Accordingly, the AO has disallowed ₹ 1,74,01,436/- on account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities below. We notice that the assessee has furnished following reply in response to the remand report furnished by AO: 3.2 In this respect, the appellant s submissions made during the appeal proceedings are as under : We are in receipt of the remand report dated 21.12.2012 on 31.12.2012 1. The assessee had filed written submissions, paper book and application for additional evidence u/R 46A before your honour The matter was remanded to the AO for a report vide letter dated 12.9.2012. The assessee had filed further details being ledger account of sundry creditors subsequently paid duly highlighted in the bank statement, in the remand proceedings. 2. On perusal of the remand report it is seen that the AO in para 6 states that out of the 5 parties, three parties are hawala operators. The AO however accepts the existence of parties on enquiry with the banks (refer 9 on page 4 of the remand report) 3. The assessee respectfully submits that : A. the assessee is proprietor of M/s Gururaj Metals, which is engaged in the business of supply of ferrous and non-ferrous metals to small scale industries. For the relevant previous year, the assessee has declared GP of 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... epted the purchases cannot be doubted. Without prejudice to above once payment are made by account payee cheques no disallowance could be made merely because parties are not found. The additional evidence produce in form of bank certificate and E return of sales tax prove the existence of the parties G. Further payments were made by account payee cheques. This fact would over shadow all other short coming a. Mather Platt (India) Ltd. vs CIT 168 ITR 493 Cal Assessee made payments to its two commission agents through agents through bank draft and account payee cheque respectively. During assessment proceedings, summons u/s 131 were issued after four years of aforementioned transaction to each of said commission agents calling upon them to confirm those payments- summons came back with remark not known from postal authorities-whether tribunal was right in holding that assessee had failed to discharges onus of establishing identification of these two commissions agent- Held No.. b. ITO V/s Kashmir Ind. Palace 99 Taxmann (Chd) (Mag) AO made addition of ₹ 52,250 treating certain purchase as bogus as party was not produced for verification-whether since payments w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Commissioner (A) deleted additions made by AO on account of bogus purchase from seven parties as also addition in trading account besides allowing triple shift allowance on machinery etc- Tribunal concurred, with analysis and conclusion drawn by Commissioner (A) on appreciation of material on record, after taking notice of fact that trading results of assessee had all along been accepted and purchases of scrap from seven parties could also be not termed as bogus for reason that in subsequent assessment year purchase from those very parties stood accepted by department to a very substantial extent- Tribunal also took notice of Revenue s contradictory stand in as much as firstly specific additions were made in assessment on account of alleged bogus purchase and then assessee s books were rejected on ground that those were not verifiable, but adjustment of bogus purchases was made while working out gross profits and that too on basis of sales version in those very books though with a slight modification-Whether brief capitulation of findings of facts returned by Tribunal led to an irresistible conclusion that these were pure findings of fact giving rise to no question of law- he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es, hence he is not required to confirm on their creditworthiness. Moreover the assessee cannot sit over and investigate the genuineness of the party or their business trisaction. The assessee as a business man taken due care in getting necessary details which were produced before your hour as well as the AO during assessment as well as remand proceedings. L. As regard attraction of provision of section 40!(3) is concerned it is applicable to cash payments. The said section states as under : where the assessee incurs any expenditure in respect of which payment or aggregate of payment made to a person in a day, otherwise than by an account payee cheque drawn on a bank or an account payee bank drafts exceeds twenty thousand rupees, no deduction shall be allowed in respect of such expenditure In the facts of the present case the payments were made by account payee cheque. The assessee has submitted the letters from RBS bank for clearing of cheques in names of 5 parties. Thus merely on presumptions and assumptions the provisions of section 40A(3) cannot be invoked. Merely because the parties are not traceable the assessee cannot be penalized for the same. M. As regard in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the bank accounts. Further, it is not the case of the assessing officer that the assessee has indulged in accounting of bogus purchases. When the assessee submitted that he could not have effected the sales without making corresponding purchases, the AO has taken the view that the assessee could have effected purchases in the grey market, which conclusion is, in fact, not supported by any material. Under this impression only, the AO has further expressed the view that the assessee would have purchased the materials by paying cash thus violating the provisions of sec. 40A(3) of the Act, which is again based on only surmises. In the absence of any material to support the said view, we are unable to agree with the view taken by the tax authorities that the purchases amount is liable to be disallowed u/s 40A(3) of the Act. On the same impression only, the AO has expressed the view in the remand report that the purchases amount is also liable to assessed u/s 69C of the Act as the source of purchases were not proved. Again the said conclusion is based upon only surmises, which could not be sustained. Thus, it is seen that the assessing officer has accepted the fact that the quanti ..... X X X X Extracts X X X X X X X X Extracts X X X X
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