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TMI Blog2017 (1) TMI 560X X X X Extracts X X X X X X X X Extracts X X X X ..... d relevant invoices of the party was also placed on record. The assessee had also furnished confirmed ledger account of the party of the earlier assessment years highlighting the bills which reconciled the difference. We find that there is no rebuttal to any of such explanation furnished and the entire amount has been added as unexplained purchases by the Assessing Officer, while the CIT(A) effected an overall scaling down of the disallowance. Considering the manner in which the replies/reconciliation filed by the assessee have been considered, in our view, the addition of ₹ 3,61,44,082/- is not at all justified. Even addition of ₹ 54,19,143/- on account of variation in the year of recording is also not justified at all. The verification exercise carried out by the Assessing Officer does not result in unearthing of any falsity in the claims made by the assessee and thus, no addition is merited. Absence of receipt of any reply from the suppliers cannot by itself demonstrate any bogus claim by the assessee unless any of the attendant facts bear out any bogus nature of the claim of expenditure by the assessee. Under these circumstances, in our considered opinion, additi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he facts and in the circumstances of the case of the appellant and in law, ld. CIT(A) has erred in upholding disallowance of ₹ 4,38,96,447/- whereas the aggregate amount of specified instances enumerated in paragraph 6.2 of the impugned order is ₹ 1,38,45,354/-. 3. Without prejudice, on the facts and in the circumstances of the case of the appellant and in law, ld. CIT(A) has erred in not directing deduction for Assessment Year 2011-12 of the sum of ₹ 1,13,58,809/- as enumerated in paragraph 6.2 of the impugned order, more so when he himself has decided the appellant s appeal bearing no. CIT(A)-8/IT-598/13-14 for assessment year 2011-12 on even date and in not directing amount of ₹ 24,77,708/- for deduction for assessment year 2009-10 as held by him in the impugned order. 4. That the impugned order being contrary to law, material on record and facts of the case may kindly be set aside, amended and modified in the light of the grounds of appeal enumerated above and the appellant be granted such reliefs as is called for on the facts and in the circumstance of the case of the appellant and in law. 3. In the cross-appeal, Revenue has raised the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t ₹ 17,55,85,788/- made by the Assessing Officer. Since the two cross-grounds arise from the same issue, both are being taken up together. 6. Briefly put, the relevant facts are that during the course of assessment proceedings, Assessing Officer carried out an exercise to verify the genuineness of the purchases and/or expenses recorded in the account books. The discussion in the assessment order reveals that notices u/s 133(6) of the Act were issued to various parties. In many cases, the notices returned un-served with the remark party not known/left . It is also noted that in many cases notices were served but either no reply was received or if the reply was received, the figures reported by the parties did not tally with the figures presented by the assessee-company. In this background, the Assessing Officer issued a notice u/s 142(1) of the Act dated 11.3.2013 show-causing assessee the various discrepancies noticed in the course of notice u/s 133(6) of the Act. 7. The Assessing Officer notes that in response, assessee insisted that all the purchases and expenses were genuine and that the parties were regular suppliers. One pertinent point which was made by the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 133(6) were either unserved or were not replied - ₹ 1,47,91,709 e) Parties relating to payment of off-loading expenses where notices issued u/s 133(6) were returned un-served/reply not received/amounts not reconciled - ₹ 54,87,524 Total - ₹ 17,55,85,788 Against such a disallowance, assessee made detailed submissions on facts and in law before the CIT(A), a copy of which has also been placed in the Paper Book before us at pages 11 to 30 and 24 to 62 respectively. 8. Before the CIT(A), assessee pointed out that assessee was required to produce 59 parties in a short span of time during the fag end of assessment proceedings. Inspite of the short period, assessee had furnished considerable information which has not been properly appreciated by the Assessing Officer. Assessee also pointed out that it was engaged in the business of manufacture of heavy and light engineering iron steel castings (Jobbing industry) as per requirements of its customers and also takes part in tenders issued by Public Sector Undertakings and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses, assessee pointed out that complete details alongwith PAN and copies of bills were produced and that non-production of parties was not fatal so as to result in disallowance. 11. The CIT(A) considered the varied submissions put forth by the assessee and even directed the Assessing Officer to make further inquiries and send a report u/s 250(4) of the Act. The Remand report furnished by Assessing Officer was confronted to the assessee and the rejoinder by assessee has also been considered by the CIT(A). 12. In this context, CIT(A) has, in-principle, upheld the stand of Assessing Officer that assessee had failed to discharge its burden with regard to the amounts in question. CIT(A) has also noted in para 6.2 of the order some of the discrepancies in date of recording of the purchases by assessee on one hand and by the supplier on the other hand. On that basis, CIT(A) records that certain payments have not been recorded in the relevant year by the assessee. The CIT(A) thereafter goes on to say that the aforesaid shows non-compliance with the mercantile system of accounting, which is otherwise adopted by the assessee. Be that as it may, CIT(A) restricted the disallowance to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (2) Anis Ahmad Sons v. CIT Anr.,297 ITR 441(SC) (3) Jethabhai Hirji Jethabhai Ramdas v. CIT, 120 ITR 792 (Bom) (4) CIT v. M/s. Nikunj Eximp Enterprises Pvt. Ltd., ITXA No.5604 of 2010 14. On the other hand, the ld. DR appearing for the Revenue has supported the order of Assessing Officer and in particular, has referred to the Remand report furnished by the Assessing Officer to CIT(A), copy of which has been placed in the Paper Book of assessee at page 31-44. It was pointed out that even during the Remand proceedings, though assessee had furnished its ledger account, but with regard to the discrepancies in the replies noted by the Assessing Officer, the reconciliations were not complete. It was, therefore, pointed out that the addition made by Assessing Officer on account of non-reconciliation of balances of the parties is quite justified. 15. We have carefully considered the rival submissions. The crux of the controversy before us arises from the action of the Assessing Officer in holding that amount of certain purchases and expenses debited in the books of accounts could not be properly verified and, therefore, he added a sum of ₹ 17,55,85,788/- to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were purchases are said not to have been disclosed by the assessee, but it was appearing in the ledger of other parties as found by the Assessing Officer. In this context, the plea of the assessee has been that it had not claimed any deduction with respect to the above amount against income of the year under consideration and, therefore, any disallowance thereof is untenable. We find that the aforesaid plea has been simply glossed over by the CIT(A). In fact, the entire edifice of the addition of ₹ 17,55,85,788/- is based on the verification exercise carried out with certain parties with whom assessee has incurred expenditure by way of purchases or other expenses. In the assessment order the Assessing Officer has enumerated in para 5.11(b) a list of cases where purchases as per audited annual accounts of the assessee did not reconcile with the details received from the parties. In the said tabulation an amount of ₹ 3,61,41,082/- has been tabulated of cases where the parties have claimed sales made to the assessee more than the amount of purchases recorded by the assessee. In this context, we find that the assessee has been consistently explaining that the purchases rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the month of March, 2013 that assessee was confronted with the result of verification exercise relating to 59 parties and was asked to produce the parties or furnish reconciliation statements. The assessee also pointed out that there was a pertinent unreasonableness of requiring the assessee to produce 59 such parties in short span of time as assessment was getting time barred on 31/3/2013. Apart there-from, the appellant company pointed out to the CIT(A) that considerable information was furnished to the Assessing Officer on various dates. It is also pointed out before the CIT(A) that assessee was registered with Excise, Sales Tax and Service Tax Department, etc. and that the products are manufactured by the assessee as per the requirements of its customers and there was no open market for sale of products manufactured by it. It was pointed out that the assessee manufactured and supplied products as per the drawings of the customers, which are users specific in nature. It was, therefore, pointed out that there was no reason to doubt the purchases effected by the assessee in a wholesale manner. In our considered opinion, the verification exercise carried out by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e matter we find no reason to interfere with the conclusion of the CIT(A) that 25% of such expenses of labour charges ₹ 1,47,91,709/- and out of off-loading expenses of ₹ 54,87,524/-, deserve to be disallowed. 15.4 In the result, out of total addition of ₹ 17,55,85,788/- sustained by the CIT(A), 25% of expense of ₹ 1,47,91,709/- out of labour charges and 25% of ₹ 54,87,524/- towards off-loading expenses are sustained and the balance of the additions made by the Assessing Officer is directed to be deleted. Resultantly, whereas the stand of the Revenue on this aspect is dismissed, that of the assessee is partly allowed. 16. The only other issue remaining in the appeal of the Revenue is relating to the disallowance of ₹ 96,96,318/- and ₹ 1,06,16,357/- representing marketing commission payment to M/s.SEFW Projects Pvt. Limited and to the bank respectively. 16.1 In this regard, the brief facts are that the commission paid to M/s.SEFW Projects Pvt. Limited was disallowed by the Assessing Officer on the ground that assessee could not prove the purpose of such commission payment. Similarly, commission paid to bank was disallowed, as accord ..... X X X X Extracts X X X X X X X X Extracts X X X X
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