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TMI Blog2017 (2) TMI 909X X X X Extracts X X X X X X X X Extracts X X X X ..... e merely on the basis of the statement of Shri. Pramod Kumar Singh, the proprietor of M/s. Siddhivinayak Steel which too was made before the sales Tax Department. After giving detailed finding from para 6.3.2 to 5.3.11, the CIT(A) has deleted the addition. The finding so recorded by CIT(A) are as per material on record. Learned DR has not controverted the finding so recorded by CIT(A). Accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance / addition made u/s.69C of the IT Act. Addition by treating the sale of scrap as unaccounted sales - Held that:- CIT(A) has recorded the categorical finding to the effect that generation of scrap was @4.88% equivalent to 234.84 M/Ts. The said quantity was developed as scrap and sold at ₹ 33,93,42/- which was reflected in sales. Therefore, the question of any addition did not arise. However, the AO has wrongly taken the sale price of scrap at the rate of finished goods which was ₹ 52,939/- M/T. The CIT(A) had also recorded a finding to the effect that similar type of scrap was developed in earlier years and the sale value have been accepted by the department. However, AO has not give ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the case and in law, the Id.CIT (A) erred in deleting the addition of ₹ 40,19,776/- which was made by invoking the provisions of section 69C of the LT. Act by treating the purchase are genuine. 2. On the facts and in the circumstances of the case and in law, the Id.CIT (A) erred in deleting the addition of ₹ 90,38,769/- which was made by treating the sale of scrap as unaccounted sales. 3. On the facts and in the circumstances of the case and in law, the Id.CIT (A) erred in deleting the addition of ₹ 3,49,424/- which was made on account of disallowance of expenditure incurred in relation to exempt income u/s 14A. 4. On the facts and in the circumstances of the case and in law, the Id.CIT(A) erred in relying upon judgments of the CIT vs. Nikunj Eximp Enterprises Pvt. Ltd. without appreciating that the facts involved in the of the appellant's case are different from the facts of the above case laws. 5. On the facts and in the circumstances of the case and in law, the Ld CIT (A) has grossly erred in not appreciating the' fact that notice u/,~ 133(6) issued to the parties from whom alleged bills were received were returned u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re, there is no reason to disbelieve the purchases of Rolling Mill from M/s. Siddhivinayak Steels. On the other hand the Assessing Officer his disallowed the said payments on the basis of statement of the Proprietor of Siddhivinayak Steels which was made before the Sales Tax Department stating that he has issued hawala Bills to various parties. In the respect the authorized representative of the appellant has strongly argued that a general statement without specifying the name of the appellant should not come in the way of purchases made by the appellant; I have gone through the order of the Assessing Officer and found that no where the Assessing', Officer has, stated the list of hawala givers by M/s.Siddhivinayak Steels and,' no where the, name of the appellant was specifically appearing in the hawala list given'. In this respect the appellants authorised representative' have relied on the decision, of the Gujarat High Curt in the case CIT vs. M.K: Brothers 163ITR Page 249 where the Gujarat High Court held as under.:- During the accounting year relating to assessment year 1971-72, the assessee had' made, purchases of the total value of ₹ 52,254/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Free India Assurance Services Ltd v DCIT reported at 62 DTR 349/(2011) 12 Taxman.com 424 (Mum) ; The Hon'ble ITAT, PuneBench in the case of Rajmal Lakhichand v ACIT reported at 79,ITD 84 ' : The Hon'ble ITAT, Jaipur Bench in case of ITO v. Kanchanwala Gems reported in 122 TTJ 854 In the case of ITO vs. Permanand, the Hon'ble ITAT, Jodhpur Bench reported in 107 TTJ 395 ' , In the case of R.K.Synthetics vs. ITO reported at 81 TTJ 909; the Hon'ble ITAT, Jcdhpur Bench Hon'ble Chandigarh IT,AT in the case of ITO v. Arora Alloys Ltd. (2012)[12 ITR (trib) 26.3], Rajmal Lakhichand v. Asstt. CIT [2001] 79 ITD 84 (Pune) . Western India Bakers (P,.) Ltd. v. Dy. CIT [2003] 87'ITD 607 (Mum.) Sharma Associates v. Asstt. CIT [1996] 217 ITR (AT) 1/[1995] 55 ITD~ 171 (Pune) (TM) , : Glorious Hospitlaity Pvt. Ltd. Vs Department of Income Tax ITAT Delhi Bench 'C' ITA No.2124/Del./2012 6.3.5. The addition by the A.O. cannot be accepted in view of judicial pronouncements. 'In this regard, I would like to refer and rely on the judgments below since the facts and circumstances of these judgements ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duties cannot be performed by substituting satisfaction or someone else,. The assessee did pay for the purchases he' made from the above two parties through cheque as was evident from the record. The statements, or, even 'the affidavits of the sellers could not be' utilized against the assessee, 'unless an opportunity was given to him to confront the said statement by way of cross-examination, etc. Admittedly, no such opportunity was given' to the assessee to confront the above sellers in the instant case. 'Further, the assessee had also discharged the primary onus cast on him by section 69 by showing the purchases, their entries in the books of account, payments by way of account payee cheque and producing the vouchers of sales of the goods. The Assessing Officer had miserably failed to bring on record any clinching evidence to prove that these alleged purchases were bogus and not genuine. Further, the Assessing officer did not make requisite investigation against the two sellers. Therefore, the Commissioner (Appeals) had rightly held that the addition made by the Assessing Officer merely on the basis of observations of sales-tax department, without condu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim on the ground as if there was no such transaction. 10. The transaction having taken place through payment by account payee cheques, such plea is not tenable and in such circumstances, the Tribunal below erred in law in revering the finding arrived at by the Commissioner of Income-tax (Appeals) accepting the said transaction as a genuine transaction. 6.3.6. On going through the assessment order, nowhere it was stated that the reports and papers received from the Sales-tax Department was put to 'the 'appellant for his rebuttal arid cross examination except one copy of affidavit and statement of the seller filed before sales tax Officer which is in general nature.. ' In this regard I would like, to refer and rely on the decision of supreme Court in the case Kishinchand Chellaram vs CIT reported in 125ITR 713 where it was held , 1. The letters dated 14-2-1955 and 9-3-1959, did not constitute any material evidence which the Tribunal could legitimately take Into account for the purpose of arriving at the finding that the amount of ₹ 1,07,350 was remitted by the assessee from its Madras Office, and if these two letters were, eliminated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .in does not prove that after receiving the money by cheque, the said party returned back the money in cash to the appellant and the appellant made any net profit out of the same. In this regard, reference is made and reliance is placed on the following judgments: i) The Hon'ble ITAT, Jaipur Bench in case of ITO v. Kanchanwela Gems reported in 122, TTJ 854 has held under: The assessee had 'furnished all necessary information including name, address, PAN, ,RST/CST numbers and telephone numbers of the suppliers, supported with documents which was expected from a prudent purchaser to establish the genuineness of claimed transaction; besides the payments had been made through account-payee cheques and goods purchased from the four parties had been exported by the assessee in the same shape,' size and weight, duly verified by the customs authorities, The Assessing Officer was not justified in doubting the genuineness of the claimed purchases made by the assessee from the four suppliers and making addition merely on basis that on subsequent occasion the parties were not found on the given addresses or in some other cases some connected person to the supplier h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the addition made by the Assessing Officer merely on the basis of observations of sales-tax department, without conducting independent enquiries was not justified. Since the purchase in question had been held as genuine purchase, addition of ₹ 55,632 could not be made to the income of the assessee. Hence, the revenue's appeal was liable to be dismissed. iii)' . In the case of R.K.Synthetics vs.ITO reported at 81 TTJ 909, the Hon'ble ITAT, Jodhpur Bench has held. It' was an undeniable fact that the addition in question under section 69 had been made on the sole basis of the statement of the partner of the assessee-firm recorded by the Central Excise authorities. That was also an undeniable fact that the Assessing Officer never recorded any further statement of the said 'partner or anybody else. A copy of the statement recorded by' the Central Excise authorities was never provided' to the assessee. No independent investigation was carried out by the Assessing Officer even though he proposed to make an addition under section 69 in the hands of the assessee. There was no evidence of suppressed sales, as the sales declared by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... co-operate with the Department for the verification of purchases. The appellant has already filed a number of Court/ ITAT decisions which are on the point. In the case of M.K. Brothers supra the Hon'ble Gujarat High Court held that in that case the tribunal had found that there was no evidence to show that bogus' vouchers' had been issued to the appellant and that nothing had been shown to indicate that any part of funds given by the appellant to these parties came back to the appellant ,in. any form and the appellant had ,made payments by cheques. The Hon'ble Court therefore, held that' the Tribunal was justified in deleting the addition. In the case of the appellant as well as the Department does not assert that the suspicious dealers have specifically claimed that the supplies to the appellant are bogus. The purchase payments have been made by the appellant by cheque and there is no evidence not even a suggestion that the funds given by the appellant as purchase price were received back by the appellant. This judgment of the Hon'ble Gujarat High Court would therefore be squarely applicable to the appellant's' case.' Similarly Hon'ble Calcu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was included in the list of suspicious dealers in the list of State Government). It has been recently held by the Hon'ble jurisdictional High Court of Bombay-' in the case of THE COMMISSIONER OF INCOME TAX-I Vs. M/s. NIKUNJ EXIMP ENTERPRISES PVT LTD as reported 2013-TIOL(Tax India Online.com)-04-HC-MUM-IT in the judgement dated December 17,2012- Whether disallowance regarding purchases made, can be made merely on the basis that' the suppliers and other relating evidences are not produced before the assessing authority or before' the first appellate authority. In this case the Assessee company had filed its ROI for the AY 2001-02 declaring a total income of ₹ 42.08 lacs. During assessment, the AO disallowed an expenditure on account of non-genuine purchases alongwith other disallowances. On appeal, CIT(A) upheld the order of the AO. On further appeal, Tribunal observed that the respondent-assessee had filed letters of confirmation of suppliers, copies of bank statement showing entries of payment through Account Payee cheques to the suppliers, copies of invoices for purchases and stock statement. This reconciliation statement gave' compl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether on the facts and in the circumstances of the case and in law the Tribunal was right in deleting the addition made by the Assessing Officer of ₹ 1,33,41,917/- towards bogus purchases even though the suppliers were nonexistent and one of the parties had categorically denied having any business dealings with the Assessee Company? 3. The respondent-assessee had filed its return of income for the Assessment Year.2001-02 declaring a total income of ₹ 42.08 lacs. The Assessing Officer interalia disallowed an expenditure of ₹ 1.33.crores on account of nongenuine purchases from 7 parties. alonqwith other disallowances. The Assessing Officer by order dated 25.03.2004 assessed the respondent assessee to an income of ₹ 1.87 crores. 4. Being aggrieved an appeal was filed by the respondent-assessee with the Commissioner of Income Fax (Appeals) ('CIT(A)'). By an order dated 19.08.2004, the CIT(A) upheld the order of the Assessing Officer interalia to the extent ₹ 1.33 crores disallowed as bogus purchases. 5. Being aggrieved by the order dated 19.08.2004 of the CIT(A), the respondent-assessee preferred an appeal to the Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e disallowed the deduction of ₹ 1.33 crores on account of purchases merely on the basis of suspicion because the sellers and the canvassing agents have not been produced before them. We find that the order of the Tribunal is well a reasoned order taking into acccount all the facts before concluding that the purchases of ₹ 1.33 crores as not bogus. No fault can be found with the order dated 30.04.2010 of the Tribunal. 8. In view of the above, we find that question as formulated is not a substantial question of law. Therefore, the appeal is dismissed with no order as to costs. 6.3.11. I have also gone through the above cited cases, more particularly the case of the jurisdictional High Court where the Bombay High Court more clearly held that Section 69C, can be applied if there is, an . unexplained expenditure; and the source of payment is not proved. In this respect the appellant's authorised representative in the above reply has stated that the purchaser the Rolling Mill was not Claimed as' expenditure and the source of payment was fully explained for which there was no dispute. He has further narrated that the facts of the case which were produced at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to delete the addition of ₹ 40,19,776/- in respect of unexplained expenditure under section 69C. In the result this ground of Appeal is allowed. 6. We have considered rival contentions and found that the Assessing Officer has discussed the issue in para 7.1 to para 7.8 of his order and disallowed ₹ 40,19,776/- as unexplained expenditure u/s.69C on account of purchases of Rolling Mill from M/s. Siddhivinyak Steel (Proprietor Shri Pramod Kumar Singh). We found that these purchases were not reflected as expenditure in the purchase account so maintained by the assessee. Actually the assessee firm had purchased capital goods from M/s.Siddhivinayak Steel. Further, it is noticed from the details that the assessee had shown to have made purchases of capital goods of ₹ 40,19,776/- from the party. The TIN Number and amount of transaction of the said party is as under:- Sl.No. Name of the purchase parties TIN Amount Date (1) M/s.Siddhivinayak Steels 27050389521V 40,19,776 7. The R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de u/s.69C of the IT Act. 8. AO has also made addition of ₹ 90,38,769/- by treating the sale of scrap as unaccounted sales. By the impugned order CIT(A) deleted the same after observing as under:- 5' 3.1 have considered the stand .of the Assessing Officer and reply filed by the representative of the appellant. It is also' noted that there is no dispute over the generation of scrap at the rate of 4.88 % equivalent to 234.84 metric tons. As per the appellant representative, the said quantity was generated as scrap sold at ₹ 33,93,426/- which was reflected in the sales. Therefore the question of' any addition 'did not arise. While the, Assessing Officer has assumed that the sale of scrap shown by the assessee was in fact sale' of finished goods, he adopted the value of scrap sale of 234.84 metric tons, by the assessee, at .the price of finished goods @Rs.52,939/- per metric ton, total amounting to ₹ 1,24,32,195/- out of which the sale of scrap shown by the assessee amounting to ₹ 33,93,426/- was reduced thereafter made the addition of ₹ 90,38,769/- on account of the difference in the value of sale of scrap. On going throu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich works out to ₹ 1,24,32,195/-. Since the assessee has already shown sales (scrap) of ₹ 33,93,426/-, therefore, the difference of ₹ 90,38,769/- was added back to the total income of the assessee. From the record, we also found that during the year under reference, there were scrap generation of 4.88% which is 234.84 metric tons. The said scrap was sold at ₹ 33,93,426/- for which the complete details were given to Assessing Officer along with details of sale of finished goods. The facts of scrap sale have also been stated in the Tax Audit Report. Even there is no dispute with the Department over the generation of scrap at 4.88%. 10. The CIT(A) also recorded the categorical finding to the effect that generation of scrap was @4.88% equivalent to 234.84 M/Ts. The said quantity was developed as scrap and sold at ₹ 33,93,42/- which was reflected in sales. Therefore, the question of any addition did not arise. However, the AO has wrongly taken the sale price of scrap at the rate of finished goods which was ₹ 52,939/- M/T. The CIT(A) had also recorded a finding to the effect that similar type of scrap was developed in earlier years and the sale valu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here he has stated that the borrowed funds were utilized for investment in shares. I am therefore of the opinion that the payment of interest should not be considered in working of the disallowances u/s 14A. Accordingly, I direct the Assessing Officer to delete the additions of ₹ 3,25,224/., out of the addition of ₹ 3,49,424/- the balance addition made of ₹ 24,200/- is hereby confirmed which is taken as 0 5% of the average investment. In the result this ground of Appeal is allowed. 12. We have considered rival contentions and found from record that disallowance u/s.14A has been dealt by the AO at para 8.1 to 8.4. Disallowance of interest was deleted by CIT(A) after observing that assessee has its own capital and accumulated profits of ₹ 2,49,43,402.10 as on 31.03.2009 and the' total investment in shares of the two Private Limited Companies were ₹ 48,40,000/-. The said investments were not made from any borrowed funds. Whatever funds borrowed were utilised for business purpose. During the year under reference the totaI interest paid on borrowed funds of ₹ 1,30,10,812/- while disallowing the expenses u/s 14A the Assessing Officer und ..... X X X X Extracts X X X X X X X X Extracts X X X X
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