9911796707
TMI Blog2017 (3) TMI 813X X X X Extracts X X X X X X X X Extracts X X X X ..... ent of Maharashtra by the Assessing Officer (AO) that certain bogus parties have provided accommodation entries by issuing bills for bogus purchases to a large number of taxpayers without actual supply of goods. One of such parties, was the assessee in the case on hand, who obtained bogus purchase bills amounting to Rs. 28,07,050/- from M/s. Chirag Steel Centre in the year under consideration, as per statements given before Sales Tax Department. The AO treated M/s. Chirag Steel Centre as a bogus dealer, providing accommodation bills. Observing that this party was not an approved vendor and that payments were made nine months after issue of bills, the AO came to the view that the assessee has failed to establish the genuineness of the said purchases of Rs. 28,07,058/- from M/s. Chirag Steel Centre with any corroborative evidence and brought the same to tax in the assessee's hands. Further additions/disallowances were also made in respect of bad debts written off, prior period expenses, internet expenditure and cessation of liabilities. The assessment was completed under section 143(3) of the Act vide order dated 15.02.2014 wherein the net loss of the assessee was determined at (-) R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en up together for adjudication. 4.2 In its ground (supra), Revenue has assailed the order of the learned CIT(A) as being erroneous in deleting the addition of Rs. 28,07,058/- on account of bogus purchases. The learned D.R. was heard and (i) placed strong reliance on the AO's view in making the said addition in the order of assessment and (ii) alternatively prayed for upholding the addition of Rs. 3,50,882/- of profit on bogus purchases @ 12.5% thereof. 4.3 4.3 The learned A.R. of the assessee, while submitting that the decision of the learned CIT(A) in deleting the addition of Rs. 28,07,058/- made by the AO on account of bogus purchases was in order, assailed the impugned order of the learned CIT(A) in holding that addition of 12.5% of the bogus purchases should be added back to the income of the assessee as profit thereon. According to the learned A.R., the learned CIT(A) failed to appreciate that the material purchased during the year were fully recorded in the assessee's books of account, which were not rejected by the AO and evidence regarding purchase orders, ledgers, copies of invoices, payment details with bank entries which are paid through bank cheques, details of recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al accepted that they have effected the sales and therefore the purchases could not be held to be non-genuine. The decision in the case of Imperial Imp Exp. (supra) is also factually different from that of the case on hand and also would not come to the assessee's rescue as in the cited case the entire sales were by way of exports and therefore there was no liability towards sales tax in respect of the purchases affected by it. Further the sales were never doubted by the AO and therefore it was concluded that the sales could not have been effected if the purchases were not made. The fact situation is not so in the case on hand. 4.4.2 We find that the learned CIT(A) has addressed the issue of bogus purchases in detail and after considering the assessee's submissions, the AO's findings and the judicial pronouncements on this issue, in similar factual matrix the learned CIT(A) deleted the addition of Rs. 28,07,058/- on account of bogus purchases. However, following the decision of the Hon'ble Gujarat High Court in the case of CIT vs. Simit P. Sheth (2013) 356 ITR 451 (Guj), the learned CIT(A) has held that since the direct one to one relationship between purchase of the said mate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the books of accounts. That being the position, not the entire purchase price but only profit element embedded in such purchases can be added to the income of the assessee. So much is clear by decision of this Court. In particular, Court has also taken a similar view in case of Commissioner of Income Tax- IV vs. Vijay M Mistry Construction Ltd. vide order dated 10.01.2011 passed in Tax Appeal No. 1090 of 2009 and in case of Commissioner of Income Tax-I vs. Bholanath Poly Fab Pvt. Ltd. vide order dated 23.10.2012 passed in Tax Appeal No. 63 of 2012. The view taken by the Tribunal in case of Vijay Proteins Pvt. Ltd. Vs. CIT reported in 58 ITD 428 came to be approved. If the entire purchases were wholly bogus and there was finding of fact on record that no purchase were made at all, counsel for the revenue would be justified in arguing that the entire amount of such bogus purchases should be added back to the income of the assessee. Such were the facts in case of ACIT (OSC) Ward 5(3) Nadiad Vs. Pawanraj B Bokadia (supra). This being the position, the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 41(1) of the Act on account of cessation of liability, ignoring the fact that they were barred by limitation. The learned D.R. for Revenue placed strong reliance on the AO's findings on this issue in the order of assessment. 5.2 Per contra, the learned A.R. of the assessee supported the finding rendered by the learned CIT(A) on this issue; relied on submissions put forth before the authorities below and placed reliance on the decisions of the Hon'ble Gujarat High Court in the case of CIT vs. G.K. Patel & Co. (212 Taxman 384) and of the Hon'ble Delhi High Court in the case of CIT vs. Jain Exports Pvt. Ltd. (89 DTR 265). 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record; including the judicial pronouncements cited. As per the details that emanate from the record, the AO required the assessee to furnish details of name, address, nature of transaction of all creditors; including those outstanding for more than three years as on 31.03.2011. After considering the assessee's submissions/details filed, the AO invoked the provisions of section 41(1) of the Act and Explanation thereof inserted w.e.f. 01.04.1997 on the ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceeding.AO called upon the assessee to furnish ageing analysis of the creditors - AO found that assessee had not paid money to many of such creditors for years together - Assessee failed to furnish any evidence except that the amounts were still payable by the assessee, AO made additoin under sec. 41(1) .- CIT(A) restricted addition - Tribunal held that .s. 41(1) could not have been invoked in the year under consideration as the event had to be triggered either on the side of the creditor or the debtor or by law - Held cessation of liability has to be either by reason of operation of law, i.e., on liability becoming unenforceable at law :by the creditor and debtor declaring unequivocally his intention not to honour his liability when payment is demanded by creditor, or a contract between parties, or by discharge of debt -Rs. the debtor making payment thereof to his creditor - In the instant case there was no declaration by assessee that it does not intend to honour its liabilities nor was there any discharge of debt - As no event had taken place in the year under, consideration to indicate remission or cession of the liabilities in question, S. 41(1) could not have been invoked - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 6. Ground No. 3 - Prior period expenses 6.1 In this ground, Revenue assails the order of the learned CIT(A), as being erroneous in deleting the disallowance of Rs. 12,66,805/- on account of prior period expenses. The learned D.R. for Revenue vehemently supported and placed strong reliance on the AO's finding rendered in the order of assessment on this issue. 6.2 Per contra, the learned A.R. of the assessee submitted that the direction of the learned CIT(A) deleting the disallowance of Rs. 12,66,805/- on account of prior period expenses was in order and is to be upheld. 6.3.1 We have heard the rival contentions and perused and carefully considered the material on record. On an appreciation of the facts on record the AO, on noticing that the tax audit report mentioned that an amount of Rs. 12,66,805/-, being prior period expenses, was debited to the Profit & Loss account, disallowed the said expenditure for the reason that it did ot pertain to the year under consideration. On appeal, it was submitted by the assessee that as the assessee's business of construction was executed at several on-site jobs; there were delays in receipt of bills and therefore at the end of the account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re has been distortion of profit - There was thus. No justification to depart from the previous years - Disallowance on the ground that expenses had occurred and crystallized during the earlier years was not therefore sustainable," 5.5 If we apply the facts of the case to the present case, Delhi HC's case banking offices are located throughout the country and assessment subsequent years and AO had earlier in the subsequent years. As the facts are identical to our case, following Delhi HC's decision, the appellant's claim is allowed. AO's addition is deleted and ground of appeal is allowed." 6.3.2 Before us, Revenue has failed to controvert the aforesaid decision of the learned CIT(A). In our view in the factual matrix of the case as discussed above, we see no reason to interfere with the finding rendered by the learned CIT(A) in allowing the assessee's claim for allowing its claim of prior period expenses amounting to Rs. 12,66,805/- (supra) and therefore uphold the same. Consequently, ground No. 3 of the Revenue's appeal is dismissed. 7. Grounds 4 & 5 of Revenue's appeal are general in nature and therefore no adjudication is called for thereon. 8. In the result ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
