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TMI Blog2017 (5) TMI 632X X X X Extracts X X X X X X X X Extracts X X X X ..... l as not genuine, there is no justification for making any disallowance of interest paid to the above parties. It is also relevant to mention that interest was paid to above mentioned parties for the Assessment Year 2010-11. For identical reason the Assessing Officer had disallowed the interest paid for A.Y. 2010-11. The disallowance made by the Assessing Officer for Assessment Year 2010- 11 was deleted by the CIT(A) and same was confirmed by the Tribunal. Thus we hold that the Assessing Officer is not justified in disallowing interest paid. - ITA No. 198/RPR/2014 - - - Dated:- 11-5-2017 - Shri N.S. Saini, Accountant Member And Shri George George K., Judicial Member Revenue by : Ms. Sheetal Verma, DR Assessee by : Shri R.B. Doshi, AR ORDER Per: George George K., J. M. 1. This appeal at the instance of the Revenue is directed against the order of the CIT(A), Raipur dated 27.06.2014. The relevant assessment year is 2011-12. 2. The effective grounds raised by the Revenue read as follows: 1. Whether in law and on facts and circumstances of the case, the learned CIT(A) has erred in relying on the appellate order for A.Y. 2010-11 in deciding the appeal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to point out any difference in facts for Assessment Year 2010-11 with that for facts of the current assessment year. 4.3 We have heard the rival submissions and perused the material on record. The Tribunal in assessee s own case for Assessment Year 2010- 11 (supra) on identical facts had decided the issue raised in Ground No.2 in favour of the assessee. The consideration of the facts, the submissions and finding, of the Tribunal for Assessment Year 2010-11 are reproduced below for ready reference: Ground Nos. 1 2 3. At the outset of hearing of the appeal, the Id. DR supporting the action of the A.O contended that Shri Jitendra B. Salecha, Director of M/s Colourshop Trading Co. Pvt. Ltd [for short, Colourshop] and M/s Induja Traders Pvt. Ltd in the affidavit dated 10.1.2012 stated that these companies were dealing in cloth and steel as a small time trader; fake bills of purchases/sales were issued to various parties for monetary gains; neither any goods were purchased nor sold by him in the said companies and they were working only for commission charged @ 0.05% of bill amount. Notices issued to these companies returned unserved and the sales tax commissioner, Mumba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he statement of other director. He further explained that there cannot be any motive or gain for the parties to make purchases and sales at the ruling price, when the sources of funds, transfer of funds is verifiable. Regarding other questions also, the said director has fairly answered. In cross examination, the A.O, has asked only two questions, the first relating to transactions between CTCPL and ITPL, which the deponent has denied. In the second question, the AO. has asked to clarify under what circumstances Shri Jitendra B. Salecha had given the statement that the transactions took place amongst the three companies i.e. Electrotherm (India) Ltd., ITP1 and CTCPL, if otherwise not enquired, should have been termed as trading transactions and the deponent has stated that Shri Jitendra B. Salecha was not the Director in CTCPL during the financial year 2009-10 and expressed his ignorance about the reasons and circumstances under which he had given the said statement. In his cross examination, the A.O. did not ask any questions regarding the transactions with the appellant company. The appellant's Counsel, who was also present in the proceedings did not opt for cross-examination ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n sold. Copies of Income tax returns submitted by seller and buyer were filed by appellant. The A.O. has not disputed the maintenance of quantitative details in respect of the purchases and sales made by the appellant. The purchase and sale transactions are duly supported by vouchers to prove the delivery and receipt of goods between parties. The payment made for purchase of traded goods was undisputedly through proper banking channel. The A.O. has accepted the sale of trading goods made by the appellant. Having accepted the sale of goods and sale proceeds having been considered for determining the income, the source of purchases being not disputed, there remains very little case for disallowing the entire purchases on the basis of statement/affidavit of a third party,that too without offering cross-examination of the deponent. It is not the case of the AO. that purchase price paid by appellant was not at fair market value of the goods purchased. It is also not the case of the A.O. that purchase price paid by appellant had flown back to the coffers of appellant company. The party from whom purchases were made is assessed to income tax and copy of income tax return and audited finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art of this order reads as follows: 3. Rival contentions have been heard and record perused. During the course of assessment for A.Y.2010-11, the AO observed that as per information received from Sales Tax Department, some of the parties were bogus supplier and the assessee was found to be having purchased materials from the eight parties, who were reported to be bogus by the Sales Tax Department. Accordingly, the AO made addition of ₹ 1,19,80,841/- in respect of these parties. The assessee was asked vide Show Cause Notice to provide the whereabouts of the parties, the assessee himself submitted the ledger, of the parties which were not relied upon by the AO as the assessee has not produced the parties. In view of the findings in the paragraph no.4, it was held by the Assessing Officer that the assessee did not purchase any goods from these eight parties. Accordingly, the aggregate of the purchases detailed in para no. 4 totalling to ₹ 1,19,80,841 /- was treated as unexplained expenditure under section 69C of the Act, added to the returned income of the assessee. 4. By the impugned order, the CIT(A) deleted the part of addition after observing a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respective parties. Accordingly, the AO was justified in making the addition. 7. On the other hand, Id.AR contended that assessee was engaged in business of contractor and was operating in interior part of the Maharashtra State, where materials are not available easily. Our attention was also invited to the findings recorded by CIT(A) to the effect that all the purchase bills and supply bills were certified by Government authority for executing his work, accordingly assessee was required to incur expenditure for consumption of goods as well as for maintenance of machinery. He further contended that CIT(A) has already upheld addition of ₹ 3 lacs out of such purchases which works out to be 3% of the such purchases as an extra profit having been taxed by the CIT(A) by upholding addition of ₹ 3 lacs. In support of the order of CIT(A), reliance was placed by Id. AR on the following decisions :- i) Shri Ramila Pravin Shah Vs. ACIT, ITA No.5246/Mum/2013 ii) Shri Ganpatraj A Sanghavi Vs. ACIT, ITA No.2826/Mum/2013 iii) M/s G.V.Sons Vs. ACIT, ITA No.2239/Mum/2012 iv) Shri Deepak Popatlal Gala Vs. ITO, ITA No.,5920/Mum/2013 v) Babulal C. Borana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we found that the gross profit of the assessee has been consistently growing year after year which is depicted in the table below and which has been accepted by the Department: Assessment Year Sales Gross Profit GP Ratio 2008-09 21,59,13,671 2,06,07,377 9.54% 2009-10 30,70,57,145 3,91,87,695 12.76% 2010-11 23,89,16,358 4,05,61,675 16.97% 2011-12 13,48,05,536 3,07,24,335 22.79% The accounts of the appellant were duly audited u/s 44AB of the Act and the same have not been rejected by AO. However from the above table it is evident that assessee has been declaring higher gross profit during the year under consideration as compared to the GP rate shown in earlier years. 9. Hon'ble Bombay High Court in the case of Nikunj Eximp Enterprises (P) Ltd (216 Taxman 171) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... back amount spent on purchases as income of assessee - Whether Tribunal was justified in deleting aforesaid addition to income of assessee on ground that there was no evidence to show that vouchers given by those parties to assessee were bogus or that any part of those payments came back to the assessee-Held, yes 13. In view of the detailed finding recorded by CIT(A), which has not been controverted by Id. DR by brining any positive material on record, we do not find any reason to interfere in the order of CIT(A). Applying the proposition of law discussed in the above judicial pronouncements to the facts of the instant case, we do not find any infirmity in the order of CIT(A) sustaining addition of ₹ 3 lakhs out of total purchases. 14. The facts and circumstances in the assessment year 2011- 2012 are pan materia, therefore, following the reasoning given hereinabove, we do not find any reason to interfere in the findings so recorded by CIT(A), which are as per material on record. 6. From the above, it is clear that the ITAT Mumbai considered the ratio of the decisions of the Bombay High Court in the case of Nikunj Eximp Enterprise [P] Ltd [supra], decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any independent enquiries from the sales tax authorities and he drew a baseless conclusion on the basis of information of third party who was neither authorized nor having any sustainable information about the purchases made by the assessee during A.Y 2010-11. The A.O was quite wrong in taking the affidavit of Shri Salecha as gospel truth wherein he is a director of two companies and purchase with one Induja Traders was accepted and purchased in spite of the fact that there was no whisper or reference about the assessee in the statement of Shri Salecha. Thus, we have no hesitation to conclude that the A.O took irrelevant facts as basis for making lisallowance without properly considering the material placed before im and without any cogent or positive evidence. 9. At the same time, we also observe that the Id. CIT(A) properly called remand report of the A.O and also after taking on record the rejoinder of the assessee. He also considered the statement of Shri Sanjay Jain one of the directors of Colourshop wherein he confirmed the purchase transaction by the assessee on the ground that the same were undertaken in the regular course of business which were also supported by bil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bench s order, unless the same is reversed by the Hon ble High Court. As on date, Ld. DR has not been able to point out that the said order of the ITAT for Assessment Year 2010-11, has been reversed by the Hon ble High Court. Therefore, we uphold the order of the CIT(A) as correct and in accordance with law. It is ordered accordingly. 4.5 In the result, Grounds No. 1 and 2 are rejected. Ground No. 3 (Disallowance of trading loss of ₹ 1,83,17,200/-) 5. As narrated in the preceding paragraph, the Assessing Officer had treated purchases from Colourshop Trading Co. Pvt. Ltd. and M/s Induja Traders Pvt. Ltd. as bogus purchases. He had further held that the sales made by the assessee out of such purchases which had resulted in loss of ₹ 1,83,17,200/- is also bogus and added the same to income of the assessee. 5.1. On further appeal, the CIT(A) allowed the claim of the assessee. The relevant observation of the CIT(A) reads as follows: 4.2 I have gone through the observations of the Assessing Officer and submissions of the appellant. The Assessing Officer has reached at the conclusion that the claim of the loss was sham because he inferred that the purchase an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, the appeal for the said assessment year was allowed vide order in Appeal No.69/13- 14 dated 30.08.2013. There being no change in the facts and submissions, the disallowance made out of interest expenses to the above companies is not sustainable, hence, deleted. The appeal is accordingly allowed on this ground of appeal. 6.2 The Revenue being aggrieved, is in appeal before us. 6.3 Having heard the rival submissions and perused the material on record. We render the following findings. The AO, in the previous year, when the loan was received had not disallowed same as not genuine, having not disallowed the principal as not genuine, there is no justification for making any disallowance of interest paid to the above parties. It is also relevant to mention that interest was paid to above mentioned parties for the Assessment Year 2010-11. For identical reason the Assessing Officer had disallowed the interest paid for A.Y. 2010-11. The disallowance made by the Assessing Officer for Assessment Year 2010- 11 was deleted by the CIT(A) and same was confirmed by the Tribunal in ITA No. 177/RPR/2013 order dated 09.12.2016. 6.4. Therefore, in view of the coordinate Bench of the Tr ..... X X X X Extracts X X X X X X X X Extracts X X X X
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