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TMI Blog2017 (10) TMI 1247X X X X Extracts X X X X X X X X Extracts X X X X ..... been solely disallowed as in the opinion of the Revenue authorities there was no justification for such an increase in the salary as they were not convinced that the increase in turnover is only because of efforts of the Director. As find that Revenue authorities in this case are trying to enter into the shoes of the businessman, which is not permissible. Accordingly set aside the orders of the authorities below on this issue and decide the issue in favour of the assessee. - ITA No.1282/Mum/2017, ITA No.1283/Mum/2017 And ITA No.1284/Mum/2017 - - - Dated:- 3-7-2017 - Shri Shamim Yahya, Accountant Member For The Appellant : Shri Vimal Punmiya For The Respondent : Shri B.Satyanarayana Raju ORDER These are appeals by the assessee against common order of learned CIT(A) dated 28.11.2016 for the aforesaid assessment years. 2. One common ground is that the learned CIT(A) erred in confirming that notice was issued u/s 151 after getting approval from proper authority whereas sanction was not taken from property authority. 3. On this issue, learned Counsel of the assessee did not elaborate and did not make any cogent submission. Accordingly, this ground is dism ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ller parties have admitted these facts before the Sales tax authorities in the form of Sworn affidavits. Based on such revelations the assesses was asked by the AO to submit certain details with regard to the parties who have sold the goods to them like addresses of the parties, PAN details, ledger copies, IT returns, financials of the parties etc. so as to established the genuineness of the transaction. There was no compliance and required details were not given to the AO. Accordingly, the AO has estimated the profit @ 35% on the bogus purchases which the appellant might have earned additionally by buying the same material in a grey market and manipulating the invoices by obtaining them from the above parties for accommodation in the books. 6. Upon assessee s appeal, the learned CIT(A) referred to the decision of the Hon ble Gujarat High Court in the case of Simit P.Seth (356 ITR 451). The learned CIT(A) concluded as under:- In the instant case, the appellant has failed to produce any independent evidence to prove the purchases like transport bills, delivery challans etc. either during assessment proceedings or during appellate proceedings. With regard to the information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the assessee has made the purchases from grey market and purchases from grey market give benefit to the assessee in the form of non-payment of taxes and others. Hence, disallowance of 12.5% of the bogus purchases is very reasonable. Hence, I do not find any infirmity in the order of the learned CIT(A). Accordingly, I uphold the same. 11. Another common issue raised is that learned CIT(A) erred in confirming addition of depreciation on additional fixed assets purchased during the year. 12. On this issue, the A.O. has noticed that the assessee has made certain additions to assets, in respect of Computer, Crane Machine and Tools Dies and claimed depreciation on such assets. In this regard, the assessee has not submitted any details / explanation to the A.O. Therefore, depreciation claimed on new assets was disallowed for want of copy of bills, delivery challans and payment schedule in respect of new assets added. 13. Upon assessee s appeal, the learned CIT(A) adjudicated the issue as under:- I have carefully considered the facts of the case and the submissions of the ld.AR. It is noticed that the assessee has bought certain fixed assets like tools and die ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation. Since, no explanation was provided even during the appeal proceedings, the disallowance of depreciation made by the AO is confirmed. 14. Against the above order, the assessee is in appeal before the ITAT. 15. I have heard both the Counsel and perused the records. The learned Counsel of the assessee submitted that as in the case of bogus purchases above, the purchase to the extent of 12.5% in this case may be allowed and consequent depreciation granted. Upon careful consideration of the facts, I do not find any merit in the submission of the learned Counsel of the assessee. 12.5% disallowance on account of bogus purchases has been done in the earlier part of this order in the trading account on the premises that the sales have not been doubted. However no such presumption can be made in the case of purchase for fixed assets. Assessee having failed to provide any evidence for the purchase of fixed assets cannot be granted 12.5% allowance for fixed assets purchased on adhoc basis. Hence, I do not find any infirmity in the orders of the authorities below on this issue. Hence I confirm the same. 16. One issue raised in assessment year 2009-2010 is that CIT(A) er ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g the increase in the sale price of the material dealt by the assessee. Further, there is no justification given for such a hike of remuneration (more than double) when the GP increase was only insignificantly high i.e. from 7.15% to 7.76% between A.Y.2008-09 to 2011-12. In view of the above discussion, I, do not find any justification of so much increase in the remuneration paid to directors. The argument that the directors have offered the remuneration for taxation in their hands is secondary. I, therefore, confirm the disallowance made by the AO. 19. Against the above order, the assessee is in appeal before ITAT. 20. I have heard both the Counsel and perused the records. I find that no cogent evidence has been brought on record by the authorities below to disallow the Directors remuneration. It is not the case that the remuneration is bogus, it has been solely disallowed as in the opinion of the Revenue authorities there was no justification for such an increase in the salary as they were not convinced that the increase in turnover is only because of efforts of the Director. I find that Revenue authorities in this case are trying to enter into the shoes of the businessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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