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TMI Blog2017 (11) TMI 177X X X X Extracts X X X X X X X X Extracts X X X X ..... ance of interest paid to the members of AOP by invoking provisions of Section 40(ba) - Held that:- The assessee has now filed an additional evidences by way of supplementary partnership deed dated 22.09.2008 amending original JV agreement dated 12-09-2008 and it is now claimed that the status of the assessee is of the partnership firm and not AOP . The assessee has also filed correspondence with registrar of firms, which are all placed in paper book filed with the tribunal. These documents needs verification by the authorities below and we are inclined to set aside and restore this issue to the file of the AO for necessary verification and enquiry before adjudicating denovo on merits in set aside proceedings after giving an opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. One peculiar facts we have observed that the supplementary partnership deed is dated 22.09.2008 modifying J.V agreement dated 12.09.2008 . The stamp paper used for aforesaid supplementary partnership deed are issued by treasury on 28-04-2008,while the original J.V agreement was executed on a stamp paper issued by treasury on 02.09.2008. The A.O sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of third party statement without even affording any opportunity to cross verify. f. The Ld.CIT (A) and the Ld. AO have erred in making assumptions and treating the affidavit filed by the suppliers with the Sales Tax Department, stating that they provide accommodations bills, to be a conclusive one. g. The Ld. CIT (A) and the Ld. AO have erred in relying upon certain judicial pronouncements which are inapplicable, not relevant or clearly distinguishable. ALTERNATE GROUND 3. Alleged violation of provisions of Sec. 40A(3): a. The Ld. CIT (A) and the Ld. AO have also erred in law and in facts in alleging that there is contravention of the provisions of section 40A(3) of the Act, completely ignoring the fact that all the payments to the subject party were made by crossed account payee cheques through regular bank account of the appellant firm. b. The Ld. CIT (A) and the Ld. AO have also erred in law and in facts in alleging that the appellant firm has received back cash from the subject party without bringing on record any independent evidence in support of the same. 4. Additions u/s. 40(ba) for Interest of ₹ 83,97,919/- paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e failed to furnish their latest addresses and also failed to produce these three parties before the AO for verification . The assessee also did not furnish any confirmation from the said parties before the AO. The AO also observed that Sales Tax Registration of these two parties namely M/s Navkar Corporation and M/s Om Sai Enterprises who appeared in the list of hawala dealers prepared by Maharashtra Sales Tax Authorities were cancelled by the Sales Tax Authorities. The assessee only filed copy of the purchase bills and ledger account of the party. The assessee also claimed that payments had been made through banking channel. The assessee did not also furnish octroi receipts, lorry receipts or site gate pass/site stock register copy showing the movement of goods from the above parties to the assessee s site. It was observed by the AO that Shri Ashwin P Mehta proprietor of M/s Navkar Corporation in his statement recorded before Sales Tax Authorities had stated that he has not done any business and that only accommodation bills were being provided by his concern. It was unearthed by Sales Tax authorities during search that said Mr Ashwin P Mehta has floated large number of concerns ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which immediately after clearing, the funds were withdrawn in cash or transferred to other accounts in the same bank which bank accounts were also of hawala dealers declared by sales tax authorities. The A.O. relied upon the decision of ITAT, Delhi in the case of DCIT v. Phoolwati Devi (2000) 314 ITR ATI Delhi and decision of Hon ble Supreme Court in the case of Sumati Dayal v. CIT (1995) 214 ITR 801(SC) and the AO concluded that Navkar Corporation and Om Sai Enterprises have not supplied any material to the assessee nor do they have any infrastructure or capacity to supply material and these concerns are only existing on papers and supplying bills without supplying any material. The A.O concluded that these purchases as are reflected in the said bills from Navkar Corporation and Om Sai Enterprises to the tune of ₹ 41,26,961/- were made by the assessee from other parties from the grey market by making payment in cash, while cheque were issued by the assessee in favour of Navkar Corporation and Om Sai Enterprises which were returned back by the said concerns to the assessee in the form of cash which is evidenced from the bank statement of the said concerns. Thus, the A.O. co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision of section 40 and held that assessee is an AOP and interest paid to member of an AOP is not allowable deduction while arriving at profit and gain of business or profession keeping in view provisions of Section 40(ba). It was observed by the AO that Section 40 is applicable notwithstanding anything to the contrary contained in the provisions of section 30 to 38 and hence interest of ₹ 83,97,919/- paid by the assessee to its members were disallowed by the AO and added back to the income of the assessee keeping in view the provision of Section 40 (ba). The A.O observed that M/s. Marudhra Builders has filed a loss return of ₹ 4,46,981/-, M/s. Soman Associates has shown an income of ₹ 4,72,729/- and Citi Buildcon Pvt. Ltd has shown an income of only ₹ 20,78,000/- . Thus, it was observed by the AO that only an amount of ₹ 25,50,000/- was effectively offered for taxation as against exempt income of ₹ 83,97,919/- claimed by the assessee towards interest paid to its members, which led to the disallowance of entire interest of ₹ 83,97,919/- which was brought to tax by the AO at maximum marginal rate as one of the member of AOP was a private ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the tune of ₹ 2,98,75,700/-, out of which purchases to the tune of ₹ 44,78,415/- were held to be bogus purchases from the following three parties. Name of party TIN No Amount 133(6) sent Hemal Enterprises, 27090261071 ₹ 3,51,454/-. Unserved Navkar Corporation 27810662837 V Rs 25,25 390- Unserved Om Sai Enterprises 27370739127 V Rs.16,01 571/ Unserved Total amount RS.44 78415/- The learned counsel for the assessee submitted that the payments were made to these parties against purchases effected from them through account payee cheque . It was submitted that delivery challans / lorry receipts could not be produced before the authorities below. It was submitted that notices u/s. 133(6) were issued by the AO which could not be served on these three parties as they are not traceable . It was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee. 5.2 With respect to the second issue, the learned counsel for the assessee submitted copy of supplementary partnership deed dated 22.09.2008 as an additional evidences which is placed in the file. An affidavit dated 29-07-2017 is also filed by the assessee duly executed by Mr. Kishore Soman that there was a supplementary partnership deed dated 22-09-2008(pb/page15-19) which was executed but the same could not be produced before the authorities below and instead JV deed dated 12-09-2008 was only submitted. It was claimed that the assessee is a partnership firm and not AOP. The learned counsel for the assessee also submitted copy of acknowledgement of application with Registrar of firms and also copy of correspondence with the registrar of firms which are placed in paper book 20-25 as an additional evidences. Prayer was made before us to admit all these additional evidences as it is claimed that these additional evidences goes to the root of the matter for adjudicating the issue on merits . It was submitted that these additional evidences were not before the A.O and learned CIT(A). It was submitted that these additional evidences be admitted and matter may be restored to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which assessee could not give. The assessee also could not produce confirmations from these three parties. The assessee, however, produced purchase bills and also evidence of making payment to these three parties by cheque through banking channel. The purchase bills so submitted by the assessee, however, did not contain any details such as lorry number, order date, challan number, date of removal of goods, mode of transport, the signature of the person at site who has received the goods or gate pass entry number . The two parties namely Navkar Corporation and Om Sai Enterprises are listed as hawala dealers by Maharashtra Sales Tax Department and their sales tax registration was cancelled by Maharashtra Sales Tax authorities. The Maharashtra Sales tax authorities during search operations recorded their statements wherein these parties stated that that they are only issuing bogus purchase bills on papers without supplying any physical material . The said parties have also given affidavits before sales tax authorities confirming that they are merely accommodation entry providers and issues only paper bills without supplying any material . . It was unearthed by Sales Tax authorities ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of hawala dealers from record, the primary onus which lay on the assessee to prove the genuineness of the purchases and also to prove consumption/utilization of the material was not discharged by the assessee . The purchases of the material are in the books of the assessee wherein the assessee is claiming the same as deduction from the income and assessee has to discharge onus of proving that the purchases are genuine and the material was infact utilised/consumed for construction business of the assessee which assessee failed to do so in the instant case keeping in view factual matrix of the case as is emerging from records. The assessee could not produce the parties before the A.O nor were the notices issued by the AO u/s. 133(6) were served on the these three purchasing parties. The assessee could not produce latest addresses of these three purchasing parties to enable AO to make necessary enquiry, investigation and verifications with respect to the alleged purchases made from these parties. The assessee did not maintain stock register/site stock records nor was movement of stock proved by the assessee as no delivery challans, lorry receipts nor octroi receipts, site stock regist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... now filed an additional evidences by way of supplementary partnership deed dated 22.09.2008(pb/page 15-19) amending original JV agreement dated 12-09-2008 and it is now claimed that the status of the assessee is of the partnership firm and not AOP . The assessee has also filed correspondence with registrar of firms, which are all placed in paper book filed with the tribunal(page 22-25/pb). These documents needs verification by the authorities below and we are inclined to set aside and restore this issue to the file of the AO for necessary verification and enquiry before adjudicating denovo on merits in set aside proceedings after giving an opportunity of being heard to the assessee in accordance with principles of natural justice in accordance with law. One peculiar facts we have observed that the supplementary partnership deed is dated 22.09.2008 modifying J.V agreement dated 12.09.2008 . The stamp paper used for aforesaid supplementary partnership deed are issued by treasury on 28-04-2008,while the original J.V agreement was executed on a stamp paper issued by treasury on 02.09.2008. The A.O shall verify this aspect and its genuineness as to why old stamp papers which were issue ..... X X X X Extracts X X X X X X X X Extracts X X X X
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