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TMI Blog2018 (5) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... lete the addition and direct the AO to delete the addition of ₹ 54,000/- made on account of interest expenses. Addition of 20% of the total amount of expenses claimed by the assessee - Held that:- AO has pointed out that entries in the ledger are not supported by any bills or vouchers. The assessee had even not maintained the log book for the vehicles. The AO has further pointed out that in all these expenses personal element involved cannot be ruled out. Since, the assessee has failed to substantiate its claim by adducing corroborative evidence, the Ld. CIT (A) has rightly confirmed the disallowance to the extent of 20% on the expenses claimed. Hence, we do not find any infirmity in the findings of the Ld. CIT (A). We therefore uphold the findings of the Ld. CIT (A) and dismiss this ground of appeal of the assessee. - ITA No. 7172/MUM/2017 And ITA No. 7173/MUM/2017 - - - Dated:- 25-4-2018 - SHRI G.S. PANNU (AM) AND SHRI RAM LAL NEGI (JM) For The Assessee : Shri M. Subramanian (AR) Revenue : Ms. N. Hemalatha (DR) ORDER PER RAM LAL NEGI, JM These appeals have been filed by the assessee against the two orders dated 24.10.2017 passed by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses paid against unsecured loans. Accordingly, the AO asked to show cause as to why interest paid to Ms. Anita Mohandas and Ms. Girija Ramdas, related parties @ 18% should not be restricted to 12%. The assessee submitted copy of bank statements as a proof of payment made to these parties and copy of return of income filed by M/s Anita Mohandas. However, the AO holding that the assessee has failed to justify the rate of interest paid to the related parties restricted the rate of interest to 12% and disallowed ₹ 54,000/- out of the total interest paid to Ms. Anita Mohandas and Ms. Girija Ramdas on the basis of reasonable market interest rate and disallowed and added the same to the income of the assessee. 6. It was further noticed that assessee had debited the total amount of ₹ 1,67,652/- on account of expenses on Motor Car, depreciation on motor car staff welfare, telephone charges and sundry expenses. The assessee was accordingly asked to explain as to why ad hoc expenses should not be disallowed, the assessee produced the ledger, however, the entries in the ledger were not supported by any bill or vouchers. Moreover, the assessee has not maintained the log ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee had not maintained stock register. Moreover, the assessee used the purchase material; therefore, not stock register was maintained. 11. On the other hand, the Ld. Departmental Representative (DR) submitted that since the assessee has failed to establish the genuineness of transaction, the Ld. CIT (A) has rightly confirmed the addition of 25% of the total amount of bogus purchases made by the AO. The Ld. DR further submitted that the findings of the Ld. CIT (A) is based on the decision of the Hon ble Gujarat High Court delivered in the case of CIT vs. Sanjay Oil Cakes 316 ITR 274 in which disallowance on account of bogus purchases in the case of manufacturer was sustained @ 25% of the total amount of bogus purchases. 12. We have perused the material on record in the light of the rival submissions. Enquiry conducted by the Sales Tax department had established that the parties, from whom the assessee had shown purchases, were bogus and they only used to issue bogus bills without supplying any material. Assessee also failed to secure the presence of the said parties during the assessment proceedings. The assessee also failed to produce any cogent evidence to prove the gen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed the bank statement to prove the payment and also filed the copy of return of income filed by Ms. Anita Mohandas to established the genuineness of the transaction. So far as Ms. Girija Ramdas is concerned she did not file her return of income as her income was below taxable limit. 14. On the other hand, the Ld. DR submitted that since the assessee had deliberately kept sundry debtor in its balance sheet and has been paying the interest on unsecured loans for several years to the related parties to reduce its profit, the Ld. CIT (A) has rightly upheld the disallowance made by the Ld. CIT (A). Hence, there is no merit in the contention of the assessee. 15, We have heard the rival submissions and perused the material on record in the light of the rival contention. The AO has disallowed the expenses by restricting the interest @ 12% per annum on the ground that the interest paid is excessive or unreasonable as compared to the prevailing market rate. We notice that in the said case, the assessee has submitted the statement of bank account to establish the genuineness of the transaction and also submitted the copy of return of income filed by one of the lenders in which the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed. Hence, we do not find any infirmity in the findings of the Ld. CIT (A). We therefore uphold the findings of the Ld. CIT (A) and dismiss this ground of appeal of the assessee. ITA No. 7173/MUM/2017 (Assessment Year: 2011-2012) 19. In the present case, the assessee filed its return of income for the assessment year under consideration declaring the total income of ₹ 9,23,298/-, which was processed u/s 143(1) of the Act. Subsequently, on the basis of information received from the Sales Tax Department and DGIT (Inv.) that the assessee had obtained bogus bills from bogus dealer PM Steel Alloys during the previous year, the assessment was reopened u/s 147 of the Act and after verification, the AO determined the amount of bogus purchases shown by the assessee at ₹ 13,91,490/-. The AO after taking into consideration, the contention of the assessee in the light of the evidence on record made addition of ₹ 3,47,873/- i.e. 25% of the total amount of bogus purchases made by the assessee. 20. The AO also restricted the interest paid @ 18% to Ms. Girija Ramdas and Ms. Anita Mohandas, related parties, to 12% considering the reasonable market interest rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce out of expenses. . 23. Before us, the Ld. counsel for the assessee submitted that the assessee does not want to press ground no. 1 to 3 of its appeal. Accordingly, we dismiss ground no. 1 to 3 of the assessee s appeal as not pressed. 24. Ground No. 4 of this appeal is identical to the ground no. 4 of the assessee s own appeal for the A.Y. 2010-11 discussed above. Since, we have modified the findings of the Ld. CIT (A) and restricted the addition to 12.5% of the total amount of bogus purchases made by the assessee, consistent with our findings, we modify the order of the Ld. CIT (A) and restrict the addition to 12.5% of the Total amount of bogus purchases determined by the AO in this case also and direct the AO to make addition of 12.5% of the total amount of bogus purchases. 25. Ground No. 5 of this appeal is identical to the ground no. 5 of the assesee s own appeal for the A.Y. 2010-11 discussed above. Since, the facts of the case are similar in both the cases, and since we have allowed the identical ground and decided the issue in favour of the assesse in the assesse s own case aforesaid, we allow this ground of appeal of the assessee and direct the AO to delete ..... X X X X Extracts X X X X X X X X Extracts X X X X
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