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TMI Blog2019 (2) TMI 1320X X X X Extracts X X X X X X X X Extracts X X X X ..... s 68. CIT(A) has deleted addition made by the AO on the basis of additional evidence filed by the assessee towards unsecured loan taken from 23 parties and confirmed unsecured loan taken from 12 parties. CIT(A) also directed the AO to work out interest components of genuine loans as well as loans which were confirmed has unexplained credits. CIT(A) has, by following his predecessor’s order, directed the AO to examine the claim of the assessee in light of additional evidence and also keeping in view findings recorded by the CIT(A) for AY 2009-10. Revenue has not challenged the findings of CIT(A) in deleting addition made by the AO towards unexplained loan for AY 2009-10. Since the issue is recurring from AY 2009-10 and which has a cascading effect on addition made by the AO towards interest disallowance for the year under consideration, we find that there is no error in the findings recorded by the Ld.CIT(A) and directing the AO to examine the claim of the assessee in the light of evidence filed by the assessee and also keeping in mind the findings recorded by the Ld.CIT(A) for AY 2009-10. - Decided against revenue - ITA No.1713/Mum/2017 - - - Dated:- 15-2-2019 - Shri Sandeep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 on 19-03-2013 determining total income at ₹ 63,93,730 by making addition towards unexplained expenditure u/s 69C of the Act, 1961 towards alleged bogus purchases from certain parties, who were appearing in the list of suspicious / hawala dealers of MVAT, Government of Maharashtra. The AO also made addition of ₹ 24,01,365 towards estimated profit from the project @7% on total expenditure incurred for the year and debited to the P L Account. The assessee carried the matter before the first appellate authority. The Ld.CIT(A), vide his consolidated order for AYs 2008-09 to 2011-12, has scaled down addition made by the AO towards alleged bogus purchases by estimating 25% profit on alleged bogus purchases. The Ld.CIT(A) also deleted addition made by the AO towards estimation of profit from the project by reducing interest paid on alleged loans from work-in-progress. Aggrieved by the order of Ld.CIT(A), the revenue is in appeal before us. 3. The first issue that came up for our consideration is addition made towards alleged bogus purchases from suspicious hawala dealers. The Ld.AR for the assessee, at the time of hearing submitted that this issue is covered in favour o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observation is as under. 1. the AO has formed his view about the bogus nature of the purchases made by the appellant from the above parties on the basis of non-compliances of notices u/s 133(6) of the I.T. Act. In my opinion, only on the basis non-compliance of notices u/s T33(G) regarding above mentioned three parties, cannot be Taken as The sole basis to Treat the entire purchases from These parties as bogus or non-genuine. The AQ is required to make further in-depth independent investigation on the issue. On the given set of facts and circumstances and without appreciating The evidences submitted by the appellant during assessment proceedings, entire purchases from These parties cannot be held to be bogus. I! has not been appreciated that the goods shown To be purchased from these parties were used in the business of The appellant and without which, corresponding Turnover would not possible. Thus, there ought to be purchases made and hence, entire disallowance is not justified. b. in this regard. I find the ratio raid down by the Hon ble High Court of Bombay in the case of CIT v. Nikunj Exlmp Enterprises (P.) Ltd., quite relevant wherein Hon'ble High Court has he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was claimed to have been made and instead may have been purchased from grey market without proper billing or documentation. d. As o! now The Issue of such types of unverifiable purchases have been much discussed and debated by the various courts and Tribunals. In many judicial pronouncements on The issue. The Courts have taken a consistent view that in case of non-existent parties from which the purchases are shown to have been made, onry part of such purchases can be disallowed, particularly in the such cases where the corresponding sales are not doubted. Alternatively, the profit embedded in such sales against the alleged bogus purchases should ba brought to tax. e. In the case of CtT-1 Vs Simit P. Shceh, ITA no. 553 of 2012, order dated 16.01.2013. while deciding a similar issue, the Hon'ble High Court ot Gujarat has held That: 'We are broadly in assessment with the reasoning adopted by the Commi (Appeals) with respect to the nature of disputed purchases of stifle. it may ha that thn three suppliers from whom the assesses claimed to have purchased the steel did not own up to such sales. Howsoever, vital question while considering whether the entire amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 in the case of CIT v. Kishor Amivtist PatiI in tfi result, tax appeal is dismissed. g. In view of the facts and circumstances and (he judicial pronouncements cited above, what can be disallowed or (axed in The instant case, is the excess profit element embedded in such purchases shown to have been made from these parties. In this regard, the yardstick laid down by aforesaid judicial pronounce men Is by disallowing 20% of purchases as the benefit garnered in such unverifiable purchases where safes are not disapproved, is ? sound benchmark that is being adopted in the present case too. h. Therefore In the instant case, it is found that all the facts and circumstances outlined above lead to the conclusion that although The purchases made by the appellant from the three parties mentioned above during the year under consideration cannot be summarily rejected but at me same Time it difficult to accept that The purchases shown on the invoices/bills issued by these parties are as per the prevailing market price of those materials or actually been made from such parties and might have been purchased in the grey market, The appellant has not placed any evidence on record that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss. The Ld.AO has excluded interest paid on unsecured loan on the ground that the total unsecured loan on which interest has been paid, has been treated as unexplained cash credit u/s 68 of the I.T. Act, 1961 for AY 2009-10 and also consequent interest expenditure is reduced from work-in-progress. The Ld.CIT(A) has considered the issue in AY 2009-10 and after considering additional evidence filed by the assessee, deleted addition on account of unsecured loan from 25 parties and sustained the addition made on account of unsecured loan from 12 parties. For the year under consideration, the Ld.CIT(A), by following the finding recorded for AY 2009-10, directed the AO to examine the claim of the assessee, in the light of documentary evidence and findings of the Ld.CIT(A) for AY 2009-10 and accordingly reduce interest component with respect to genuine loans. 8. Having considered the arguments of both the sides, we find that this is a recurring issue which is emanating from AY 2009-10. The AO, initially made addition towards unsecured loan taken from certain parties u/s 68 of the Act. The Ld.CIT(A) has deleted addition made by the AO on the basis of additional evidence filed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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