9911796707
TMI Blog2022 (1) TMI 228X X X X Extracts X X X X X X X X Extracts X X X X ..... nating materials and accordingly the jurisdiction of the AO can not be justified. Further we find merit in the contentions of the ld A.R. that statement recorded during search do not constitute incriminating material as the same can not be said to be found during the course of search but is recorded to elicit more information/explanation of the searched person on the incriminating documents/gold/jewellery found during search. Therefore after perusing the material on record and considering rival contentions and also the decisions cited before us, we are of the considered view that a statement recorded during the course of search can not be considered an incriminating material in order to make addition in an unabated assessment year. Therefore, this is an undisputed position of law that in case of unabated assessment year, no addition can be made in absence of any incriminating material found during the course of search. - Decided in favour of assessee. Profit estimation on On-money - CIT(A) partly upholding the order of AO on the issue of on-money by directing to apply 25% as against the 100% added by the AO - HELD THAT:- In view of the profit margin of the assessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... counting standards not adopted for preparing such accounts and method, rate of depreciation which have been incorrectly adopted for preparation of profit and loss account laid before the Annual General meeting. In our considered view none of the aforesaid conditions laid down by the tribunal gets fulfilled in the case of the assessee. Therefore we are inclined to uphold the order of ld CIT(A) by dismissing the appeal of the revenue. Addition on protective basis - As argued substantive addition has not yet been confirmed and accepted by the assessee and there is possibility of revenue loss in case substantive addition is deleted by higher authorities - CIT-A deleted the addition - HELD THAT:- As perusing the material on records in the appellate order including the charts of on money calculation filed by the assesse, calculated by the AO and reworking thereof by ld CIT(A), we note that the substantive addition has been confirmed @ 12.50% of the on money in the hand Man Global Ltd in AY 2015-16 and thus the protective addition was rightly deleted by the ld CIT(A). We further note that in on money as reworked by ld CIT(A) has been accepted both by the assesse as well as revenue an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kala Gas Company already dealt by CLB in petition of Mr J.C. Mansukhani. As in the year under consideration, the commission was paid for exports made to M/S Abu Dhabi Gas Industries Ltd. and not to Kala Gas Co, however, the A.O. without applying the mind has only referred the letter from Kala Gas Co. without appreciating fact that in AY 2013- 14 there is no sale to Kala Gas Co. The AO on the basis of addition made in AY 2009-10 on alleged letter of Kala Gas Co. also made disallowance in AY 2013-14 without appreciating the facts correctly that there is no export to Kala Gas Co. We note that similar payment of commission has been allowed by the revenue in the earlier years and therefore even on the principal of Consistency, impugned addition on account of Export Commission can not be sustained. - Decided against revenue. Addition on account of Service charges paid - Allowable revenue expenses or not? - HELD THAT:- The expression commercial expediency is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The case of the assessee finds support from the decision of Hon ble Apex Court in the case of S.A. Bui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urce in the grey market. Such purchases can not be ruled out as the materials were used in the manufacturing process, the inspection report whereof was on the records and stock register showing monthwise receipt and consumption of materials. So under these circumstances it is settled position now that entire alleged bogus purchases can not added to the income of the assessee as it would affect the profits of the assessee unrealistically and unreasonably. Therefore under such circumstances only profit margin on those bogus purchases can at the most be added. Accordingly we set aside the order of ld CIT(A) on this issue and direct the AO to apply a profit rate of 5% on the bogus purchases. - ITA No. 7440/Mum/2019, ITA No. 7533/Mum/2019, ITA No. 7534/Mum/2019, ITA No. 7535/Mum/2019, ITA No. 7536/Mum/2019, CO No.81/Mum/2021 (Arising in ITA No. 7440/Mum/2019 for AY 2011-12), CO No.82/Mum/2021 - - - Dated:- 25-11-2021 - (Arising in ITA No. 7533/Mum/2019 for AY 2012-13), CO No.83/Mum/2021 (Arising in ITA No. 7534/Mum/2019 for AY 2013-14), CO No.84/Mum/2021 (Arising in ITA No. 7535/Mum/2019 for AY 2014-15), CO No.86/Mum/2021 (Arising in ITA No. 7536/Mum/2019 for AY 2015-16), ITA No. 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial found during the course of search proceedings. These addition is beyond the scope of assessment framed u/s 153A of the Income tax Act, 1961 and hence deserved to be deleted. 2. On the facts and in the circumstances of the case, the CIT(A) erred in confirming disallowance of 12.5% of Assessee's purchase from M/s Karma Ispat Limited. The disallowance is not justifiable and deserves to be deleted. 3. On the facts and in the circumstances of the case, the CIT(A) erred in confirming disallowance under section 14A of the Act of ₹ 23,03,070/-. The disallowance is not justifiable and deserves to be deleted. 4. The respondent craves leave to add, alter, amend and/or withdraw any ground or grounds of cross objections either before or during the course of hearing of the same. 4. The facts in brief are that the assesse filed the return of income on 30.09.2011 declaring total income of ₹ 1,34,37,790/-. The Assessee is engaged in the Real Estate Business. The assessee has developed two projects called MAN Opus and Shanti Sadan. A search under section 132 of the Act was conducted in case of the Man Group of Companies including the appellant assessee on 10. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nfined to the additions based upon the incriminating materials found during search and not otherwise. The ld. AR submitted that since no incriminating documents/materials were found during the course of search with respect to bogus purchases and expenses claimed u/s 14A in respect of exempt income, the addition made by the AO lack jurisdiction. So far as the addition on account of bogus purchases is concerned, the ld. AR submitted that during the course of survey proceeding in the case of Karma Ispat Limited in the month of March 2010, it was found that said entity was providing accommodation bills to various parties and only on that basis the addition towards bogus purchases were made without any incriminating material found during the course of search proceedings in the of assesse during the search. 7. Therefore the AO has no jurisdiction to addition in respect of bogus purchases and disallowance u/s 14A of the Act. The ld counsel for the assessee, therefore, submitted that the ld. Assessing Officer has simply gone beyond the scope of the provisions of section 153A of the Act which comes into operation only after a search has been carried out u/s 132 of the Act and to assign ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss corroborated by other substantive materials. In defence of his arguments the ld DR relied on certain decisions namely i) PCIT v. Best Infrastructure (India) Pvt. Ltd. Ors. [397 ITR 82 (Del)] ii) CIT v. Harjeev Aggarwal [290 CTR 263 (Del)] iii) PKSS Infrastructure Pvt. Ltd. v. DCIT and vice-versa (Mum ITAT) [ITA No. 5680-5681/Mum/2018 and 5802-5803/Mum/2018] dated 29.11.2019 and iv)Geetanjali Space Pvt. Ltd. v. DCIT [ITA No. 782/Mum/2019] dated 31.05.2019 11. Finally the ld AR prayed before the bench that in light of the foregoing facts and circumstances and various decisions , the order of ld CIT(A) may be set aside and the AO may be directed to delete the addition. 12. The ld DR on the other hand relied heavily on the order of AO submitting that the search was conducted on the assesse when it came to light during the course of survey and search on Karma Ispat Ltd that this entity is engaged in providing accommodation entries. The ld DR submitted that it is only during search u/s 132 of the Act conducted on 21.07.2011 wherein Mr. Rajesh Mehta MD of Karma Ispat Ltd admitted that Karma Ispat Ltd. has been engaged in providing bogus accommodation entries also. The ld DR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 153A of the Act as under: 26. The plea raised on behalf of the assessee that as the first proviso provides for assessment or reassessment of the total income in respect of each assessment year falling within the six assessment years, is merely reading the said provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word assess has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. b) In CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd. (2016) 374 ITR 645 (Bom)(HC) wherein it was held that no addition can be made in respect of assessments which ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year, no addition can be made in absence of any incriminating material found during the course of search. In view of the above facts and circumstances of the case and various decisions as discussed above, we are inclined to set aside the order of Ld. CIT(A) on this issue and direct the AO to delete the additions as being without valid jurisdiction. The ground No.1 is allowed. 15. The issues raised in ground no. 2 3 are on merits of the additions made towards bogus purchases and u/s 14A of the Act. Since we have allowed the appeal of the assesse on jurisdictional/legal issue, the ground no. 2 and 3 are not being adjudicated. 16. The cross objection of the assesse is allowed. ITA No. 7440/Mum/2019(Revenue s Appeal) 17. The revenue has challenged the deletion of addition by ld CIT(A) to the extent of 87.50% of the bogus purchase as against the 100% addition made by the AO. Since we have allowed the appeal of the assessee on the legal by holding that the jurisdiction of the AO to make addition is invalid. Consequently the appeal of the revenue becomes infructuous and is accordingly dismissed. 18. In the result the cross objection by the assesse is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngs and post search proceedings various statements on oath were taken under section 132(4)/131 of the Income Tax Act copies whereof are filed Master paper book page no. 1 to 23. The Man group has vide letter dated 31/03/2015 filed before the DDIT (Inv.) Mumbai a tentative entitywise and year wise bifurcation of receipt on the basis of excel sheet and notings jottings found during the course of search proceeding. It was clearly mentioned in the said letter that the exact yearwise and entitywise disclosure cannot be quantified at this stage. The entitywise and year wise disclosure of receipt given vide letter dated 31/03/2015 was just tentative. As per the said letter, the details and bifurcation of the entitywise receipts are extracted below for ready reference: (Rs. In lacs) Sr. No. Name of the parties A.Y.2015-16 A.Y. 2014-15 A.Y. 2013-14 A.Y. 2012-13 Total 1 Man Infraprojects Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18.25 2203.4 2 M/s M Concepts Retail LLP 0.14 0.15 4.32 46.65 51.56 3 M/s Merino Shelter Pvt. Ltd. 95.72 85.00 306.24 163.20 650.16 4 M/s Man Global Limited 589.64 171.17 410.75 426.00 1597.56 Total 1325.99 1003.89 1118.41 1054.40 4502.69 24. The A.O. after comparing receipt worked out as above vis- -vis bifurcation of receipt given vide letter dated 31.03.2015. The addition of ₹ 3,62,11,000/- (i.e. ₹ 426.00 lacs receipt as per A.O s working Less ₹ 63.99 additional income offered to tax in return filed under section 153A of the Act ) is added on substantive basis. Further the difference between the Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n money receipts by MAN Group 1325.99 1003.89 1053.40 1054.41 4437.68 Less: Contra entries as per submission dated 31.03.2015 to Investigation wing. 202.51 269.58 (107.18) 82.80 447.71 Less: On money receipt considered in Merino Shelters Pvt Ltd 95.72 85.00 306.24 163.20 650.16 Less: On money receipt considered in M Concepts Retail LLP 0.14 0.15 4.32 46.96 51.57 Less: On money (Scrap) to be considered in Man Industries (India) Limited 96.45 - 3.00 19.25 116.90 Balance on money Receipt to be considered in Man Global Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... receipts done by the CIT(A) was not disputed either by the appellant assessee Group or by the revenue. The aforesaid year wise and entity wise bifurcation is duly accepted as such. The ld. AR submitted that the Ld. CIT(A) has determined on money cash receipts belonging to the assessee at ₹ 742.20 lacs and directed to restrict the addition to the extent of 25% of ₹ 742.20 lacs as against additions of ₹ 3,62,11,000/- on substantive basis and ₹ 2,12,99,000/- on protective basis respectively. The ld. AR referred to the appellate order and pointed out that ld. CIT(A) has held that only profit embedded in alleged on money cash receipts is to be taxed which was a perfect finding by the ld CIT(A) and further directed the AO to estimate the profit rate @25%. The department is in appeal challenging the relief allowed by ld CIT(A) to the assessee by allowing 75% of the on money towards expenses with allegation that the nature and allowability of the expenses found in excel sheets could not be verified besides challenging the expenses in cash do not qualify for deduction under section 40A(3) of the Act. The ld AR invited the attention of the bench to the statement of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only profit embedded to the receipts should be taxed and was rightly done by the ld CIT(A). The AR re-iterated that the year wise and entity wise receipts reworked out by the CIT(A) reached finality as the same was neither disputed by the Revenue nor by the assessee. On the issue of application of 25% on the on money, the ld AR vehemently argued that the profit estimated by the CIT(A) @ 25% of gross receipts is relatively on higher side in view of the fact that the profit earned by the assessee against its Real estate project is 4.45% as noted at page no. 9 by CIT(A) in the appellate order. The ld AR therefore prayed before the bench that considering the same, profit ratio of 25% estimated by the CIT(A) is exorbitant and may be restricted to only profit actually being earned by the Assessee company. 28. The ld DR, per contra, submitted before the bench that the order of ld. CIT(A) is wrong as the ld CIT(A) has wrongly allowed the relief of 25% of the on Money to the assesse towards the expenses by holding that only profit can be brought to tax and not the entire on money. The ld AR submitted that incriminating material/documents were found during the course of search on the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7; 2,12,99,000/- respectively. Now the assesse has challenged the estimation of income on money at @ 25% whereas the revenue has challenged the allowance given by the ld CIT(A) to the tune of 75% towards expenses on the ground that nature and allowability of the expenses found in excel sheets could not be verified beside challenging the expenditure in cash not qualifying for deduction under section 40A(3) of the Act. We have considered the facts of the case and rival contentions and certainly agree with the findings of ld CIT(A) that entire on money can not be taxed and it is only profit embedded in on money is to be taxed . We note that assessee s average profit from real estate business from AY 2012-13 to 2015-16 is 4.45%. Now the contentions of the assesse is that the estimation of income in respect of on money has to based on some realistic basis that has to be on the basis of profit ratio of the assessee and should not be estimated arbitrarily as done by the CIT(A). Before arriving at final conclusion we would like to discuss the decisions relied by the ld AR which are discussed as under: (i) In the case of CIT(A) Vs. Abhishek Corporation in ITA No. 15 of 2003 , Hon ble G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e an addition of 17.08% of the gross on money receipts. The said decision of Mumbai Tribunal is also upheld by the Bombay High Court in ITA No. 2452 of 2013. The head note of decision of Bombay High Court is reproduce as under: Taxable profits of the Project 'Prime Mall' by adopting net profit of 17.08% of the total gross sales - Held that:- We find that the Revenue seeks to substitute the estimated net profit arrived at by the Tribunal with a new figure of net profit. This without in any manner showing that the estimate arrived at by the Tribunal in the impugned order is perverse. It is a settled position of law that in estimated net profit arrived at by the authorities is a question of fact and if the material on record does support the estimate arrived at by the Tribunal then it does not give rise to any substantial question of law (see CIT v/s. Piramal Spinning and Weaving Mills Ltd. 1979 (10) TMI 45 - BOMBAY High Court). In this case, we find that the net profit estimated at 17.08% is a very possible view on the facts found. No substantial question of law Tribunal directing the Assessing Officer to allow deduction towards remuneration and interest, even in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Dhanlaxmi Builder Vs. DCI Central 3 Mumbai (Supra), the coordinate bench held that 8% net profit of the gross on money receipt is considered to meet the end of justice. 30. Considering the facts of the assesse vis a vis the ratio laid down by various judicial forums as discussed above we are of opinion that in view of the profit margin of the assesse from the real estate business, it would meet the ends of justice if a rate of 12.50% is applied on the on money. Accordingly the order of the ld CIT(A) is modified and AO is directed to apply profit rate of 12.50% on the on money. Consequently the ground no 1 in the assesse cross objection is partly allowed . 31. In the revenue appeal, the part deletion of addition to the extent of 75% of the on money is challenged besides challenging the allowability of cash expenses u/s 40A(3). Since we have allowed the ground 1 raised in the cross objection by the assesse, the appeal of the revenue becomes infructuous and is accordingly dismissed. 32. The issue raised in the 2rd ground in the cross objection by the assesses against the confirmation of addition of ₹ 62,887/- as made by the AO u/s 14A of the Act towards earning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ised in ground no.2 is on merit and against the order of ld CIT(A) partly sustaining the addition to the extent of 12.50% of bogus purchases. Since we have allowed the appeal of the assesse on jurisdictional/legal issue, the ground no. 2 is not being adjudicated. 38. Accordingly, the cross objections of the assessee are allowed. 39. In ITA No.7438/Mum/2019 AY 2011-12, the revenue has challenged the deletion of addition by ld CIT(A) to the extent of 87.50% of the bogus purchases as against the 100% addition made by the AO. Since we have allowed the appeal of the assessee on the legal issue by holding that the jurisdiction of the AO to make addition is invalid. Consequently the appeal of the revenue becomes infructuous and is accordingly dismissed. 40. The issue raised in ground no. 1 in CO 87 88/Mum/2021 is similar to one as decided by us in ground no. 1 in CO 82/Mum/2021 A.Y.20012-13. Therefore our decision in ground no. 1 in CO: 82/Mum/2021 A.Y.20012-13 would ,mutatis mutandis, apply to ground no. 1 in CO 87 88/Mum/2021 and accordingly the order of CIT(A) is modified and AO is directed to apply a profit rate of 12.50% on the on money. The ground 1 in the above t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stment can be made to arrive at the book profit as per the provision of section 115JB of the Act. It is undisputed fact that the accounts of the assessee were prepared in accordance with the part II and Part III of Schedule IV of the Companies Act 1956, which is further certified by the statutory auditors. The accounts of the assessee were also accepted as such by the A.O. and therefore any adjustment that can be made in the book profit are only with regards to those items as provided in the clause (a) to (ha) of the Explanation appended to section 115JB of the Act. The ld AR argued that no adjustment has been prescribed or provided in section 115JB of the Act as regards to the on money receipts, bogus commission etc. as added by the by A.O. to the book profits. The AO has no power to tinker with the accounts of the assessee and hence the adjustment made by the A.O. to the book profit are erroneous and may kindly be deleted. In defence of his arguments the ld AR relied on the following judicial pronouncements: A)Apollo Tyres Ltd. Vs Cit [2002] 255 Itr 273 (Sc), B)Malayala Manorama Co. Ltd. Vs.Cit, [2008] 300 Itr 251 (Sc), C)The Cit Vs M/S Nhpc Ltd. 2018 (4) Tmi 47 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 115J of the Income Tax Act, 1961 to rework net profits by substituting the rates prescribed in Schedule XIV of the Companies Act, 1956 and no addition should be made to book profits u/s 115JB of the Act. Further decision of Rishiroop Rubber International Ltd Vs. DCIT (supra) relied upon by A.O., the facts are totally different than the facts of assesse. In the case of Rishiroop Rubber International Ltd there was question of accounting of depreciation on dismantled assets as per the provision of Companies Act and Accounting standard 6. It is not out of place to submit that the coordinate bench in the case of Rishiroop Rubber International Ltd has allowed the A.O. to rewrite the book profit under section 115JB of the Act in following two cases namely i) if it is discovered that profit Loss account is not drawn up in accordance with Part II and Part III of Schedule IV to the companies Act, however, the Assessing Officer cannot disturb the Net Profit as shown by the assessee where there are no such allegation, fraud, misrepresentation but only a difference of opinion as to whether particulars amount should be property shown in the profit and loss account or in the Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /03/2015. The addition of ₹ 14,000/- was made by AO based upon above referred Excel Sheets on substantive basis and difference between the A.O. s receipt and receipt as per the Appellant s letter dated 30.12.2015 ₹ 169.86lacs (170 0.14) lacs was added on protective basis. Assessment under section 143(3) r.w.s. 153C of the Act was framed on 29/12/2016 at a total income of ₹ 1,59,87,586/-. 51. In the appellate proceedings, the ld CIT(A) observed that total receipt as per excel sheets i.e. 3990 lacs was duly taxed in the case of Man Group of entities including alleged receipt of ₹ 169.86 added on protective basis by the A.O. Therefore the ld CIT(A) has given a finding of fact that the protective addition of ₹ 1,69,86,000/- being on money received has been confirmed substantively in the case of M/s Man Global Limited for A.Y. 2015 16. Therefore, this addition made on protective basis is deleted. 52. After hearing the rival contentions and perusing the material on records in the appellate order including the charts of on money calculation filed by the assesse, calculated by the AO and reworking thereof by ld CIT(A), we note that the substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me since the assessee had offered additional income in the return of income filed under section 153A of the Act. 57. At the outset the ld AR submitted that the additions made by the AO were without jurisdiction as these addition were not on the basis of incriminating material found during search proceedings. The Assessee submitted that d in the form of books of accounts/documents or any unexplained money, bullion, jewellery or any other valuable asset was found to doubt the commission payment made by the Assessee company. This proved that as a result of the search carried out u/s 132 in the case of the assessee, no material or evidence was found to justify addition made by Assessing Officer on account of Commission payment. The material relied upon by the A.O. i.e. letter of M/s Kala Gas Services is not incriminating material. The letter was part of CLB Petition filed in October-2012 and is certainly a public Document. At the time of original assessment proceedings, the alleged letter is part of Public document. The then A.O. has determined the assessed income under section 143(3) of the Act after both the petitions of CLB were filed, which proved beyond doubt that alleged let ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on the legal /jurisdictional issue by holding that the AO has no jurisdiction to make additions without incriminating materials in an unabated assessment year and consequently additions made will not survive. Consequently the appeal of the revenue becomes infructuous and is accordingly dismissed. ITA No. 7527/Mum/2019 CO No. 90/Mum/2021 A.Y. 2010-11: CO:90/Mum/2021 62. The issue raised in ground no. 1 is identical to one as decided by us in CO No.81/Mum/2021AY 2011-12, therefore our decision in Co No.81/Mum/2021AY 2011-12 would ,mutatis mutandis, apply to ground no. 1 as well. Accordingly we set aside the order of CIT(A) on this issue by holding that AO has no jurisdiction u/s 153A to make additions without incriminating materials found during search. Resultantly all additions made by the AO are directed to be deleted. Ground no. 1 is allowed. 63. The issues raised in ground no. 2 3 are on merit of the additions made towards unaccounted scrap sales of ₹ 19,00,000/- and disallowance of ₹ 20,00,000/- u/s 14A of the Act. Since we have allowed the appeal of the assesse on jurisdictional/legal issue, the ground no. 2 and 3 are not being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will not survive. Consequently the appeal of the revenue becomes infructuous and is accordingly dismissed. ITA No. 7530/Mum/2019 and CO No.92/MUM/2021 Assessment Year: 2013-14 CO No. 92/MUM/2021 70. The issue raised in ground no. 1 is against the order of CIT(A) upholding the jurisdiction of the AO to make addition in the assessment framed u/s 153A when there is no incriminating material seized during the year. At the time of hearing the ld AR did not press this ground and therefore the ground no. 1 is dismissed as not pressed. 71. The issue raised in ground no. 2 is against the order of CIT(A) upholding the jurisdiction of the AO to make addition in respect of scrap sale of ₹ 3,00,000/-. At the time of hearing the ld AR did not press this ground for the reason that telescoping has been allowed by the ld CIT(A) against the additional income offered in the return of income filed in response to notice u/s 153 A of the Act and therefore the ground no. 2 is dismissed as not pressed. 72. The issue raised in the ground no.3 is against the order of CIT(A) upholding the addition of ₹ 5,00,000/- as made by the AO u/s 14A of the Act. 73. Duri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76. It can be seen from aforesaid details that as assessee had sufficient interest free funds, proportionate disallowance of interest expenditure is not justified. The AR relied on following decisions in defense of his arguments: a)PCIT v. Sintex Industries Ltd.[2018] 93 taxmann.com 24 (SC) b) CIT v. Reliance Utilities and Power Ltd. (313 ITR 340): c) CIT V/s Suzlon Energy Limited. 215 Taxman 272 (2013) d) HDFC Bank Ltd Vs. DCIT 2(3), Mumbai Others, [2016] 383 ITR 529, 77. The ld Ar submitted that in view of facts of the assesse and judicial decisions as referred to above , for the purpose of disallowance u/s 14A, only net interest expenditure if any is required to be considered. The ld AR argued that in present case, there is positive income only and hence disallowance of proportionate interest expenditure is unwarranted and deserves to be deleted. The ld AR submitted that credit may allowed towards the proportionate interest expenditure disallowed in return of income. 78. After hearing both the sides and perusing the material on records, we find that the assessee s own interest free funds are far more than the investments in shares and mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... puted either by the assessee group or by the department. On the basis of aforesaid bifurcation of total receipts which is not disputed by the department, the ld CIT(A) gave a findings of fact that that impugned receipt of ₹ 397.10 lacs is duly taxed on substantive basis in case of Man Global Pvt. Ltd. in para no. 8.10 of the appellate order and further noted that any further addition in case of assessee will amount to double taxation of single receipts and not justifiable and thus allowed the appeal of the assesse on this issue. 83. After hearing the rival contentions and perusing the materials on records we find that that the on money recalculated by the ld CIT(A) was accepted by the assesse as well as by the revenue. As per the said working the ld CIT(A) recorded a finding of fact that the said amount has been taxed in the hands of group entity M/S Man global Ltd and any further addition will result in double addition resulting into double taxation which is not permitted under the Act. We have also perused the records before us along with the working of on money done by the ld CIT(A) and do not find any infirmity in the appellate order. We are therefore upholding the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in connection with overseas supply order as majority of its business is to overseas customers in Oil and Gas Sector based in Middle East. As per general terms condition, the assesse is to manufacture and supply of pipes from its factory situated in India to the port of overseas customer s country and in certain cases till the customer s project site. As per business expediency, the assesse in the normal course of business, hires the agents based on geographical area and also project specific requirements as the case may be, who not only procured order for assessee but also provides the market analysis, indicative prices, and competitor s strategies. The agent also ensures to arrange for tender documents and assist in bidding to procure order, to collect project completion certificates, renders logistic support for ensuring safe delivery of pipes, as the case may be. The assesse submitted that in Middle East countries, in most of cases, the assessee does not have direct contacts with the agencies releasing the supply orders and therefore assessee must have local agents/intermediaries in order to procure order and enhance assessee s presence in the region . Therefore, the Company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontentions did not find favour with the AO and he disallowed and added the amount of commission of ₹ 3,48,61,001/- to the income of the assesse. 88. In the appellate proceeding, the ld CIT(A) allowed the appeal of the assesse on this by holding the assesse has filed all evidences in support of its claim before the AO. The ld CIT(A) noted that the commission payment was made in connection overseas supply orders as majority of its business is to overseas customers in Oil and Gas Sector based in Middle East. Ld CIT(A) also noted that as per business expediency, the in the normal course of business hires the agents based on geographical area and also project specific requirements as the case may be, who not only procures order for assessee. The ld CIT(A) also observed that the payments were made out of commercial and business expediency as these agents used to provide the market analysis, indicative prices, and competitor s strategies beside ensuring to arrange for tender documents and assist in bidding to procure order, to collect project completion certificates, renders logistic support for ensuring safe delivery of pipes, as the case may be . The ld CIT(A) also appreciat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e exports orders and to comply with the formalities is genuine and can not be doubted. We note that the assesse has furnished before the AO all evidences including the permission from RBI and FEMA. The only basis for disallowing the commission was the letter from the overseas customer M/S Kala Gas Company dated 5.5.2011 stating that it did not know the two companies M/s Alpine Enterprise LLC and M/s Sun Overseas Trading and have had no business relationship with them of any nature and thus the commission paid to M/s Alpine Enterprise LLC and M/s Sun Overseas Trading in connection with the sale made to M/s Kala Gas Company was disallowed. We also note that said letter was part of the petition filed by Mr. J C Mansukhani, brother of the Chairman Mr. Rameshchandra Mansukhani of the Company before the Company Law Board (CLB) against the Company and its Chairman vide petition no. 72/397- 398/CLB/MB/2012/603 filed in October-2012 and it is an official document filed by the then director of the Company who is in dispute with the Chairman of the Company. The Company Law Board decided the issue in favour of the assesse and the operative part is reproduced as under for your ready reference p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd of appeal is against the order of CIT(A) deleting the addition of ₹ 48,84,570/- as made by the AO on account of Service charges paid to Man Overseas DMCC/-. 93. During the assessment proceeding, the AO notice that the assesse has paid ₹ 48,84,570/- as service charges to Man Overseas DMCC/-. The AO noted that activities of the assesse were through brokers and agents appointed by the foreign company with which the assesse had business transactions and as such no additional services are required. The A.O. has observed that the assessee failed to prove clearly nexus between the services provided by overseas entity and the business activity of the Assessee. The assesse submitted before the AO that these service charges were paid to Man Overseas Metals DMCC under an agreement and copy of Service agreement executed with Man Overseas metals DMCC was also furnished before the AO by pin pointing the specific clauses in the agreement for services to be rendered by Man Overseas Metals DMCC. The service agreement was executed for the ease of the assessee s business transactions in UAE. Man Overseas Metals DMCC is having requisite skills and abilities and the assessee has hir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Appellant as under: (i) The service charge was paid in connection to the sale of the Appellant for current year and hence is Revenue expenditure. (ii) |The expenditure was incurred for any personal purpose. The AO has not stated that the money is spent for the personal purpose. (iii) The expenditure indeed incurred wholly and exclusively for the purpose of business of the Appellant. The Appellant has furnished the documents viz. agreement for service, bank payment proof and the payment of service charge Is essential looking at export turnover of the company in Middle East region also that It Is 100% subsidiary of the company. 11.5 It has been consistently held in decisions relating to Section 37 that the expression for the purpose of business Includes expenditure voluntarily Incurred for commercial expediency. The expression commercial expediency* an expression of wide import and includes such expenditure a6 @ prudent businessman incurs for the purpose of business. The expenditure may not have been incurred under any legal obligation, but yet it is allowable as a business expenditure if it was incurred on grounds of commercial expediency. In this ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers making all the arrangement for the meting including travelling within UAE etc., ----------------------- 3. Fees and Expenses For the services rendered by Man Overseas under this Agreement, MIL will make payments of AED 9,00,000/- per annum to Man Overseas. This shall be exclusive of the actual cost incurred by Man Overseas exclusively for and on behalf of MIL while performing its duties under this agreement. 96. It is clear from the above that nature of services as covered in the service agreement are not rendered by the agents and ld CIT(A) has given a specific finding on this aspect. The services include viz., Promoting Marketing the products of MIL, arranging visas for various employees of MIL, arranging meeting of MIL with its customers in UAE, representing MIL before various Judicial and Quasi - Judicial authorities, liaising with various clients of MIL in UAE, obtaining tender for various orders making all the arrangement for the meting including travelling within UAE etc. There is no iota of evidence to show that the payment of service represented only accommodation entry or was only a paper transaction. There is also no evidence to show that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order of ld CIT(A) by dismissing the ground raised by the revenue. Our decision on this issue would, mutatis mutandis, apply to ground no.5 of this appeal as well. Accordingly the ground no.5 is dismissed. 98. The issue raised in the 6th ground of appeal is against the deletion of addition of ₹ 1,68,96,638/- by CIT(A) as made by the AO on account of Depreciation of claimed on account of premium. 99. During the course of Assessment Proceeding the A.O. observed that the assessee has made excess payment to the bond holder to the extent of ₹ 12,40,33,655/- and accordingly deprecation on capitalized premium amounting to ₹ 1,68,96,338/- was claimed by the assesse. The AO during the assessment proceedings noted that depreciation on the excess payment made to FCCB holders can not be allowed and added the same to the income of the assessee. 100. The ld CIT(A) allowed the appeal of the assesse by observing that the AO has not disputed the fact that the withholding tax is paid actually paid by the Assessee. Further it is also not a case wherein the assessee has recovered withholding tax from the bond holder. The payment made by the assessee is its business de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase and in the law, the Ld. CIT(A) erred in deleting the addition made to the 115JB income without appreciating the fact that Apex Court in the case of Apollo Tyres Ltd has decided the issue in favor of the revenue. 103. The facts in brief are that after search on the assesse on 10/12/2014, an assessment under section 143(3) r.w.s. 153A of the Act was framed on 29/12/2017 by the AO making an addition of ₹ 7,24,14,600/- on account of on money on the basis of hard disc seized from the premises of M/S Man Global Ltd. The ld CIT(A in the appellate proceedings, deleted the addition on the ground that the on money has been taxed in the hand of anther group concern M/S Global Ltd on substantive basis as noted by the ld CIT(A) in para 8.9 of the appellate order. As has been mentioned above yearwise and entity wise working of on money receipts finalized by the CIT(A) was not disputed either by the Assessee Group or the department. The aforesaid year wise and entity wise bifurcation is duly accepted as such. In this background our decision on the grounds of appeal are as follows. 104. The issue raised in ground no .1 is similar to one as decided by us revenue s appeal in ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue raised in ground no.1 is similar to one as decided by us in ITA No.7430/Mum/2019 A.Y.2013-14 (supra) upholding the order of ld CIT(A) on this issue. Therefore our decision would, mutatis mutandis, apply to ground 1 of this as well. Accordingly the ground no. 1 is dismissed by upholding the order of ld CIT(A). 108. The issue raised in ground no.2 is against the order of ld CIT(A) deleting the addition of Commission paid to M/s. Alpine Enterprises LLC. As we have decided the similar in ground no.3 in ITA No.7530/M/2019 A.Y.2013-14 (supra) in assessee s own case wherein we have dismissed the appeal of the revenue by upholding the order of ld. CIT(A). Therefore, our decision would, mutatis mutandis, apply to ground of this as well. Accordingly the ground no. 2 is dismissed by upholding the order of ld CIT(A). 109. The issue raised in ground no.3 is against the order of ld. CIT(A) deleting the addition as made by the AO to book profit u/s 115JB of the Act. Since we have decided similar issue in in ground no.2 in revenue s appeal in ITA No.7539 7432/Mum/2019 from para no.42 to 48 (supra) by upholding the order of ld CIT(A). Therefore our decision would, mutatis mutandi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation entries and thus inflated the purchases. Accordingly, the AO rejected the books of accounts of the assessee under section 145(3) of the Act and added the entire purchases of ₹ 9,14,75,919/- to the income of the assessee. The AO with regard to the remaining purchases of ₹ 136,29,35,933/- which were made for trading purposes and did not come to the plant of the assesse, the AO observed that these purchases were also not fully genuine and after computing the average GP of the assessee which ranged between 1% to 2% came to the conclusion that the estimated GP of 5% would be sufficient to cover up all the leakages of revenue and accordingly calculated the estimated profit @5% which comes to ₹ 6,81,46,796/-. Out of this, assessee has already offered ₹ 2,24,00,000/- to tax and therefore remaining profits ₹ 4,57,46,796/- (₹ 6,81,46,796-2,24,00,000) was added to the income of the assessee. 112. In the appellate proceedings, the ld CIT(A) deleted the addition of ₹ 4,57,46,796/- after taking into account the contentions made by the assesse by observing and holding as under: 9.6 The fact that the assessee had made purchases for manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01/- may kindly be reversed and order of the AO may be restored. 114. The ld AR submitted before the bench that statements of Shri Ajay Shingal was recorded during the course of survey proceedings. It is submitted that the statement recorded on oath during the survey cannot be the sole basis for taking adverse view against the Assessee. Section 133A of the Act does not empower any income tax authorities to examine any person on oath, hence any such statement lacks evidentiary value and any admission made during the survey cannot by itself be made the basis of addition unless some backed by some substantive materials as held in the case of CIT vs Khader Khan Son 352 ITR 480 (SC). 115. As regards to the statement dated 13.12.2016 the ld AR submitted that vide said statement, Mr. Ajay Shingal has confirmed that out of total sales to M/s Harmony Exim Pvt. Ltd., Sales of ₹ 145,44,11,852/- were genuine sale and sale of ₹ 9,14,75,919/- represented just sale bill. Hence both the statements of Mr. Ajay Shingal is contradictory. Vide statement dated 11/12/2014, he has alleged that sales of ₹ 145,44,11,852/ were sale without actually delivery of goods. As against t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ramesh Chandara Mansukhani has not verified the facts regarding purchases made Harmony Exim Pvt. Ltd. Under these circumstances he has accepted the statement of Shri Ashok Gupta and offered to disclose purchases of ₹ 9,14,75,919/- lakhs as additional income. However, the transaction of Purchases from Harmony Exim Pvt. Ltd was verified in detail. Accordingly detailed explanation was given later on vide statement dated 09/12/2016 wherein Shri Ramesh Chandra Mansukhani has explained that purchases from Harmony Exim Pvt. Ltd were genuine purchases, delivery against the purchase received and these purchases were consumed in manufacturing process. The A.O. has relied upon statement recorded during the course of search proceedings i.e. on 13/12/2014. Detailed clarificatory statement of Shri Ramesh Chandra Masukhani dated 09/12/2016 recorded on oath was grossly ignored by A.O. without pointing any defects or without bringing any corroborative evidence to substantiate that the purchases from M/s Harmony Exim Pvt. Ltd. were bogus purchase. The Ld. A.O. fails to consider the following documents / explanation submitted by the assessee to prove the genuineness of purchase transaction from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d it was accepted by assesse as well as supplier that these supplies were in fact made to the assesse and have been further sold off. We note that ld AO estimated the profits by treating the purchases as not fully genuine for which there were corresponding sales. We also note that the assesse has produced the following evidences before the authorities below as well as before us to prove the genuineness of the purchases: Ledger account of M/s Harmony Exim Private Limited 1. Bank statement reflecting the payment made to Harmony Exim Pvt. Ltd 2. Delivery challans of M/s Harmony Exim Pvt. Ltd. 3. Annual accounts of M/s Harmony Exim Pvt. Ltd for F.Y. 2014 15 4. Relevant extract from VAT return filed by the Assessee wherein purchase made from M/s Harmony Exim Pvt. Ltd was duly disclosed. 5. Relevant extract from VAT return of M/s Harmony Exim Pvt. Ltd wherein sale to the Assessee was duly disclosed. 6. Copies of Bank statement of Harmony Exim Pvt. Ltd giving the particulars of amount received from the Assessee 7. Confirmation of account of M/s Harmony Exim Pvt. Ltd. 8. Invoice copies in respect of purchase made by M/s Harmony Exim Pvt. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bogus purchases. 123. The issue raised is against the confirmation of addition of ₹ 9,14,75,919/- by ld CIT(A) as made by the AO on account of non genuine purchases. The facts qua this addition has also been discussed while in ground no 4 of the cross appeal. The AO made the addition on the basis of statement of some employees of the Man group and also Chairman of the Company Shri Ramesh Chandra Mansukhani who latter on retracted from his statement. While searching Man Group, a suppler of materials M/s. Harmoney Exim Pvt. Ltd was surveyed and statements were recorded u/s 133A and 131 of the Act as discussed above while deciding the ground no 4 in the cross appeal of the Revenue. Accordingly the AO called upon the assessee to prove the genuineness of the purchases and also required the assessee to furnished evidences in support of its claim. We note that the assessee filed the following documents to prove the purchases: i. Ledger account of Harmony Exim Pvt. Ltd. ii. Copy of Store issue report wherein HR coil purchase from M/s Harmony Eximp Pvt. Ltd. were shown to be issued for production / manufacturing of spiral pipes iii. Copy of inspection report was ..... X X X X Extracts X X X X X X X X Extracts X X X X
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