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TMI Blog2022 (11) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... icting the disallowance on account of bogus purchases to Rs.5,00,000/- as against Rs.2,63,08,871/- made by the AO without properly appreciating the facts of the case and the material brought on record. 3. The Ld.CIT(A) erred in law and facts in deleting the addition of commission expenses amounting to Rs.19,29,530/- made by the AO without appreciating the facts of the case and the material brought on record. 4. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. 5. It is therefore, prayed that the order of the Ld.CIT(A) may be set aside and that of the Assessing Officer may restored to the above extent. 3. The first issue raised by the revenue is that the Ld. CIT(A) erred in restricting the disallowance made by the AO under the provisions of section 14A r.w. Rule 8D of the Act to Rs. 71,436/- against the amount disallowed by the AO at Rs. 12,21,613/- under normal computation of income as well as under book profit u/s 115JB of the Act. 4. The facts in brief are that the assessee in the present case is a limited company and engaged in the business of trading in Gold, Silver and MCX trading of raw cotton ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at disallowance under section 14A could not be made. In the process tribunal relied on the decision of Division Bench of Punjab and Haryana High Court in case of CIT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 in which also the Court had observed that where the assessee did not make any claim for exemption, section 14A could have no application. 8.2. In view of the above we do not find any infirmity in the finding of learned CIT(A) as limiting the disallowances under section 14A of the Act to the extent of exempted income. 8.3. Coming to disallowances/adjustment to the book profit under the provision of clause (f) of the explanation 1 to section 115JB of the Act, we note that the Special Bench of the Hon'ble Delhi Tribunal in the case of ACIT vs. Vireet Investment Pvt. Ltd. reported in 82 Taxmann.com 415 has held that the disallowances made u/s 14A r.w.r. 8D cannot be the subject matter of addition while determining the net profit u/s 115JB of the Act. The relevant portion of the said order is reproduced below: "In view of above discussion, the computation under clause (f) of Explanation 1 to section 115JB(2), is to be made without resorting to the computation as con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the proceedings and unnecessary litigation. Thus we direct the AO to make the disallowance of 1% of the exempted income as discussed above under clause (f) to Explanation-1 of Sec. 115JB of the Act. We also feel to bring this fact on record that we have restored other cases involving identical issues to the file of AO for making the disallowance as per the clause (f) to Explanation-1 of Sec. 115JB of the Act independently. But now we note that there is no mechanism provided under the clause (f) to Explanation-1 of Sec. 115JB of the Act to make the disallowance independently. Therefore our action for restoring back the issue to the file of AO would unnecessarily cause further litigation. Thus we limit the disallowance on an ad-hoc basis @ 1 % of the exempted income as per the clause (f) to Explanation-1 of Sec. 115JB of the Act. Thus in view of the above the ground of appeal of the Revenue is partly allowed. 9. The second issue raised by the Revenue is that the Ld. CIT(A) erred in restricting the disallowance to Rs. 5,00,000/- against the disallowance made by the AO at Rs. 2,63,08,871/- on account of bogus purchases. 10. The assessee in the year under consideration has shown p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... person who appeared was neither the partner nor the employees of M/s Uma Cotton Industries. As such the AO failed to realize that the person namely Shri Yogesh G. Sanetar was the nephew of the managing partner namely Shri Babu A. Patel. The assessee on behalf of M/s Somnath Cottgin (I) Pvt. submitted that due to short notice received at the close of the year, the authorized person cannot appear. However, the copy of confirmation of account as well as bills were produced. Likewise, M/s Cresent Shipping Agency(I) Ltd. is the carrier of the cargo i.e. charter owner of the shipping and it is not the C&F agent as perceived by the AO. 14.2 As such M/s Crescent Shipping Agency(I) Ltd., as the C&F agent of assessee, its job was confined to clearing and loading of the cargo on the ship. With respect to the transport bill shown for the delivery of goods from Tankara to Ahmedabad, the assessee submitted that the goods were actually delivered at the port but due to clerical mistake the destination was shown as Ahmedabad. However, this clerical mistake cannot be made any basis to draw an inference against the assessee. 14.3 The assessee also submitted that the purchase was made against form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it was a valid appearance before the AO and the AO's observation in this regard is without any basis. 5.5. With regard to the personal appearance of M/s. Somnath Cottgin Pvt. Ltd., it was not possible due to short span of time granted by the AO, but the confirmation of the said party along with copy of bill of sale of cotton was submitted as per letter dated 30-03-2015. 5.6. The AO has made few observations about the discrepancies noticed in the debit notes and transport receipts which have been explained by the appellant in the written submission reproduced under preceding paras and those did not have any material impact of the issue under consideration. Even with regard to the cancellation of the TIN by Gujarat Commercial Tax Dept. of M/s. Uma Cotton Industries on 31-03-2014 and M/s. Somnath Cottgin Pvt. Ltd. from 31-03-2012 would not be material for consideration of the issue involved as those purchases from those parties are prior to the date of cancellation of the TIN. 5.7 On going through the details of purchases of the cotton bale from these two parties and corresponding export of those cotton bales the appellant had derived the gross profit of Rs. 74.62.797/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the AO has doubted on the genuineness of the purchases shown by the assessee for the reasons which have been elaborated above and therefore the same was disallowed. However, the Ld.CIT(A), found that the sale was not possible without having the purchase and therefore he allowed the grounds of appeal of the assessee in part. 18.1 Now the controversy arises whether the purchase shown by the assessee is bogus in nature. In this regard we note that the assesse has shown export sales which was duly supported based on form H, bill of lading, shipping bill etc. Likewise, there was received money against such export sales. Thus, all these cumulative informations suggest that the assessee without making the purchase, cannot export the goods. There were various documents filed by the assessee in his form of confirmation, sales bills of the parties. Besides, the authorized representative appeared on behalf of M/s Uma Cotton Industries, all these documents cannot be neglected merely on the reasoning that there was some mismatch in the transport bills as discussed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 012 and these credits were found withdrawn on the next day in the bank accounts of the agents. The AO also observed that no details of the agent specific work have been submitted. Nothing about their educational qualification and their knowledge about the assessee's business has been brought on the record to prove that actual services have been rendered by the agents. Thus, the AO was not satisfied with regard to the genuineness of the claim of commission paid to the above parties. 6.8. On the other side, the appellant has submitted the copies of the debit notes received from the parties, copies of confirmation of account, details of TDS made on the commission payments, TDS certificate copies besides bank statement showing the payment to the agents through banking channels. It was also argued that the commission to the parties were made which was evident from the above said documents. The aforesaid agents have duly confirmed the transactions carried out by them in response to notice u/s. 133(6) of I.T. Act. It also filed the copies of agreements executed with the agents. The commission agents were not related parties as per section 40A(2)(b] of I.T. Act. The appellant also s ..... X X X X Extracts X X X X X X X X Extracts X X X X
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