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TMI Blog2024 (5) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... e was of the percentage of disallowance. In said case delivery of material was not established whereas in the instant case the AO has neither doubted delivery nor doubted consumption of the diesel and therefore, sustaining ad-hoc disallowance, merely on the basis of the presumption, cannot be upheld and accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition sustained by him. Decided in favour of assessee. Disallowance on account of alleged bogus tyre purchase bills - disallowance of 10% of expenses out of expenses on purchase of tyres shown from M/s Om Shree Siddhivinayak tyres during year under consideration - HELD THAT:- In view of the observations during the course of the survey, the director of the assessee company Shri Satish Mandhania admitted fact of the bogus purchase. The cashier of the assessee company also stated of receipt of cash back from M/s Om Shree Siddhivinayak tyres. In view of those statements coupled with failure on the part of the assessee in providing complete details of delivery challans of the bills in respect of M/s Om Shree Siddhivinayak tyres, the Assessing Officer held 10% of the purchases as bogus and ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as further rejected the argument of the Assessing Officer in the original assessment order that director of the assessee was a non-filer. In our opinion the status of the director of company as non-filer is not relevant while deciding the identity, creditworthiness and genuineness of the transaction of a company. Thirdly, the AO in assessment order mentioned that cash deposits were made in bank account of said party, however, the ld CIT(A) has pointed out that not a single instance has been brought on record by the AO. Before us also no such instance has been brought by the ld Departmental Representative. In our opinion, once the AO in the remand report has accepted the identity and creditworthiness of the share subscriber and genuineness of the transaction, then, filing of further appeal before the Tribunal on the said issue, is not justified. Ground of appeal of the Revenue dismissed. Addition of share application money received from one party - CIT(A) deleted addition - AO has doubted the creditworthiness of M/s Kasturi only for the reason source of money in the hands of said party was share application money from other 13 companies, whose credential were not verified - HELD THA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and genuineness of the transaction. Further, in respect of statement by the director of the respective parties the Ld. CIT(A) has recommended for taking action of reassessment in their hand. In our opinion there is no infirmity in the finding of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same - Decided against revenue. - Shri Om Prakash Kant (Accountant Member) And Ms. Kavitha Rajagopal (Judicial Member) For the Assessee : Dr. K. Shivaram And Mr. Shashi Bekal For the Revenue : Mr. Manish Sareen, CIT-DR ORDER PER BENCH These appeals by the assessee and the Revenue are directed against a common order dated 30.06.2023 passed by the Ld. Commissioner of Income-tax (Appeals) 47, Mumbai [in short the Ld. CIT(A) ] for assessment years 2013-14 to 2018-19 respectively. As common issue-in-disputes are involved in these appeals , therefore, same were heard together and disposed off by way of this consolidated order for sake of convenience and avoid repetition of facts. 2. Both parties agreed to take up assessment year 2013-14 as a lead case for arguments and follow the decision in the assessment year mutatis mutandis to other assessment years. Accordingly, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot established by the assessee with regard to the alleged parties? 2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the disallowance of unsubstantiated expenses without appreciating the facts that the identity, creditworthiness and genuineness was not established by the assessee with regard to the alleged parties? 3. Briefly stated facts of the case are that the assessee is a private limited company, engaged in the business of manufacturing of bricks blocks, crystal marbles, cement etc. and transportation of ash generated in thermal power stations. For the assessment year 2013-14 , assessment u/s 143(3) of the Income-tax Act, 1961 (in short the Act ) was completed on 26.03.2015 against the returned income of Rs. 10,37,95,810/-. Subsequently, a survey action u/s 133A of the Act was carried out by the Investigation Wing of the Income-tax Department, Mumbai at the premises of the assessee on 13.08.2019 along with premises of other group concerns. During the survey proceedings, statement of various persons including directors of the assessee company were recorded, wherein they admitted of recording of entry of bogus bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer for bogus purchases under the head fuel/diesel purchased from three parties. The facts qua the issue in dispute are that the assessee was registered owner of more than 400 trucks and dumper trucks during the year under consideration. In the impugned assessment order, the Assessing Officer held the purchases of fuel (diesel) from three parties namely (i) M/s KM Suchak Company, (ii) M/s Uganda Services and (iii) M/s Ambaji Petroleum as bogus on the basis of the various observations, firstly statement of employees of the assessee and partners, directors and supplier companies, secondly, entries of purchases from those three concerns not maintained by the assessee on E mist i.e. accounting software used by the assessee. The assessee however submitted that the persons whose statement had been recorded by the Investigation Wing were not responsible for or handling diesel purchase of the assessee and therefore, those statements were not to be relied upon. Further, it was submitted that all those persons had filed affidavit retracting the statement which were recorded u/s 133A/131 of the Act during survey proceedings. Further, it was submitted that statement recorded dur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... logical to conclude that the whole fuel (diesel purchases from the three alleged parties are bogus. In this regard he has verified the bogus fuel/diesel purchases by verifying the factual data regarding the total running kilometer vs. diesel purchase consumption. He has tabulated the details of diesel expenses including the alleged bogus fuel expenses and running kilometers as submitted by the assessee as under: Total (Running) Kilometer Diesel Purchase in LTR consumption Average Kilometer per litre 2012-13 76,92,475 38,57,021 1.99 2013-14 71,47,503 32,17,560 2.22 2014-15 70,80,612 32,36,768 2.19 2015-16 77,87,065 38,04,139 2.05 2016-17 76,83,886 37,54,853 2.05 2017-18 71,85,943 34,72,036 2.07 According to the AO, it is apparent from Table that the running average of commercial vehicle is ranging from 1.99 to 2.22 kilometer per litre. For F.Y. 2012-13 relevant to A.Y. 2013-14, the appellant has total running of transportation of 76,92,475 km and total purchase of diesel/ fuel of 38,57,021 litres making an average of 1.99 kms/litre. According to the AO the quantity of diesel/fuel, as disallowed in the assessment order is 19,41,595 litres which works out to 50.34% of the total diese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her, he submitted that statements made during survey proceedings could not be admitted as evidence in view of the decision of the Hon ble Supreme Court in the case of S. Khader Khan Sons (supra). The Ld. Counsel submitted that in the remand proceedings, the Assessing Officer has duly examined all the bills and vouchers and running of the trucks along with log book on test basis and he himself was satisfied with the evidences. The only basis for sustaining 10% disallowance is the statement of the parties which are not reliable as evidence and therefore, the Ld. CIT(A) is not justified in sustaining the same. He further submitted that the decision relied upon by the Ld. CIT(A) are factually different from the assessee and therefore, same should be ignored. 6.2 On the contrary, the Ld. DR relied on the finding of the Ld. CIT(A) and submitted that in the statements those parties had clearly stated that against the cheque payment cash was returned back to the employees of the assessee. He submitted that retraction affidavits have been submitted after substantial delay and therefore, no cognizance should be given to those. 6.3 We have heard rival submission of the parties on the issue in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing disallowance to 10% when the complete list of bills and delivery location along with vehicle numbers used for supplying goods/materials were provided to the Assessing Officer during the assessment proceedings. In our opinion, the Ld. CIT(A) is not justified in sustaining 10% diesel/fuel expenses as bogus merely for the reason that 10% disallowance has been made in respect of bogus tyre purchases by the Assessing officer. In the case of PCIT Mumbai v. JK Surface Coatings Pvt. Ltd. in ITA No. 1850 of 2017 (Bombay) relied upon by the ld CIT(A), the bogus purchases were undisputedly confirmed and only issue was of the percentage of disallowance. In said case delivery of material was not established whereas in the instant case the Assessing Officer has neither doubted delivery nor doubted consumption of the diesel and therefore, sustaining ad-hoc disallowance, merely on the basis of the presumption, cannot be upheld and accordingly, we set aside the finding of the Ld. CIT(A) on the issue in dispute and delete the addition sustained by him. The ground No. 1 of the appeal of the assessee is accordingly allowed. 7. The ground No. 2 of the appeal relates to disallowance of Rs. 29,54,983 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the AO has relied upon the statement of Shri Satish Mandhania, Director of the assessee company, Shri Ram Sajeevan Tiwari, Cashier and Shri Mahendra Gangan, Supervisor in M/s. E-fleet systems Pvt Ltd. In reply to Q.No. 17, Shri Ram Sajeevan Tiwari had stated that he used to collect cash from M/s. Om Shree Siddhivinayak Tyres. He has also indicated range of cash received per month from this vendor. Shri Mahendra Gangan, in his statement has stated in reply to Q.No. 20 that he did not enter the data of some of the bills/vouchers/documents of M/s. Om Shree Siddhivinayak Tyres. It is further stated in para 9 of the assessment order that although this vendor has submitted a written submission before the AO but did not attend in compliance to summons issued u/s. 131 of the Act. The AO has also stated that the appellant has failed to provide complete set of all the invoices and supporting documents such as delivery challans including description of tyre no. and bills etc. Finally, the AO has come to the conclusion that 10% of the purchases made during the year is certainly non-genuine and accordingly added to the total income of the appellant. 16.1 In reply, the appellant has stated tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lure on the part of the assessee in providing complete details of delivery challans of the bills in respect of M/s Om Shree Siddhivinayak tyres, the Assessing Officer held 10% of the purchases as bogus and accordingly disallowed. The assessee also failed to produce details of delivery challans in respect of purchase bills where tyre numbers and size were not mentioned in the invoices before the ld CIT(A). Before us, also no such details to support that goods were actually delivered in respect of bills where tyre numbers and sizes were not mentioned. In absence of any such supporting documents, the statements get corroborated that part of the purchases from M/s Om Shree Siddhivinayak tyres are in the nature of bogus. In absence of complete details provided, the Assessing Officer is justified in making estimated disallowance @ 10% of total expenses on tyre purchase. Accordingly, we uphold the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground No. 2 of the appeal of the assessee. 8. The ground No. 3 of the appeal of the assessee relates to disallowance of Rs. 5,31,951/- sustained by the ld CIT(A), out of disallowance for unsubstantiated expenses of Rs. 53,19,316/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i Mr. Ramesh S. V. Takawale. He was supplying labour at Pune Project. With respect to this concern too, ledger confirmation/ bank statement and invoice copies were submitted. It is also claimed that payments were made through proper banking channel. 20.2 The AO in the remand report has stated that he issued notice to these concerns u/s. 133(6) of the I.T. Act for furnishing of supporting documents in order to verify the payments made to these two entities. However, no reply was received from these two entities. Hence, the AO has stated that the additional evidence filed by the appellant may not be admitted at the appellate stage. In the rejoinder the appellant has stated that merely because parties are not responding to notice adverse view should not be taken against the assessee when it has produced other supporting documents such as GST No., certificate from banks. On careful consideration full relief with respect to disallowance of Rs. 53,19,316/- cannot be given as existence of these parties have not been fully established. However, at the same time, the genuineness of the transaction has not been denied. There are sufficient documentary evidences produced by the appellant to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that those parties have not been found that their address because, the notice issued u/s 133(6) of the Act has not been claimed to be returned unserved. Once, notice were served it was the duty of the Assessing Officer to enforce their attendance or carry out inquiry by sending Inspector at their site. In absence of any such evidence of nonexistence of those parties, the action of the Ld. CIT(A) in sustaining addition @ 10% of the total expenses purely on ad-hoc basis is not justified. The finding of the Ld. CIT(A) on the issue in dispute is accordingly set aside. The ground No. 3 of the appeal of the assessee is accordingly allowed and the ground No. 2 of the appeal of the Revenue is dismissed. 9. The ground No. 4 of the appeal of the assessee relates to disallowance of Rs. 36,79,111/- u/s 40(a)(ia) of the Act made by the AO, out of which amount of Rs. 5,69,535/- has been sustained by the Ld. CIT(A). This ground of appeal was not pressed before us and therefore, same dismissed as infructuous. 10. Now we take up the ground No. 1 of the appeal of the Revenue, wherein the Revenue has challenged the deletion of the addition for the share application money amounting to Rs. 11,85,74,000 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eply was received against the notice issued u/s 133(6). In the opinion of the AO, in the remand report, when the reply of the party has not been received and the assessee from his own side has furnished all such required document, acceptance of the additional evidence may be taken on merit basis. In the rejoinder the appellant has again stated that it has proved the creditworthiness, identity and genuineness by filing return of income and bank statement of the parties. Moreover, the appellant has returned the share application money in subsequent year due to dispute. All these transactions have taken place through banking channel. It is also stated that the total reserve and surplus of M/s. Dhanteras Agency Pvt. Ltd. far exceeded the share application money given to the appellant. Hence merely because no reply is received from the company, which is strike off, the assessee cannot be held liable for the same. 32.6 On careful consideration I find that no adverse comment has been given by the AO in the remand report with respect to evidences produced at the time of remand proceedings. It is a fact that share application money received in F.Y. 2012-13 was repaid back in F.Y .2013-14. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... money has been returned bank in the subsequent year as reported by the AO in the remand report. Thus, all the three limbs of section 68 has been complied with and no adverse view has been taken by the AO in remand report. Taking all the factors into account, in my considered view the addition of share application money received from M/s. Dhanteras Agency Pvt. Ltd. is unjustified and deserve to be deleted. Thus, the addition of Rs. 11,85,74,000/-is deleted. Hence, ground of appeal No. 7 is allowed. 10.1 It is evident that in the remand proceedings no adverse comment has been given by the Assessing Officer in respect of additional evidence produced. The Assessing Officer himself has noted the creditworthiness of the share subscriber and commented that total reserve and surplus of Rs. 1,35,92,291/- was much higher than share application money given to the assessee Rs. 11,85,74,000/-. The basis for the Assessing Officer in the original assessment proceedings for making addition was firstly, that M/s M/s Dhanteras Agency Pvt. Ltd. did not respond to the notices issued u/s 133(6) of the Act. For which the assessee has submitted during the appellate proceedings that said company has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the facts and in the circumstances of the case and law on the subject, the learned assessing officer erred in making disallowance of Rs. 32,57,764/- on account of unsubstantiated expenses the learned CIT (Appeal) erred in confirming disallowance of Rs. 3,25,776/-being 10% of Rs. 32,57,764/-on account of unsubstantiated expenses of without correct appreciation of facts and law on the subject. In view of the facts and circumstances of the case and law on the subject, the same may be deleted. 11.1 The grounds raised by the Revenue are reproduced as under: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the disallowance of share application money without appreciating the facts that the identity, creditworthiness and genuineness was not established by the assessee with regard to the alleged parties? 2. ii. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the disallowance of unsubstantiated, expenses without appreciating the facts that the identity, creditworthiness and genuineness was not established by the assessee with regard to the alleged parties? 3. Whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onfirmation, bank statement highlighting the receipts and payments to justify the genuineness of the share application money received during the year under consideration. It has also submitted that the appellant had submitted the name of the parties from which M/s Kasturi had received share application money along with acknowledgement of I.T. return with computation of total income, PAN, financial statement, ledger highlighting bank transactions along with share application confirmation of said parties. The appellant has further submitted that Kasturi has been issued the shares against the share application money received on 28.03.2023. To satisfy this, Form No. PAS-3, list of allottees, valuation report, Form PAS-5, master data of the company and copy of resolution for verification of the undersigned are also submitted. Thus, it is claimed that not only the identity of the creditor but creditworthiness and genuineness have been fully established and hence no disallowance is called for. The appellant has also relied on certain judicial decisions. 38.3 On careful consideration of the submission of the appellant as well as various details brought on record, I find that identity of M/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f money is not explained in their hand, then addition warrants in their case and not in the case of assessee. We are of opinion that if addition has been already made in the case of Kasturi, then no further addition is required in the case of the assessee. In view of above, in principle we do not find any error in the order of the Ld. CIT(A) on the issue in dispute but for verification of the fact addition in respect of source of money has been already done in assessment of Kasturi, we restore the matter back to the Assessing Officer. The ground No. 1 of the appeal of the Revenue is accordingly allowed for statistical purpose. 13. The ground No. 3 of the appeal of the Revenue relates to deletion of disallowance of depreciation of Rs. 6,75,000/- by the ld CIT(A) which was made by the AO with respect to old vehicle sold during the year. On the basis of Annexure RM-1 found during the course of survey, the Assessing Officer noted that assessee company had unaccounted sales of vehicles during the assessment year 2018-19. On the basis of such unaccounted sales corresponding to assessment year 2018-19, the Assessing Officer was of the view that in all the probability assessee had received ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be reduced from block of assets and accordingly depreciation claimed to that extent was disallowed in the assessment order. Accordingly, depreciation worked out at Rs. 6,75,000/-for A.Y. 2014-15 was disallowed by the AO and added back to the total income for the year under consideration. 37.1 During the appellate proceedings, the ld. AR has stated that it has submitted statement containing names of purchaser, PAN, address, sold vehicle registration number along with mode of payment and receipt to the AO for verification. According to the appellant, it has received sale proceeds of vehicles in cheque and bill record of receipts in books of accounts. No lacuna has been found by the AO during the assessment proceedings. 37.2 On careful consideration I find that entire work of the AO for the year under consideration, work and extrapolation of figures related to subsequent years. He has clearly mentioned that Assessee has sold vehicle and by extrapolating the findings in F.Y. 2017-18 and 2018-19 in these years, the unaccounted sales on vehicle sold in year under consideration has been determined. 37.3 Thus, it is apparent that no evidence of any unaccounted sales of vehicle has been fou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in the circumstances of the case and law on the subject, the learned assessing officer erred in making disallowance of Rs. 12,20,666/- on account of unsubstantiated expenses the learned CIT (Appeal) erred in confirming disallowance of Rs. 1,22,066/- being 10% of Rs. 12,20,666/- on account of unsubstantiated expenses of without correct appreciation of facts and law on the subject. In view of the facts and circumstances of the case and law on the subject, the same may be deleted. 14.1 The ground Nos. 1 to 3 of the appeal being identical to grounds raised by the assessee in assessment year 2013-14 ,therefore, following our finding in assessment year 2013-14, the ground Nos. 1 to 3 of the appeal of the assessee for the year under consideration are decided mutatis mutandis. ITA No. 3234/Mum/2023 15. Now, we take up the appeal of the assessee for assessment year 2016-17. The grounds raised by the assessee are reproduced as under: 1. On the facts and in the circumstances of the case and law on the subject, the learned Income Tax officer erred in making addition of Rs. 9,75,79,573/- being alleged bogus purchase of fuel / diesel the learned CIT (Appeal) erred in confirming the disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithout correct appreciation of facts and law on the subject. In view of the facts and circumstances of the case and law on the subject, the same may be deleted. 3. On the facts and in the circumstances of the case and law on the subject, the learned assessing officer erred in making disallowance of Rs. 4,84,000/- on account of unsubstantiated expenses the learned CIT (Appeal) erred in confirming disallowance of Rs. 48,400/-being 10% of Rs. 4,84,000/-on account of unsubstantiated expenses of without correct appreciation of facts and law on the subject. In view of the facts and circumstances of the case and law on the subject, the same may be deleted. 16.1 The ground Nos. 1 to 3 of the appeal being identical to grounds raised by the assessee in assessment year 2013-14 ,therefore, following our finding in assessment year 2013-14, the ground Nos. 1 to 3 of the appeal of the assessee for the year under consideration are decided mutatis mutandis. ITA No. 3232/Mum/2023 and ITA No. 3028/Mum/2023 17. Now we take up the appeal of the assessee and Revenue for assessment year 2018-19. The grounds of appeal of the assessee are reproduced as under: 1. On the facts and in the circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , these credits were loans in nature of accommodation entries because both those companies were controlled and operated by entry provider sh Prakash Jajodia, therefore, he asked the assessee to discharge burden u/s 68 of the Act in respect of those credits under reference. In response the assessee submitted that those two parties were the distributors of the assessee since 2010 and the amount received was as a security deposit under distribution agreement. The assessee also filed copy of the distribution agreements. It was explained by the assessee that the source of the funds in hands of the distributors was by way of receipt from sale debtors. The copies of the sales registers and bank statement of assessee also submitted along with other documentary evidence to establish identity creditworthiness of those two concerns and genuineness of the transactions. However, the Assessing Officer was not satisfied with the contention of the assessee. According to him the shareholders of those two concerns were found to be dummy directors controlled by accommodation entry provider Sh Prakash Jajodia. The Assessing Officer referred to the statement of Shri Prakash Jadodia recorded u/s 131 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appellant's hand was deleted. Same situation exists for this year too. At the same time, I find that loan/deposit taken from M/s Trump Trexim Pvt. Ltd. is also on the same footing and the situation, nature of evidences, findings of the A.O. are also same as that of M/s Metropolitan. Considering totality of facts and circumstances of the issue involved, it is held that addition of unsecured loans/ deposits and interest paid of Rs. 3,00,82,390/- is uncalled for and hence it is deleted. However, the AO may explore the possibility of reopening of the assessments of M/s Metropolitan Distributors Pvt. Ltd. and M/s Triumph Trexim Pvt. Ltd. for the relevant A. Yrs as the A.O. has expressed his doubt about the genuineness of such shareholders. Thus, the ground of appeal no. 6 is Allowed. 18.3 Before us, the Ld. Departmental Representative (DR) submitted that assessee has failed in discharging its onus u/s 68 of the Act and therefore, the Ld. Assessing Officer is justified in making additions u/s 68 of the Act in view of the statements of the director of the said concerns. 18.4 On the other hand, the Ld. Counsel for the assessee submitted that in respect of both the parties, copy of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctive parties the Ld. CIT(A) has recommended for taking action of reassessment in their hand. In our opinion there is no infirmity in the finding of the Ld. CIT(A) on the issue in dispute and accordingly, we uphold the same. The ground No. 1 of the appeal of the Revenue is accordingly dismissed. 18.6 The ground No. 2 of the appeal of the Revenue relates to disallowance of depreciation on unaccounted sales of old vehicles in this regard the relevant finding of the Ld. CIT(A) is reproduced as under: 59. In this ground, disallowance of depreciation on sale of vehicle during the year under consideration, i.e., Rs. 29,30,168/- has been challenged. During the course of survey proceedings statement of oath of Shri Ravishankar M Patel was recorded. He stated that it relates to sale of old vehicles where cash was received to the extent of Rs. 43,10,002/- This amount was not accounted for during the year under consideration. This statement was further confirmed by Shri Satish Mandhania, Director of the company. It is further stated by the AO in para 8.9 that the assessee company had given details of only 24 vehicles which were sold during the year. Hence, according to the AO even cheque cont ..... X X X X Extracts X X X X X X X X Extracts X X X X
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