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2018 (10) TMI 1857 - ITAT MUMBAIEstimation of income - bogus purchases - additions were restricted @ 12.5% by CIT-A - HELD THAT:- Payments were made through account payee cheques and the AO himself has not ruled out the possibility, that the assessee might have made these purchases from grey markets from some other parties by investing unaccounted cash. As per the factual position, the sale proceeds of said goods have been duly accounted for in the books and offered to tax. CIT(A) had correctly concluded that addition of entire purchase amount cannot be made in the present case, rather a reasonable percentage of such purchases in order to fulfill the gap of any revenue leakage was applied. Thus, the additions were restricted @ 12.5% of the alleged purchases. No new facts or contrary judgments have been brought on record before us in order to controvert or rebut the findings so recorded by Ld. CIT(A). Therefore, there are no reasons for us to interfere into or deviate from the findings recorded by the Ld.CIT(A). Payments to persons specified in section 40A(2)(b) - CIT(A) in deleting the addition made by the AO as unproved penalty and sustaining only 20% of the said expenditure - HELD THAT:- CIT(A) after correctly appreciating the facts of the present case had concluded that the assessee had made payments to M/s. Pancharatna Plastics. Even the auditors in their tax audit report had made an observation that the assessee had made payments to persons specified in section 40A(2)(b) which prompted the AO to call for the information/details in relation to this expenditure. Although the assessee had furnished the details of expenditure, however the AO disallowed the entire expenditure u/s 40A(2)(b) on the ground that no corroborative evidence was furnished. The Ld. CIT(A) correctly concluded that if no corroborative evidence in relation to this expenditure was coming forth from the assessee then, the AO ought to have disallowed this expenditure under section 37 and not under section 40A(2)(b). CIT(A) also correctly appreciated that the question of disallowance would arises only where there is excessive payment of expenditure to such person who are referred in clause (b) of section 40A (2) of the Act and in the instant case, it is the father of the appellant. In this case, the transactions were between sister concerns in regular course and they have not paid any amount to each other towards expenses warranting the additions under section 40A(2)(b). As per the provisions, the additions can only be made if excessive or unreasonable was spent. But the AO had disallowed the entire expenditure without substantiating the quantum of unreasonable or excessiveness. Under section 40A(2)(b) only such excessive and unreasonable expenditure paid to specified person is disallowable. Therefore, Ld. CIT(A) correctly confirmed the additions to 20% of alleged disallowance. - Decided against revenue. Addition u/s 69C - Unexplained purchases - discrepancy between the accounts of the assessee and the said M/s Lanscape Enterprise - HELD THAT:- CIT(A) after correctly appreciating the facts of the present case had concluded that as per the facts, the assessee made purchases from M/s Landscape Enterprises and since, there was a discrepancy between the accounts of the assessee and the said M/s Lanscape Enterprise, therefore additions u/s 69 C were made. Ld. CIT(A) after appreciating the factual position had rightly concluded that the assessee has on his part substantiated the details of purchases made by him from the said M/s. Landscape Developers and has also substantiated the payments made by cheques to the said M/s. Landscape Developers. The assessee had also reconciled the figures of purchases and payments with the said party and had arrived at negligible difference of ₹ 4,624/- as against the total purchase transaction of ₹ 43,25,579/-. Therefore, deleted the disallowance made by AO correctly. - Decided against revenue. Unexplained Expenditure U/s 69 - survey at the residential premises of the assessee, Laptop belonging to assessee’s brother was found and impounded - HELD THAT:- CIT(A) after correctly appreciating the facts of the present case had concluded that during the survey at the residential premises of the assessee, Laptop belonging to assessee’s brother Mr. Kevin Rajendra Shah was found and impounded. On the basis of various print outs, the additions were made although, assessee had denied to have incurred such expenditure but AO rejected the stand of the assessee. The Ld. CIT(A) after considering the factual position and the submission made by the assessee, had rightly concluded that the survey team had exceeded their jurisdiction by entering the residential premises of the assessee and Kelvin R. Shah was in no way connected with the activities of the assessee CIT(A) had correctly mentioned that AO had disregarded assessee’s own books of accounts which were regularly maintained and assessee is also regularly assessed to tax. It was correctly appreciated that AO had just taken the print-outs from the laptop Mac-book of one Mr. Kevin Rajendra Shah, the younger brother of the assessee who had nothing to do with the business activities of the assessee and had proceeded to make an add back to the appellant's returned income as Unexplained Expenditure U/s 69 of the Act. The income based on such guess work has no place in law and the same requires to be deleted. - Decided against revenue. Addition based on survey proceedings - mention of expenses in Mac-book of Brother and found at Brother's place - HELD THAT:- AO had disregarded assessee’s own books of accounts which were regularly maintained and assessee is also regularly assessed to tax. As per the facts of the present, the AO had just taken the print outs from the laptop Mac book of one Mr. Kelvin R. Shah, younger brother of the assessee who had nothing to do with the business activity of the assessee. The addition made by the AO was based on guess work which has no place in law. The Ld. CIT(A) while reaching to the conclusion had correctly relied upon the judgment of Hon’ble Supreme Court in the case of CIT Vrs. S. Khader Khan [2013 (6) TMI 305 - SC ORDER] Addition u/s 69C - during the course of survey operations under section 133A of the Act, a loose document was impounded which depicts expenditure purported to have been incurred by the assessee - HELD THAT:- When dumb document like the present loose sheet of paper is recovered and the Revenue wants to make use of it, then the onus rests on the Revenue to collect cogent evidence to corroborate the noting therein. Since in the present case, the Revenue has failed to corroborate the noting by bringing some cogent material on record to prove conclusively that the noting in the seized paper reveal the unaccounted expenditure incurred by the assessee. Thus the impugned addition was made by the AO on grossly inadequate material or rather no material at all and as such, deserves to be deleted.
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