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2017 (2) TMI 1128 - ITAT MUMBAIAddition on bogus purchases - AO received an information from DGIT(Investigation), Mumbai that the assessee has entered into bogus transactions from three hawala parties without taking actual delivery of goods - Held that:- The assessee filed before the AO complete books of accounts, items wise stock register evidencing the receipts of gift materials and issue thereof as attached in the paper book page 56 to 78. In order to prove the use of gift items in the promotional activities, photographs of the functions and promotional activities and also confirmations from the shop keepers were also produced before the AO which were disbelieved by the AO on the ground that the confirmations were not bearing the PAN of the persons confirming the consumptions of gift materials. The assessee has also produced copies of bank statements of Punjab National Bank and Axis Bank evidencing the payments through banking channels by account payee cheques to the suppliers filed at pages no. 32 to 51 of the paper book. Having considered all these facts which were before the AO as well as FAA, we find that the assessee has discharged its onus by producing the books of accounts, stock register, stock tally and also filing various documentary evidences such as statements of banks etc, confirmations and photographs of the promotional events before us. The purchase made by the assessee could not be disbelieved merely on the basis of information received from the third party without carrying out any meaningful enquiry and further verification on the various records and information filed during the course of assessment proceedings. We are not in agreement with conclusion drawn by the FAA upholding the action of the AO. - Decded in favour of assessee. Allowance of auditors fees and legal and profession expenses - eligible revenue expenditure - Held that:- We find that the assessee has debited a sum on account of yearly provisions for internal audit and tax audit fee and legal and professional charges payable to Mr.K A Pandit for “Actuarial valuation for determining gratuity and leave encashment provision for staff” . The said expenses are in the nature of routine and regular expenses which are incurred and provided at the end of each year and were accordingly accounted for by the assessee on the basis of mercantile system of accounting. Further, the FAA has rightly came to the conclusion that the assessee has rightly accounted for these expenses by following the mercantile system of accounting and the same could not be disallowed by treating as provision for expenses and in the nature of contingent expenses. The FAA also noted that the said expenses are not based upon the guess work or adhoc and were provided in the same manner as in the earlier years on the basis of mercantile system of accounting. Moreover, the liability was very much ascertained and foreseeable due to regular nature of expenses. We are, therefore, inclined not to interfere with the reasoned order of the ld.CIT(A) on this issue and accordingly uphold the same by dismissing the ground raised by the revenue. Disallowance of proportionate interest - Held that:- We find that the assessee has advanced money to M/s Tracstar Investment Pvt Ltd during the year to the tune of ₹ 5,00,62,122/- which accordingly to the assessee was a business advances wholly given out of commercial expediency and business considerations as the said company bottled the liquor manufactured by the assessee and was given in that connection. The FAA also recorded the findings of facts in his appellate order that no disallowance of proportionate interest was made by the AO in the earlier years. Moreover, the assessee’s own funds were more than ₹ 124 crores and the ld. CIT(A) further recorded the finding of facts that the said advances was not given out of borrowed funds. In our opinion, the order passed by the ld. CIT(A) ,after considering the contention and submissions that the advances were given out of business consideration and commercial expediency as M/s Tracstar Investment Pvt.Ltd was providing bottling services to the assessee, does not contain any infirmities and conclusion drawn by the ld. CIT(A) is supported by the decision of the jurisdictional High Court in the case of Reliance Utilities ([2009 (1) TMI 4 - BOMBAY HIGH COURT ]) in which it has been held that the assessee’s own funds are more than the borrowed funds then no disallowance on account of interest is called for.
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