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2020 (11) TMI 70 - HC - Income TaxAddition u/s 14A - sufficiency of own funds - HELD THAT:- Disallowance u/s 14A cannot be more than the exempt income earned by the Assessee during the assessment year in question. In this case, there is no dispute that the dividend i.e. the exempt income earned by the Assessee during the relevant Assessment Year, was only ₹ 45,371/-. Accordingly, the disallowance in this case could not have exceeded ₹ 45,371/-. It is only because the Assessees voluntarily offered a disallowance to the extent of ₹ 65,000/-, that the Commissioner (Appeals) made a disallowance to the extent of ₹ 65,000/-. First substantial question of law is required to be answered against the Revenue and in favour of the Assessee. Disallowance of cash purchases - HELD THAT:- We are unable to agree with the contentions of Ms. Razaq. The record indicates that the total purchases of the Assessees during the relevant assessment year were in the range of ₹ 29.97 crores. As against this, cash purchases were of ₹ 60,20,080/- which corresponds to around 2% of the total purchases. The purchases were in a series of transactions, involving an amount of less than ₹ 20,000/-. This is not a case where the books of account of the Assessees were rejected by the AO. The record also establishes that the Assessees obtained 'H' Form concerning these purchases. Assessees have also offered a plausible explanation that such purchases were from smaller traders or mining contractors who would collect residual iron ore spilled on land and then sold for a cheaper price based on on the spot cash payments. Both, the Commissioner (Appeals) and the ITAT have recorded concurrent findings on the issue of cash purchases and it cannot be said that such findings suffer from perversity to warrant interference in this Appeal. Second substantial question of law is also required to be answered against the Revenue and in favour of the Assessee. Additions made under 41(1) - assessee had not filed any confirmation of trade creditors and existence of liabilities - Commissioner (Appeals) and the ITAT deleting the addition made u/s 41(1) - HELD THAT:- Even the reasonings of the Commissioner (Appeals) and the ITAT suffer from no perversity whatsoever. The view taken is consistent with the law laid down by this court in Chase Bright Steel Ltd [1988 (12) TMI 80 - BOMBAY HIGH COURT]. There is material on record, which also suggests that the confirmations were indeed received and filed by the Assessees though, there are contradictory findings by the AO on this issue. Third substantial question of law is required to be decided against the Revenue and in favour of the Assessee. Undervaluation of closing stock merely by passing journal entries - Commissioner (Appeals) and the ITAT deleted the addition - HELD THAT:- We detect neither any perversity in the concurrent findings of fact recorded by the Commissioner (Appeals) and the ITAT, nor can we say that the two authorities misconstrued the legal position in this regard. Revenue, on one hand, cannot accept rendering of service as genuine and tax the transactions based on the same and the other hand, urge that there has been undervaluation of the closing stock and on such basis make additions to the returned income. Accordingly, even the fourth substantial question of law is required to be answered against the Revenue Additions towards staking and handling expenses and blending and screening charges - assessee has failed to prove genuineness of rendering any service by sister concern - ITAT deleted the addition - HELD THAT:- Sister concern M/s. Karishma Goa Mineral Trading Pvt. Ltd. had rendered similar types of services to M/s. Karishma Global Mineral Exports Pvt. Ltd. during the assessment year 2010-11 and the said expenditure was never disallowed by the Revenue during the assessment of M/s. Karishma Global Mineral Exports Pvt. Ltd. even though such assessment was completed under Section 143(3) - there was a factual error on the part of the AO in holding that the sister-concern was never involved in this type of activity. We are satisfied that both Commissioner (Appeals) and the ITAT did scrutinize the transaction with required care and caution and only thereafter recorded the concurrent findings of fact. Therefore, even the fifth substantial question of law is required to be answered against the Revenue
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