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TMI Blog2012 (2) TMI 277X X X X Extracts X X X X X X X X Extracts X X X X ..... ejection of books of account. 4. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.7,99,960/- made by the AO on account of non-business expense made by the Director of the assessee company. 5. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.7,50,000/- made by the AO on account of purchase of agricultural land. 6. On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the addition of Rs.1,02,104 (Rs.82,274 + Rs.19,740) made by the Assessing Officer on account of expenses incurred on telephone and business promotion. 7. The appellant craves leave, to add, alter or amend any ground of appeal raised above at the time of the hearing. I.T.A. No. No.94/D/2011[Assessee] 1) "On the facts and circumstances of the case and in law, the learned CIT(A) XXVI has erred in upholding the disallowance of Rs.33,45,075/- being 20% of the entire cash purchases made by the assessee by invoking the provisions of section 40A(3). 2) On the facts and circumstances of the case and in law, the learned CIT(A) XXVI has erred i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year 2006-07 restricted the disallowance to 20% of the cash purchases in terms of provisions of section 40A(3) of the Act, holding as under: "4.3 On this issue in the preceding year, the CIT(A)-15, New Delhi vide his order in the assessee's case in appeal No.332/08-09 dated 24.9.2010 has upheld the disallowance made by the Assessing Officer. The CIT(A) has observed that the cash purchases were made in a manner to manipulate and circumvent the mandate of the provision of section 40A(3). He also held that the appellant has not discharged it's liability in proving the purchases as genuine as no details of the vendors from whom the purchases have been made are available. A finding has been recorded that in assessment year 2006-07, as the cash purchases were not verifiable, the disallowance of cash purchases @20% was sustainable as against 25% applied by Assessing Officer. On this issue, the facts of the present year i.e. assessment year 2007-08 are identical to that of assessment year 2006-07. I am in agreement with the CIT(A)'s finding for assessment year 2006-07, it is held that the provisions of section 40A(3) are applicable on these transactions. Therefore, I confirm the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AR on behalf of the assessee while inviting our attention to decision dated 11.3.2011 of the ITAT in the assessee's own case in I.T.A. nos.5198 & 5559/D/2010 for assessment year 2006-07 submitted that the aforesaid issues are squarely covered by the said decision. Accordingly, he pleaded that these issues may be decided in the light of the said decision. The ld. DR ,on the other hand, relied upon the findings of the AO. 5. We have heard both the parties and gone through the facts of the case as also the aforesaid decision of the ITAT. We find that while adjudicating an identical issue, a co-ordinate Bench in their decision dated 11.3.2011 for the AY 2006-07 concluded as under:- "4.2 We may now consider the facts of our case in the light of aforesaid decisions. The facts in the case of Aloo Supply Company are different because each payment made to the payee was less than Rs.2,500/-. The question here is not only in regard to the applicability of the provision contained in section 40A(3) but also about genuineness of the cash purchases, raised by the revenue in ground No.2 of the appeal. The finding of the Assessing Officer is also to the effect that the purchases are not verifiabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputably, the facts and circumstances are similar to the facts and circumstances in the AY 2006-07,as pointed out by the ld. CIT(A).In this year also, the assessee prepared internal memos to support the purchases and quantitative details are not reliable. While complete verification exists in respect of purchases, payment for which is made by account payee cheque/draft, such a conclusion cannot be arrived at in respect of cash purchases. Thus, the findings of the ld. CIT(A) that no deficiencies have been pointed out in the books of account is not correct. Apparently, books or accounts are not correct and complete. In such a situation, there would be no alternative but to estimate the purchases made by the assessee. The assessee has also not furnished any details comparing the cost per kg. in respect of cash purchases and purchases made by payment of account payee cheques or drafts. Therefore, as concluded by the ITAT in the preceding assessment year, the disallowance made by the learned CIT(A) has to be considered in the overall situation that the books are not reliable. In such a situation, we are of the view that the learned CIT(A) was right in disallowing 20% of the amount invol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for treating the payment as 'sham purchase' and made for other extraneous consideration is observation that purchases are made from 'sweepers & scavenges'. It is seen that the company has made purchases from Sh. R. Sood on 7.4.2006 for Rs.98,500/-, on 21.05.2006 for Rs.1,22,000/-, on 21.06.2006 for Rs.5,29,460/-, and on 20.11.2006 for Rs.50,000/-. The purchases are made by cheques and have been duly entered in the stock register a fact not controverted by the Assessing Officer. The submission of the appellant that the average purchases price paid to Shri Rishi Sood at Rs.2806 per kg. As against total average purchase price of Rs.3133 per kg. has also not been addressed adversely by the Assessing Officer. In view of these evidences available on record, the disallowance made by the Assessing Officer is based purely on surmises and conjectures. The appellant has discharged its onus u/s 37 of the I.T. Act for claiming the amount as genuine purchases. The addition made by the Assessing Officer is accordingly deleted." 8. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR supported the order of the AO while the ld. AR on behalf of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the submissions of the learned counsel as well as the facts on record. As the purchase of land is reflected in the balance sheet as on 31.3.2007 at a value of Rs.7,50,000/-, there is no justification for treating the investment as unexplained. The appellant has filed a copy of the sale deed and the bank statement, which shows availability of balance of Rs.7,53,973/- on the date of issue of cheque No.943388 for Rs.7,52,250/-. As the source of investment is duly explained the addition of Rs.7,50,000/- is deleted." 12. The Revenue is now in appeal before us against the aforesaid findings of the ld. CIT(A).The ld. DR supported the order of the AO while the ld. AR on behalf of the assessee relied upon the findings in the impugned order. 13. We have heard both the parties and gone through the facts of the case. Indisputably the investment of Rs.7,50,000/- in the agricultural land is accounted for in the books of account and consequently in the balance sheet as on 31.3.2007 while the payment was also made through the bank account of the assessee. In these circumstances, we do not find any justification for treating the investment as unexplained. In the absence of any basis, we have no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of business and it was for personal use of the director. Therefore, the disallowance was upheld. The assessee relied on the decision of Hon'ble Gujarat High Court in the case of Sayaji Iron & Engg. Company Vs. CIT, (2002) 253 ITR 749, in which it was held that if any benefit is granted to the directors, the same is taxable in their hand as perquisite. Thus, the expenditure in so far as assessee is concerned, has been incurred for the purpose of business. Relying on this judgment, the disallowance made by the learned CIT(A) is deleted and ground No.3 in the appeal of the assessee is allowed. 7. Ground No.3 in the appeal of the revenue is that the learned CIT(A) erred in deleting the addition of Rs.96,283/-, made by the Assessing Officer on account of expenses incurred on telephone and business promotion. The situation is more or less the same as in respect of disallowance from vehicle running and maintenance expenses. In so far as the company is concerned, the expenditure has been incurred for the purpose of business. Relying on our arguments in respect of that ground, it is held that the learned CIT(A) rightly deleted the disallowance." 18. In the light of view taken by the co ..... X X X X Extracts X X X X X X X X Extracts X X X X
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