TMI Blog2012 (7) TMI 341X X X X Extracts X X X X X X X X Extracts X X X X ..... acity for Atta shown in accounts is 60,000 MTs while production was 73,149 MTs and 84,316 MTs respectively. Assessee was also getting grinding done on lease contract also. All these facts show that there cannot be a direct nexus between purchases and sales - in favour of assessee. Against the deletion of addition made on account of employees provided fund and ESIC by CIT(A)- Held that:- The deduction of payment of employees’ contribution towards provident fund and ESI cannot be disallowed under section 43B, if paid before the due date of filing the return - in favour of assessee. Against the deletion of addition of interest free loan given to sister concern of assessee by CIT(A) - assessee also gave interest-free loans and advances to its sister-concerns - Held that:- Revenue was not able to establish any nexus between the amount borrowed by the assessee company on interest and the amounts advanced by the assessee to its sister-concerns. In fact major parties from whom interest was not charged were the same as in assessment year 1977-78 for which the Tribunal held that there was no warrant for adding any notional or deemed interest - to decide whether interest on funds borrow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only on the basis of reason to suspect. Ld. AR relied on the decision of Hon'ble Delhi High Court in the case of Bawa Abhai Singh reported in 253 ITR 83 (Del.). Ld. AR also submitted that the reasons to suspect are not the same as reasons to believe. For this, he relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Indian Oil Corporation reported in 158 ITR 956 (SC). Ld. AR also submitted that the reason to believe must have a rational connection with or relevant bearing on the formation of the belief. For this, he relied on the decision of Hon'ble Supreme Court in the case of ITO vs. Lakhmani Mewal Das reported on 103 ITR 437 (SC). Finally, Ld. AR pleaded to set aside the order of the CIT (A) on this issue. 4. On the other hand, ld. DR relied on the decision of authorities below and also submitted that the Assessing Officer received the information from the investigation wing that assessee has received accommodation entry for the purchase bills. The investigation wing passed on the information that Shri Naresh Kumar, son of Shri Deendayal, proprietor of N.K. Trading Co. engage in providing bogus accommodation entries and assessee is also beneficia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come has escaped assessment. For this, the Assessing Officer recorded the reasons as required by law. The assessee s name was figuring in the beneficiaries of these bogus accommodation purchase bills. The amount of the accommodation purchase bills was also specified in the information. In view of these facts, we find that Assessing Officer has rightly assumed jurisdiction for initiating proceedings. There was specific information received from the office of Directorate of Investigation as regards to the transactions entered by the assessee with a concern which was indulging and providing accommodation purchase bills. These transactions were not genuine transactions. In our considered view, it was neither a change of opinion nor it conveyed a particular interpretation of a specific provision which was done in a particular manner in the original assessment. In our considered view, the reason to believe has been appropriately understood by the Assessing Officer. There was sufficient material on the basis of which notice was issued. The sufficiency of the reasons for formation of belief cannot be considered at this stage. Therefore, this plea of the assessee made through ld. AR under R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as wrongly asserted. Further, he pleaded that these alleged purchases made has not produced an iota of evidence which can prove that he has supplied the goods as per bills to the assessee. No books of account even kachha books of account were produced. There is no single evidence of purchases made by this alleged supplies to the assessee. It is only a verbal assertion which cannot be taken as evidence to explain the purchases. The CIT (A) is completely unjustified in granting the relief. The CIT (A) has also negated the fact that when the N.K. Trading Co. has sales of ₹ 41.56 lacs to the assessee which is more than ₹ 40 lacs turnover for which the provisions of section 44AB are applicable. It is only the assessee to whom these bogus accommodation entries of ₹ 41,56,449/- were made there were others also. The CIT (A) s observation that there are provisions for penalty u/s 271B has no relevance. Such findings are irrelevant for considering the nature of such bogus transactions. The circumstantial evidences clearly establish that N.K. Trading has provided bogus entries and with the help of these entries, the assessee has siphoned of the taxable income. Ld. DR also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank even when books were claimed to have been taken away by accountant. Simply making a statement that the books of account were taken away by the accountant and the accountant had fled away, cannot be an acceptable explanation for not producing the evidence in support of contention that purchases were genuine. There is no evidence which could show that N.K. Trading has actually purchased the goods which were supplied to the assessee. Not getting the accounts audited as per the provisions of section 44AB of the Act even when the turnover exceeds the limit also solidify the belief that transactions were not genuine. 11.1 The assessee is a manufacturer of Atta and other bye products. Wheat is raw material used to produce Atta and other products. There cannot be a direct tally of raw material purchased and output sold out. CIT (A) observation that no sales can be executed without making corresponding purchases is perverse. In the assessee s case, there cannot be direct corresponding nexus of purchase and sales. The purchases of wheat were of thousands of tons costing in many crores. To be specific during the financial year 2000-01 relevant to Assessment Year 2001-02, purchases we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... side the order of CIT (A) on this issue. We allow this ground of revenue s appeal. 12. In the ground no.3, the issue involved is against the deletion of addition of ₹ 55,959/- made on account of employees provided fund and ESIC. 13. We have heard both the sides on the issue. The details of payment of provident fund are as under :- Month Amount Delayed by April, 1998 9,388/- 2 days June, 1998 10,392/- 4 days August, 1998 9,001/- 3 days October, 1998 9,638/- 3 days December, 1998 8,784/- 4 days February, 1999 8,756/- 1 day Total 55,959/- The assessee had made payment in the grace period permitted in Provident Fund Act and ESI Act. We find that this issue is covered in favour of the assessee by the decision of Hon'ble jur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re and do not require any adjudication. 15. Ground No.2 is against the deletion of addition of ₹ 27,05,320/- made on account of bogus purchase made from M/s. N.K. Trading Co. This issue is covered by our aforesaid decision in ITA No.2777/Del/2010 for Assessment Year 1999-00 vide paras 11 11.1 in favour of the revenue. Accordingly, following the same, we allow this ground of revenue s appeal. 16. Ground No.3 is against the deletion of addition of ₹ 29,340/- made on account of belated payment of employees contribution of EPF and ESI. This issue is covered by our aforesaid decision in ITA No.2777/Del/2010 for Assessment Year 1999-00 vide para 13 against the revenue. Accordingly, following the same, we dismiss this ground of revenue s appeal. ITA No.2779/Del/2010 (Assessment Year : 2001-02) 17. Ground Nos.1, 3 4are general in nature and do not require any adjudication. 18. Ground No.2 is against the deletion of addition of ₹ 2,04,389/- made on account of bogus purchase made from M/s. N.K. Trading Co. This issue is covered by our aforesaid decision in ITA No.2777/Del/2010 for Assessment Year 1999-00 vide paras 11 11.1 in favour of the revenue. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, no notional interest can be disallowed on any single transaction entered during the course of the business of the company. Further, when company has the surplus available net owned funds, hence, additions made notionally being interest calculated hypothetically on conjectures and surmises cannot be disallowed. It must be noted that this loan has not been given in the current year, hence, interest disallowance out of current year income is not substantiated. Under the available facts, additions made amounting to ₹ 3,00,000/- be hereby deleted. 24. We have heard both the sides in detail and we have also considered the facts of this issue. We find that the issue is covered by the decision of Hon'ble jurisdictional High Court in the case of CIT vs. Basti Sugar Mills Co. Ltd. in ITA No.89 of 1993 dated 1st September, 2010 wherein the Hon'ble High Court has held as under : 2. The facts regarding question no.1 are that the assessee company borrowed large sums of money from banks and others and paid a huge interest of about ₹ 66,00,000/- on these borrowings. The assessee also gave interest-free loans and advances to its sister-concerns details of which are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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