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2015 (3) TMI 645 - ITAT MUMBAI

2015 (3) TMI 645 - ITAT MUMBAI - TMI - Disallowance u/s 69C - @ 2% of bogus billing as unexplained expenditure - CIT(A) restricting the disallowance lowing the order of his predecessor for the earlier assessment years on the same issue - Held that:- The facts are not in dispute inasmuch as it is also not in dispute that the A.O. has accepted the purchases and sales as disclosed by the assessee and has not rejected the books of accounts as maintained by the assessee. While making the addition of .....

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t to cross examination was reserved. However, during the course of assessment, the assessee has asked for the cross examination which was denied by the A.O. on the ground that the same is untenable and unacceptable.

In absence of any contrary material placed on record by the Revenue to show that the cross examination of Mr. K.K. Gupta was provided to the assessee, we respectfully following the ratio of precedents of the earlier years and keeping in view that the assessee in his submis .....

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ssion payment at the rate of 0.25% instead of 2%. - Decided against revenue.

Disallowance of depreciation on plant and machinery - CIT(A) deleted disallowance - Held that:- It is not the case of the Revenue that the plant and machinery were not installed at the assessee’s business premises or the same were not used for the purpose of the business of the assessee or the rate of depreciation claimed by the assessee is not according to the Rules, we are of the view that the estimated dis .....

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R Per Amit Shukla (JM) : The aforesaid appeal has been preferred by the Revenue against the order dated 15.11.2011, passed by the Commissioner of Income-tax (Appeals) - 37, Mumbai [CIT(A)], for the quantum proceedings u/s 143(3) r.w.s. 153A, for the assessment year 2007-2008, on the following grounds of appeal. 1. On the facts and in the circumstances of the case and in Law, the Ld.CIT(A) erred in restricting the disallowance of ₹ 1,39,33,163/- u/s 69C @ 2% of bogus billing as unexplained .....

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, the Ld.CIT(A) erred in deleting the disallowance of depreciation in respect of portion of value shown in the books which represented over invoicing of assets as detected during the course of survey and in respect of which the Ld.CIT(A) confirmed the addition on commission paid for such bogus bills. 2. At the outset, the learned Counsel submitted that the issue raised by the department in ground nos.1 and 2 are covered in favour of the assessee by the earlier order of the CIT(A) as well as the .....

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has made sale of ₹ 69,66,58,158, which were arranged by these parties. The AO noted that as in the earlier year, it was found that these persons were providing accommodation entries, and therefore, commission paid for obtaining these accommodation entries was estimated at 2% of the sales and accordingly, addition was made on account of unexplained expenditure u/s 69C. In this year also, the AO estimated the commission payment of 2% on ₹ 66,66,58,158 which worked out to ₹ 1,39, .....

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he CIT(A) is as under:- 2.6.1 I have carefully considered the rival submissions and perused the material on record. As par the ld. AO, Shri Praveen Jain issues only accommodation bills without delivery of the goods. In these purchases, there is absence of normal procedure that are followed for other purchases and Shri Praveen Jain accepted that he has not made any delivery of goods. These circumstances made the Id. AO to hold that these transactions were merely on paper and were in the nature of .....

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the course of the search on the appellant, the Department had not found any evidence that could prove the case of the Department that such commission was paid by the appellant. The Id. AR submitted that due diligence was not required for transactions requiring different equipments of specific brands or OEMS since these equipments were of specific brands and models. Ld. AR relied on the copy of purchase orders, orders, invoices raised by the parties (seized by the Department) which are indicators .....

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sactions were genuine and carried out with basic prudent principles of business. The Id. AR further relied on the income shown out of these transactions. 2.6.3 After carefully considering the facts and circumstances of the case as elaborated herein above, it is not disputed that Shri Praveen Jain confirmed that the transactions never resulted into any delivery of goods and also no transaction expenses were debited in the books. It is apparent that the appellant had entered into transaction with .....

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sionately considered the facts and circumstances of the case. I have already held that during the course of investigation, one Mr. K K.Gupta confessed before the Investigation Wing of the Department that he was in the business of providing bogus bills / accommodation bills and for the said parties he used to charge commission @0.25% of the aggregate value of the bogus bills. On the basis of such confessional statement given by him, the Department conducted Survey Operations in office premises of .....

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ause such commission expenses were in the nature of unexplained expenditure disallowable u/s. 69C of the Act. In view of Finance (No.2) Act inserting proviso with effect from 01-04-1999,such unexplained expenditures are not deductible. Under the circumstances, the addition made by the AO @0.25% of the aggregate value of bills issued by the said Mr. K K Gupta to the present appellant are confirmed. Accordingly, the addition of Fs. 2,51,698/- for A.Y 2004-05, ₹ 2,00,229/- for A Y 2005-06 and .....

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ability it is evident that Praveen Jain has given only accommodation entries for which he must have charged commission. 2.6.6 After accepting the conclusion of the Id. AO about the accommodation entries I now proceed to determine the quantum of commission that must have been charged by Shri Praveen Jain. 2.6.7 The Ld. AO on pages 11-12, para 6.6 held that commission paid for accommodation entries is held as unexplained expenditure and hence he disallowed 2% of ₹ 69,66,58,158/- amounting to .....

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on entries had confessed to charging commission ® 0.25%. 4. Before us, the learned Counsel submitted that, against the said order of the CIT(A), department has not filed any appeal before the Tribunal. In fact the assessee had preferred an appeal before the Tribunal against the confirmation of commission payment at the rate of 0.25%. The Tribunal had even deleted the said commission payment because the said parties were not cross-examined and assessee has brought on record that no actual tra .....

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ct matter of dispute right from the assessment year 2004-2005 to assessment year 2006-2007. In the first appeal, the learned CIT(A), after detailed discussion, has held that commission payment should be restricted to 0.25% looking to the various facts and circumstances of the transactions involved. Such a percentage of commission payment so far as the department is concerned, the same has attained finality, because no appeal was preferred by the department on this issue, on the contrary, the ass .....

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ccepted the purchases and sales as disclosed by the assessee and has not rejected the books of accounts as maintained by the assessee. While making the addition of undisclosed commission of ₹ 2,51,698/-, the A.O. has relied upon the statement of Mr. K.K. Gupta recorded on oath by the DDIT (Inv.) on 25-7-2007 u/s 131 of the Act. However, during the course of assessment proceedings it was stated by the assessee that at the time of statement recorded by the DDIT (Inv.) it was inter alia state .....

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page 714 & 715): …………But before the income-tax authorities could rely upon it, they were bound to produce it before the assessee so that the assessee could controvert the statements contained in it by asking for an opportunity to cross-examine the manager of the bank with reference to the statements made by him……….. 13. In absence of any contrary material placed on record by the Revenue to show that the cross examination of Mr. K.K. Gupta was .....

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y we delete the same. The grounds taken by the assessee are, therefore, allowed. 7. In view of the aforesaid facts and precedents of the earlier years and also that the assessee is not in appeal before us, we uphold the order of the CIT(A) sustaining the commission payment at the rate of 0.25% instead of 2%. Accordingly, ground No.1 as raised by the Revenue is dismissed. 8. So far as the issue relating to ground No.2, the learned Counsel submitted that this issue is squarely covered by the decis .....

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essment orders, he disallowed the depreciation and added back to the income of the assessee. The learned CIT(A) too, following the earlier order of the CIT(A), deleted the said disallowance. In the Revenue s appeal for assessment years 2005-2006 and 2006-2007, the Tribunal has upheld the order of the CIT(A) after noting down the following facts and holding as under:- 33. Brief facts of the above issue are that it was observed by the A.O. that the assessee has shown purchases of capital goods fro .....

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iew of the following evidences (page 7 & 8 of Assessing Officer s order):- (a) The factual existence of the said machinery as found under a due diligence conducted by an independent body Earnest & Young an accounting firm of high repute with far more credibility than Mr. Gupta. (b) The authenticated location, testing report and installation report filed before your kind self and already on record as relating to the said machinery. (c) Some of the said machinery is also part of the demerg .....

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n possible without the additional machinery. The said Annexure is self explanatory. It was further stated that necessary documents related to the purchase of assets are already filed before the A.O. It was further stated that the above assets have not been installed in the assessee s centre and the details of its inspection report and verification report was already filed. It was, therefore, submitted that the above assets are being used for business purposes, therefore, the depreciation be allo .....

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CIT(A). 36. We have carefully considered the submissions of both parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the assessee has installed the above plant and machinery in its business centre and has claimed depreciation thereon. However, the A.O. without any basis has disallowed the depreciation at 35% of the depreciation claimed. On appeal the ld. CIT(A), however, allowed the same vide finding recorded .....

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f the assets, the source of purchases, the cost and date on which the same was put to use. The appellant had also furnished sample bills to prove that the assets were purchased by inviting quotations from various parties. It was argued before the A.O. that all purchases were duly backed by delivery challans, testing and installation report. All relevant bills and vouchers with reference to the purchases of such assets were made available to the Income Tax Survey Team and to the A.O. Details of a .....

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relevant disclosure including that of the latest financial position and complied with the requirement stipulated in law in Company Petition No. 405 of 2006 connected with Company Application No.542 of 2006. The appellant had also given necessary undertakings before the Honorable Bombay High Court. The Regional Director has filed affidavit and relied upon the report of the Registrar of Companies after examining the scheme and relying upon the report, the Regional Director has certified that the .....

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