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2015 (9) TMI 176 - ITAT JAIPUR

2015 (9) TMI 176 - ITAT JAIPUR - TMI - Disallowance of expenses - CIT(A) deleted addition - Held that:- The assessee’s attitude was not cooperative with this Bench, therefore, we have not allowed further adjournment and on perusal of the assessment order that the ld Assessing Officer made specific observation on various points as mentioned in the preceding paras of this order. However, the ld CIT(A)’s order is not specific, is very sketchy and cryptic, therefore, in the interest of justice, we s .....

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passed by the Ld. CIT(A)-III, Jaipur for A.Y. 2002-03. The sole ground of appeal is against deleting the disallowance and other expenses amounting to (Rs. 13962535/- (-) ₹ 1396253) to ₹ 12566282/-. 2. This case was fixed by this office from 09/06/2011 and 17 opportunities had been provided. The appeal was admitted in the year 2011 by the revenue or this was the last date given to the assessee on 23/3/2015. Even a final chance was given to the assessee on 18/5/2015. The assessee agai .....

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oks of account were maintained in a computerized system and generated in the form of computer printouts. There was a marked change in the nature of business inasmuch as during the year the assessee had claimed to have commenced business of trading and export of readymade garments. The assessee made payment U/s 40A(2)(b) of the Act to various persons of group. The ld Assessing Officer observed that these payments were in the nature of subterfuge in the overall scheme of tax avoidance or rather to .....

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on account of purchase and job work at ₹ 12,60,36,553/-, which was found by the Assessing Officer as device to evade the tax. The entire purchase of the fabric was made from KIPL for which the assessee had credited its account the stitching expenses. Even clearing export expenses are paid by it on behalf of the assessee. Account of KIPL stands credited by ₹ 1,18,981/- on account of telephone expenses. Thus in substance, the fabric is purchased from KIPM, stitching work is done by KIP .....

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manufacture or export as the assessee had no infrastructure. Only the assessee company has computer and motor car, furniture and fixture in the fixed schedule of the balance sheet. The ld Assessing Officer asked to submit the copy of bills of consultancy charges, which was admittedly no traceable by the assessee like excise duty bills are not traceable. Further the travelling detail were also not traceable as admitted by the assessee company before the Assessing Officer. The export activity done .....

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o carry out garments business, net income from the business activity of purchase and sale of garment etc. was estimated at Nil by the Assessing Officer. Income U/s 28 iiia, iiib and iiic had been assessed separately. The assessee claimed loss in share business at ₹ 30,44,764/-, which was ₹ 1,69,08,522/- in preceding year. The ld Assessing Officer has reproduced the trading account of share business on pages 7 to 9 of the assessment order. After considering the expenses debited in the .....

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e from the sister concern. It is further observed that sale of shares to this very sister concern from whom shares were purchased are to the tune of ₹ 89.33 crores and held that all the shares purchased were sold back to them. These hard facts put a serious questions marked against genuineness of business transactions carried out by the assessee with its sister concern. All the business activity of the assessee company had been carried out at Mumbai operating from the same premises as the .....

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sales are to the sister concern and intermixing and interlacing of the funds with the sister concerns. There is no genuine business carried on by the assessee in shares. As held by the Hon'ble Supreme Court in the case of Mcdowell & co. Ltd. 154 ITR 148 colourable devices cannot be part of tax planning and it is wrong to encourages or entertain the belief that it is unable to avid payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay taxes honestly .....

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ax obligation. Accordingly he invoked the provisions of Section 145(3) of the Act. The ld Assessing Officer assessed the net profit from the purchase and sale of garments/textile at Nil. Similarly any loss from share transaction is ignored and net profit from it is also taken Nil. The expenses debited in the P&L account is not allowable as are not found genuine and unsubstantiated or being inadmissible U/s 14A of the Act being incurred against dividend income of ₹ 1103980 which does no .....

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. In this regard, it is seen that the appellant company has made the purchases/sales of the shares, through the sister concerns, who are share brokers/sub brokers of the established/recognized stock exchanges i.e. NSE/BSE, and not from/to them. Further, it is seen that the appellant had filed all the relevant details/documents in support of the share business, wherein no specific defect was found by the ld A.O.. Apart from that, it is also observed that similarly, the details of the claimed expe .....

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and debited to the Profit and Loss account could not be related to the dividend income. It was pointed out that the assessee company had shown substantial business of trading in shares, as well as, of manufacturing and export of garments and as per the provisions of section 14A, only that expenditure, which was relatable to the dividend income could have been disallowed. It was argued that the Assessing Officer had not mentioned as to which expenditure had been incurred for earning the dividend .....

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eparately to the exempt income and non exempt income. Therefore, in such circumstances, a part of the claimed expenses is to be disallowed to estimate basis, U/s 14A of the I. T. Act, keeping in view the relevant details of the exempt and non exempt income of the appellant. On that basis, I find it reasonable to disallow 10% of the claimed interest, operational and other expenses, amounting to ₹ 1,39,62,535/-. Accordingly, the impugned disallowance is sustained to the extent of ₹ 13, .....

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