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2015 (9) TMI 745 - ITAT AHMEDABAD

2015 (9) TMI 745 - ITAT AHMEDABAD - TMI - Addition on on account of alleged inflated expenses - Held that:- It is settled position of law that the assessee is required to prove veracity of the claim which it has made before the Revenue Authorities. In the case in hand, the assessee made purchases from three parties amounting to ₹ 12,69,880/-. It was found that such parties did not exist on the given addresses. Therefore, the genuineness of the claim could not be verified. The assessee was .....

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VAP/ST Numbers. All the bills were computer-generated did not have detailed addresses of the parties and no contact numbers are mentioned in any of the Bill. - Decided against assessee.

Confirmation of disallowance u/s.40A(3) - contention of the assessee is that the payment is made to the Electricity Company of the Government of Gujarat - Held that:- the payment was made in cash is not in dispute. The payment is made to a Company engaged in the business of distribution of power-suppl .....

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CIAL MEMBER : This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax(Appeals)-I, Surat [ CIT(A) in short] dated 04/04/2012 pertaining to Assessment Year (AY) 2008-09. The Assessee has raised the following grounds of appeal:- 1. The CIT(Appeals) erred in holding the addition to the extent of ₹ 8,75,698/- on account of alleged inflated expenses. 1.1. The CIT(Appeals) failed to appreciate the submissions and evidences produced by the assessee. 1.2. Wit .....

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ppellant reserves its right to add, amend, alter or modify any of the grounds stated hereinabove either before or at the time of hearing. 2. Briefly stated facts are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s.143(3) of the Income Tax Act,1961 (hereinafter referred to as the Act ) was framed vide order dated 30/12/2010; thereby the Assessing Officer (AO in short) made addition of ₹ 12,69,880/- on account of inflated expenses. The AO also made .....

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re against the confirmation of addition to the extent of ₹ 8,75,698/- on account of alleged inflated expenses. The ld.counsel for the assessee submitted that the authorities below were not justified in making the addition and confirming the same. He submitted that the AO made addition on the basis that due to inflated expenses, there was decline in Gross Profit (GP) ratio at 44.84% to 29.68%. He submitted that the Revenue has accepted the GP ratio at 22.37% in the subsequent year (i.e. AY .....

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gard to the fact that on enquiry it was found that the claim of purchases made from the parties was found to be incorrect. He further submitted that the judgement of the Hon ble Jurisdictional High Court in the case of Mayank Diamonds Pvt.Ltd. vs. ITO as relied upon by the ld.counsel for the assessee relates to Diamond Industries where profit margins are very low, whereas the assessee is engaged in the business of embroidery job-work where profit margins are high. 3.2. In rejoinder, the ld.couns .....

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t year at 22.37%. It is not in dispute that the AO made enquiry through Inspector who reported that purchases as claimed by the assessee from three parties amounting to ₹ 12,69,880/- could not be verified as the parties on the given addresses do not exist during the Financial Year 2007-08. It is settled position of law that the assessee is required to prove veracity of the claim which it has made before the Revenue Authorities. In the case in hand, the assessee made purchases from three pa .....

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aim in respect of the purchases made, but the assessee in the given case has grossly failed to do so. The AO pointed out that on the bills furnished by the assessee, there was no mention of VAP/ST Numbers. All the bills were computer-generated did not have detailed addresses of the parties and no contact numbers are mentioned in any of the Bill. The ld.counsel for the assessee has placed reliance on the judgment of the Hon ble Jurisdictional High Court in the case of Mayank Diamonds Pvt.Ltd. vs. .....

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ment was made to Dakshin Gujarat Veej Company Ltd. The ld.counsel for the assessee submitted that the authorities below were not justified in making the addition. He submitted that Dakshin Gujarat Veej Company Ltd. is a concern of the Gujarat Government. He placed reliance on the judgement of Hon ble High Court of Delhi rendered in the case of Basu Distributor (P.)Ltd. vs. Asst. CIT reported at (2012) 19 taxmann.com 111(Delhi), dated 06/02/2012. 5.1. On the contrary, ld.Sr. DR opposed the submis .....

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ade to the Electricity Company of the Government of Gujarat. Therefore, is a State within the meaning of Article-12 of the Constitution of India. He submitted that although it is not made in a legal tender. He placed reliance on the Board s Circular No.34 (F No.13A/92/69-IT(A-II), dated 5.3.1970. We find that the Hon ble High Court of Delhi in the case of Basu Distributor (P.) Ltd. vs. Asst. CIT[supra] has held as under:- 8. In the present case, the appellant assessee had filed before the Tribun .....

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s were made in cash, as preparation of a bank instrument or issue of cheque would have resulted in a missed opportunity or failure of a favourable or good business deal with the third parties. The provisions of Section 40A (3) and Rule 6 DD (j) have been incorporated in the Act in order to check the incurring of bogus and fictitious expenses to non existing parties. In the present case, the appellant-assessee had furnished explanations on the basis of the bank statements as well as the ledger ac .....

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