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TMI Blog2015 (11) TMI 182X X X X Extracts X X X X X X X X Extracts X X X X ..... he appeals filed by the Revenue against the orders of the CIT(A)-I, Surat dated 09.08.2011, 17.01.2011 and 20.01.2011 for Assessment Years 2008-09, 2005-06 and 2006-07 respectively. Since these appeals involve common issues, these were heard together and are being disposed of by this consolidated order for the sake of convenience. 2. The cross-objection filed by the assessee is late by 573 days. At the time of hearing before us, it is submitted by the learned Counsel for the assessee that for the Assessment Year 2005-06 the Revenue filed the appeal on 08.09.2008. However, by mistake by the staff of the ITAT, the acknowledgement was issued in the name of Abhishek Exports instead of correct name of assessee, i.e., Abhishek Exim Pvt Ltd. That, the copy of appeal filed by the Revenue was also supplied to Abhishek Exports; therefore, the copy of the memo of the appeal filed by the Revenue in the case of assessee, i.e., Abhishek Exim Pvt Ltd., was put by the staff of the assessee in the file of M/s. Abhishek Exports. The learned Counsel clarified that Abhishek Exports is another firm of the same group. In support of his contention, the learned Counsel produced photocopy of the acknowled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otice was issued on 08.04.2010. The assessee has filed cross-objection on 28.04.2010 which was the earliest opportunity when the assessee came to know of the appeal filed by the Revenue for Assessment Year 2005- 06. In the above circumstances, we are of the opinion that the assessee was prevented by reasonable cause for delay in filing of the crossobjection. We are, therefore, condone the delay in filing of the crossobjection by the assessee and admit the cross-objection for hearing on merits. ITA No.2704/Ahd/2008 - Revenue's appeal: AY 2005-06 CO No.109/Ahd/2010 by Assessee : AY 2005-06 5. The only ground raised in the Revenue's appeal is against the reduction in disallowance out of purchases. The Assessing Officer had disallowed 10% out of purchases. On appeal, the CIT(A) reduced the disallowance to 2% of the purchases. The Revenue is in appeal against the reduction in disallowance while the assessee is in cross-objection vide Ground No.2 of the cross-objection against the disallowance sustained. The facts of the case are that the assessee derives income from various activities which included purchase, import, manufacturing, sales and export of diamond, precious stone, textile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the above purchases treating it as not verifiable. Accordingly, Rs. 1,00,51,455/- being 10% of Rs. 10,05,14,555/- is disallowed and added to the total income of the assessee. Penalty proceedings u/s 271(1)(c) of the Act are being initiated for furnishing inaccurate particulars of income and concealment of income." 6. On appeal, the CIT(A) sustained the disallowance at 2% of the purchases with the following finding:- "3.3 I have considered the submission made by the appellant and observation of the AO. The AO has stated in para 3.6, that in the submission, the assessee itself has stated that "Without prejudice to the submission made there is a possibility of purchases from unauthorized dealers and in that case, some lumpsum disallowance may be made." Relying on this statement as well as case laws as mentioned above, the AO made the disallowance of 10% of the purchases. The AO has admitted that the assessee has given confirmations from all these parties and the copies of demand drafts / account payee cheques through which the appellant had made payment to these parties. It is also clear that the AO has not been able to bring on record any material to show that the purchases we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on that instead of purchasing the goods from the parties in whose name purchase bill is there, assessee might have purchased the goods from some other parties and actual purchase price might be lower than what is claimed by the assessee. He, therefore, disallowed 10% of the purchase amount on estimate basis. The CIT(A) noticed that for the year under consideration the gross profit rate as well as the net profit rate - both is better than the immediately preceding year which was accepted by the Revenue. He was, therefore, of the opinion that even after the rejection of books of account, there was no justification for the disallowance of as high as 10% of the purchases, but at the same time, the assessee before Assessing Officer has submitted that when the purchases are not verifiable, then a lump-sum disallowance may be made. After considering all the facts and the assessee's submissions, the CIT(A) deemed it proper to sustain the disallowance at 2% of the purchases and therefore, the disallowance was reduced to Rs. 20,10,291/- as against Rs. 1,00,51,455/- made by the Assessing Officer. After considering the facts of the case and the arguments of both the sides, we do not find any j ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... basis that the Tribunal was of the opinion that the assessee committed no wrong and was, therefore, entitled to seek deduction of payments to contractors of Rs. 32,94,149/- from which amount the assessee had deducted tax and deposited it with the Revenue before the last date for filing of the return. There was no illegality in the order of the Tribunal." 11. Admittedly, in the case under appeal before us, the TDS was deposited before the due date for filing of the return. The Assessing Officer has given the chart in page no.2 of the assessment order from which it is evident that the TDS was deposited on 30.05.2005 which was much before the due date for filing of the return. Therefore, the above decision of Hon'ble jurisdictional High Court would be squarely applicable. Respectfully following the same, we delete the disallowance made by the Assessing Officer u/s 40(a)(ia) and allow ground No.1 of the assessee's cross-objection. 12. Ground No.3 of the assessee's cross-objection is against the 20% disallowance out of wages. We have heard both the parties and perused the material placed before us. We find that the Assessing Officer disallowed 20% out of wages on the ground that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance at 2% of the purchases. Accordingly, the ground raised in the Revenue's appeal as well as Ground No.1 of the cross-objection, both are rejected. 17. The only other ground raised in the assessee's cross-objection is against the disallowance of Rs. 36,27,518/- out of wages. Both the parties admitted that these grounds are identical to the grounds raised by the assessee in its cross objection for Assessment Year 2005-06; and for the detailed discussion therein, we sustain the disallowance out of wags at Rs. 5,00,000/-. ITA No.1195/Ahd/2010 - Revenue's appeal: AY 2007-08 ITA No. 545/Ahd/2010 - Assessee's Appeal : AY 2007-08 18. The only ground raised in the Revenue's appeal is against the restriction in the disallowance out of purchases at 2% as against the 10% disallowed by the Assessing Officer, while the first ground of the assessee's appeal is against the sustenance of disallowance at 2% of purchases. Both the parties admitted that this issue is identical to the issue raised by both the parties for Assessment Year 2005-06; and for the detailed discussion therein, the ground raised by the Revenue as well as Ground No. 1 of the assessee's appeal, both are rejected. 19 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee is concerned, it has produced the confirmation from all the sellers and has also produced the sales vouchers issued by them and the evidence of the payments having been made by cheque. None of these evidences produced by the assessee were found to be incorrect, false or fabricated. Merely because the seller party was not found available at the address given by them in their sale bill, some disallowance on estimate basis may be justified; but that is not sufficient to levy the penalty u/s 271(1)(c) of the Income-tax Act. None of the parties from whom the assessee has claimed to have purchased the goods denied having sold the goods to the assessee. Therefore, the purchases from those parties have not been found to be false or bogus. So far as the penalty proceedings are concerned, the assessee has duly substantiated the purchases claimed to have been made by it by producing confirmation of seller parties as well as vouchers, and details of payment made through banking channel. In the above circumstances, in our opinion, the CIT(A) rightly held that the assessee is not liable to be penalized u/s 271(1)(c), merely because part of the disallowance on account of unverifiable purchas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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