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2015 (11) TMI 182 - ITAT AHMEDABAD

2015 (11) TMI 182 - ITAT AHMEDABAD - TMI - Disallowance of 10% of purchases - CIT(A) deemed it proper to sustain the disallowance at 2% of the purchases - Held that:- No justification to interfere with the order of the CIT(A). So far as the Revenue’s appeal is concerned, the CIT(A) has already recorded that the GP as well as NP of the year under consideration is better than the preceding year which was accepted by the Revenue. Therefore, the Revenue should not be aggrieved because of reduction i .....

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in the order of the CIT(A) and reject the Revenue’s appeal - Decided in favour of assessee in part

Delay in the deposit of TDS - Addition on account of payment of job charges as per provisions of section 40(a)(ia) - Held that:- 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 mu .....

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xceeding ₹ 20,000/-. He merely presumed that all the cash payments would be exceeding ₹ 20,000/-. The disallowance u/s 40A(3) cannot be made on the basis of presumption. As not a single payment in cash exceeding ₹ 20,000/- for wages have been pointed out; therefore, in our opinion, Section 40A(3) is not applicable.

we find that in Assessment Year 2008-09 the CIT(A) while deleting the disallowance out of wages u/s 40A(3) have sustained lump-sum disallowance of ₹ .....

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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 f .....

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ghtly 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 purchases was sustained by the CIT(A) and eventually by us. Similarly, for lump-sum disallowance out of wages, no penalty u/s 271(1)(c) is liable to be imposed. The Assessing Officer had made the disallowance u/s 40A(3) amounting to ₹ 49,94,612/-. While deciding the quantum appeal, we have given the finding that the disallowance u/s 40A(3) is not call .....

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9/Ahd/2010, ITA No. 1597/Ahd/2009, CO No. 175/Ahd/2009, ITA No. 1195/Ahd/2010, ITA No. 545/Ahd/2010, ITA No. 748/Ahd/2011, ITA No. 988/Ahd/2011, ITA No. 989/Ahd/2011 - Dated:- 29-9-2015 - SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI S. S. GODARA, JUDICIAL MEMBER For The Revenue : Shri Vilas Shinde, Sr. DR with Shri M.P. Singh, CIT-DR For The Assessee : Shri K.K. Shah, AR ORDER PER G.D. AGRAWAL, VICE PRESIDENT: ITA Nos. 2704/Ahd/2008 and 1597/Ahd/2009 are the appeals filed by the Revenue and CO Nos .....

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ue 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 .....

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e 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 acknowledgement-cumnotice issued by the ITAT for filing of the appeal by the Department for Assessment Year 2005-06 in the case of assessee, i.e., Abhishek Exim Pvt Ltd as well as the photocopy of the envelope by which the appeal memo was supplied. That the appeal was fixed for hearing for the first time in Surat Camp on 28.05.2010 for w .....

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im Pvt Ltd. In support of this contention, Shri Kiran Shah, the Counsel of the assessee has filed the affidavit. The learned Counsel also relied upon the decision of Hon ble Apex Court in the case of CIT vs. West Bengal Infrastructure Development Finance Corporation Ltd., reported in (2011) 334 ITR 0269, in support of his contention for condonation of delay. 3. The earned Departmental Representative, on the other hand, stated that the facts stated by the learned Counsel may be verified from the .....

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er-sheet of the ITAT, the name of the respondent is mentioned as Abhishek Exports. On the file cover of the ITAT also name of the respondent was mentioned as Abhishek Exports, which is subsequently rectified as Abhishek Exim Pvt Ltd. These facts support the contention of the learned Counsel that the copy of the appeal memo for filing of the appeal by the Revenue is served on the wrong assessee. The assessee came to know about the filing of the appeal by the Revenue for the first time when the ca .....

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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-obje .....

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133(6) at the address of the seller have been returned unserved. Though the assessee has produced the confirmation of all the parties as well as copy of the purchase bill and the details of payment having been made by cheque, but the Assessing Officer disallowed 10% of the purchases with the following finding:- 3.5 The assessee has failed to produce these parties. The total amount of transactions with these eight parties comes to ₹ 10,05,14,555/-. This is the amount of purchases shown by .....

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urchase expense of the assessee must be at much lower amount than what claimed by the assessee. 3.6. It is pertinent to mention here 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. Reliance is placed on the decision in the case of Income Tax Officer Vs. Sun Steel ITAT Ahd. B Bench (2005) 92 TTJ 1126. In the said case the Hon bl .....

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lhi ITAT) & CIT Vs. M.K . Brothers (1987) 163 ITR 249 (Guj). In view of the above facts and circumstances of the case, it would be fair and reasonable to disallow 10% of the above purchases treating it as not verifiable. Accordingly, ₹ 1,00,51,455/- being 10% of ₹ 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. .....

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ove, 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 were bogus so the payments were bogus. This is also clear from the fact that the AO has not disallowed the specific purchases but h .....

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ppellant has further stated that the disallowance is adhoc and without bringing any material on record to show that the purchases are bogus or the payment is bogus. Further the AO has given no reason as to why the disallowance should be at the rate of 10%. No basis for adopting this percentage has been given, hence according to the appellant, the disallowance is adhoc and based on conjectures and surmises. In view of these reasons, I agree with the appellant that the disallowance made by the AO .....

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s partly allowed. 7. Both the parties, aggrieved with the order of the CIT(A), are in appeal before us. Revenue is aggrieved for the reduction made by the Assessing Officer while the assessee is aggrieved for the disallowance sustained. 8. We have heard both the parties and carefully considered their arguments and have also perused the orders of the lower authorities as well as the material produced before us. We find that the Assessing Officer himself has recorded the finding that the goods pur .....

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he 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 Assess .....

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nterfere with the order of the CIT(A). So far as the Revenue s appeal is concerned, the CIT(A) has already recorded that the GP as well as NP of the year under consideration is better than the preceding year which was accepted by the Revenue. Therefore, the Revenue should not be aggrieved because of reduction in the disallowance by the CIT(A). So far as the assessee s cross-objection is concerned, the assessee itself has stated before the CIT(A) that Without prejudice to the submission made ther .....

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learned CIT(A) grossly erred in confirming addition of ₹ 2,31,33,256/- on account of payment of job charges as per provisions of section 40(a)(ia) of the Act as per para 2.3 of the appeal order. 10. We have heard both the parties and perused the material placed before us. We find that the Assessing Officer has disallowed the job charges on the ground that there was delay in the deposit of TDS. At the time of hearing before us, it was submitted by the learned Counsel that the TDS was deposi .....

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e authorities below. The Hon ble jurisdictional High Court in the case of CIT vs. J.K. Construction Co. (supra) has held as under:- Held, dismissing the appeal, that the assessee had to make deduction before 31st March of the year and as long as such amounts were deposited before the last date for filing of the return, the requirements of law would be fulfilled. It was on this basis that the Tribunal was of the opinion that the assessee committed no wrong and was, therefore, entitled to seek ded .....

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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 fin .....

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other hand, pointed out that in Assessment Year 2008-09, the CIT(A) has restricted the disallowance out of wages to ₹ 5,00,000/- which was accepted by the assessee. He, therefore, submitted that if the ITAT accepts the assessee s contention that Section 40A(3) is not applicable, then a lump-sum disallowance out of wages should be made. 14. We have carefully considered the arguments of both the sides and perused the material placed before us. Admittedly, for applicability of Section 40A(3) .....

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ted out; therefore, in our opinion, Section 40A(3) is not applicable. 15. Now, we find that in Assessment Year 2008-09 the CIT(A) while deleting the disallowance out of wages u/s 40A(3) have sustained lump-sum disallowance of ₹ 5,00,000/- out of wages and such disallowance have been accepted by the assessee. Therefore, for the sake of consistency, we sustain the disallowance out of wages at ₹ 5,00,000/-. ITA No.1597/Ahd/2009 - Revenue s appeal: AY 2006-07 & CO No.175/Ahd/2009 by .....

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uphold the disallowance 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 ₹ 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 susta .....

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al 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. The only other ground raised by the assessee is against the disallowance of ₹ 39,35,948/- out of wages. This ground is also admitted to be similar to the ground raised by the assessee in Crossobjection for Assessment Year 2005-06; and for the detailed discussion therein, we .....

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these grounds are similar to the ground raised by the Revenue and assessee in earlier years and for the detailed discussion therein, we uphold the order of the CIT(A) and reject both the grounds of the Revenue s appeal. ITA No.988/Ahd/2011 - Revenue s appeal: AY 2005-06 21. The only ground raised in the appeal by the Revenue is against the deletion of penalty levied u/s 271(1)(c), which was cancelled by the CIT(A). 22. We have heard both the parties and perused the material placed before us. Th .....

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the assessee because the goods have been exported by the assessee and sale consideration from such export of the goods was disclosed. The Assessing Officer doubted the genuineness of the purchases merely because the parties were not found at the address given. On these facts, the Assessing Officer presumed that the goods might have been purchased by the assessee from some other dealers than the dealers mentioned in the purchase bills. He, therefore, disallowed 10% out of the purchases. On appea .....

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y 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 .....

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