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2015 (6) TMI 965 - ITAT MUMBAI

2015 (6) TMI 965 - ITAT MUMBAI - TMI - Revision u/s 263 - necessary inquiry with regard to such purchases/expenses and expenses claimed in respect of accommodation bill not made by AO - Held that:- The assessee was engaged in the business of hotel wherein the expenditure alleged to be incurred on plumbing, electrical items, furniture, printing and stationary etc. amounting to ₹ 2,98,13,059/-, appears to have reduced directly the profit earned by assessee. Even in respect of alleged bogus p .....

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absence of making any inquiry as well as applying wrong proposition of treating the assessee as dealer and applying the GP rate on such accommodation bill which is actually in the nature of expenses, the Ld. CIT was justified in setting aside the order perused by AO and restoring the matter back to the file of the AO for deciding afresh after making necessary inquiry with regard to such purchases/expenses and affording assessee adequate opportunity of hearing. - Decided against assessee - ITA N .....

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following grounds of appeal: 1. In the facts of the case and in Law, the learned CIT erred in invoking Section 263 to the case of the Appellant only by way of change of opinion, without pointing out any error in the order of the A.O. and also by wrongly rejecting the detailed submissions made to her from time to time. 2. In the facts of the case and in Law the Show Cause Notice & or order u/s 263 alleging errors and prejudice, itself is erroneous on many counts as follows. a) In the facts of .....

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though all the details were furnished to the Assessing Officer. c) In the facts of the case and in Law, the learned CIT has erred in disregarding the fact that similar deduction was already allowed in several scrutiny assessments in earlier years as well. d) In the facts of the case and in Law, the learned CIT has erred in overlooking various judgments pronounced by the different Courts and jurisdictional tribunals. e) In the facts of the case and in Law, the learned CIT has erred in invoking th .....

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mmodation bill/entry providers by the Sates Tax Department of Maharashtra. The assessee was asked to explain as to why the purchases made by the assessee from those parties be not treated as bogus. In this respect, a statement on oath u/s.131 of the I.T. Act of assessee company s director Mr. Rahim Maredia was recorded whereby he was asked to clarify and explain these purchases pertaining to non genuine bills of ₹ 3,60,24,582/-. It was also brought to his notice that the above named partie .....

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able to produce those parties and in order to have peace of mind and avoid protracted litigation, he had agreed with the Gross Profit on such transactions relating to those parties as offered to tax. Mr. Rahim had further stated that the above declaration made by him was to avoid litigation and to buy peace of mind. As the declaration was made voluntarily, he had requested no penal action may be taken on this voluntary offer of Gross Profit to tax. The AO observed that the assessee had accepted .....

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ately two preceding years i.e. for A.Y.2009-10 was 13.31% and for A.Y.2010-11 was 12.93% and the average of the above had come to 12.12 %. Taking the base of this percentage, he estimated the Gross Profit on the above transactions at 15% observing that the assessee would not have to bear any administrative expenditure on the quantum. Accordingly, he added an amount of ₹ 3,60,24,582/- being 15% of the non genuine purchases of ₹ 54,03,687/- to the total, income of the assessee. 4. The .....

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tlery, routine repairs etc. The assessee was engaged in running a hotel and thus there were no corresponding sales against these purchases. The entire alleged bogus purchase should have been disallowed by the AO. He therefore was of the view that the order of the assessing officer was erroneous and prejudicial to the interests of the revenue. He therefore invoking his revision jurisdiction under section 263 of the Act asked the assessee to explain in this respect. 5. The Ld. CIT, further, observ .....

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icial to the interest of Revenue. The Ld. CIT dealt with judicial pronouncement cited at bar by Ld. A.R. wherein addition was sustained as a percentage of purchases in respect of assessee engaged in the business of trading where stock register/inventory established one to one diary for purchases and sales. However, in this case assessee has made purchases which has been claimed as expenditure, no corresponding sales of such purchases had been shown by the assessee. The Ld. CIT, therefore, found .....

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ous and prejudicial to interest of Revenue. Further reliance was placed by Ld. CIT(A) on the decision of Hon ble Rajasthan High Court in the case of Woolen Carpet Factory 125 Taxman 763, wherein purchases were found to be ingenuine and addition was made under section 69 of the IT Act. He accordingly set aside the assessment and restored the matter to the AO for doing the assessment afresh after making necessary enquiry with regard to such purchases and affording assessee adequate opportunity of .....

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ses (ii) Bank statements showing payments to these parties (iii) Copies of ledger accounts (iv) Copies of bills/delivery challans and confirmation wherever available (v) Judicial pronouncements relied upon. It had been further explained that during the course of assessment proceedings, the Director of the company Shri. Rahim Maredia appeared before the AO and stated that the assessee had been undertaking genuine transactions with the above parties. It had not been established that any part of fu .....

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ssee was not in a position to produce the parties. However, since the matter was very old and in order to have peace of mind and avoid protracted litigation agreed for gross profit addition on such transactions. The AO estimated 15% addition on the gross profit and accordingly added ₹ 54,03,687/-. It was argued that revision proceedings were not called for since the AO had completed the assessment after enquiry and after verification of details and due application of mind and thereafter he .....

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vited our attention to page 63 of the paper book to show that the assessee had given reply in respect of the inquiries. He has further invited our attention to the assessment order to show that the AO had discussed this issue. He has relied upon various judicial decisions to contend that if details were called for by AO and the same were considered by him then, revision cannot be resorted to; That if two views were possible and AO had taken one view it would not render the order erroneous. He ha .....

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ons were made treating the said purchases as bogus, but the said additions made by the Department were deleted by the Tribunal on the ground that additions cannot be made on conjectures and surmises. 8. On the other hand, The Ld. D.R. contended that before making addition of 15% of bogus purchases, the AO has neither made any inquiry with regard to the actual purchases so made nor made any inquiry with regard to the genuineness of the expenditure so claimed. As per the Ld. D.R., since the assess .....

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e by the assessee. 9. We have heard the rival contentions of the Ld. Representatives of both the parties and have also gone through the records. We have also deliberated on the judicial pronouncements cited at bar as well as referred by CIT in his order. In the instant case, assessee is in hotel business and running hotel in the name of Hotel Marine Plaza. Return of income was filed declaring income at ₹ 2,65,76,741/-. During the course of scrutiny assessment, AO found that assessee has ma .....

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led the director of the assessee company by issuing notice under section 131, while recording statement, the director of the company categorically accepted and offered to tax the gross profit on the quantum of above purchases/expenses. Thereafter, AO rejected books of account under section 145(3) of the IT Act and after taking average GP rate of 15%, made an addition of ₹ 54,03,687/- computed on such bogus purchases/expenses. As per our considered view, since the purchases so made were not .....

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