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Shri Hiralal Chunilal Jain Versus Income tax Officer Ward 14 (1) (4) , Mumbai. and Vica-Versa

2016 (1) TMI 1089 - ITAT MUMBAI

Unexplained expenditure u/s.69C - FAA had reduced the addition to 20% - Held that:- AO had made the addition on the basis of information received from the Sales tax department, but, he did not make any independent inquiry. He did not follow the principles of natural justice before making the addition. The FAA had reduced the addition to 20%, but he has not given any justification except stating that same was done to plug the probable leakage revenue. Considering the peculiar facts and circumstan .....

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the disallowance. For claiming deduction u/s.37(1) of the Act the assessee has to lead evidences in his support-he has to produce documentary evidence to prove that expend was actually incurred and was incurred wholly and exclusively for the purpose of business in the case of Ramanand Sagar (2002 (2) TMI 52 - BOMBAY High Court )the Hon’ble Bombay High Court has held that the burden of proof is on the assessee to establish beyond doubt that the expenditure is solely incurred for the purpose of bu .....

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we are remitting back the issue to the file of the AO for fresh adjudication, who will decide the matter afresh after affording a reasonable opportunity of hearing to the assessee.

Addition on account of bogus purchase - Held that:- AO had added ₹ 10.50 lakhs to the income of the assessee for the year under appeal and FAA had reduced it to ₹ 2.10 lakhs. We have deleted the addition made under the head bogus purchases while deciding the appeals filed by the assessee for bot .....

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appeals for the next AY.by challenging the order of the CIT-A, dated 22.01.2014. The details of filing of returns etc.can be summarised as under: AY. ROI filed on Returned income Assessment date Assessed income 2009-10 30.09.2009 Rs.3,77,140/- 25/09/2013 Rs.10,98,880/- 2010-11 01.10.2010 Rs.4,11,851/- 15/03/2013 Rs.28,01,910/- ITA No.4547/Mum/2014,AY.-2009-10: 2. Assessee, an individual is proprietor of M/s. Divya Alloys and is engaged in business of resellers of ferrous and non ferrous metals. .....

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r, the supplier was not produced by the assessee. Summons issued to Shiv Sagar could not be served on the given address. The AO held the purchase transaction bogus and treated the entire purchase (Rs.7.21 lakhs)as unexplained expenditure u/s.69C of the Act. 3. Aggrieved by the order of the AO, the assessee preferred an appeal before the First Appellate Authoirty(FAA). Before him, it was argued that the AO had relied upon the information supplied by the investigation wing of the Sales Tax Departm .....

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quantitive details were maintained by the assessee with regard to purchase and sales, that the AO had accepted the sales. After considering the submissions of the assessee and the assessment order, the FAA held that STD had treated the suppliers of goods as suspicious dealers, that they had paid VAT, that during the investigation the suppliers had admitted that they had issued accommodation bills, that the assessee had not produced the party, that he might have purchased the goods from grey mark .....

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at even a copy of the statement was not provided wherein the allegation against the assessee were made by the alleged suppliers, that all the purchases and sales were recorded in the books of accounts, that the assessee was a resller, that the NP was 1.7%, that the GP was about 7% , that the FAA had ignored those vital facts while upholding the partial addition. He relied upon the cases of Rajeev Kalathil(67SOT52),Tristar Jewellery(ITA/8292/Mum/2011 dated 31.07.2015-AY.2006-07)and Nikunj Eximp E .....

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upplier but same was not given, that the AO had not supplied the copy of the statements of Shiv Sagar to the assessee, that in the books of accounts of the assessee all the purchases and sales were recorded, that payments were made through banking channels, that the AO had made addition of entire purchases u/s.69 of the Act, that the FAA had reduced it to 20%. It is a fact that the AO had not rejected the sales of the assessee and the assessee was maintaining the quantative details and stock reg .....

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pra)the Tribunal has held as under: 2.4. We find that AO had made the addition as one of the supplier was declared a hawala dealer by the VAT Department. We agree that it was a good starting point for making further investigation and take it to logical end. But, he left the job at initial point itself. Suspicion of highest degree cannot take place of evidence. He could have called for the details of the bank accounts of the suppliers to find out as whether there was any immediate cash withdrawal .....

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umstances of the case,we are reversing the order of the FAA. Effective ground of appeal is decided in favour of the assessee. First three grounds of appeal are about ITA No.2545/Mum/2014-AY.-2010-11: 6. First three grounds of appeal are about disallowance made under conveyance expenses/office expenses/travelling expenses, telephone expenses and warehouse/godown rent. During the assess -ment proceedings the AO found that the assessee had debited various expenses to its P&L account namely conv .....

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chers, that almost all the expenses were paid in cash for which only self-made vouchers were prepared. He held that personal element embedded in those heads of expenditure could not be ruled out for want of itinerary/log book etc. Therefore, he disallowed a sum of ₹ 1.59 lacs(being 50% of the total expenditure or ₹ 3.19 lacs) and added back to the total income of the assessee. He found that he debited telephone expenses of ₹ 61,073/- in the P&L Account. On verification from .....

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ted the assessee to furnish the address of warehouse and copy of leave and license agreement for the warehouse, mode of payment and name of the person to whom the warehouse charges were paid. The assessee did not furnish the name and the address of the party to whom the expenses , amounting to ₹ 96,000/- were paid in cash. Therefore, the AO disallowed the expenditure and added the same to the income of the assessee. 7. Aggrieved by the order of the AO, the assessee preferred an appeal befo .....

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nses of (Rs.52,465/-) included general repairs, repairs to furniture and similar expenses, travelling expenses of (Rs.56,480/-) were incurred for travelling outside Mumbai for business purposes, that the disallowance made by the AO was on higher side. With regard to telephone expenses the assessee argued that it included payment of tata indicom telephone and included payment of mobile bill of employees , that the expenses were incurred for business it was further submitted that warehouse expense .....

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vidence, that he had not given party-wise breakup of expenses, that in place of travelling expenses the assessee should have travelling tickets etc, that the assessee was operating his business activities from his residential premises and did not have any separate office, that during the assessment proceeding he had furnished details of only one employee, that he had not paid salary to any one, that the assessee was not maintaining any office premises for its employees, that expenses incurred on .....

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is. Finally, he upheld the order of the AO with regard to the expenses disallowed under various heads. 8. Before us, the Authorised Representative(AR) contended that the disallowances were on higher side. Departmental Representative (DR) supported the order of the FAA. 8.1We have heard the rival submissions and perused the material before us. We find that the expenses incurred under five heads namely conveyance, office expense staff welfare expenses sundry expenses and travelling expenses had be .....

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FAA does not suffer from any legal infirmity with regard to those five items. As far as telephone expenses are concerned we would like to mention that the AO had partially allowed the expenditure claimed by the assessee and had disallowed the remaining amount as the assessee had not produced supporting evidences. In these circumstances, we are of the opinion that order of the FAA does not need any interference from our side. We further find that the assessee had claimed that warehousing charges .....

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d exclusively for the purpose of business in the case of Ramanand Sagar (256 ITR 134)the Hon ble Bombay High Court has held that the burden of proof is on the assessee to establish beyond doubt that the expenditure is solely incurred for the purpose of business. In the case before us, the incurring of expenditure disallowed by AO and upheld by the FAA itself is not proved. Thus, the assessee has failed the first test itself. In short, confirming the order of the FAA, we decide Gr. No.1-3 against .....

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ssessee stated that he was maintaining his personal books of account apart from the business book of proprietary firm. The assessee produced his personal books including cash book and the Balance-sheet before him and claimed that he had surplus money in his own personal account. The FAA called for a RR from the AO. In his report the AO mentioned that the assessee had opening balance of ₹ 3.84 lakhs as per the passbook, that out of ₹ 3.84 lacs a sum of ₹ 3.00 lacs was transferre .....

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inquiries were made in that regard. DR left the issue to the discretion of the Bench. We have heard the rival submissions and have perused the material before us. We find that the assessee had filed the cash flow statement and the balance sheet in his support, that the FAA had not analysed the documents properly, that availability of cash was prima facie established. In our opinion, it requires further investigation. Therefore, in the interest of justice we are remitting back the issue to the f .....

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