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2016 (4) TMI 557 - ITAT DELHI

2016 (4) TMI 557 - ITAT DELHI - [2016] 48 ITR (Trib) 462 - Revision u/s 263 - Held that:- For Brokerage expenses the case was selected for scrutiny to verify the admissible of the said expenses, but no enquiry appeared to have been made as to the purpose and basic of payment of brokerage, its connection with the business and whether the payment commensurate to the benefit derived by the Company. However, a complete list of the agents alongwith addresses was available on records, but no attempt a .....

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reconcile the figure of sales and purchases as disclosed in the P&L A/c are yet to be reconciled. It was seen that the reconciliation statement shows addition of credit note to Purchases in order to reconcile the figure of total purchases. Similarly, sales have been reconciled by adding a figure under the nomenclature “Sale High Seas” (not part of VAT return) and no reason whatsoever for such addition has been given nor any evidence was produced.

Reconciliation of bank balance as on .....

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fy/examine the same.CIT has rightly set aside the issue in dispute to the file of the AO to examine the same afresh

Various loans amounting to ₹ 9 crores is concerned, we find that the same was also not enquired into and verified by the AO during the assessment proceedings. On this issue, the assessee has furnished copies of bank account of the lenders as well as their assessment details, but the same was not verified entry wise from the books of account as well as bank account .....

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hase @ of ₹ 33,000/- per MT from M/s Star Wire India Ltd., on 3.6.2009 in respect of goods described as “round”, another seller M/s Narayan & Company has sold the same to another person @Rs.32,330/- per MT on the same date. This reveals that purchases from related parties have been shown by the assessee at inflated price. Therefore, in our considered opinion, Ld. CIT has rightly set aside the issue in dispute to the file of the AO to examine the same afresh - Decided against assessee - I.T .....

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3-2015 passed u/s 263 of the Income-tax Act, 1961 passed by the Ld Commissioner of Income-Tax, (Central), Gurgaon is against law and facts on the file in as much as he was not justified to set aside the order dated 31-12-2012 passed u/s 143(3) of the Income-tax Act, 1961 by the Deputy Commissioner of Income-Tax, Central Circle-I, Faridabad on the ground that the same is allegedly erroneous and prejudicial to the interests of the Revenue in as much as the twin conditions as laid out in Section 26 .....

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of ₹ 50,85,988/- on account of Brokerage expenses claimed in the Profit & Loss Account; b) reconcile the figures of sale and purchase for fresh consideration de novo covering all factual aspects as there is difference in sales and purchase as per the purchase/sales register vis-a-vis the VAT returns and the purchases and sales disclosed in the profit and loss account c) reconcile bank account with the bank balances in various accounts of the Appellant Company for fresh consideration a .....

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cluding tax implication in respect of transactions with interested parties in respect of Loan amounting to ₹ 9 crore raised by the Appellant Company from various parties. g) examine afresh whether the transaction with related parties are hit by the provisions contained in Section 40A(2)(b) of the Income-tax Act, 1961 and to take appropriate decision as per the provisions of the aforesaid section. h) to hold that proper inquiries were not made by the Ld. Assessing Officer at the time of fra .....

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in the business of trading of iron and steel. The details and documents with regard to the income shown and expenses claimed have been placed on record. Books of accounts and vouchers have also been produced by the Assessee and examined on test check basis by AO. The AO accepted the income declared by the assessee and completed on total income of ₹ 22,59,020/- vide order dated 31.12.2012 passed u/s. 143(3) of the I.T. Act, 1961. 3. Ld. CIT while examining the assessment order, found that A .....

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i) With regard to the loans of ₹ 54 lacs raised from Dyna Power and ₹ 2.46 crores from M/s National Housing Development Finance Corporation (ii) Unsecured Loans squared up during the year. (e) Applicability of the provisions of Section 40A(2)(b) of the Act in respect of purchases made from MIs Star Wire (I) Ltd, a related enterprise, and payment of salary of ₹ 40,000/- per month to Shri Surendra Kumar Gupta. 4. In compliance of the Notice dated 07.3.2014 assessee filed its repl .....

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d a conclusion drawn by the AO on the basis of an analysis of all the relevant facts and examination of the evidence filed and as such the order passed by him u/s. 143(3) of the Act cannot be considered to be erroneous whereby one of the mandatory tenets for the provisions of Section 263 to come into play are not satisfied. 5. After examination of the Reply of the Assessee and documentary evidences, Ld. CIT passed the impugned order u/s. 263 of the I.T. Act dated 18.03.2015 by observing that the .....

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3) of the I.T. Act in the case of the assessee as well as the documentary evidences filed by him in the shape of Paper Book containing pages 1 to 267 having the copy of the notice u/s. 263; copy of written submission dated 14.11.2014 filed before the CIT, (Central) Gurgaon; Complete details of the parties to whom brokerage has been paid by the Assessee Company alongwith confirmations from some parties; statement reconciling the differences of purchases and sales as per books and VAT return; stat .....

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f the I.T. Act; copy of reply dated 22.9.2012 in response to notices; copy of reply dated 23.10.2012 filed before the DCIT, Faridabd during the course of assessment proceedings u/s. 143(3) of the I.T. Act, 1961. 7.1 Ld. Authorised Representative of the assessee has reiterated the similar contentions before us which he made before the Ld. CIT. He submitted that AO has completed the assessment after examining all the evidences filed by the assessee making detailed enquiry thereof, despite that Ld. .....

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ons with respect to each of the issues were made as under:- (a) With regard to brokerage expenses, it was submitted that the Assessee Company is basically engaged in trading of steel wherein payment of brokerage is not only required but also essential not only to generate sales by identifying customers and their requirements but also sometimes to facilitate in the collection of dues and guarantee the recovery of the outstanding. Brokerage is an integral part of the Assessee Company's busines .....

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the bank statements, the bank reconciliation statement duly reconciling the same. (d)(i) With regard to the loans of ₹ 54 lacs raised from Dyna Power and ₹ 2.46 crores from M/s National Housing Development Finance Corporation, the requisite documentary evidence with regard to confirmations, bank statements and Income Tax Returns along with extract of the relevant bank statements in which the cheques received from the said parties have been deposited were filed. . It may be clarified .....

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e question of applicability of the provisions of Section 40A(2)(b) of the Act in respect of purchases made from MIs Star Wire (I) Ltd, a related enterprise, and payment of salary of ₹ 40,000/- per month to Shri Surendra Kumar Gupta, it was submitted as under:- Under sub-section (2) of Section 40A, expenditure incurred in a business for which payment has been or is to be made to the taxpayer's relatives or associate concerns is liable to be disallowed in computing the profits of the bus .....

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ing to these criteria is to be is allowed in computing the profits of the business or profession. In view of the above, Ld. AR submitted that no exercise of the revisionary powers u/s. 263 of the Act is called for in the facts and circumstances of the case, hence, the order of the Ld. CIT may be quashed and the order of the AO may be restored. 8. On the contrary, Ld. DR relied upon the order passed by the Ld. CIT dated 18.3.2015 because the assessment order passed by the AO was held to be errone .....

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ncome Tax Act without being guided by any observations made in the impugned order. 9. We have heard the rival contentions and considered the Paper Book alongwith case laws cited by the assessee and orders of the authorities below. We find that the AO has not even made any attempt to make any enquiry before accepting the claim of the assessee and accepted the claim in a hurry manner without applying mind. From the records, it reveals that the AO has not even appropriately appreciated the evidence .....

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or scrutiny to verify the admissible of the said expenses, but no enquiry appeared to have been made as to the purpose and basic of payment of brokerage, its connection with the business and whether the payment commensurate to the benefit derived by the Company. However, a complete list of the agents alongwith addresses was available on records, but no attempt apparently was made to verify even one of these persons. Therefore, in our considered opinion, Ld. CIT has rightly set aside the issue of .....

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concerned, we find that VAT return and purchase and sales registers in order to reconcile the figure of sales and purchases as disclosed in the P&L A/c are yet to be reconciled. It was seen that the reconciliation statement shows addition of credit note to Purchases in order to reconcile the figure of total purchases. Similarly, sales have been reconciled by adding a figure under the nomenclature Sale High Seas (not part of VAT return) and no reason whatsoever for such addition has been give .....

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State Bank of Patiala is concerned, we find that in a Bank reconciliation statement various cheques issued by the assessee but not presented in bank as well as cheques received but not encashed by the assessee, these entries requires verification from the bank account of the assessee in various banks, however, AO has not made any attempt to verify/examine the same. Therefore, in our considered opinion, Ld. CIT has rightly set aside the issue in dispute to the file of the AO for fresh considerat .....

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bank account of the assessee. Therefore, in our considered opinion, Ld. CIT has rightly set aside the issue in dispute to the file of the AO with the direction to verify the dates, cheque number and amount from the bank account of the lender and tally it with the entries in the books of account as well as bank account of the assessee, besides examining the identity, creditworthiness and genuineness of the transactions including tax implication thereof, which does not need any interference on ou .....

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per MT from M/s Star Wire India Ltd., on 3.6.2009 in respect of goods described as round , another seller M/s Narayan & Company has sold the same to another person @Rs.32,330/- per MT on the same date. This reveals that purchases from related parties have been shown by the assessee at inflated price. Therefore, in our considered opinion, Ld. CIT has rightly set aside the issue in dispute to the file of the AO to examine the same afresh whether the transaction with related parties are hit by .....

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