TMI Blog2016 (5) TMI 976X X X X Extracts X X X X X X X X Extracts X X X X ..... of payments made to Samsuddin Pailan, we find that no specific arguments were advanced by the Ld. DR by controverting the findings of ld. CIT(A) and hence, we find no infirmity in his order in this regard. In respect of payments made to Das Enterprise, it is established by the assessee that the payment is made towards purchase of material and not for any contract. Hence, the provisions of section 194C of the Act could not be made applicable to the facts of this case. We find that the Learned DR was not able to advance any specific arguments before us against the order of Ld. CIT(A). Hence, the ground no. 1 of revenue appeal is dismissed . We also find that the assessee was not able to advance any specific arguments before us against the order of Ld. CIT(A) in respect of this addition and accordingly the assessee’s Cross Objection is dismissed. Disallowance u/s. 40A(3) - Held that:- We find that the AO adjudicated this issue in detail with regard to payment made to each party. The Ld. AR before us was not able to prove that the case falls under the exception provided in rule 6DD of the I. T. Rules. Hence, we confirm the addition made by the Ld. AO. - Decided against assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 1,95,000/- (iii) Samsuddin Pailan towards freight charges - ₹ 1,59,509/- (iv) Das Enterprises towards interior decoration charges - Rs.2,70,595/- Total - Rs.10,59,658/- The party wise details of payment are as below:- 3.1. Air Transport Corporation (Assam) Ltd. - ₹ 4,34,584/- Freight charges were paid to M/s. Air Transport Corporation Ltd.(Assam). The copies of bills as well the documents showing the transportation of goods were filed before the AO. According to the AO the payment on account of transportation charges paid to the said party were contractual payment and accordingly the provisions of section 40(a)(ia) were applicable. It was submitted that there was no oral or written contract with any transport operators who were hired whenever the need arose without any pre requisition or order to the transporters. No disallowance u/s. 40(a)(ia) was called for, where there was no oral or written contract with the transporters or truck owners. The assessee had to hire lorries whenever the assessee wanted to send the g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evant expenses were well within the purview of TDS. And the assessee has raised cross objections before us on the following ground no. 1: 1. For that the Ld. CIT(A) erred in confirming the disallowance of ₹ 159509/- out of disallowance u/s. 40(a)(ia), 6,14,711/- out of disallowance u/s. 40A(3), ₹ 4,36,000/- disallowed as prior period expenses, without property considering the submissions of the appellant. 3.6. The Ld. AR reiterated the same submissions as made before Ld. CIT(A). He placed reliance on the following decisions in support of his contention in respect of payments made to Air Transport Corporation (Assam) Ltd.- (i) Decision of Hon ble Calcutta High court in the case CIT Vs. M/s. Stumm India, ITA No. 127 of 2009 dated 16.08.2010, (ii) Decision of Ahmedabad ITAT B Bench in the case of M/s. Pragati Trading Co. Vs. ITO, ITA No. 3478/Ahd/2008 for AY 2005-06 dated 26.11.2010, (iii) Decision of Visakhapatnam ITAT in the case of Mythri Transport Corporation Vs. ACIT reported in 124 TTJ 970 The Ld. DR vehemently supported the order of the AO. 3.7. We have heard rival submissions and perused the material available on record an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd not for any contract. Hence, the provisions of section 194C of the Act could not be made applicable to the facts of this case. We find that the Learned DR was not able to advance any specific arguments before us against the order of Ld. CIT(A). Hence, the ground no. 1 of revenue appeal is dismissed . We also find that the assessee was not able to advance any specific arguments before us against the order of Ld. CIT(A) in respect of this addition and accordingly the assessee s Cross Objection is dismissed. 4. The second ground to be decided in this appeal of revenue is as to whether the disallowance u/s. 40A(3) of the Act could be made in the facts and circumstances of the case. 4.1. Brief facts of this issue is that the Ld. AO observed that the assessee had made payments in cash exceeding ₹ 20,000/- otherwise than by way of an account payee cheque or account payee bank draft towards freight charges, purchase of material and purchase of betel nuts. The details of payments are listed by the AO at page 3 of his order. The Ld. AO observed that the assessee smartly recorded the payment of freight charges made to various transporters in its cash book with as many payments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. AR during the course of hearing agreed for the addition confirmed by the ld. CIT(A) to the extent of ₹ 80,150/-. He reiterated the arguments as made before the CIT(A). In response to this, Ld. DR vehemently supported the orders of the lower authorities for the balance sum of ₹ 6,14,711/-. 4.5. We have heard rival submissions and perused the material available on record. We find that the AO adjudicated this issue in detail with regard to payment made to each party. The Ld. AR before us was not able to prove that the case falls under the exception provided in rule 6DD of the I. T. Rules. Hence, we confirm the addition made by the Ld. AO. Accordingly, ground no.2 of revenue s appeal is allowed and ground no.1 of assessee s CO in this regard is dismissed. 5. The third issue to be decided in this appeal of revenue is as to whether the disallowance on account of bogus purchases could be made in the facts and circumstances of the case. 5.1. Brief facts of this issue are that the Ld. AO observed that the assessee has shown a meager profit of ₹ 21,000/- on purchase and sale of betel nuts. He accordingly, proceeded to issue notice u/s. 133(6) of the Act to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in respect of some of the parties and issued commission u/s. 131(1)(d) of the act to Income Tax Officer, Port Blair to verify the identity of the said parties and genuineness of the transactions shown by the assessee with them. In response, ITO port Blair, vide his letter dt. 31.10.2012 informed that the existence of M/s MKM Copra Co. could not be ascertained in Calicut, Port Blair Andaman. The said fact was conveyed to the assessee. In response, assessee furnished a Xerox copy of affidavit from one Mr. R. Madhivannan. Vide this affidavit Mr. R. Madhivannan declared that he carried out the business under the name and style M.K.M. Copra Co. and had a transaction of ₹ 16,15,935/- with M/s Saha Agency. The aforesaid affidavit cannot be treated as genuine and hence cannot be accepted as because:- - Letter was sent on the address as supplied by the assessee i.e. M/s . M.K.M. Copra Co., Calicut, Port Blair, Andaman. Postal Authority on enquiry on 07.04.2012, 09.04.2012, 10.04.2012, 11.04.2012, 12.04.2012 and 13.04.2012 reported that the party is Not Known at the given address. - After that Departmental Inspector visited the address and reported that there is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome favour or under coercion or pressure from the party. The aforesaid facts of the report of I.T.O, Port Blair were conveyed to the assessee vide letter dt. 12.03.2013 and assessee was asked to prove the identity of the said persons and genuineness of the alleged transactions. 5.4. In response to this, ld. AO observed that the assessee only gave vague and evasive reply without controverting the specific findings of the AO. Based on the above observation, the Ld. AO treated the purchases made from following three parties (i) Asha Traders - ₹ 18,02,848/- (ii) William tham - ₹ 14,75,415/- (iii) M.K.M. Copra Co. - ₹ 16,15,935/- Rs.48,94,198/- as bogus purchases and disallowed the same. 5.5. Before the Ld. CIT(A) the assessee argued that the assessee purchased raw betel nuts and the same cannot be kept in store for more than one or two days. The assessee immediately sold the same. The parties who sold the betel nuts procure the same for the assessee from producers and after adding their c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e facts of the instant case and accordingly, inflated the gross profit by 4% on purchase of 110428 kgs made from these three parties and sustained the addition of ₹ 1,93,566/- (Rs.48,94,198 x 4%) and granted relief for the balance. Aggrieved, the revenue is in appeal before us on the following ground: 3(a) On the facts and circumstances of the case ld. CIT(A) erred in restricting the disallowance of ₹ 48,94,198/- on account of bogus purchase made by the AO to ₹ 1,93,566/- (b) On the facts and circumstances of the case CIT(A) erred in not continuing the total disallowance made on a/c of bogus purchase as the purchase was shows from two nonexisted party and the third party had categorically denied to have any transaction with the assessee. The assessee has also raised the following ground in its Cross Objection: 2. For that the Ld. CIT(A) erred retaining addition of ₹ 1,93,566/- for inflation in the rates of purchase when there was no difference in the rate of purchase between various parties. 5.7. We have heard rival submissions and perused the material available on record. The Ld. DR argued that the Ld. CIT(A) has not negated the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were not found nor were they produced for examination: 1. Anus Association ₹ 2,10,709 2. Rolex Enterprises ₹ 1,11,042 3. Konica Steel ₹ 2,58,734 ₹ 5,80,485 On the basis of above facts, at the most it, can be presumed that the assessee di not make purchases from above parties but made from other unregistered dealer and got benefit of margin of purchases from unregistered dealer. We find that to that extent an estimation of profit can be made which will be fair and reasonable under the facts and circumstances of the case. Therefore, for the above purposes we estimate ₹ 50,000 and accordingly the order of the CIT(A) is modified and the addition to the extent of ₹ 50,000 is sustained and balance addition of ₹ 26,89,407 is deleted out of the total addition made of ₹ 27,39,407/-. 5.8 ITAT, Chandigarh bench third member case in the case of J. R. Solvent Industries Pvt. Ltd. Vs. ACIT reported in 68 ITD 65( TM) wherein it was held as under: H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uestion of yield of rice bran oil and DORB cake monthwise was not considered by the Tribunal as the same was not properly projected by the assessee and the question of input and output was also not considered as had been done in the assessment year 1988-89 and this apparently was also not projected on behalf of the assessee. The Judicial Member, however, had not offered any comment whatsoever on these aspects as also on various other factual details and findings recorded by the Accountant Member in his order. In conclusion, the Accountant Member had rightly took the view that the assessee did purchase rice bran, whether from the firm R or from some other party/parties, and such rice bran did go into the production of oil otherwise the assessee would not have been able to show the yield of rice bran oil and DORB comparable to that of earlier years. After opining so, the Accountant Member, appropriately directed the Assessing Officer to recompute the addition in relation to 11600 qtls. on the ground that there was an element of inflation in the purchase price and the further confirmation of the addition of ₹ 1,45,600 on the ground that 1300 qtls. of rice bran did not re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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