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2017 (1) TMI 455 - ITAT MUMBAI

2017 (1) TMI 455 - ITAT MUMBAI - TMI - Disallowance of bogus purchases - Held that:- Admitted facts are that the AO neither in the original proceedings nor during remand proceedings objected to sales made by assessee. In that eventuality it is imperative on our part to hold that there must be purchases. Whether the purchases are from Grey Market or whatever the assessee has made purchases although payments are made to hawala dealers. In that eventuality it is to be seen whether the payments are .....

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fit varies from 5% to 8.77%, but these purchases are from Grey Market and its profit element is little higher and accordingly, we direct the Assessing Officer to make further addition of 3 % of the bogus purchases and accordingly estimate the income. We direct the Assessing Officer accordingly. - Preliminary expenses written off u/s 35 D (1) - Held that:- The details regarding the public issue expenses in respect of commission, brokerage, other charges for drafting, typing and printing are n .....

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amija, DR For The Assessee : None ORDER PER MAHAVIR SINGH, JM: This appeal by the Revenue is arising out of the order of CIT (A)-18, Mumbai in appeal No. CIT (A)-18/IT-42/DCIT-8(3)/2013-14 vide dated 14-10-14. The Assessment was framed by DCIT Circle -8(3), Mumbai for the AY 2010-11 vide his order dated 06-03-2013 u/s 144 of the Income Tax Act, 1961 (hereinafter the Act ). 2. The first issue in this appeal of Revenue is against the order of CIT (A) in restricting the disallowance of bogus purcha .....

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granting a relief of ₹ 64,33,99,861/- ignoring the fact that the assessee failed to produce documentary evidences of purchases during the course of assessment proceedings as well in remand proceedings. Rest of the ground Nos. 2 and 3 are argumentative, hence need not to be reproduced. 3. Brief facts leading to the above issue are that the assessee company is engaged in the business of manufacturing and dealership of all kinds of Industrial power control, instrument cables and related item .....

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action relating to bogus purchase bills:- Name of the party providing Bogus Bills/ Hawala Entries F.Y. of the transaction A.Y. of the transaction Amount (Rs.) SHREE GANESH TRADING COMPANY 2009-10 2010-11 54670729/- SHREE GANESH TRADING COMPANY 2009-10 2010-11 76998384/- AKSHAT ENTERPRISES 2009-10 2010-11 55018874/- SHREYAS MARKETING AGENCY 2009-10 2010-11 55118398/- Total 241806358/- The AO required the assessee to explain the above purchases and prove that these are genuine. The assessee explai .....

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sing Officer. It was claimed by assessee that there is no unaccounted purchases in the books of account of the assessee and all the books of account are audited by a chartered accountant and there is nothing incriminating found in the audit. But the assessing officer has not accepted the explanation of the assessee and made disallowance of bogus purchases amounting to ₹ 24,18,6,385 by observing as under:- At the outset, it needs to be mentioned that it is a necessary and expedient to narra .....

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a purchase invoice, accepts the cheque for which the bill is prepared. The cheque so obtained from the so called buyer is deposited in the account of the hawala giver then the hawala giver passes on this amount to three to four layers and ultimately cash is withdrawn from first account which is passed on to the purchaser after deducting the commission of the hawala giver. This is a raw method of accepting hawala purchase bills. In such cases total purchases being bogus, unproved and non-genuine .....

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oducing the same. In such type of transactions by virtue of undeclared stock the provision of Sec 69 comes into play for bringing into tax an element of undisclosed income in the form of investment. iii) In the third type the person purchases goods from the Grey market at lower price without bills because goods available in Grey market is very cheap compared to white market. The consideration is paid in cash and to cover up this transaction the purchaser approaches the hawala giver seeking bogus .....

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ion 69C comes into play being unexplained expenditure. Thus on both these accounts the expenditure incurred on purchases calls for disallowance. In assessee s case whatever be the situation the disallowance of expenditure incurred by the assessee calls for disallowance in toto. Accordingly disallowance of ₹ 24,18,06,385/- made to the total income. Penalty proceedings u/s 271 (1)(c) of the I.T. Act, 1961 are initiated separately for the default committed by the assessee within the meaning o .....

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even during the appellate proceedings. The A.O. has treated the purchases as bogus but accepted the sales and gross profit declared in the return of income. Now question arise whether there can be any sales without purchases. The answer is always in the negative that no sales can be made without purchases. The situation can be that purchases may not be made from the parties from whom invoices have been obtained as mentioned by the AO in the assessment order. But when the sales are accepted then .....

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lant It is noticed that in earlier years, the main business of the assessee was manufacturing and dealership of all kinds of industrial power control instruments and related items but in the year under consideration it has shown trading of rs.65,65,30,470/out of the total purchases at rs.67,34,02,306/-. The gross profit shown in the year under consideration was at 5.71% as against 8.77% in the preceding year. From the perusal of the submissions made by the AR of the appellant, it is noticed that .....

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the turnover can be added back. But, there is no reasonableness in adopting this 1/2% GP. Keeping in view the principle of natural justice and the decision of the Hon'ble courts on this issue, only the reasonable profit has to be added back on the purchases made from the hawala parties. The gross profit has been reduced from 8.77% to 5.71% during the year under consideration which is explained as major manufacturing activity in the last year and major part of the trading activity if the yea .....

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venue came in second appeal before the Tribunal. 4. We have heard rival contentions and gone through the facts and circumstances of the case. Admitted facts are that the AO neither in the original proceedings nor during remand proceedings objected to sales made by assessee. In that eventuality it is imperative on our part to hold that there must be purchases. Whether the purchases are from Grey Market or whatever the assessee has made purchases although payments are made to hawala dealers. In th .....

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timated. We are of the view that the assessee s gross profit varies from 5% to 8.77%, but these purchases are from Grey Market and its profit element is little higher and accordingly, we direct the Assessing Officer to make further addition of 3 % of the bogus purchases and accordingly estimate the income. We direct the Assessing Officer accordingly. This issue of Revenue s appeal is partly allowed. 5. The next issue in this appeal of Revenue is as regards to the order of CIT (A) allowing prelim .....

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business or for setting up a new unit.? 6. Brief facts are that the assessee has incurred expenditure in relation to increase in share capital amounting to ₹ 1,12,9,210/-. According to AO, the assessee has issued, subscribed and paid up share capital increased from ₹ 5,68,91,000/- to ₹ 68,91,000/- to ₹ 26,68,98,680/- and accordingly these expenses relating to increase in share capital cannot be allowed, in view of the decision of Hon ble Supreme Court in the case of Broo .....

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