TMI Blog2017 (3) TMI 187X X X X Extracts X X X X X X X X Extracts X X X X ..... , under the facts and circumstances of the case, we direct the TPO/Assessing Officer to take the corporate guarantee fee @ 0.50% and make the adjustment accordingly. Thus, the issue of corporate guarantee as raised vide ground nos. 1.1 to 1.5 is treated as partly allowed. Disallowance u/s. 14A read with rule 8D - Held that:- The ratio and the principle laid down by the Hon'ble Bombay High Court in the case of Reliance Utilities Ltd (2009 (1) TMI 4 - BOMBAY HIGH COURT) and HDFC Bank, (2014 (8) TMI 119 - BOMBAY HIGH COURT) are clearly applicable, wherein their Lordships have reiterated several times that if the assessee has surplus funds in the form of reserves & surplus or share capital, then presumption is that investment would have been made from surplus funds/interest free funds and not from the borrowed funds. Accordingly, we direct the AO to delete the disallowance of interest expenditure as worked out under rule 8D (2)(ii). Now coming to issue of disallowance of indirect expenditure u/r 8D (2)(iii), we agree with Ld. Counsel that the investments from where income is taxable or the investments which are for business or strategic reasons need to be removed from the working o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material has been purchased which are proven from item wise inventory prepared and entered in the books of account and is reflected from material consumed in manufacturing or credited to capital WIP, etc.,( which stands unrebutted or undisputed), then no adverse inference qua the purchases can be made, because instead of registered dealers assessee has made purchase from grey market. As regard the other discrepancies as highlighted by ld. CIT DR by referring to AO’s order qua the delivery part, the same loses its credibility whence it has been shown that material purchases are appearing in the books of account and consumption of the same has not been doubted. AO should have carried further this information to examine the entries in the books of account and the consumption details. As reiterated above at various places, the factum of purchase so far as the assessee is concerned cannot be disputed when the hawala person himself had admitted that he had arranged the purchases from grey market and got them supplied. This statement before the AO cannot be discarded at all. Thus, in the totality of the facts and circumstances of the case, we hold that the addition on account of so cal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is engaged in the business of manufacturing and trading of consumer electronics and home appliances, exploration crude oil and gas, investment in shares, securities and properties, lease and finance and other incidental activities. 3. The brief facts qua the issue relating to transfer pricing adjustment of ₹ 45,45,85,468/- in respect of guarantee commission and ₹ 1,48,45,548/- in respect of fee for letter of undertaking are that, the assessee company has given guarantee/letter of undertaking for credit facilities availed by its AEs and recovered guarantee commission from its AE in the following manner:- Name of the AE Guarantee in INR From To Guarantee Commission Proportion Guarantee commission upto 31st March 2011 in INR For the period after 31st March 2011 in INR Videocon Global Energy Holding Limited Corporate Guarantee 6,77,10,00,000 1/4/2010 17/9/2010 84,63,750 84,63,750 Venus Corporation Corporate Guarantee) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the Finance Act 2012 introduced Explanation to Sec 92B with retrospective effect from 01.04.2002 and as per the Explanation Corporate Guarantee is a type of capital financing transaction and within the meaning of definition of international transactions under 92B. 5. Apart from that the assessee also submitted a detailed analysis and reasoning to justify firstly; it is not an international transaction and therefore no bench marking is required; secondly, the rate of 3% as guarantee commission is not correct on the facts of the case; and lastly, charging of 0.25% of guarantee commission is justified from internal CUP. However, the Ld. TPO, after detailed analysis and discussion, held that the arms length guarantee commission/fee should be calculated at the rate of 3%. The relevant observations in the finding of the TPO are appearing from pages 29 to 32 of his order. The calculation of 3% was applied by the TPO in the following manner:- Uncontrolled Price: As discussed above and as given in the show cause notice, the guarantee fee is calculated at a rate of 3% p.a. on amount based on the number of days the guarantee was outstanding during the FY 2010-11. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The guarantee fee charged by the assessee to the AE is ₹ 8463,750. Hence the difference between ALP of guarantee commission and commission actually charged is to be adjusted as computed below: Arm s Length Guarantee Fee calculated above Rs.9,91,77,534/- Guarantee Fee received Rs.84,63,750/- Difference between arm s length price and price charged by the assessee Rs.9,07,13,784/- Thus, the above amount of ₹ 9,07,13,784/- is treated as transfer pricing adjustment being the difference between the arm s length guarantee fee receivable and the actual guarantee fee received by the assessee from its AE, Videocon Global Energy Holdings Ltd, British Virgin Islands for the FY 2010-11. 6. As regards the letter of undertaking in the case of Videocon Hydrocarbon Holdings Ltd., commission allowance, the adjustment was made in the following manner: Outstanding Guarantee Amount Rs.18,056.00 Million No. of days the guarantee is outstanding during the FY 2010-11 (07-03-2011 to 31.3.2011) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e guarantees provided by the assessee. To demonstrate this point, the details provided were as under:- Particulars Amount in million rupees Security Charge on present and future assets of the AE (assets net off current liabilities as on 31.3.2011 @ 45.14) 8958.03 Hypothecation of receivables of AE 6217.63 Approximate value of security (excluding Guarantee given) 15,175.66 Loan for which Guarantee Given (Amount in million rupees) by Assessee as on 31.3.2011 9028.00 Value of security covering Loan 1.68 times Videocon Global Energy Holding Ltd. Guarantee of USD 150 Million Particulars Amount in million rupees Security Margin Deposit of USD 30 Million @ 46.44 (as on 1.9.2010) 1393.20 Loans and advance (joint venture interest as on 1.9.2010) (230.89 millions) 10722.53 A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hlighted the infirmities in the said decision and as to why this decision does not have binding precedence at all. He also pointed out that the ITAT, Mumbai Bench in the case of Everest Kanto Cylinder Ltd., (supra) has categorically held that it is an International Transaction and in the assessee s own case the assessee has treated it as International Transaction . 10. However, we are not entering into semantics of this argument as to whether corporate guarantee is an International Transaction or not, because before us, the Ld. counsel Mr. Sonde has mainly raised the issue that, benchmarking if at all is required to be done, then same should be done by taking the corporate guarantee commission rate between 0.25% and 0.50% and in support of which he relied on various decisions. He has not stressed on this issue, whether corporate guarantee is an international transaction or not. Whence assessee before us is not pursuing the matter, we are also not inclined to adjudicate the issue. On merits, Ld. CIT DR tried to justify the charging of corporate guarantee commission @ 3% and submitted that there are various decisions wherein corporate guarantee commission of 2% to 3% have bee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . made u/s. 14A read with rule 8D. 13. The brief facts qua the disallowance made u/s. 14A read with rule 8D are that, the assessee had earned dividend income of ₹ 49,14,724/- from various investments made. The Assessing Officer noted that though the assessee had earned exempt income in the form of dividend, however it has not claimed such income as exempt from tax and has been shown as miscellaneous income. Despite the fact that no exempt income has been claimed, the ld. Assessing Officer issued show cause notice as to why the dividend income should not be considered as exempt and expenditure attributable for earning of such exempt income should not be computed in accordance with section 14A read with rule 8D. In response to the said show cause notice, the assessee had submitted as under: II. Dividend Income of ₹ 49,14,724/- has been shown in the Investment Division. Our investments as per Sch. 6 of our Balance Sheet are of ₹ 39,66,70,91,020. Our share capital of ₹ 347,95,82,540 and Reserves Surplus of ₹ 79,65,27,57,457 total up to ₹ 83,13,23,39,997/- which amount is more than our investments. Hence, it is submitted that provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 10,33,96,481/- was made and similar disallowance was made to the computation of book profit/s. 115JB. This disallowance has been confirmed by the DRP also. 14. Before us the Ld. Counsel, Shri Arvind Sonde submitted that first of all, when there is no exempt income i.e. when the assessee has not claimed any exempt income and Assessing Officer has also not allowed/accepted any exempt income, then there is no question of any disallowance u/s. 14A in relation to that income. In support, he relied on the following decisions: i) CIT vs. Delite Enterprises ITA No. 110/2009 (Bombay HC); ii) Cheminvest Limited vs. CIT (ITA No. 749/2014) 378 ITR 33 (Delhi HC); iii) CIT vs. Corrtech Energy Pvt. Ltd 223 Taxman 130 (Gujarat HC); iv) CIT (11) Kanpur vs. M/s. Shivam Motors (P) Ltd. 272 CTR 277 (Allahabad HC); v) CIT v. Lakhani Marketing lnc. [2014] 272 CTR 265 (Punjab and Haryana HC); vi.) CIT vs. Winsome Textile Industries Ltd. 319 ITR 204 (Punjab and Haryana HC); vii) CIT-IV vs. Holcim India Private Limited ITA No. 486/2014 ITA No. 299/2014] (Mumbai ITAT) viii) Avshesh Mercantile P. Ltd. vs. ACIT [ITA No. 5779/Mum/2006] 148 TTJ 607 ix) Jindal Steel Alloys Ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Finance Bill 2001 by which section 14A was inserted w.r.e.f. and host of various proposition that the intention and purpose of section 14A was to enlarge the scope of apportionment of various expenditure irrespective of the fact whether the business or activities of assessee is divisible or indivisible. In his detailed write up he has highlighted the concept and the scope of section 14A and how the disallowance gets triggered wherever investments are made which are capable of earning exempt income. On the issue of strategic investment also he has relied on certain decisions of the Tribunal, some of which are earlier to the decision relied upon by the assessee. 17. After considering the rival submissions and on perusal of the relevant material placed on record as well as the finding given in the impugned order, at the outset we are of the opinion that the basic premise on which the disallowance under sec. 14A gets triggered is that, there has to be an income to the assessee which does not form part of the total income and assessee claims any deduction in respect of expenditure attributable to earning of such income. If assessee has not claimed any exempt income or has made it par ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ropositions which needs verification. Accordingly, we direct the AO to examine the same and compute the disallowance of indirect expenditure. Since our decision on disallowance of interest is based on direct Jurisdictional High Court decisions, therefore, we do not deem fit to go into the various propositions made by the Ld. CIT, DR in his written notes which is more on intention and purpose for insertion of section 14A. On the issue of indirect expenditure also, we are following the decisions of the coordinate decisions as relied upon before us. Accordingly, ground no. 2.1 to 2.5 is treated as allowed. The alternative grounds taken vide ground nos. 2.4 and 2.5 have become purely academic and therefore, no separate adjudication is required. 18. As regards the issue raised in ground nos. 3.1 and 3.2 that disallowance u/s. 14A should be added as part of the book profit, the same too is now a settled proposition that if any disallowance under sec. 14A is made in the normal computation, then the same would be added to the book profit u/s. 115 JB. Accordingly, we order that, whatever disallowance is made under rule 8D, the same should be added to the book profit. 19. The next issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r mentioned that Shri Suresh A. Parekh, Shri Dinesh Parekh and Shri Sushant Laddda with the help of their allies and using different bank accounts in the names of different entities, provided accommodation entries to various persons. The details of entities used along with the details of proprietors/partners have been illustrated at page 29 of the assessment order. During the year under consideration, the assessee had carried out similar transaction with following hawala dealers: (i) Puram Trading Company (ii) Mahalaxmi Distributors (iii) Swastik Enterprises (iv) Suresh Light House (v) Jagdish Trading Company (vi) Manek Enterprises (vii) G.M. Traders (viii) Sarvesh Enterprises (ix) Trishul Enterprises (x) Sai Enterprises (xi) Crystal Enterprises 21. Before us, Ld. CIT DR, Shri N.K. Chand for the assistance of the Bench has filed written submission along with copy of statement of the key person, Mr. Suresh A. Parekh which was recorded by the DIT (Inv.) and also made reference to the cross examination of Suresh A. Parekh in pursuance of Tribunal order in the AY 2009-10. He pointed out that the Assessing Officer in his order has referred to statemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tor etc, bank accounts and total turnover of accommodation bills provided through such entities. Q. 13. Please explain through which entities / common entities the business of providing accommodation bills was carried out by you, Shri Dinesh Parekh and Shri Sushant Ladda. Ans. I am submitting herewith the entity wise/common entity wise person wise bifurcation as per Annexure 'B'. Q.14. On the basis of your above statement, please submit details of entity wise financial year wise bifurcation of the turnover between you and the other two persons. Ans. Sir, I would like to clarify here that we have tried hard to work out the beneficiary wise details of accommodation bills /entities provided by us through each bank account held by each entity. However, since the matter is very old, we could ascertain certain entries and as such these entries have been shown by us as suspense entries. We are still working on the same so as to give you the complete beneficiary wise list of accommodation entries provided by us. We assure you that such list of beneficiaries will be submitted at the earliest by clearing the entire suspense entries. Meanwhile, in order to work o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e question number 11, your attention was brought to various statements given by you and others on earlier occasions before the DDs IT(INV). You are once again requested to explain the procedure/modus operendi of providing entries to various business houses/business men/entities/persons with a hypothetical example, say for a bill of ₹ 100/-. Ans. For giving an accommodation bill of ₹ 100/- to a businessman, I would provide the bill of ₹ 100/- to such businessman either directly from the entities under my control or from entities controlled by my allies. The said businessman would then book bogus purchase for ₹ 100/- and he would then pay ₹ 100/- in the account of the Hawala party (such as Param, Swastik etc.) through RTGS. Then after withdrawing the payment on the same day or at times, the next day, keeping my commission and the commission of my allies, if any, I used to return the balance amount in cash to such businessman. Q.16. Does this mean that the beneficiaries to whom you have provided accommodation bills have booked bogus purchases to the extent of amount of accommodation entries provided by you and your allies? Yes, these are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material from the aforesaid parties was not acceptable on the basis of the investigation carried out by the Sales Tax Department, Pune; Investigation Wing of Mumbai; and also the Investigation carried out by the ADIT (Inv.), Kolhapur. He was of the opinion that the aforesaid entities were wholly and exclusively involved in providing the accommodation entries and no physical goods as claimed by the assessee were supplied to any corporate houses including the assessee company. 23. It has been brought on record before us that in the assessee s own case for the AYs. 2009-10 and 2010-11, similar issue had come up for consideration wherein the Tribunal vide order dated 06.02.2015, had set aside the addition/disallowance on account of purchases made from the said dealers with a clear direction to adjudicate the issue afresh after giving cross examination of Shri Suresh A. Parekh. In pursuance thereof, a fresh statement of Shri Suresh A. Parekh was recorded on 12.03.2015 after summons were issued to him u/s. 131 by the AO and assessee was given opportunity to cross examine him in the presence of senior officers of the assessee company. In his statement before the Assessing Officer, Shri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttern in the evidence in the form of entry which is made at the time of gate pass. His main conclusion was that neither Shri Suresh A. Parekh has substantiated the delivery of goods in question nor the assessee company has been able to adduce any credible evidence of the actual receipt of goods. A reference has also been made on the statement of Managing Director recorded on 23.01.2013 wherein he stated that he is unable to verify the things as the records were in Aurangabad factory. He also referred to the statement of Accounts Manager of the assessee company, Shri Rajesh Methi who was unable to explain the discrepancy as pointed out by the investigation party on the pattern of evidence made in respect of hawala entities. In the written submission, the Ld. CIT, DR has also pointed out to the various discrepancies which has been raised by the Assessing Officer, which for the sake of ready reference his submissions on this aspect is reproduced herein below: 16. On perusal of invoices submitted for supply of goods in the name of aforesaid parties are in bulk quantity of various items and on analysis it is that The Primary details of Purchase order Date are not mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here are no evidence of vehicle numbers which carried this much material. 16.3 The Assessing Officer subsequently at page 84 of the assessment order discusses Annexure A-6 which is purchase made from other than the hawala dealers at pages 85, 85, 86, the Assessing Officer has demonstrated that the documentation in respect of the parties other than the hawala parties appears to be complete and proper. Thus he has pointed out a stark contrast in the nature of documentation and has clearly pointed out that the documentation in respect of hawala parties is not in the normal course of business. He has Blade inferences on impounded material at pages 86-87 of the assessment order. The Assessing Officer has made conclusions in para 8.17 and 8.18. In para 9, at page 89 of the assessment order, he has tabulated non- genuine purchases in respect of 8 concerns amounting to ₹ 63.06 crores. In para 10 to 14 he has classified the various transactions into different categories. 16.4 In para 15 (part of para 9.1 of the final assessment order), the Assessing Officer has worked out the disallowance depending upon the nature of purchases and disallowances to be made. 17. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ails of sale invoices and the payment details. No documentary evidences to justify the purchase order details i.e., the name and designation of the employees of the company, who placed the purchase orders with supporting documents i.e., quotation, market enquiry conducted for procurement, etc. details of gate passes evidencing the receipt of material i.e., date and time, place, stamps and seals on such invoices, etc have been filed. 19. In view of the above discussion, it can be summarized as under; (i) the assessee has not received any material against the tax invoices received from Hawala Dealers managed and controlled by Shri Suresh A. Parekh, Sangli. (ii) The above fact has been accepted at various stages, by the hawala party that it was providing only accommodation entry and not doing any real business. (iii) The statement of the hawala party that it has supplied goods to the assessee company is not supported by any documentary evidences or substantiated with proper books. Therefore as per the preponderance of the probability the contention of the hawala party and the assessee company cannot be accepted that the material has been supplied. (iv) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material from the grey market and after procuring the said material, the same were sent to the factories of the assessee company by the suppliers of grey market directly and once the bill was received the payment was made through account payee cheques/RTGS. Further, during his cross examination, Suresh Parekh confirmed that he deals in electronic items i.e., Cable, AV, LCD, Monitor, PC, Corrugated Sheet Ply, ABS, Master Batch., Polypropylene, etc., in bulk and that there is a huge demand in the market for supply of the aforesaid items. He supplied the aforesaid, items through the concerns like Swastik Enterprises, G M Traders, Param Trading Co., Sarvesh Enterprises, Mahalaxmi Distributors, Suresh Light House, Jagdish Trading Co Ltd, Manek Enterprises etc. to various corporate houses including M/s. Videocon Industries Ltd., Aurangabad, Maharashtra. He further stated that since he is having huge experience of more than 20 years in acquisition and supply of above mentioned items to various corporate houses, therefore, he use to receive telephonic or oral orders from the purchase departments of the factories, specifying the specifications of the products and their quantity required ur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... moned Mr. Suresh A. Parekh and recorded his statement u/s. 131 of the Income Tax Act 1961 on 12/3/2015, wherein he has explained /clarified his earlier statement before ADIT (Inv.). In the statement before ADIT, Mr. Suresh A. Parekh had stated that he had provided accommodation bills to various entities without delivery of goods. This statement was specifically confronted by AO on 12.03.2015 (Q. No. 8 9 on Page No. 45 and 46 of the Assessment Order), wherein he has explained and clarified that the statement given on 18.03.2014 was correct as all the concerns mentioned therein had issued only bills and not supplied any material. He has clearly explained that the material was procured and delivered from grey market suppliers who did not issue sale bills. Mr. Suresh A. Parikh had, in the certificate dated 07.01.2013 and affidavit dated OR.01.2013, even before his statement before ADIT Kolhapur on 18.03.2014 confirmed supply of material and in Q.No.11 in statement dated 12.03.2015 before the AO, he has again reiterated and reconfirmed the said certificate dated 07.01.2013 and explained the modus operandi of his activities. From above, it is very clear that he procured material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained without retracting the earlier statement. (Refer Reply to Question nos. 17 (wrongly mentioned as 16) on Page No. 54 of the Assessment Order). As appellant had received material, which is confirmed by Suresh Parekh in his affidavit as well as in statement u/s 131 before the AO, and also by Mr. Rajesh Methi, Accountant at the factory during survey proceedings, the question of receiving any cash does not arise. 3. Contention of the AO: The AO has stated that the assessee company has shown huge volume of transactions with the entities managed and controlled by Shri Suresh Amritlal Parekh, proprietor of M/s. Jagdish Trading Company. (Page No 38 of the Assessment Order) Submission of the Appellant: It is submitted that total purchases of ₹ 63.07 crores from these entities is only 0.79% of total purchases of ₹ 7996.14 crores during FY 2010-11. It consist of various items, the details and utilization of whir-h have been duly submitted to the survey party as well as to the AO. Analysis or purchase transactions/bills from concerns managed by Shri Suresh A Parekh made by the AO: (Page No. 57 of the Assessment Order). 4. Contentio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ivery challans, Gate Stamp etc which were impounded by the survey party. Thus all the invoices, delivery challans have stamps of the Gatekeeper which has been verified by the survey party also. It is not the case of the AO that there is only one stamp of the gate keeper on all the purchases. Having more than one stamp and different stamps on different bills on different days is normal practice and does not make a purchase bogus. Further, material utilization details of the said purchases have already been submitted by the appellant. 7. Contention of the AO The AO stated that Mr. Suresh A Parekh has simply stated that he has procured the material from grey market and material was supplied to the company in the name of aforesaid hawala parties. However, in support of purchase of goods Mr. Suresh A Parekh has not submitted any evidences. (page 61 of the Assessment Order) Submission of the Appellant As regards, the details of suppliers from whom he had purchased the material in the grey market, Mr. Suresh A Parekh stated that he did not have such details as the same were taken by the Sales Tax Department/Income Tax Department during their inquiry in th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese purchases were seized by the Sales Tax Department / Income Tax Department during their inquiry in the year 2012 2014. (Refer Reply to Question nos. 17 (wrongly mentioned as 16) (Page No. 54 of the Assessment Order). 10. Contention of the AO The AO has stated that the discrepancies, in the bills of various dealers with that of other bills, were also shown by the Survey Team while recording the statement of Shri Rajesh H. Methi, Accounts Manager at the Aurangabad Factory, however no convincing reply to explain the discrepancies was given. This fact was duly confronted to Shri Venugopal N. Dhoot, Chairman Managing Director of the Company in the survey proceedings at Fort Office, Mumbai. No explanation in this regard was given. (Page No. 87 of the Assessment Order) Submission of the Appellant In this regard, Mr. C.P Saroj, the Principal officer, clarified that a survey action U/s.133A of the Act was carried out at the factory premises at Aurangabad as well as at the office premises in Mumbai. The statement of Shri Venugopal N. Dhoot was recorded at the office premises Mumbai and in those proceedings at that point of time, Mr. C.P Saroj was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arekh along with his family members had made various entities through which he is providing accommodation bills. During the course of initial investigation by the Sales Tax Department as well as by the Investigation Wing of the Income-tax Department, he had admitted that he is providing bogus bills and accommodation entries for purchase of various materials and also explained the modus operandi of his business transaction. Since the statement was taken on the back of the assessee, the Tribunal had directed the Department/AO to record fresh statement of Shri Suresh A. Parekh wherein he was given opportunity to be cross examined by the assessee. During the course of fresh statement/ cross examination by the AO in the impugned assessment proceedings as discussed above, Shri Suresh A. Parekh had categorically confirmed that he deals in various electronic items in bulk and that there is huge demand in the market for supply of the aforesaid items. He had also given the name of concerns through which he had supplied various items to various corporate houses including M/s. Videocon Industries Ltd., Aurangabad. In his statement, he has stated that on telephonic or oral orders he used to sou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The material proof for supply of material is by reference to copy of invoices which mentions delivery challans and then there is gate pass stamp when it enters the factory premises and this gate pass stamp has been impounded by the survey party which has been referred to by the AO. It has also been brought on record that more than once, stamp on different bills on different dates has been placed which is normal practice and no adverse inference can be made that these purchases are bogus qua the assessee. Apart from that, the assessee has given the details of nature of material purchased, copy of ledger account, payment details, material utilisation of the item wise details of purchases made from the concerns of Shri Suresh A. Parekh. The revenue is harping greatly on the first statement of Shri Suresh A. Parekh wherein he has admitted that he is providing accommodation bills and charging commission on them without actual supply of goods; and neither Shri Suresh A. Parekh nor the assessee could adduce any evidence that actually material has been supplied to the assessee. From the records as well as the heads under which addition has been made by the AO it is seen that the addition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aterial is evidenced firstly, from the invoices/bills and stamped gate passes and secondly, which is most important that the manufacturing and consumption details of the item wise material purchased from Shri Suresh A. Parekh have been duly entered in the books of account and consumption of the same has neither been disturbed nor doubted. There could be some discrepancy about the transportation bills from the suppliers of grey market or transportation cannot be proved by documentary evidence by Shri Suresh A. Parekh, however, the other evidences showing the material purchased has been duly recorded in the books of account and also the details of material utilisation used for manufacturing, plant and machinery and inventory etc. has not be discarded or doubted, only goes to show that material has been purchased and utilized, albeit through rotation mode done by Shri Suresh A. Parekh. He has categorically stated in his statement that expenditure on delivering of goods are borne by the actual suppliers in grey market then onus is not on the assessee, because, when the material purchased has been recorded by the assessee it its books of account and neither the manufacturing account nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... payments made material has been purchased which are proven from item wise inventory prepared and entered in the books of account and is reflected from material consumed in manufacturing or credited to capital WIP, etc.,( which stands unrebutted or undisputed), then no adverse inference qua the purchases can be made, because instead of registered dealers assessee has made purchase from grey market. 30. As regard the other discrepancies as highlighted by ld. CIT DR by referring to AO s order qua the delivery part, the same loses its credibility whence it has been shown that material purchases are appearing in the books of account and consumption of the same has not been doubted. AO should have carried further this information to examine the entries in the books of account and the consumption details. As reiterated above at various places, the factum of purchase so far as the assessee is concerned cannot be disputed when the hawala person himself had admitted that he had arranged the purchases from grey market and got them supplied. This statement before the AO cannot be discarded at all. Thus, in the totality of the facts and circumstances of the case, we hold that the addition on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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