TMI Blog2017 (4) TMI 1092X X X X Extracts X X X X X X X X Extracts X X X X ..... requirement. Thus, 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 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). 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 of the average value of investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus, we hold that the addition on account of so called alleged bogus purchases cannot be added as income of the assessee and the same as directed to be deleted. - Decided in favour of assessee Non-granting of credit of taxes or short credit of TDS/advance tax -- Held that:- We direct the AO to examine the matter and after verifying the records grant the credit of TDS/advance tax properly. - IT APPEAL NO. 1310 (MUM.) OF 2016 - - - Dated:- 24-2-2017 - R.C. SHARMA, ACCOUNTANT MEMBER AND AMIT SHUKLA, JUDICIAL MEMBER, JJ. For The Appellant : Arvind Sonde, AR For The Respondent : N.K. Chand ,DR ORDER Amit Shukla, Judicial Member - The aforesaid appeal has been filed by the assessee against final assessment order dated 21.01.16, passed by Ld. DCIT-3(3)(2), Mumbai (hereinafter referred to as the AO) under section 143(3) r.w.s. 144C(13) in pursuance of direction given by the Dispute Resolution Panel (DRP) under section 144C(5) vide order dated 23.12.15. In various grounds of appeal, the assessee has raised following issues: (i) Transfer pricing adjustment of ₹ 46,94,26,016/- in respect of 'Guarantee Commission' and 'Fee for Letter of Undertaki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 13,54,20,00,000 1/4/2010 31/3/2012 6,77,10,000 3,38,55,000 3,38,55,000 Videocon Hydrocar -bon Holding Limited (Letter of undertaking 18,05,60,00,000 7/3/2011 6/3/2012 4,51,40,000 30,91,781 4,20,48,219 12,13,13,750 4,54,10,531 7,59,03,219 4. Out of the total amount of guarantee commission recovered of ₹ 12,13,13,750/-, the assessee pointed out that the guarantee commission income charged by the assessee covers the period beyond 31.03.11 and therefore, the guarantee commission was allocated on time proposit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Computation of Arm's Length Price: Outstanding Guarantee Amount Total fees to be charged Amount of ₹ 902.80 outstanding for 342 days @ 3% 38,06,60,054 Amount of ₹ 902.80 outstanding for 23 days @ 3% 1,70,66,630 Arms Length Guarantee Fee Rs.39,77,26,684 Based on this calculation TPO calculated the arm's length price in the case of Venus Corporation Ltd. in the following manner:- The assessee has recovered guarantee fees for two years upfront at 0.25% per annum of ₹ 6,77,10,000. Accordingly, 50% of said guarantee fees charged by assessee is adjusted against Arm's Length Price calculated above. Balance 50% of guarantee commission charged by assessee will be carried for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 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) 25 days Arm's Length Guarantee Commission/Fee 1.5% p.a. Arms Length Guarantee Fee @ 2.0497% p.a. on the outstanding corporate guarantee for 24 days 1,78,08,658 Price Received vis- -vis the Arms Length Price: The guarantee fee charged by the assessee to the AE is ₹ 451,40,000 for full year. Assessee has given said undertaking on 7th March 2011 and accordingly charged guarantee fees for the period 7th March 2011 to 6th March 2012. Guarantee Fees for 25 days charged by assessee will be adjusted against ALP guarantee fees calculated above and balance ₹ 420,48,219/- will be carried forward to next year. Accordingly, hence no adjustment is required in this case. Arm's Leng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Guarantee of USD 150 Million Particulars Amount rupees in million 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 Approximate value of security (excluding Guarantee given) 12,115.73 Loan for which Guarantee Given 150 million at 46.44 as on 1/9/2010rupees) by Assessee as on 31.3.2011 6966.00 Value of security covering Loan 1.739 times Regarding letter of undertaking given to Videocon Hydro Carbon Ltd., he pointed out that State Bank of India has charged bank guarantee commission by giving 50% concession to assessee (i.e. 50% of 1.75%) which comes to 0.875%. If adjustment on account of entity risk, currency risk and country risk is given then it comes down approximately 0.44%. Thus, at the most the corporate guarantee commission can be taken at 0.4% to 0.5%. In support of this contention, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mission 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 been accepted. 11. After considering the rival submissions and on perusal of the impugned orders, we find that it is an undisputed fact that the assessee has given corporate guarantees to financial institution/banks in respect of loan or credit facilities extended to its two AEs and letter of undertaking to the lenders in the case of another AE. For providing such corporate guarantee it has recovered 0.25% as guarantee commission. In support of charging of 0.25%, the assessee, first of all, contended that the loans for which the assessee has given guarantee are primarily covered by pledged securities, hypothecation of debtors' balances and other assets of the AE, therefore, it cannot be sai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 provisions of Sec. 14A of the I. T. Act, 1961, are not applicable in our case as held by B'bay H.C. in Reliance Utilities Power Ltd., 313 ITR 340 (Bom) followed in Godrej Boyce Ltd., ITAT, Mum, No. 1629/MUM/09. We have inadvertently not claimed exemption u/s 10(34) of the Act, in respect of Dividend Income of ₹ 49,14,724/- included in accounts of our Investment Division. You are requested kindly allow the same and oblige. However, the Assessing Officer rejected the assessee's contention and held that, since assessee itself has not claimed dividend income as exempt and has included as part of miscellaneous income, therefore, it will not be treated as exempt. He was of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] 378 ITR 33(Delhi); (iii) CIT v. Corrtech Energy (P.) Ltd. 372 ITR 97 (Guj.); (iv) CIT v. Shivam Motors (P) Ltd. 2014 (5) TMI 592 - ALLAHABAD HIGH COURT; (v) CIT v. Lakhani Marketing lnc. 2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT; (vi) CIT v. Winsome Textile Industries Ltd. [2009] 319 ITR 204 (Punj. - Trib.) ; (vii) CIT v. Holcim India (P.) Ltd. 2014 (9) TMI 434 - DELHI HIGH COURT (viii) Avshesh Mercantile (P.) Ltd. v. Asstt. CIT [2012] 54 SOT 19 (Mum.) (ix) Jindal Steel Alloys Ltd. v. ACIT [IT Appeal No. 9611 (Mum.) of 2009] (x) Asstt. CIT v. Lafarge India Holdings (P.) Ltd. [2008] 19 SOT 121 (Mum.) (xi) Asstt. CIT v. M Baskaran [2015] 152 ITD 844 (Chennai - Trib.) 15. That apart, he pointed out that the assessee had huge surplus fund in the form of 'share capital' and 'reserve and surplus' which aggregated to ₹ 8313,23,39,997/- which is far excess than the investments made which stood at ₹ 3966,70,91,020/-. Thus, in view of the decision of Hon'ble Bombay High Court in the case of CIT v. Reliance Utilities Power Ltd. [2009] 313 ITR 340; CIT v. HDFC Bank Ltd. [2014] 366 ITR 505 (Bom.); and again in HDFC Bank v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 part of total income liable for tax, then provisions of sec 14A does not get triggered. This basic postulate is not satisfied in the present case, because neither the assessee has claimed it as exempt income nor Assessing Officer has allowed any exempt income which was in the form of dividend income of ₹ 49,14,724/-. Once the revenue itself has treated the exempt income as part of the total income which has been held to be taxable, then the disallowance of expenditure under sec. 14A does not gets triggered, especially in light of the judgments of various High Courts as referred to above especially in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed. 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 issue relates to various additions made on account of purchases from certain dealers which has been treated as bogus and sums aggregating ₹ 63,06,73,365/- has been added to the income of the Assessee. 20. The relevant facts and background qua this issue are that, an information was received to the Assessing Officer vide letter dated 15.05.2014 from the Assistant Director of Income-tax (Inv.), Unit-Ill, Kolhapur, allegedly indicating that certain concerns from whom purchases has been shown did not actually sell material but only issued bills, that is, were providing accommodation entries. Base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 statement of Shri Suresh A. Parekh recorded on 28.03.2014 by DDIT (Inv.), Kolhapur and in his specific reply to question no.12, he admitted that he is in the business of providing accommodation bills without delivery of goods and this activity was being carried out by him from Sangli. He also referred to question No. 13 and 14 which was appearing at pages 32 and 33 of the assessment order. The relevant questions for the sake of ready reference are reproduced hereunder: Q.12. As admitted by you on earlier occasions, you were indulged in providing of accommodation bills/entries to various business hous ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 out the details of turnover of accommodation entries achieved by each one of us either independently or in common, we have agreed to accept the following basis: 1. The turnover of accommodation bills independently carried out by each person has been identified and the same has to be taken separately. 2. The turnover of accommodation bills carried out in common between me and Shri Dinesh Parekh and where beneficiaries have been identified, such turnover has to be shared by me and my younger brother Shri Dinesh Parekh in the ratio of 50:50. 3. The turnover of accommodation bills carried out in common ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 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 only accommodation entries in the books of the beneficiaries as in respect of such bills neither me nor my allies had sold any goods to them nor was there any physical movement of goods. Based on such reply, the Assessing Officer had concluded that Shri Suresh A. Parekh had received the cheques/RTGS from the corporate houses in the respective bank account maintained in the names of various entities and after the receipt of RTGS/clearance of cheque, cash was withdrawn and handed over to the respective corporate houses after deducting their commission. During the course of assessment proceedings, the assessee was asked to provide com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in 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 Suresh A. Parekh first of all admitted to the modus operandi of his business/transaction but stated that he had sourced the material from grey market from the dealers where he did not get the bill. It is after the material has been supplied to M/s. Videocon Industries Ltd., Aurangabad (assessee) by the suppliers of the grey market that bills are prepared in the names of various entities controlled by him. He also confirmed before the Assessing Officer that proprietors of the said concerns were his family members and friends. Thus, he categorically admitted that he had actually procured the material from grey market without sale bill ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Tax Invoice. Also there is no mention in respect of 'Transportation details' i.e., delivery terms. All the invoices produced before have no proper seals of the assessee company evidencing that the material has really been received in the factory premises. More importantly, certain delivery challans have also been attached to the bills, however, one of the delivery challans have acknowledgment of receipt of material either of the company or the supplier. More so there are materials of various specifications, however, no such supporting evidences of specific specification for supply of material has been attached to the bills/deli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. Therefore, the fact of admission of non-supply of goods by the proprietors/partners of the aforesaid entities in the deposition given before the Sale-tax authorities have been proved that they never supplied the goods but only issued sale bins for commission. Importantly, this fact was brought to the notice of Shri Suresh A. Parekh, while recording his statement on oath (Q.No.13) for which he 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 Shri Parekh has not submitted any evidences. This demonstrates that he has n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gli. (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) The impounded material regarding vouchers and other documents pertaining to purchase clearly shows the difference and discrepancies between the genuine purchase and bogus purchase as has been observed above. (v) Further, no single evidence of delivery has been submitted at any point of time by either the haw ala party or the assessee company even though specifically been asked for. Even during the course of survey no evidence was found at the premises of the assessee, whereas in other genuine purchases, all such evidences were found or submitted by the assessee. 24. In view of the aforesaid finding the Assessing Officer made following additions/disallowances on acco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, 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 urgently. According to their requirement, he sourced the suppliers from the grey market and supplied the items as per their requirement along with the bills of the aforesaid concerns and accordingly, received the payments. The parties from whom he purchased the materials in grey market do not provide any sale bill; therefore, he has regularized the said supply of those goods by raising invoices through the aforesaid concerns against which the payments have been received, by cheques/RTGS. By utilizing the payments received, from the corporate houses, he pays, the supplier, who supplied the goods in grey market without bill. With regard to the transportation cost and other related expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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 from grey market and gave bills of other parties who had not supplied any material. He also confirmed that he had huge experience in acquisition and supply of electronic materials and in response to oral purchase orders and as per requirement, he sources the supplier in the grey market who supplies the items and receives the payments via the entities controlled by him. (Refer to Question no. 8 and 9 of statement u/s. 131 of the Act on 12/3/2015 Page No. 45 - 46). 2. Contention of the AO The AO has stated that in reply to Q. Nos. 15 16, in statement dated 18-03-2014, Suresh Parekh had categorically explained the modus operandi adopted by him for giving accommodation bills and also his co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant: 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. Contention of AO: The Primary details of Purchase order Date are not mentioned in the Tax Invoice. (Pg. 57 of the Assessment Order). Submission of the Appellant: It is clarified by Suresh Parekh that he has received oral/verbal purchase order. Total Purchases made by the Appellant during FY 2010- 1 1 were ₹ 7996.14 crores. It is not the case of the AO that there are purchase orders in each and every purchase other than the purchases of ₹ 63.07 crores. There are number of instances other than these purchases of ₹ 63.07 crores, where appellant has purchased material with oral orders and material has been received. The mere absence of a purchase order does not make genuine purchases made by the appellant as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ever, 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 the year 2012 2014. As regards transportation cost and evidence in respect of supply or materials, he explained that expenditure on delivery or goods are borne by actual suppliers in grey market to whom he had paid cash. (Refer Reply to Question nos. 14 and 17 (wrongly mentioned (IS 16) on Page No. 51 and 54 of the Assessment Order). 8. Contention of the AO The AO has stated that a perusal of the purchase bills submitted from the various dealers indicate the use of same gate entry stamp i.e. stamp having only challan number and signature of a person. While in other purchases, the gate entry stamp is different and more elaborate and is having various fields. (Page No. 66 of the Assessment Order) Submission of the Appellant The Appellant generally main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 present. In the statement, various questions were put by the department in respect of the aforesaid purchase- transactions made by the assessee company. At that point of time the requisite details were not available at the office premises in Mumbai where the statement of Shri V. N. Dhoot was recorded as the same were maintained at factory premises at Aurangabad. Therefore, the Managing Director has stated, that the transactions with the aforesaid, parties are not immediately verifiable. The necessary details as called for have been duly reconciled with necessary supporting and submitted before Investigation Wing as well as in the assessment proceedings. Therefore, the purchases shown from the aforesaid parties are genuine, the material of which have been received through Shri Suresh Parekh, along with the bills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 source the suppliers in the grey market as per the specification of the products and direction of the purchase department of the assessee company and the suppliers from the grey market supplied these items directly to the assessee company. Since these suppliers operate in grey market, therefore, to regularize the same, he used to give sale bills to the assessee company by raising invoices through his concerns against which the payment was received by him and the same has been distributed to the suppliers of the material in the grey market. In his cross examination he has also explained and clarified his earlier statement and admitted that what has been said is correct but he admitted and clarified that material has been actually procured and delivered from the grey market to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 on account of alleged bogus purchases has been made on the utilisation of following materials and the treatment in accounts: Utilization of material as- Amount (Rs.) Treatment in Accounts Plant Machinery/Moulds 23,79,82,268 Addition to Plant and Machinery Trail Run 13,94,92,838 Charged to Capital WIP account Trail Production 6,83,99,170 Charged to Capital WIP account Machinery Spares 14,97,74,663 Shown as Inventory in Balance Sheet Raw Material Consumables 3,50,24,425 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the other entries made in the books of account have not been rejected, then these items shown in the books of account cannot be discarded. AO has not brought on record that the details of items purchased from Shri Suresh A. Parekh is not appearing in the books of account when the assessee has specifically raised this issue before the AO. Either the entire statement of Shri Suresh A. Parekh should be accepted or it should be discarded in its entirety. Only one part of the statement given at initial stage cannot be solely relied upon for making the addition and the second part of the statement which has been made before the AO himself during the course of the assessment proceedings when it was subject to cross examination cannot be disregarded or rejected by the revenue. As ..... X X X X Extracts X X X X X X X X Extracts X X X X
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