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2016 (2) TMI 1093 - ITAT CHANDIGARH

2016 (2) TMI 1093 - ITAT CHANDIGARH - Tmi - Addition u/s 36(1)(iii) - Held that:- From the perusal of the ledger account of M/s J.V. Steel Traders, it is quite clear that it is a regular supplier of the assessee since 1.4.2005. The purchases were being made and payments were given in regular course of business. Even the advance given during the year is an advance against purchases. It is also not in dispute that of M/s J.V. Steel Traders is not related to the assessee. The observations of the CI .....

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e may be thousands of reasons for giving such advances, which the assessee is not obliged to answer to the department, it in his business acumen according to which he takes these business decisions. It is not in dispute that M/s J.V. Steel Traders is a regular supplier and advances have been given during the regular course of business. Regular debit and credit entries are appearing in the ledger account. The purchases were made in the earlier as well as subsequent years. These reasons are enough .....

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ent years 2008-09 and 2009 10 respectively. The appeal before the CIT (Appeals) was against the order of the Assessing Officer made under section 143(3) of the Income Tax Act, 1961 (in short the Act ). ITA No.773/Chd/2015 : 2. Briefly, the facts of the case are that during the assessment proceedings, the Assessing Officer noticed that the assessee had given advances to M/s J.V. Steel Traders as under : Date Particulars Type of Debit Entry Credit 01.04.2007 Opening Balance 13.07.2007 The Karnatak .....

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65,59,764 has been due from M/s J.V. Steel Traders in respect of certain purchases to be made from it. The submission of the assessee was that last year it had given M/s J.V. Steel Traders some advance payment for purchase of raw material and then some goods were supplied by him and could not be supplied the goods in toto and then an amount of ₹ 50 lacs was returned by him in the next year after lot of efforts. It was a trade advance to bind the supplier to supply the goods at reasonable .....

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,913/- was made. 4. Before the learned CIT (Appeals) again the submissions made before the Assessing Officer were reiterated. After considering the submissions, the learned CIT (Appeals) confirmed the addition made by the Assessing Officer. 5. Aggrieved, the assessee has come in appeal before us, raising the following grounds : 1. That the Worthy Commissioner of Income Tax (Appeals) has erred in confirming the addition as made by the Assessing Officer to the tune of ₹ 4,70,913/- u/s 36 (1) .....

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ed is against the facts and circumstances of the case. 5. That the Appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off. 6. The learned counsel for the assessee submitted before us, referring to the ledger account of M/s J.V. Steel Traders placed in the Paper Book, which is an account from the period 1.4.2005 to 31.3.2008, that the M/s J.V. Steel Traders is a regular supplier and purchases were being made from it regularly. It is not a s .....

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CIT(A) & Aanr. (2007) 288 ITR 1 (SC). Another argument raised by the learned counsel for the assessee was that since the assessee was having sufficient owned funds, the presumption is that these advances were made out of the owned funds and no disallowance under section 36(1)(iii) of the Act can be made. For this, reliance was placed on the judgment of the Hon'ble Jurisdictional High Court in the case of Bright Enterprises Pvt. Ltd. Vs. CIT in ITA No.224 of 2013 (O&M) dated 24.7.201 .....

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course of appellate proceedings. The appellant is engaged in manufacturing and trading of bicycle parts and is purchasing sheet coil plate from M/s J.V steel traders. The appellant had paid interest of ₹ 25,69,289/-. The appellant received ₹ 50,00,000/- from the said party on 13.07.2007 and thereafter again paid ₹ 50,00,000/- and ₹ 20,00,000/- to the said party on 27.07.2007 and on 09.01.2008 respectively. The Assessing Officer held it to be an interest free advance for n .....

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purchased from the said party is very important to the appellant and in order to secure regular supply, certain advance is given. However, the Assessing Officer has rightly observed that the item sold by M/s J.V steel traders is not any unique item which is not available in the market for which the appellant had to pay in advance. Neither has the appellant produced any such evidence nor has he made any such plea. Hence, no justification of the advance is proved and the business purpose for the a .....

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availability of material. Further, the appellant has not given the details of the 'other reasons' and there is no proof regarding the rates' given as a reason by the appellant for not making the purchases. Since, the appellant has not been able to justify the reasons given by him in the shape of non availability of material and other reasons and in the absence of any supporting evidence to prove its claim, the same cannot be accepted. Further, as rightly he-Id by the Assessing Offic .....

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el traders and the proportionate interest was rightly disallowed by the Assessing Officer. These grounds of appeal are accordingly dismissed. 9. We are not in agreement with the observations of the learned CIT (Appeals). From the perusal of the ledger account of M/s J.V. Steel Traders, it is quite clear that it is a regular supplier of the assessee since 1.4.2005. The purchases were being made and payments were given in regular course of business. Even the advance given during the year is an adv .....

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not. There is no need for the learned CIT (Appeals) to ask the assessee the evidence to prove the other reasons for giving advances. There may be thousands of reasons for giving such advances, which the assessee is not obliged to answer to the department, it in his business acumen according to which he takes these business decisions. It is not in dispute that M/s J.V. Steel Traders is a regular supplier and advances have been given during the regular course of business. Regular debit and credit .....

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: 10. The ground Nos.1, 2 and 3 raised by the assessee relate to addition under section 36(1)(iii) of the Act. 11. The issue in these grounds is similar to the issue in grounds Nos.1, 2 and 3 raised by the assessee in ITA No.773/Chd/2015 and the findings given in ITA No.773/Chd/2015 shall apply to this case also with equal force. 12. The ground No.4 raised by the assessee is against the order of the learned CIT (Appeals) in sustaining the disallowance of ₹ 1,26,873/- claimed by the assesse .....

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siness in may countries including Sudan and Egypt, where the assessee has sent Shri Rajesh Arora, an agent who works for various parties on commission basis. In order to expand and increase the business, it was decided to hire a commission agent and work through him, but he was unable to fetch any business, therefore, no commission was paid to him. After considering the submissions of the assessee, the learned CIT (Appeals) upheld the disallowance made by the Assessing Officer stating that he is .....

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