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D.C.I.T., Circle-3, Asansol Versus M/s. Janardan Cement Co. Pvt. Ltd.

2017 (11) TMI 791 - ITAT KOLKATA

Disallowance of bogus purchase - disallowance equal to gross profit @ 15% of gross turnover - Held that:- As Ganesh Rice Mills vs CIT [2005 (3) TMI 95 - ALLAHABAD High Court] find that the substantial question of law considered was as to whether the tribunal was right in coming to the conclusion that the purchases claimed by the assessee were not genuine ignoring the quantitative account available before the Tribunal. The Hon’ble Allahabad High Court confirmed the findings of the Tribunal that t .....

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supports the conclusion arrived at by CIT(A). We, therefore, find no grounds to interfere with the order of CIT(A). Consequently ground no.1 raised by the revenue is dismissed. - Disallowance on account of interest payment as penal in nature - whether interest was paid by the assessee for delayed payment of excise, income tax and sales tax was liable to be disallowed - Held that:- According to the AO the aforesaid payment was in the nature of penal for infraction of law. Therefore it cannot .....

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it of Explanation 1 to section 37. We are of the view that the conclusion of CIT(A) on this issue are correct and calls for no interference - Decided against revenue - Disallowance on account of ROC expenses on increased authorized capital - addition which was a fee paid to the registrar of companies for increase in share capital of the assessee on the ground that the same was capital in nature and cannot be allowed as deduction in computing the income from business - Held that:- Before us i .....

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en, Addl. CIT For The Respondent : Shri K.M.Roy, FCA & Shri D.B.Thakur, Advocate ORDER PER N.V.VASUDEVAN, JM: This is an appeal by the Revenue against the order dated 20.03.2013 of CIT(A)-Asansol relating to AY 2008-09. 2. Ground No.1 raised by the revenue reads as follows :- 1. That, the Ld. CIT(A), Asansol has erred in law and on facts by restricting the disallowance equal to gross profit @ 15% of gross turnover, where disallowance of Rs.73,85,885/- made by the AO on account of bogus purch .....

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sons from whom purchase in the business of trading in cement was made by the assessee. The notice so sent by the AO was returned with the following postal remarks :- Name Nature of transactions Postal remarks Remarks M/s. Maa Tara Traders & Suppliers Purchase of cement for ₹ 21,35,000/- Illegible Ma Vindyavasini Trading Co. -do- ₹ 20,15,000/-do- Ma Supply Agency -do- ₹ 25,44,000/- Not known Dholi Sati Trading Co. -do- ₹ 21,65,000/- NK U.K.Singh Purchase of slag ₹ .....

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ssee. The profit from trading business of the assessee was declared as follows :- Sale of Trading Goods Rs.2,31,23,460.00 Less : Purchases of Trading Goods Rs.2,00,00,000.00 Profit from Trading Activity Rs. 31,23,460.00 (Subject to O/H Exp) 5. The assessee contended that without effecting purchases there cannot have sale of cement and therefore purchases are considered not genuine. The corresponding sales should also be ignored. This was rejected by the AO and the addition of ₹ 1,73,85,885 .....

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nsider that an assessee can not promote the same article or goods of the other manufacturers which it is producing itself. It is against the business ethics. More over in this case the party from whom purchase of cement has been shown are proved to be bogus as postal remarks as mentioned in show-cause letter dtd. 10/12/2010. the assessee has been informed vide order sheet dtd. 14/12/2010 by commenting "He contended' non-service of letter does not prove that purchases are bogus. He is in .....

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ing to addition' for similar amount. Penalty proceeding u/s 271 (1)( c ) for this fault of the assessee is initiated.Addition Rs.1,73,85,885/- 6. Before CIT(A) the assessee reiterated that the contentions as put forth before the AO and further brought to the notice of AO that the gross profit declared by the assessed during the previous year was much higher than what was declared in A.Y.2006-07 and 2007-08. The assessee also brought to the notice of CIT(A) that if the addition made by the as .....

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ied on the decision of ITAT Ahmedabad in the case of VR Textiles vs JCIT 11 ITR (Trib.) 478 (Ahm) and Jharkhand High Court in the case of Amitabh Construction P. Ltd. Vs Addl. CIT [2011] 335 ITR 523 (Jhar). 7. The CIT(A) on consideration of the above submissions was of the view that the action of AO in making the impugned addition cannot be sustained and that rejection of books of account of the assessee would have been the proper course. The CIT(A) thus rejected the book results and estimated t .....

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rnover out of manufacturing is inversely proportional. Out of the total sale of ₹ 2.87 crores, ₹ 2.31 was sale of trading goods. Such a comparable case is not identified. 9. As sated in paragraph 8 a comparable case of peculiar features figuring in accounts of appellant is not identified. The Gross Profit disclosed is 7.11 %. This is a case where accounts is suspect being inability to prove whether majority of expense is correct or not. It is a well settled judicial proposition that .....

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of the opinion that a Gross Profit rate of 15% is appropriate in the case. The figure is pitched at 15% to absorb the all inaccuracies in the improper, incomplete, unravelled and doubtful accounts. Accordingly the Assessing Officer is directed to estimate income on the basis of determining the Gross Profit at the above rate of 15%. The ground is partly allowed. 8. Aggrieved by the order of CIT(A) the assessee has raised ground No.1 before the Tribunal. 9. We have heard the submissions of the ld .....

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he quantitative account available before the Tribunal. The Hon ble Allahabad High Court confirmed the findings of the Tribunal that the purchases in question were bogus. There was no occasion for Allahabad High Court to consider whether the entire purchase should be added or income on sales estimated in the given circumstances. We are therefore of the view that the decision relied upon by the ld. DR will not support the plea of the ld. DR before the Tribunal. On the other hand, we find that the .....

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nature. 12. As far as ground no.2 raised by the revenue is concerned it relates to addition of ₹ 28,463/- made by the AO on the ground that the interest was paid by the assessee for delayed payment of excise, income tax and sales tax was liable to be disallowed. According to the AO the aforesaid payment was in the nature of penal for infraction of law. Therefore it cannot be allowed as deduction in view of the Explanation 1 to section 37(1) of the Income Tax Act, 1961 (Act) which provides .....

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