TMI Blog2018 (5) TMI 949X X X X Extracts X X X X X X X X Extracts X X X X ..... nces without waiting for the remand report - Held that:- In the instant case, the CIT-A had not merely accepted the version of the assessee. Instead, the ld CITA had thoroughly examined himself the entire reconciliation statements filed by the assessee before the AO which were completely ignored by the AO. We find that the CIT-A had even examined the statements with the supporting evidences that are available in the paper book of the assessee. We are not inclined to accept the grounds of the revenue that the CIT-A had erred in disposing off the appeal without waiting for the remand report. AR drew our attention to the various pages of the paper book that were relied upon by the CIT-A while passing the order on merits. On merits, the submissions made by the assessee before the ld CIT-A, the findings of the CIT-A and the submissions made by the ld AR before us, remain uncontroverted by the revenue before us. Hence we do not find any justifiable reason to interfere with the order of the ld CIT-A in this regard. Accordingly, the Grounds 2 & 3 raised by the revenue are dismissed. - I.T.A No. 1310/Kol/2016 - - - Dated:- 11-5-2018 - Hon ble Shri M.Balaganesh, AM And Hon ble Shri S.S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,504/- obtained from ICICI Bank, Overdraft facility of ₹ 3,31,39,768/- from BNP Paribas. The ld CITA verified the loan sanction letter issued by BNP Paribas which showed that the loan was granted for specified facilities such as export shipment credit, packing credit and bill discounting. Accordingly he concluded that the specified secured loans obtained by the assessee could not have been diverted for making investments and accordingly held that only own funds were utilized for making investments. By placing reliance on the decision of the Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd reported in 313 IR 340 (Bom), he deleted the disallowance made under Rule 8D(2)(ii) of the Rules in the sum of ₹ 7,09,878/-. With regard to disallowance under Rule 8D(2)(iii), he directed the ld AO to re-compute the disallowance by considering only dividend bearing investments in line with the decision of the co-ordinate bench of this tribunal in the case of REI Agro Ltd reported in 144 ITD 141. Aggrieved, the revenue is in appeal before us on the following ground:- 1. that on the facts and circumstances of the case, Ld. CIT(A) has erred in allowing relief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the postal authority. The assessee was asked to furnish new address of the party, if any, which was duly filed. On the new address provided by the assessee, letter was again issued but it also returned unserved. The ld AO observed that since the letters remained unserved, the genuineness of the transactions remained unverified. The ld AO also observed the following discrepancies in respect of certain parties :- 4.1. From the aforesaid table, the ld AO concluded that in respect of serial numbers 1,4 5 above, the assessee had suppressed its income by inflating its expenditure by ₹ 1,46,29,344/- ( 14055777 + 513349 + 60218) . The ld AO observed that the assessee had not furnished any reconciliation in respect of the above and accordingly treated the difference of ₹ 1,40,55,777/- from M.A. Enterprises as bogus expenditure. The ld AO further observed that in respect of parties mentioned in serial numbers 4 5 above, the expenses claimed by the assessee on account of stitching work and hire charges could not be verified and accordingly disallowed the same. In effect, the aggregate disallowance made by the ld AO in this regard was ₹ 1,46,29,344/- as unexplain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee with the suppliers / third parties may not match or reconcile up to every single rupee. It was specifically pointed out that the assessee had indeed furnished the reconciliation statement vide letter dated 26.12.2011 along with written submissions explaining the differences with the Inspector attached to the office of the ld AO. The ld AO however completely brushed aside the submissions and the reconciliation statement filed by the assessee and added amounts of ₹ 1,46,29,344/- and ₹ 94,45,995/- as unexplained expenditure u/s 69C of the Act made from undisclosed sources respectively. 5.1. The assessee submitted that the observation of the ld AO that assessee had not furnished any reconciliation is factually incorrect in as much as the assessee had filed a letter dated 26.12.2011 furnishing complete reconciliation between the figures as per its books and figures as reported by the respective parties. The same were also subject matter of verification by the ld Inspector of Income Tax (ITI) attached to the office of the ld AO. The assessee explained before the ld CITA, that various infirmities had crept in in the understanding of the ledger accounts by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee merely because the parties failed to respond to notice issued u/s 133(6) of the Act as the assessee had duly discharged its initial burden by filing all the requisite details. It was also argued that subsequently the assessee was able to prevail over the payees and obtained the requisite details. The ledger account of the assessee in the books of M/s Sofia Fashions was filed, wherein , it could be noticed that the details of invoices, payments and debit notes raised by the assessee reconciles and no difference exists. In addition to the same, the assessee also enclosed the TDS certificate issued to the aforesaid payee. Accordingly, it was pleaded that expenses of ₹ 5,13,349/- claimed by the assessee were genuine and should be allowed as deduction from the profits of the business. 5.3. As regards M/s Batra Associates, the assessee submitted that there was only one single purchase made from the party and the copy of invoice was enclosed thereon. The assessee had also deducted tax at source on the payment made to M/s Batra Associates. The copy of TDS certificate issued to M/s Batra Associates was filed by the assessee. Accordingly, it was pleaded that expense of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The amount credited in the name of M/s Pushp Creation in the appellant's books is ₹ 41,22,220/-. In the course of assessment the said amount was reported to the AO. On reconciliation it was noted one debit note No. 0800620 raised on M/s Pushp Creation of ₹ 3,53,100/- was credited to Shipping Forwarding Account. Once the same is considered the Net Billing by Pushp Creation as per the appellant's books would be 37,69,120/- In view of the foregoing it is submitted that the addition of ₹ 15,10,649/- as alleged unreconciled difference was factually incorrect and therefore deserves to be deleted in full. (ii) Ar Dee Textile For FY 2008-09; the total of the debits in the appellant's account as per the Party's books is ₹ 7,74,90,564/-. The said amount comprises of the invoices raised by the Party on the appellant during the year under consideration. The appellant reiterates that in case of defects/quality issues/rate differences, it raises debit notes on the Party. The appellant debits and claim only the net amount (Amount as per Invoices - Amount raised in Debit Notes) as expenditure in the Profit Loss Account. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition was bad in law and deserves to be deleted in full. In light of the above stated facts and the documents placed on record, it would be noted that there are no unreconciled differences between the claim of expenses made by the assessee and the details furnished by the suppliers barring M/s Pushp Creation M/s Ar Dee Textile. Even in respect of the latter two parties it is submitted that the un- reconciled amounts are very minimal in comparison to the voluminous transactions between the appellant and these parties. The appellant apprehends that the minimal differences may be on account of rebates/discounts and/or differences on the debit notes raised by the appellant. The appellant submits that these minimal differences are very common when a person has a running account with its suppliers/customers and the same may therefore be ignored. In totality of facts and circumstances the appellant submits that the addition of ₹ 1,46,29,344/- and ₹ 94,45,995/- as alleged unexplained expenditure u/s 69C and expenditure made from undisclosed sources was grossly unjustified, arbitrary and bad in law. The AO should therefore be directed to delete the impugned disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onciliation were furnished by the appellant till date and therefore the differential amount was added as bogus expenditure. In the course of the appellate proceedings the AR furnished and explanatory statement which the accountant of the appellant had furnished before the AD on 26.12.2011 and which was examined by the Inspector attached to C the office of the AD. Copy of this statement was forwarded to the AD for his comments but no explanation or counter-comment thereon has been furnished by the AO till date. From the explanatory statement as also the appellant's ledger account in the books of M/s M.A. Enterprises read along with the reconciliation statement furnished by the appellant, it appeared that as per the appellant's books there was opening credit balance of ₹ 60,644/- and the said balance tallied with the ledger a/c furnished by M/s M.A. Enterprises. Excluding the opening balance, the total of the debit side as per the appellant's ledger in the books of M/s M.A. Enterprises was ₹ 2,44,86,225/- and with regard to such amount debited the appellant had deducted tax u/s 194C amounting to ₹ 5,44,348/-. As such the appellant had liability to pay ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was noted that there was no discrepancy of ₹ 1,40,55,777/- as alleged by the AO. Rather the said difference was based on the AO's incorrect understanding of the ledger account furnished by M.A. Enterprises. Since the AO deducted the opening debit balance from the gross debit amount appearing on the second page of the Ledger Account, he came to incorrect conclusion that the amount confirmed by the party was only ₹ 98,86, 100/- whereas if one totals all the sums on the first second page of the appellant's ledger account appearing in the books of M.A. Enterprises then it appeared that the gross amount of debit side amounted to ₹ 2,45,46,869/- inclusive of opening debit balance as also the amount of TDS. The addition of ₹ 1,40,55,777/- was therefore factually unsustainable and the same is directed to be deleted. 7.1. The ld CITA granted relief to the assessee in the sums of ₹ 5,13,349/- and ₹ 60,218/- in respect of M/s Sofia Fashion and M/s Batra Associates by observing as under:- 5.5. As regards the remaining two sums of ₹ 5,13,349/- in the name of Sofia Fashion and ₹ 60,218/- in the name of Batra Associates, the disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- and ₹ 6,95,55,218/- in the name of M/s Pushp Creation and M/s Ar Dee Textile respectively. Both the parties had furnished their confirmations to the AO in response to notices u/s 133(6) in which they confirmed to have received payments of ₹ 56,32,869/- and ₹ 7,74,90,564/- respectively. In other words the AO found that both the parties though confirmed the transactions, according to amounts confirmed the expenditure incurred by the appellant was higher than amounts the claimed by the appellant in the books. The AO has noted that the AR was asked to reconcile this difference but explanation and reconciliation were not furnished. The AO therefore treated the differential sum of ₹ 94,45,995/- as the expenditure which the appellant actually incurred from its undisclosed sources. I however find that the appellant's representative had furnished statement of reconciliation with supporting documents in the AO's office on 26.12.2011. This was apparently not considered by the AO and therefore copy of the reconciliatory statement along with supporting documents was forwarded to the AO for his comments. However as set out above, no comments have been furnishe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unting to ₹ 74,68,368/-. As such even as per the account confirmation of Ar Dee Textile, the net billing on the appellant by Ar Dee Textile was only ₹ 7,00,22,196/- and not ₹ 7,74,90,564/- as allegedly considered by the AO. Even with regard to the difference between ₹ 6,95,55,218/- being amount as per the appellant's books and ₹ 7,00,22,196/- as per Ar Dee Textile, the appellant furnished the following reconciliation: 6.5. From the above statement, I note that the net biling as per books of Ar Dee Textile amounted to ₹ 6,95,64,836/- whereas the expenses as per appellant s books amounted to ₹ 6,95,55,218/-. There was thus unreconciled difference of ₹ 9,618/-. However, the fact remain that the appellant had claimed less expenses to the tune of ₹ 9,618/- and having regard to the volume of transactions between the parties, such difference was too small and could arise on account of timing differences. For the reasons set out in the foregoing therefore I find that the appellant had fully reconciled its transactions with Ar Dee Textile and the unreconciled difference was not ₹ 79,35,346/- as alleged by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ithin the prescribed time. In the continued inaction of the ld AO, the ld CITA had no other choice but to examine the various evidences and documents available on record by himself and then pass a speaking order that too after waiting for a long period of 3 years for the remand report. Even otherwise, the powers of the ld CITA are co-terminus to that of the ld AO and he could do it himself what ld AO could do. In the instant case, the ld CITA had not merely accepted the version of the assessee. Instead, the ld CITA had thoroughly examined himself the entire reconciliation statements filed by the assessee before the ld AO , which were completely ignored by the ld AO. We find that the ld CITA had even examined the statements with the supporting evidences that are available in the paper book of the assessee. In these facts and circumstances, we are not inclined to accept the grounds of the revenue that the ld CITA had erred in disposing off the appeal without waiting for the remand report. 9.1. Before us, the ld AR drew our attention to the various pages of the paper book that were relied upon by the ld CITA while passing the order on merits. On merits, the submissions made by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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