TMI Blog2018 (12) TMI 577X X X X Extracts X X X X X X X X Extracts X X X X ..... usively establish the incurring of the travelling expenses and its nexus with its business, thus are of the view that the lower authorities were fairly justified in disallowing a part of the said expenses. However, at the same time, we are unable to persuade ourselves to endorse the disallowance of 25% of the said expenses which as per our considered view is highly exorbitant in the backdrop of the scale of the business of the assessee. There is substantial force in the contention of the A.R that keeping in view the substantial turnover of more than ₹ 610 crores of the assessee company for the year under consideration, incurring of travelling expense to the extent of ₹ 15,08,143/- can safely be held to be a miniscule amount. We the nature of business of the assessee company, therein restrict the disallowance of the travelling expense to the extent of 10% of the total amount of such expenses. Disallowance u/s 36(1)(ii) - Held that:- A matter of fact that no such payment was made to the said director in the earlier years. We have given a thoughtful consideration to the contentions raised by the A.R in support of its claim that the remuneration of ₹ 36 lac paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utable documentary evidence. Thus, in terms of our observations recorded the ground of appeal No. 1 raised by the revenue in respect of the bogus purchases fails. The Ground of appeal No. 1 raised by the revenue is dismissed. - ITA No(s). 5972/Mum/2017, ITA No(s). 5438/Mum/2017 - - - Dated:- 7-12-2018 - Shri R.C. Sharma, AM And Shri Ravish Sood, JM For the Appellant : S/sh. Hari Raheja Mani Jain, A.R‟s For the Respondent : Shri. Chaitnya Anjania, D.R ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present cross appeals filed by the assessee and the revenue are directed against the order passed by the Commissioner of Income-tax (Appeals)-9, Mumbai, dated. 16.06.2017, which in turn arises from the assessment order passed by the Assessing Officer (for short A.O ) under Sec. 143(3) of the Income Tax Act, 1961 (for short Act ), dated. 31.03.2015. We shall first advert to the appeal of the assessee. The assessee has assailed the order of the CIT(A) by raising the following grounds of appeal before us : The following grounds of appeal are without prejudice to one another. 1. On the facts and circumstances of the Appellant s case and in law the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #8377; 3,33,30,920/-. The return of income was processed as such under Sec. 143(1) of the Act. Subsequently, the case of the assessee was selected for scrutiny assessment under Sec. 143(2). 3. The A.O while framing the assessment inter alia made the following additions/disallowances in the hands of the assessee : Sr. No. Particulars Amount 1. 20% disallowance of Miscellaneous Expenses ₹ 2,94,491/- 2. 50% disallowance out of Travelling Expenses ₹ 7,54,072/- 3. Disallowance of the remuneration paid to director under Sec. 36(1)(ii) of the Act. ₹ 36,00,000/- 4. Addition of loans and share premium under Sec. 68 of the Act ₹ 14,40,82,458/- 5. Disallowance of purchases ₹ 4,83,27,950/- Income of the assessee was thereafter assessed by the A.O vide his order passed under Sec. 143(3), dated 31.03.2015 at ₹ 24,01,64 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 14,72,456/- It was averred by the Ld. A.R that though the entire details pertaining to the above mentioned expenses were submitted with the A.O during the course of the assessment proceedings, but the latter while framing the assessment had whimsically disallowed 20% of the expenses amounting to ₹ 2,94,491/-. The ld. A.R took us through the observations of the A.O in context of the aforesaid disallowance. On a perusal of the assessment order it stands revealed that the aforesaid expenses were disallowed by the A.O for the reason that they were only supported by self made vouchers. The contention of the assessee that the aforementioned expenses were indispensably required for the running of the business and the veracity of the same had been checked and certified by the auditors, however, did not find favour with the A.O. The Ld. A.R submitted that the CIT(A) without placing on record any cogent material which could justify disallowance of any part of the aforementioned expenses had however upheld 10% of the total disallowance. It was the contention of the Ld. A.R that now when neither of the lower authorities had either pointed out any su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the disallowance under Sec. 36(1)(ii) of the remuneration of ₹ 36,00,000/- paid by the assessee company to its director viz. Mr. Mohit Kamboj during the year under consideration. It was submitted by the ld. A.R, that the said disallowance was backed by misconceived facts and misconstruing of the settled position of law on the part of the lower authorities. It was submitted by the Ld. A.R that during the year under consideration the assessee company had paid a remuneration of ₹ 36,00,000/- to its director Mr. Mohit Kamboj, which in the backdrop of the substantial scale of business of the assessee company and the efforts and hard work that was put in by him for maintaining as well as improving the business of the assessee company, was well within the reasonable parameters. In order to fortify his aforesaid contention, it was submitted by the Ld. A.R that the tremendous increase in the turnover and profits of the assessee company during the year under consideration viz. A.Y. 2012-13, as in comparison to the earlier years was solely attributable to the efforts of the said director viz. Sh. Mohit Kamboj. Further, it was submitted by the Ld. A.R that the payment of remun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e ld. A.R in order to fortify his aforesaid contention drew our attention to the copy of the ledger account of Sh. Mohit Kamboj appearing in the books of account of the assessee company for Financial Year 2012-13. Further, in order to drive home his aforesaid contention the Ld. A.R drew our attention to the reconciliation statement of ICICI Bank Account No. 026105007511 of the assessee company for the period 01.03.2012 to 31.03.2012. It was submitted by the Ld. A.R that the amount of ₹ 11,00,00,000/- just remained to be a book entry which on the transaction not having fructified was reversed in the subsequent year. In order to buttress his aforesaid claim the Ld. A.R took us through the observations of the CIT(A) in context of the issue under consideration. It was observed by the CIT(A) that the A.O had recorded a finding that though the assessee company had received a loan amounting to ₹ 15,76,40,458/- from its director Sh. Mohit Kamboj during the year under consideration, but out of the said amount an amount of ₹ 11,00,00,000/- was not reflected in the bank statements of either of the parties. It was submitted by the Ld. A.R that as observed by the CIT(A), i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... account . In support of his aforesaid contention, the ld. A.R relied on the judgment of the Hon ble High Court of Bombay in the case of PCIT-13, Mumbai Vs. Veedhata Tower Pvt. Ltd. [ITA No. 819 of 2015; dated 17.04.2018] (copy placed on record). Further, the ld. A.R in order to substantiate the identity and capacity of Shri Dev Gupta, proprietor of M/s Dev Jewels, therein took us through the copy of his income tax return, copy of audited balance sheet, copy of trading and profit loss account and copy of audit report in Form No. 3CB for the year under consideration i.e A.Y 2012-13 (Page 67 -81 of APB). In order to dispel the doubts as regards the identity of Shri Dev Gupta, proprietor of M/s Dev Jewels, it was submitted by the ld. A.R that assessment for A.Y 2012-13 was framed under Sec. 143(3) in the case of the said person. In order to fortify his aforesaid claim the ld. A.R took us through the copy of the assessment order of Shri. Dev Gupta for A.Y 2012-13 (Page 109 -111 of APB'). In the backdrop of the aforesaid facts, it was averred by the ld. A.R that no doubts as regards the identity and capacity of Shri Dev Gupta, proprietor of M/s Dev Jewels, was liable to be dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .R that the stock summary of gold was submitted before the A.O, which was verified by him. In the backdrop of the aforesaid facts the ld. A.R submitted that the purchase and sale transactions of the assessee with the aforementioned parties viz. (i) M/s Arham Jewells (ii). M/s Dev Jewels; and (iii) M/s Rajeshwari Impex were duly verified by the A.O during the course of the assessment proceedings and no discrepancy in respect of the same had emerged. Further, it was the contention of the assessee before the CIT(A) that the purchases and sales made to the aforementioned parties were substantiated by the assessee on the basis of supporting documents furnished with the A.O during the course of the assessment proceedings. In sum and substance, it was the contention of the ld. A.R that no discrepancy was pointed out by the A.O either as regards the valuation or the quantity of the purchases and sales of the assessee with the aforementioned parties. The ld. A.R submitted that the observation of the A.O that the funds of the assessee company were received by Mr. Mohit Kamboj and thereafter routed back to the assessee company was totally baseless. The ld. A.R adverting to the observations ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... turnover (inclusive of gross Profit calculated and shown by the assessee in its books of account ). It was the contention of the ld. A.R that as no part of the purchases and sales made by the assessee from the aforementioned parties were disproved after necessary verifications by the lower authorities, therefore, there was no reason for drawing of adverse inferences as regards the same. 7. Per contra, the ld. Departmental Representative (for short D.R ) relied on the order of the A.O. In context of the disallowance of the expenses it was averred by the ld. D.R that the onus was cast upon the assessee to establish the genuineness of the said respective deductions, which it had failed to do. In support of his aforesaid contention the ld. D.R relied on the judgment of the Hon ble High Court of Calcutta in the case of CIT Vs. Korlay Trading Co. Ltd. (1998) 232 ITR 820 (Cal). Further, in order to buttress his aforesaid contention the ld. D.R took support of Sec. 105 of the Indian Evidence Act. It was submitted by the ld. D.R that the A.O had called upon the assessee to substantiate the expenses with supporting bills/vouchers, and also to establish that the same were incurred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n certain judicial pronouncements viz. (i). Uma Kant Vs. DCIT (2014) 369 ITR 220 (Bom); (ii). CIT Vs. N.R. Portfolio Pvt. Ltd (2013) 263 CTR 456 (Del); and (iii). CIT Vs. Ruby Traders Exporters Pvt. Ltd (2003) 263 ITR 300. In context of the addition of ₹ 11 crore made by the A.O, it was submitted by the ld. D.R that the assessee had failed to demonstrate as to what corresponding assets were generated in respect of the aforementioned loan which was raised from Mr. Mohit Kamboj. Further, the ld. D.R adverted to the G.P. addition of 1.72% that was made by the A.O in respect of the purchases claimed by the assessee to have been made from the aforementioned three parties viz. (i) M/s Dev Jewels; (ii) M/s Arham Jewellery; and (iii) M/s Rajeshwari Impex. The ld. D.R submitted that the aforesaid addition was substantially scaled down by the CIT(A) by substituting the same by an overall estimation of the GP rate of 2% on the total turnover of the assessee. It was the contention of the ld. D.R that Mr. Dev Gupta, proprietor of M/s Dev Jewells and Mr. Vishal Jain, proprietor of M/s Arham Jewellery were parties which were involved in carrying out bogus transactions. In order to fortify ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the year under consideration. It was submitted by the ld. A.R that in the totality of the facts of the case the gross profit disclosed by the assessee was not liable to be dislodged. 9. We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We shall first advert to the disallowance of ₹ 1,47,246/- i.e 10% of the miscellaneous expenses amounting to ₹ 14,72,456/- that has been upheld by the CIT(A). We find that the A.O while framing the assessment had disallowed 20% of the aforesaid expenses, leading to a consequential addition of ₹ 2,94,491/- in the hands of the assessee. The aforesaid disallowance was made by the A.O for the reason that the various expenses booked by the assessee under the said head of expenditure viz. (i) telephone and mobile charges; (ii) petrol expenses; (iii) business promotion expenses; and (iv) hotel expenses were only supported by self made vouchers, which did not inspire much confidence. We find that the disallowance of the aforesaid expenses by the A.O was thereafter scaled down by the CIT(A) to 10% of the total expenses. Admittedly, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its directors viz. Mr. Mohit Kamboj and Mr. Naresh Kapoor. The A.O in order to verify the veracity of the aforesaid expenses had directed the assessee to place on record the corresponding bills/vouchers and the nature of travelling expenses, as well as establish the nexus of incurring of the same with the business of the assessee company. As the assessee failed to place on record the necessary documentary evidence, the A.O disallowed 50% of the said expenses and made a consequential addition of ₹ 7,54,072/-. However, on appeal, it was the contention of the assessee that in the backdrop of a turnover of ₹ 610 crores of the assessee company for the year under consideration, the miniscule amount of travelling expenses of ₹ 15,08,143/- was much well within the reasonable parameters. It was the contention of the assessee before the CIT(A) that for achieving the turnover to the said extent the directors of the assessee company were required to travel all over the country to secure sale orders and increase its profitability. Further, in order to fortify the veracity of the aforesaid expense the assessee had taken support of the fact that its books of account had duly b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld stand restricted to an amount of ₹ 1,50,814/-. The order of the CIT(A) is modified to the said extent. The Ground of appeal No. 2 is partly allowed in terms of our aforesaid observations. 12. We shall now advert to the disallowance of an amount of ₹ 36 lac by the A.O under Sec. 36(1)(ii) of the I.T Act, which thereafter had been upheld by the CIT(A). Before adverting to the merits of the issue, we are of the considered view that the aforesaid statutory provision under which the disallowance had been made needs to be culled out as under: 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in Sec.28 (i) .......................................................................................................... (ia). .......................................................................................................... (ib). .......................................................................................................... (ii) any sum paid to an employee as bonus or commission for services rendered, where such sum would n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idence before him. Insofar the reliance placed by the assessee on the judgment of the Hon ble High Court of Delhi in the case of AMD Metaplast (P.) Ltd. Vs. CIT (2012) 341 ITR 563 (Delhi) was concerned, it was observed by the CIT(A) that the facts involved in the said case were distinguishable. It was noticed by the CIT(A) that in the case before the High Court the assessee had established that the payment was made to the director as per the terms of appointment and he had rendered his services as required. Insofar the order of the ITAT, Pune in the case of Arihant Infra Project Pvt. Ltd. Vs. JCIT (2015) 64 Taxman.com (Pune) that was relied upon by the assessee, it was observed by the CIT(A) that the same too was distinguishable on facts. The CIT(A) noticed that in the aforementioned case the commission was paid to the managing director for the services which were rendered by him as per the terms of appointment. It was observed by the CIT(A) that in the case before him the assessee had failed to establish that the payment of ₹ 36 lac to Mr. Mohit Kamboj, director of the assessee company who was holding 99.9% shares was as per the terms of the appointment order which would hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... passed at the Annual General Meeting of the company authorising payment of remuneration of ₹ 36 lac to the said director. Further, it is also a matter of fact that no such payment was made to the said director in the earlier years. We have given a thoughtful consideration to the contentions raised by the ld. A.R in support of its claim that the remuneration of ₹ 36 lac paid by the assessee company to Mr. Mohit Kamboj, director for the services rendered by him was not liable to be disallowed under Sec.36(1)(ii), but are unable to persuade ourselves to accept the same. We have perused the observations of the CIT(A) and find ourselves to be in agreement with the well reasoned view taken by him that the amount of ₹ 36 lac paid by the assessee company to Mr. Mohit Kamboj, director was rightly disallowed by the A.O under Sec. 36(1)(ii) of the I.T. Act. We thus finding no infirmity in the order of the CIT(A) in context of the issue under consideration uphold his order to the said extent. The Ground of appeal No. 3 raised by the assessee is dismissed. 15. We shall now advert to the addition of ₹ 14,40,82,458/- made by the A.O by holding certain amounts receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany. In the absence of a plausible explanation as regards the aforesaid discrepancy the A.O assessed the amount of ₹ 11,00,00,000/- as an unexplained cash credit under Sec.68 in the hands of the assessee company. Further, it was observed by the A.O that an amount of ₹ 3,17,12,458/- was advanced by Mr. Mohit Kamboj on 01/03/2012 to the assessee company. It was noticed by the A.O that on the same day i.e on 01/03/2012 Mr. Mohit Kamboj had received an amount of ₹ 3,17,10,565/- from M/s Dev Jewels which was utilised by him for advancing the aforesaid amount to the assessee company. The A.O was of the view that M/s Dev Jewels was not a genuine party and had by projecting itself as a main supplier was only facilitating bogus purchases for the assessee company. Further, it was observed by the A.O that M/s Dev Jewels would in the garb of loans/advances make available the funds of the assessee company to Mr. Mohit Kamboj. Subsequently, the said funds would be routed back in the form of loans by Mr. Mohit Kamboj to the assessee company. On the basis of his aforesaid observations the A.O held a conviction that after completion of the bogus purchase transactions by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e observations of the A.O had observed that out of the loan aggregating to ₹ 15,76,40,458/- received by the assessee company from its director Mr. Mohit Kamboj, an amount of ₹ 11,00,00,000/- was not reflected in the bank statements of either of the parties. The ld. A.R during the course of the hearing of the appeal submitted that as against the aforesaid cheques aggregating to ₹ 11,00,00,000/- received from Mr. Mohit Kamboj, cheques for identical amounts were issued on the same date i.e 31.03.2012 to its creditors viz. (i) M/s Arham Jewellery: ₹ 10,00,00,000/-; and (ii) M/s Dev Jewels: ₹ 1,00,00,000/-. It is the contention of the ld. A.R, that because of certain reasons as the cheques received from Mr. Mohit Kamboj were not presented by the assessee for payment, therefore, the corresponding cheques issued by the assessee company to its aforementioned creditors were also at its instance not presented for clearance by them. It was averred by the ld. A.R that the entries passed by the assessee company in its books of accounts' during the year under consideration were reversed in the subsequent year i.e A.Y 2013-14. In order to fortify his aforesaid c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y previous year. On the basis of a logical reasoning, it can safely be concluded that a credit of sum in the books of accounts of an assessee would indispensably presuppose a debit of an equal corresponding amount i.e increase in the assets to a same extent. Admittedly, as observed by the CIT(A), the sum of ₹ 11 crore is not found reflected in the bank statements of either of the parties. Thus, it can safely be concluded that the amount to the said extent had not flown into the bank accounts of the assessee. Rather, it is the claim of the ld. A.R that the assessee had issued cheques of an equivalent amount of ₹ 11 crore on the same day i.e 31.03.2012 to two parties viz. (i) M/s Arham Jewellery: ₹ 10,00,00,000/-; and (ii) M/s Dev Jewels ₹ 1,00,00,000/-. However, as averred by the ld. A.R, as the cheques received by the assessee from Mr. Mohit Kamboj could not be presented for certain reasons, thus the cheques issued to the aforementioned parties were also not presented by them at the instance of the assessee. We find that the ld. A.R in order to fortify his contention that the aforementioned transaction did not materialise at all had drawn our attent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id posting of entry in the books of accounts the balance payable by the assessee to the said creditor would stand reflected as a liability at a lower/reduced figure, i.e to the extent the assessee had debited his account. Now, if the cheque issued by the assessee to the creditor is thereafter at the instance of the assessee not presented by him in the succeeding year, then the assessee would reverse the said transaction and credit the account of the creditor in his books of accounts for the succeeding year. 20. In the backdrop of our aforesaid deliberations we shall now look into the facts involved in the case of the assessee before us. We are of the considered view that in terms of our aforesaid observations, the notional and short lived credit in the account of Mr. Mohit Kamboj as appearing in the books of accounts of the assessee company cannot be principally characterised as an unexplained cash credit in the hands of the assessee. We are of the considered view that on the basis of the facts averred by the ld. A.R, the nature and source of the credit appearing in the account of Mr. Mohit Kamboj cannot be held as an unexplained cash credit. Insofar the natur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the day, and not having fructified into a transaction involving actual flow of funds was thus reversed in the succeeding year is found to be in order to the satisfaction of the A.O, then no addition as regards the amount of ₹ 11,00,00,000/- shall be made in the hands of the assessee. Before parting, we may herein clarify that the A.O during the course of the set aside proceeding shall remain at a liberty to make any other enquiry to his satisfaction as he deems fit. Needless to say, the A.O shall during the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee who shall remain at a liberty to substantiate its claim before him. 21. We shall now advert to the addition of ₹ 3,17,12,458/- made by the A.O as regards the loan received by the assessee on 01.03.2012 from Mr. Mohit Kamboj, vide a cheque drawn on his account with Bank of India. We find that adverse inferences as regards the genuineness and veracity of the aforesaid amount of ₹ 3,17,12,458/- was drawn by the A.O, for the reason that on the same day a sum of ₹ 3,17,10,565/- was received by Mr. Mohit Kamboj from M/s Dev Jewels, which as alleged by the A.O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of ₹ 3,17,12,458/- received by the assessee company from Mr. Mohit Kamboj as an unexplained cash credit under Sec.68 of the I.T Act. In sum and substance, doubts in context of the source of the source of the loan received by the assessee company were raised by the A.O. We find that Mr. Mohit Kamboj had received an amount of ₹ 3,17,10,565/- from M/s Dev Jewels as on 01.03.2012. The A.O had doubted the identity of M/s Dev Jewels on the ground that summons issued to the said concern under Sec.131 of the I.T Act at the address provided by the assessee company had turned out to be a residential address, and no business activity was found to be carried out from the said premises. We may herein observe that admittedly the summons issued under Sec.131 were served on the lady residing in the aforesaid residential premises, and it is not the case of the revenue that the said notice was returned unserved. We find substantial force in the contention of the ld. A.R that as the concern viz. M/s Dev Jewels was a proprietary concern owned by Mr. Dev Gupta, therefore, providing of the residential address of the said person would in no way justify drawing of adverse inferences as regar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration. Apart therefrom, we may herein observe that as held by the Hon ble High Court of Bombay in the case of Pr. CIT-13, Mumbai Vs. Veedhata Tower Pvt. Ltd. (ITA No. 819 of 2015, dated 17.04.2018) the requirement of explaining the source of the source of a receipt had been made available on the statute vide the Finance Act, 2012, by way of a first proviso to Sec.68 of the Act, which is effective only from assessment year 2013-14. Insofar the subject assessment year i.e. A.Y. 2012-13 is concerned, no obligation was cast upon the assessee to explain the source of the source of the credit of ₹ 3,17,12,458/- in its books of account . We thus are of the considered view that in terms of our aforesaid observations the addition of ₹ 3,17,12,458/- sustained by the CIT(A) under Sec. 68 cannot be upheld and is therefore deleted. 23. We shall now advert to an addition of ₹ 23,70,000/- made by the A.O in respect of a loan claimed by the assessee to have been received during the year from Mr. Deepak Kumar Kamboj. We find that during the course of the assessment proceeding the assessee in order to substantiate the genuineness and veracity of the loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuineness of the transaction under consideration. We thus set aside the aforesaid issue as regards the addition of ₹ 23,70,000/- made under Sec.68 to the file of the A.O for fresh adjudication. Needles to say, the A.O shall during the course of the set aside proceedings afford a reasonable opportunity of being heard to the assessee, who shall remain at a liberty to substantiate its claim by placing on record the requisite documentary evidence. 25. We shall now advert to the disallowance of purchases of ₹ 1,71,73,863/- as had been sustained by the CIT(A). A separate disallowance of the labour charges paid by the assessee to M/s Arham Jewellery was subsumed in the estimated G.P addition of ₹ 1,71,73,863/- that was sustained by the CIT(A). We find that the assessee company had made certain purchase and sale transactions with the following parties: Name Purchase Sales M/s Dev Jewells 134,57,23,221 35,84,95,389 M/s Arham Jewellery 88,18,29,997 64,37,53,141 M/s Rajeshwari Impex ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) on the total turnover of the assessee company and accordingly restricted the addition to an amount of ₹ 1,71,73,863/-. 26. The assessee being aggrieved with the upholding of the addition of ₹ 1,71,73,863/- has carried the matter in appeal before us. We have given a thoughtful consideration to the aforesaid issue in the backdrop of the material available on record. We find that as observed by us while dealing with the addition of ₹ 3,17,12,458/- which was made by the A.O under Sec. 68, the identity, capacity and creditworthiness of M/s Dev Jewels had been deliberated upon by us at length. As observed by us hereinabove, the aforesaid concern viz. M/s Dev Jewels had been assessed under Sec. 143(3), vide order dated 11.03.2016 for A.Y 2013-14. In the said assessment order the aforementioned party viz. Mr. Dev Gupta, proprietor of M/s Dev Jewels had been accepted by the revenue as having been engaged in the business activity of resale of gold ornaments and jewellery. Further, the copies of the return of income, computation of income, audited balance sheet, trading and profit and loss account for the year ended 31.03.2012 and audit report in Form No. 3CB of the afo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bservations of the lower authorities that the said concern is a bogus concern cannot be accepted. 29. We find that the A.O had drawn adverse inferences as regards the genuineness and veracity of the purchases claimed by the assessee to have been made from the aforementioned parties viz. (i). M/s Dev Jewels; (ii). M/s Arham jewellery; and (iii). M/s Rajeshwari Impex, by holding a conviction that the said parties had advanced loans to Mr. Mohit Kamboj, who had further advanced loans to the assessee company, and as such the transaction has come to a full circle. Further, the labour charges paid by the assessee to M/s Arham Jewellery was also disallowed by the A.O by holding the said concern as ingenuine. In sum and substance, the A.O doubting the genuineness of the purchases claimed by the assessee to have been made from the aforementioned parties was of the view that such purchase consideration or labour charges received by the said parties found its way back to the coffers of the assessee company by way of loans advanced by them to Sh. Mohit Kamboj, who in turn would advance the same to the assessee company. We have deliberated at length on the issue under consideration and are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O to M/s Rajeshwari Impex, we are of the considered view that the same in the absence of any clinching evidence proving the ingenuineness of the purchases cannot justify characterising of the same as bogus. In the totality of the facts of the case as had been deliberated upon by us hereinabove, it can safely be concluded that the purchases claimed by the assessee to have been made from the aforementioned parties cannot be held as ingenuine. Before parting, we may further observe that though the A.O had drawn adverse inferences as regards the genuineness of the purchases claimed by the assessee to have been made from the aforementioned parties viz. (i) M/s Dev Jewells; (ii) M/s Arham Jewellery; and (iii) M/s Rajeshwari Impex, however the sales aggregating to ₹ 129,94,98,461/- made by the assessee to the said concerns as charted out by us hereinabove had been accepted by him. In the backdrop of the aforesaid facts, we are of the considered view that the revenue cannot be permitted to draw adverse inferences as regards the veracity of the purchase transactions by holding the aforesaid concerns as bogus parties, while for at the same time accept the genuineness of the sale ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) had failed to appreciate that the A.O had disallowed the bogus purchases in proportion with the overall gross profit shown by the assessee. We may herein observe that the CIT(A) had not deleted the addition of ₹ 4,83,27,950/- but rather had substituted the same by an addition to the extent of ₹ 1,71,73,863/-. We have already deliberated at length on the sustaining of the addition by the CIT(A) to the extent of ₹ 1,71,73,863/- in context of the purchases made by the assessee from the aforementioned three concerns viz. (i) M/s Arham Jewellery; (ii) M/s Dev Jewells; and (iii) M/s Rajeshwari Impex and have deleted the disallowance of ₹ 1,71,73,863/- for the reason that the purchases claimed by the assessee to have been made from the aforementioned concerns cannot be disallowed by alleging the same as bogus in the absence of irrefutable documentary evidence. Thus, in terms of our observations recorded hereinabove the ground of appeal No. 1 raised by the revenue in respect of the bogus purchases fails. The Ground of appeal No. 1 raised by the revenue is dismissed. 32. The Ground of appeal No. 2 being general is dismissed as not pressed. 33. The appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X
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