TMI Blog2019 (12) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... under the provisions of section 36(1)(vii) of the Act. Addition made for ₹ 4,899/- on account of the Act VAT credit written off. - Held that:- there was an allegation from the authorities below that the assessee has purchased the goods from the parties whose VAT/ CST registrations were cancelled. In the absence of the assistance from the side of the assessee, we can draw an adverse inference by holding that such amount of VAT credit relates to such parties i.e. the registrations were cancelled. If that be so, then it is clear that the claim was made by the assessee on account of such VAT credit for the purchases from the parties not having valid registration number. Therefore, it is inferred that such claim of the assessee was not bona fide in the absence of contrary documentary evidence. Thus we not find any reason to interfere in the order of the Ld. CIT(A). Hence, the ground of appeal of the assessee is dismissed. - ITA No. 268/Ahd/2018 (Assessment Year :2013-14) - - - Dated:- 1-10-2019 - SHRI KUL BHARAT, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER Appellant by: Shri Tushar P. Hemani, AR Respondent by: Shri Nilab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mill sale. 3. The assessee in the year under consideration has shown purchases from various parties including the parties as detailed below: 1) Impex sale corporation ₹ 8,52,507/- 2) Sankalp Traders ₹ 2,82,504/- 4. However, the AO during the assessment proceedings found that the VAT/ CST registration of the aforesaid parties were cancelled by the VAT department effective from the financial year 2011-12. Therefore the AO held that the assessee has shown bogus purchases from the parties as mentioned above. Accordingly the impugned purchases as claimed by the assessee were treated as unexplained expenses under section 69C of the Act and added to the total income of the assessee. Aggrieved assessee preferred an appeal to the Ld. CIT(A). 5. The assessee before the Ld. CIT(A) claimed that he has shown sales against such purchases in the books of accounts which have not been disturbed by the AO. In case the purchases are treated as bogus then the assessee should be entitled for the de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e does not arise at all. 8.2 Learned A.R further submitted that the corresponding sales have not been disputed. Thus, the factum of sales made by the assessee has not been doubted by AO at all. If the assessee had not made the underlying purchases, it would have been possible for assessee to make the corresponding sales. This shows that goods have undoubtedly been purchased by the assessee. Hence, no case of bogus purchases can be made out. 8.3 In case AO had any doubt as to the purchases, AO could have called for details from the said parties by issuing notices u/s.133(6) of the Act. However, AO chose not to do anything of such sort. Under such circumstances, assessee cannot be penalized by disallowaing the entire purchases made by the assessee from the referred parties. 8.4 Alternatively, it is a normal practice whereby purchases are actually made from unregistered dealers or other suppliers who do not issue any bills and hence, to regularize such bills, accommodation bills are obtained. Such goods but that, by itself, doesn t render concerned purchases as bogus. 8.5 In such scenario, addition should be confirmed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been admitted by the Revenue. As such in our considered view, such sales cannot be executed without having the corresponding purchases. There was no defect pointed out by the authorities below insofar the sales made against such purchases. Moreover, there is also no allegation regarding the genuineness of the books of accounts which were duly audited under the Income Tax Act. However, before parting we cannot ignore the practice prevailing in the business industries to purchase the goods from the grey market and subsequently justify such purchases by obtaining a purchase bill from the parties engaged in providing accommodation entries. It is because the assessee in the present case has claimed to have purchased the goods from the parties not having valid VAT/CST registration certificate though he is claiming to have purchased goods from the registered party. Moreover, there was no submission from the side of the assessee against the finding of the authorities below about the cancellation of the registration certificates of the impugned parties. In view of the above, we can presume that the actual purchases were made by the assessee from the grey market but shown in the name of imp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11.3 In case of M/s Sino star minerals Ltd. The assessee claimed to have furnished performance guarantee bond to the party amounting to USD 5500.00 only but he failed to perform the same. Therefore the party has forfeited the same equivalent to INR 2,56,355.00. The assessee accordingly claimed that such loss was incurred in the course of the business therefore the same should be allowed. The assessee in support of his contention also filed the Remittance sheet of USD and contract with Sino star minerals Ltd. 11.4 M/s Ishita Overseas The assessee claimed that he has made the sale to the party which was duly accounted for in the books of accounts. But the party did not pay the outstanding amount. Therefore the same was claimed as bad debts. The assessee also claimed that the entry in the books of accounts of the bad debts is sufficient enough to claim the deduction for the same. 12. However, the Ld. CIT (A) disregarded the contention of the assessee by observing that the amount due from the above mentioned parties was not shown as income in earlier years. Therefore, the same cannot be allowed as bad debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent raised hereinabove w.r.t. sum written off in the name of Sino Star International. j. It is submitted that certain VAT credit \vas written off bv the assessee in the books of accounts by debited the same to P L a/c. k. Such expenditure has also arisen in the normal course of business of the assessee. Hence, such sum is allowable Business loss u/s 28 or 37 of the Act. Reliance is placed on the judgments referred to hereinabove in support of similar argument raised while dealing with ground w.r.t. Bad debts. 14. On the other hand the Ld. DR vehemently supported the order of the authorities below. 15. We have heard the rival contentions of both the parties and perused the materials available on record. It is the settled law that the losses incurred by the assessee in the course of the business activities are allowable deduction either under section 37(1) or 28 of the Act. In this regard we draw support and guidance from the judgment of Hon ble Supreme Court in case of CIT Vs. Nanital bank Ltd. reported in 55 ITR 707 wherein it was held as under: Under section 10(1) of the Act the trading loss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... S 0.08% Max. Moisture 0.08% Max. PHYSICAL (SIZE) Above 10mm 10% Max. Below 150mm 40% Max. CLAUSE 4 PRICE US $ 108.00 PDMT Fob IKANDLIA PORT, INDIA BASEED ON THE PE 61PCI, FRACTION PRORATA. 15.2 We further note that the impugned payment was made by the assessee in connection with such contract as evident from the copy of the ledger of M/s Sino Star Minerals Ltd. (Guarantee Bond) placed on page 28 of the PB for the previous year 2010-11 in which such payment was made. In view of the above, we hold that the assessee is eligible for the deduction of the impugned loss as incurred in the course of the business but not as bad debts under the provisions of section 36(1)(vii) of the Act. 15.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , the assessee is in appeal before us. 18. The Ld. AR before us submitted as under: It is submitted that certain VAT credit was written off by the assessee in the books of accounts by debited the same to P L a/c. Such expenditure has also arisen in the normal course of business of the assessee. Hence, such sum is allowable Business loss u/s.28 or 37 of the Act. Reliance is placed on the judgments referred to hereinabove in support of similar argument raised while dealing with ground w.r.t.Bad debts. 19. On the other hand, the Ld. DR vehemently supported the order of the authorities below. 20. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the assessee has claimed the deduction for the amount of VAT credit written off in the books of accounts. However the assessee failed to furnish the details of the parties/purchases during the assessment proceedings in relation to which the amount of VAT credit was claimed. Thus in the absence of the documentary evidence the AO made the addition which was subsequently confirmed by ..... X X X X Extracts X X X X X X X X Extracts X X X X
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