TMI Blog2019 (2) TMI 1825X X X X Extracts X X X X X X X X Extracts X X X X ..... ule 8D. Bogus purchases - Purchase from grey market - HELD THAT:- As the assessee had failed to substantiate the veracity of the purchase transactions under consideration, therefore, it can safely be concluded that the material was purchased by him at a discounted price from the open/grey market, as against that shown in its accounts. Insofar the estimation of the profit element is concerned, the same in our considered view can safely be taken at 12.5% of the aggregate value of purchases of ₹ 1,85,321/- in the backdrop of the judgment of the Hon ble High Court of Gujarat in the case of CIT Vs. Simit P. Sheth [ 2013 (10) TMI 1028 - GUJARAT HIGH COURT ] - We thus in terms of our aforesaid observations restrict the addition in the hands of the assessee to the extent of the profit element of ₹ 23,125/- (i.e 12.5% of ₹ 1,85,321/-) that would have been involved for making the aforementioned purchases from the open/grey market. - ITA Nos.3477 & 3478/Mum/2017 - - - Dated:- 28-2-2019 - Shri G.Manjunatha, Accountant Member and Shri Ravish Sood, Judicial Member Appellant by: Shri Ajay Sekhari And Shri Dilkhush Malesh, A.Rs Respondent by: Shri D.G. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, no expenses incurred for earning the same were suo motto disallowed by it. The A.O holding a conviction that some expenditure definitely would have been incurred by the assessee for earning of the exempt income, thus worked out the disallowance under Sec.14A r.w. Rule 8D(2)(iii) at ₹ 2,13,382/-. 4. Aggrieved, the assessee assailed the order passed by the A.O in appeal before the CIT(A). The CIT(A) after deliberating on the contentions advanced by the assessee was however not persuaded to subscribe to the same and dismissed the appeal. 5. The assessee being aggrieved with the order of the CIT(A) has carried the matter in appeal before us. The ld. Authorized Representative (for short A.R‟) for the assessee at the very outset of the hearing of the appeal submitted that the A.O had mechanically worked out the disallowance under Sec.14A at ₹ 2,13,382/-. It was submitted by the ld. A.R that the A.O had failed to record his satisfaction while dislodging the claim of the assessee that no expenditure was incurred for earning of the exempt dividend income. The ld. A.R drawing support from the judgment of the Hon ble Supreme Court in the case of Godrej Boyc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing at a satisfaction that having regard to the accounts of the assessee, it was not possible for him generate the requisite satisfaction with regard to the correctness of the claim of the assessee that no expenditure had been incurred in respect of the exempt income. We therefore not being able to persuade ourselves to uphold the disallowance of 2,13,382/- made by the A.O under Section 14A r.w. Rule 8D, which thereafter had been sustained by the CIT(A), vacate the said disallowance and set aside the order of the CIT(A) to the said extent. 8. In terms of our aforesaid observations the appeal of the assessee is allowed. ITA No .3477/Mum/2017 A.Y. 2011-12 9. We shall now advert to the appeal filed by the assessee, wherein the latter has assailed before us the order of the CIT(A) upholding the assessment made by the A.O under Sec.143(3) r.w.s 147 of the IT Act, dated 31.10.2014. The assessee has assailed the order of the CIT(A) on the following grounds of appeal: 1. On the facts and circumstances of the case and in law Ld Commissioner of Income Tax (Appeals)-4 (hereinafter referred to as Ld. CIT (A) erred in confirming the action of Ld. Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11. During the course of the assessment proceedings the A.O in order to verify the genuineness and veracity of the purchases claimed by the assessee to have been made from the aforementioned parties viz. (i) M/s Nirmal Trading Company: ₹ 13,46,533/-; and (ii) M/s Pradeep Enterprises: ₹ 11,16,885/-, directed the assessee to produce them for necessary examination. However, the assessee expressed its inability to produce the aforementioned parties. The A.O in order to verify the authenticity of the purchase transactions issued notices under Sec.133(6) to the above mentioned parties, which however could not be served as it was reported that the said parties had never existed at the given addresses. In the backdrop of the aforesaid facts it was concluded by the A.O that the assessee had not made any genuine purchases from the aforementioned parties. It was noticed by the A.O that out of the purchases aggregating to ₹ 22,78,097/- stated to have been made from the aforementioned parties, the assessee had claimed an amount of ₹ 1,85,321/- as an expense during the year under consideration. Insofar the balance amount of ₹ 22,78,097/- was concerned, the same w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sted at the said addresses. In our considered view the lower authorities had rightly concluded that the assessee had not made any genuine purchases from the aforementioned parties. We find that the case of the assessee before the CIT(A) was that the material purchased from the aforementioned parties was used towards preparing of sets during the music release at J.W. Marriott. However, the CIT(A) observing that in the bill it was mentioned that the material had been used for repair work, declined to accept the aforesaid contention of the assessee. Further, it was observed by the CIT(A) that the assessee had failed to place on record any evidence of preparation of any set at J.W. Marriott. 16. We have given a thoughtful consideration to the issue before us and find that the assessee had furnished with the A.O the complete details of the consumption of material which was stated to have been purchased from the aforementioned parties for setting up of sets to facilitate the music launch and promotion of its movie Isi Life Mein at J.W. Marriott, Mumbai and Film Studio Night Club, Mumbai. In the backdrop of the aforesaid facts, we are of the considered view that now when the consum ..... X X X X Extracts X X X X X X X X Extracts X X X X
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