TMI Blog2021 (2) TMI 1055X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenses incurred with the name of the erstwhile company were actually the expenses of the assessee which should be allowable. Actually facts need to be verified at the end of the AO before the allowance of the claim of the assesse, therefore, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to decide the matter of controversy afresh after going through the relevant record/verification of the evidence produced in this regard. Needless to say that an opportunity of being heard is required to be given to the assessee in accordance with law. Accordingly, this issue is being decided in favour of the assessee Non-granting of depreciation on capital expenses - HELD THAT:- Since the issue no. 3 has been restored before the AO to verify the claim of the assessee, therefore, capital expenses are in question and yet to be decided in accordance with law. Anyhow upon the capital expenses, the depreciation is required to be allowable u/s 32 of the Act. Accordingly, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO to verify the claim of the assessee in accordance with law. Needless to say that an opportunity of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vour of the assessee against the revenue. - I.T.A. No. 3511/Mum/2019 I.T.A. No. 4337/Mum/2019 - - - Dated:- 23-2-2021 - SHRI M. BALAGANESH, AM AND SHRI AMARJIT SINGH, JM Assessee by : Shri Rashmikant C. Modi Ms. Ketki Rajeshirke Revenue by : Shri Gurbinder Singh (DR) ORDER PER AMARJIT SINGH (JM) The assessee as well as revenue have filed the above mentioned appeals against the order dated 29.03.2019 passed by the Commissioner of Income Tax (Appeals) -21, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y. 2012-13. ITA. NO.3511/Mum/2019 2. The assessee has filed the present appeal against the order dated 29.03.2019 passed by the Commissioner of Income Tax (Appeals) -21, Mumbai [hereinafter referred to as the CIT(A) ] relevant to the A.Y.2012-13. 3. The assessee has raised the following grounds: - 1. On facts and in the circumstances of the ease, the Appellant submit that the Hon'ble Commissioner of Income Tax (Appeals) erred in holding that the notice issued u/s 148 of the Income Tax Act, 1961 by the Learned Assessing Officer for the aforesaid year as valid. The Appellant submits that notice u/s 148 of the Inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I. T. Act, 1961 after recording the reasons to believe that income chargeable to tax has escaped assessment. Notice u/s 148 of the I. T. Act, 1961 was issued and served upon the assessee. Thereafter, notices u/s 143(2) 142(1) of the Act were issued and served upon the assessee. The reasons for reopening the assessment were also served upon the assessee. The assessee company is engaged in the business of Designing, Manufacturing and Marketing of Jewellery. The assessee company claimed advertisement expenditure in sum of ₹ 11,38,657/-. The notice was issued to prove the genuineness of the claim. The assessee also failed to deduct the TDS. The details are hereby mentioned as under.:- Sr. No. Name PAN Amount TDS 1 4 colour Graphics N. Digital - 80,057 - 2 A Ad Agency - 84,000 - 3 Adea Advertising AARFA5592L 1,58,065 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities Pvt. Ltd. 50,00,000 6 Arawali Stock Broking Pvt. Ltd. 1,00,00,000 Total 5,02,01,480 6. After the reply of the assessee, the share application money in sum of ₹ 4,00,00,000/- u/s 68 of the Act was added to the income of the assessee. The assessee has also taken the bogus purchase entry in sum of ₹ 5,02,01,480/- from M/s. Nakshatra Business Pvt. Ltd. On account of non-proving the sale, the AO disallowed the said bogus purchase in sum of ₹ 5,02,01,480/- and added to the income of the assessee. The total income of the assessee was assessed to the tune of ₹ 5,26,93,420/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who partly allowed the claim of the assessee but the assessee was not satisfied on the grounds mentioned above, therefore, the assessee has filed the present appeal before us. ISSUE No. 1 7. Under this issue the assessee has challenged the notice issued u/s 148 of the I. T. Act, 1961. The assessee did not press this issue, therefore, this issue is being decided in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a), where an assessee fails to deduct the whole or any part of the tax in accordance with the provisions of Chapter XVII-B on any such sum, but is not deemed to be an assessee in default under the first proviso to sub-section (1) of Sec.201, then, for the purpose of Sec. 40(a)(ia) it shall be deemed that the assessee has deducted and paid the tax on such sum on the date of furnishing of return of income by the resident payee, subject to the condition that the said resident payee satisfies certain conditions viz. (i) has furnished his return of income under Sec.139; (ii) has taken into account such sum for computing income in such return of income; and (iii) has paid the tax due on the income declared by him in such return of income. Further, the assessee shall furnish a certificate to the said effect from an accountant in such form as may be prescribed. As a matter of fact, the second proviso to Sec. 40(a)(ia) provides for an exception wherein the amount on which the assessee has failed to deduct tax at source would not call for any disallowance under Sec.40(a)(ia). In our considered view, the aforesaid second proviso had been made available on the statute to give effect to the jud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ourt while concluding as hereinabove had specifically observed that the aforesaid view was being taken in the backdrop of the peculiar facts of the case as were there before them. We thus in terms of our aforesaid observations are of the considered view that the aforesaid judicial pronouncement relied upon by the ld. A.R being distinguishable on facts would thus not assist the case of the assessee before us. 14. The appeal of the assessee is partly allowed for statistical purposes in terms of our aforesaid observations. 9. The facts and the circumstances are quite similar to the facts of the present case. The law relied by the assessee i.e. CIT Vs. Ansal Land Mark Township Pvt. Ltd. (2015) 61 Taxmann.com 45 (Delhi High Court) and M/s. Hindustan Coca Cola Beverage Vs. CIT dated 16.08.2007 also speaks the same thing in same sense. In view of the above mentioned decision, we set aside the finding of the CIT(A) on this issue and restore the issue before the AO for making the necessary verification to the effect that the payee had paid the tax or not. Accordingly, the claim of the assessee would be liable to be allowed. Accordingly, this issue is decided in favour of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the CIT(A) ] relevant to the A.Y.2012-13. 13. The revenue has raised the following grounds.:- 1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of ₹ 4,00,00,000/- made by the AO u/s 68 of the I T Act without appreciating the facts that the assessee has availed accommodation entries in the form of share premium money from the companies operated and managed by known hawala operator Shri Pravin Kumar Jain 2. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in restricting the disallowance on account of bogus purchases at 5% of ₹ 2,02,01,480/- as against 100% made by the AO without appreciating the fact that assessee failed to establish the genuineness of the purchases. 3. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was right in restricting the addition to 5% of bogus purchases without taking into consideration the decision of the Hon'ble Supreme Court in the case of M/s N.K. Proteins Ltd. V/s Dy. CIT no. 769 of 2027 dated 26.02.2017 (SC) wherein it was held that addition on the basis of undisclosed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on money paid the assessee is deemed to have discharged his onus and no further responsibility lies on the assessee to prove the source from where the share applicants have acquired the amounts advanced to the assessee and in this regard, the AR placed reliance upon the decision of the Hon'ble Bombay High Court in the case of Orient Trading Co. Ltd. V/s. (1963) 49 ITR 723 (Bom). 10.2 When share application money is received through normal banking channels, the identity of the share applicant stands proved. However, it is to be mentioned that merely because amounts have been received through banking channels, it is not sufficient to prove the genuineness of the credits. But the existence of a bank account of the share applicant itself proves the existence of the share applicants. For this proposition, the appellant referred to the decision of the Hon‟ble Patna High Court in the case of Sarogi Credit Corporation V/s. CIT{1976 }103 ITR 344 (Pat). The AR further referred to these following decisions in support of its contention. In the case of Shantilal Jain ITXA/687/2004 decided on31.7.2007, the Hon‟ble jurisdictional High Court held that merely because the credit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I have considered the above contentions raised and it is seen from the record that, the assessee has produced before the AO as well as before me the following documents: 1. PAN 2. Complete Name and Address of the Applicants 3. Copy of Board Resolution for making Share Application 4. Copy of Board Resolution for making Share Application in the Appellant Company. 5. Copy of Bank Statement of the applicant reflecting payment of Share Application Money and Source thereof. 6. Copy of Acknowledgement of Return of Income filed by the Appellant companies for the year under consideration. 7. Audited Financial Statements of the applicants for the year under consideration. For the following Share Applicants 1. Nakshatra Business Pvt. Ltd. (Hema Trading Co. Pvt. Ltd) 2. Olive Overseas Pvt. Ltd. (Real gold Trading Pvt. Ltd) 3. Rangoli Commerce Pvt. Ltd. 4. Kavya Shares and Securities Pvt. Ltd. 5. Arawali Stock Braking Pvt. Ltd. 10.6 As is evident, the assessee has produced all evidences to prove the identity, source and the genuineness and credit worthiness. It is submitted that the assessee has done everything ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M/s. Reliance Corporation Vs. ITO IRA. NO.1069 to 1071/M/2017 7 Sanghvi Realty P. Ltd. V DCIT Cirlce 5(3)(1) 3018/M/2017, 3019/M/2017, 3020/M/2017 8 ITO 32(1)(5) Vs. Gujarat Construction 9 ACIT VS. M/s. Gujarat Estate ITA.6990/M/2016 order dated 18.05.2018 10 Sunshine Metals Alloys Industries Pvt. Ltd. Vs. ITO 4(3)(4 ITA. 3213/M/2014 11 DCIT VS. M/s. Rohini Builders (2002) 256 ITR Gujarat HC 12 CIT VS. M/s. Orchid Industries P. Ltd. ITA. 1433 of 2014 13 Rohini Builders Vs. DCIT ITAT Ahmedabad (2001) 117 Taxmann.25 14 CIT Vs. M/s. Gagandeep Infrastructure Pvt. Ltd. 15 DCIT, Surat Vs. M/s. Rohini Builders SLP 16 CIT Vs. Lovely Exports 2016 CTR 195 10.8 In view of the above, facts and circumstances of the case and also in view of the decision of the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad considered them to be genuine and having sufficient creditworthiness apart from proving their identity beyond doubt. The learned counsel for the assessee also placed reliance on the decision of Hon‟ble Jurisdictional High Court in the case of CIT vs Gagandeep Infrastructure Pvt Ltd in Income Tax Appeal No. 1613 of 2014 dated 20.3.2017 in support of his contentions and in support of the order of CIT(A). No contrary decision has been produced before us by revenue. On appraisal of the finding of the CIT(A), we are of the view that the CIT(A) has decided the matter of controversy judiciously and correctly which is not liable to be interfere with at this appellate stage. Therefore, we affirm the finding of the CIT(A) on this issue and decide this issue in favour of the assessee against the revenue. ISSUE Nos. 2 to 4 17. Issue nos. 2 to 4 are in connection with the restriction of the addition to the extent of 5% of the bogus purchase. Before going further, we deem it necessary to advert the finding of the CIT(A) on record.:- 4. I have considered the facts of the case and submission of the appellant and findings by A.O. It is seen from the details available on rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g heard the submissions of both sides, we have been informed that the malpractice of bogus purchase is mainly to save 10% sales tax etc. It has also been informed that in this industry about 2.5% is the profit margin. Therefore, respectfully following the decisions of the co-ordinate bench pronounced on identical circumstances, we hereby direct that the ITA No 3238 3293/Ahd/2009 A. Y. 2006-07 Sh. Simit P sheth V ITO WD -2(2), brd Page 6 disallowance is required to be sustained at 12.5% of the purchases from those parties. With these directions, we hereby decide the grounds of the rival parties which are partly allowed. 14.3 The Hon'ble Gujarat High Court held the following in the case: This being the position the only question that survives is what should be the fair profit rate out of the bogus purchases which should be added back to the income of the assessee. The Commissioner adopted ratio of 30% of such total sales. The tribunal, however, scaled down to 12.5%. We may notice that in the immediately preceding year to the assessment year under consideration the assessee had declared gross profit @ 3.56% of the total turnover. If the yardstick of 30%, as adopted ..... 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