TMI Blog2021 (7) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... lete the addition. Disallowance u/s 14A - HELD THAT:- As in the case of Cheminvest [ 2015 (9) TMI 238 - DELHI HIGH COURT] has held that no disallowance u/s 14A can be made in a year in which no exempt income has been earned or received by the assessee. Similar view has been taken in the case of PCIT vs. Oil Industries Development Board, [ 2018 (2) TMI 1861 - DELHI HIGH COURT] and in various other decisions relied on by the assessee. Since, admittedly, the assessee in the instant case has not received any dividend income during the year, a fact stated before the lower authorities and not controverted by them, we are of the considered opinion that no disallowance u/s 14A is called for. The order of the CIT(A) on this issue is accordingly set aside and the grounds raised by the assessee are allowed. - ITA No.247/Del/2016 - - - Dated:- 5-7-2021 - Shri R.K. Panda, Accountant Member And Shri Sudhanshu Srivastava, Judicial Member For the Assessee : Shri R.S. Ahuja, CA For the Revenue : Ms Anima, Sr. DR ORDER PER R.K. PANDA, AM: This appeal filed by the assessee is directed against the order dated 19.11.2013 of the CIT(A)-31, New Delhi relati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at in the course of the survey proceedings, no stock at the premises of M/s. Jay Enn Infotech Pvt. Ltd. was found. The AO, therefore, asked the assessee to substantiate and justify the purchase of ₹ 15 lakhs from M/s Jay Enn Infotech Pvt. Ltd. In absence of any proper reply from the side of the assessee to substantiate the purchase, the AO made addition of the same to the total income of the assessee. Similarly, the AO made addition of ₹ 1,00,121/- u/s 14A of the Act on the ground that the investment made by the assessee company were of ₹ 2 crore and provisions of sub-section (1) of section 14A are applicable on such investments. Thus, the AO determined the total income of the assessee at ₹ 25,98,921/-. 4. In appeal, the ld.CIT(A) upheld the action of the AO. So far as the addition of ₹ 15 lakh is concerned, the ld. CIT(A) sustained the addition made by the AO by observing as under: 4.3.1 In this ground the appellant is agitating against addition of ₹ 15 Lakhs towards bogus purchases from M/s Jay Enn Infotech Pvt. Ltd. The AR has argued that the AO has not proved beyond doubt that the purchases from the said party were bogus. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 companies. Thus the argument of the AR that the AO has not proved beyond doubt that the purchase from M/s Jay Enn Infotech Pvt. Ltd. during the current assessment year was bogus is not tenable under the law. 4.3.4 As regards giving opportunity/confronting with the adverse evidences, I am of the view that the same has been complied with by the AO. The assessment order clearly notes that the AO has sought the appellant s explanation vide order sheet entry dated 25.11.2011. 4.3.5 As noted by the AO in the assessment order, the CMD of the Tulip group to which the appellant company belongs, has admitted that they are unable to substantiate purchases by the group companies (including the appellant) made from some 32 companies (mentioned in his letter dated 18/01/2010) which list also included M/s. Jay Enn Infotech Ltd. The CMD of the Tulip group has made the said surrender only after several opportunities were given to the group to produce the evidences and parties relating to the purchases and also only after he was confronted with the evidences collected from survey u/s 133A and enquiries on these so called suppliers. The appellant and other members of Tulip group comp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2010-11 dated 29/12/2011 and also in the assessment order of M/s Jay Enn Infotech Ltd. for A.Y 2009-10 dated 29/12/2011. 4.3.7 Further, the AR has argued that the admission/surrender was for A.Y. 2009- 10 2010-11 and not relevant for A.Y. 2007-08 in the case of the assessee. I have perused the relevant assessment records. This is also not tenable on the facts. The party involved is one and same and the facts are also identical. The surrender has been made for A.Y. 2009-10 and 2010-11. However, the transactions involved the Other years covered by search assessments and the assessee had not come forward to give detailed year wise break up of purchases from these parties in spite of giving several opportunities by the investigating team. Moreover, the results of the survey at the premises of M/s Jay Enn Infotech Ltd. showed that the concerned company did not have any stock and had a huge cash balance in books (over ₹ 11.30 crores) without a rupee found at the premises. The said party was withdrawing cash after receipt of cheques from the beneficiaries had returned them cash in exchange for a commission. 4.3.8 The contents of the assessment order of M/s Jay Enn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Ltd. Rs. (-)58,90,023/- M s Binary Network Solution P. Ltd. ₹ 1,12,71,109/- The value of stock on physical inventory has been taken on cost on informed by you. Please explain the reason for negative stock and the discrepancy in stock. A. As explained above, only my son can explain the discrepancy as I am not aware of these facts. Q.10 I am showing you annexure A-13 and A-14 which are cheque books of M/s Macro IT System P. Ltd. and M/s Kanu Peripherals P. Ltd. Annexure A-13 containing blank cheque numbers 171691 to 171700 but signed by authorized signatories. Similarly annexure A- 14, contains cheque number 152729 to 152735 which are blank but signed by authorized signatories. A. As I told you earlier, only son Mr, Sunil Jain can tell about it. As mentioned above survey in the case of the assessee was conducted on the basis of information gathered in the course of search that the Tulip Group companies had been making some bogus purchases from the assessee company and raising only bills to procure accommodation entries. In the course of survey it was noticed that only meager st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alid reasons for purchase of these products from an indescript company. 4.3.11 Considering the above factors I uphold the disallowance of ₹ 15 lakhs being bogus purchases. 5. So far as the disallowance u/s 14A is concerned, he also upheld the action of the AO by observing as under:- 4.4.3 It is noted that the main business of the assessee appears to be investment activity. The assessment records of the Tulip group have been perused by me. The appellant and other similar companies of the group are direct or indirect investors in the flag ship company of the group. Even though the appellant has accounted sales of ₹ 64.03 crores there is hardly any income before tax from the trading activity. The net profit before tax was ₹ 9.86 lakhs which included other income of ₹ 3,333. All the sales are mostly among the group companies. As against this the appellant has made investment of ₹ 2.00 Crores in the Tulip group companies mostly on the strength of sundry creditors of ₹ 6.42 Crores again mostly being sister concerns. Thus I am of the view that the appellant s main activity is the investment activity and it cannot therefore be denied tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ccount of bogus purchases for A.Y. 2009-10 and 2010-11 and no surrender was made for A.Y. 2007-08 since no incriminating materials were found during the course of search for this particular year. Referring to various decisions, he submitted that in absence of any incriminating material found during the course of search for any particular year, no addition can be made merely on the basis of presumptions and surmises. In his second plank of argument, he submitted that the coordinate Benches of the Tribunal and different Benches of the High Courts are holding that in case of bogus purchases, no addition can be made on account of such bogus purchases and only profit element embedded in it can be added. He submitted that the assessee in the instant case has shown a profit of ₹ 61,276/- from such bogus purchases which is evident from the order of the CIT(A). He submitted that if the purchase is bogus, then, the sale is also bogus and since the assessee has already offered profit of ₹ 61,276/- on account of such bogus purchases, no further addition is called for. He accordingly submitted that both legally and factually no addition on account of bogus purchase is justified. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Hon ble Delhi High Court in the case of CIT vs. Kabul Chawla, reported in 380 ITR573 and PCIT vs. Meeta Gutgutia, reported in 325 ITR 526, has deleted the additions by quashing the assessment proceedings in absence of any incriminating material found during the course relating to A.Y. 2007-08. 10.1 Even otherwise, in view of the various decisions relied on by the ld. Counsel for the assessee, the entire bogus purchase cannot be added to the total income of the assessee and only the profit element embedded therein could have been added. Since, in the instant case, the sale of the assessee has not been disturbed by the AO, treating the same as bogus, therefore, the entire bogus purchase could not have been added to the total income of the assessee. Since the assessee has already declared profit of ₹ 61,276/- on account of sales against such bogus purchases which is more than the GP rate declared by the assessee at 1%, therefore, on this count also no addition is called for in the instant case. In our opinion, if the AO treats the purchase as bogus, then, the sales also is bogus and since such bogus purchase has been sold at a price higher than cost of such bogus pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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